The American beauty conglomerate reported second-quarter sales dropped 7% to $4.3 billion, but shares jumped as much as 19% on news of a restructuring plan and a workforce reduction. Estée Lauder has about 62,000 employees globally and will eliminate 3% to 5% of those jobs. The profit recovery plan is expected to drive incremental operating profits of $1.1 to $1.4 billion if successful. Brands in the portfolio would emerge leaner and more profitable.
Fabrizio Freda, President and Chief Executive Officer, said, “We are, encouragingly, at an inflection point. We believe this now-larger plan will better position the Company to restore stronger, and more sustainable profitability while also supporting sales growth acceleration and increasing agility and speed-to-market.”
The Numbers 2nd Quarter Ended December 31, 2023
- Reported net sales of $4.28 billion represent a decline of 7% from $4.62 billion in the prior year.
- Organic net sales fell 8%, reflecting the expected challenges in Asia travel retail as well as ongoing softness in overall prestige beauty in Mainland China, and reflect a 1% headwind due to business disruptions in Israel and other parts of the Middle East.
- Reported net earnings of $313 million, compared with net earnings of $394 million in the prior-year period.
Results by Market
- Net sales in Europe, the Middle East, and Africa declined 14% due to persistent challenges in its Asia travel retail business, as well as disruptions in Israel and other parts of the Middle East.
- Asia Pacific net sales declined 7% driven by a change in consumer demand for prestige beauty.
- Americas saw net sales decline 1% on challenges in the US, partially offset by double-digit growth in Latin America, where net sales increased in nearly every country, led by Brazil and Mexico.
Results by Category:
Sales reflect a decrease in the Asia travel retail business primarily due to the ongoing actions to reset retailer inventory levels and lower conversion of travelers to consumers. The decline also reflected the impacts of the ongoing softness in overall prestige beauty in Mainland China, including lower sales during the 11.11 Global Shopping Festival.
- Skincare net sales declined 10%.
- Net sales from Estée Lauder, Clinique, and Origins declined.
- Estée Lauder net sales increased double digits in the Americas, reflecting growth from the Advanced Night Repair product franchise, including the fiscal 2024 launches of Advanced Night Repair Rescue Solution with Bifidus Ferment and Advanced Night Cleansing Balm, and the recent launch of the Nutritious line of products.
- The Ordinary saw double-digit net sales growth globally and across all geographic regions, reflected continued strength from hero products and successful innovation, such as the Soothing & Barrier Support Serum, and strong holiday demand.
- La Mer experienced net sales increases from La Mer in every geographic region, benefiting from hero product franchises and commercial activations globally, including for holiday.
- MAC saw double-digit net sales growth fueled by the successful launch of the Hyper Real franchise.
- Makeup net sales declined 8%.
- MAC net sales decreased, primarily due to the phasing out of select products in preparation for new product launches and a benefit in the prior-year period as a result of changes to its take back loyalty program. The brand saw net sales increase double digits in Latin America and several markets in Asia/Pacific, benefiting from new product innovation.
- Net sales from Estée Lauder decreased.
- Clinique saw strong double-digit net sales growth from broad-based growth in the lip, face, and eye subcategories and owing to both continued success of hero products and new product innovation.
- Fragrance net sales were flat, as increases from luxury brands Le Labo and Jo Malone London were offset by a decline from Estée Lauder.
- Net sales from Le Labo grew strong double digits, primarily due to robust consumer demand for the brand’s hero product franchises. In Asia/Pacific, net sales more than doubled, benefiting from targeted expanded consumer reach, including in Mainland China, Thailand, and Malaysia.
- Jo Malone London net sales increased, owing to compelling holiday offerings and social media activations. Net sales in the Americas grew double digits, benefiting from the Cologne Intense collection, and grew high-single-digits in Asia/Pacific, primarily driven by continued success of the English Pear & Freesia product franchise.
- Estée Lauder net sales declined, primarily due to the timing of holiday shipments compared to the prior-year period.
- Haircare net sales decreased 6%, primarily driven by Aveda reflecting softness in North America.
- Haircare operating results decreased, primarily driven by the decline in net sales.
Freda said "While mainland China and Asia travel retail declined, our retail sales trended ahead of organic sales, and these businesses are poised to return to organic sales growth in the second half."