Estee Lauder, the cosmetics company, is cutting between 5,800 and 7,000 jobs, it said on Tuesday, as part of a major restructuring plan aimed at recouping lost profits and boosting future growth.
This number is also increased from the initial intention of Estee Lauder to chop up to 3,000 positions. After some retraining, the employees will either be redeployed to other jobs or lose their jobs. According to the leadership, this is what needs to take place for the business to be in better shape and future-proof.
The announcement was made with the release of Estee Lauder’s second-quarter financial results. Though the company has been working on a turnaround plan, issues such as lower sales, inflation, and higher costs have made recovery more difficult. These struggles have led Estee Lauder to expand its job cuts and cost-saving efforts.
The restructuring will be expensive in the short term. The company projects it will invest between $1.2 billion and $1.6 billion pre-tax to finish the changes. However, Estee Lauder thinks the plan will save $800 million to $1 billion every year. The money freed up will go to reinforce business operations and to back long-term sales growth.
Plans to improve business and reduce costs
Estee Lauder now hopes the new plan will restore sales growth and lead to a strong profit margin in the next few years. It also prepares for any challenge that may come along worldwide, like new tariffs affecting costs and supply chains.
To improve its financial health, the company will take several key steps:
- Reducing unnecessary spending: Estee Lauder plans to carefully manage its expenses to improve efficiency.
- Strengthening supplier relationships: The company will work closely with its suppliers to cut costs and improve product availability.
- Managing inventory better: By controlling its supply chain more effectively, Estee Lauder hopes to reduce excess inventory and waste.
- Outsourcing some services: The company plans to shift certain business functions to outside partners that can provide them more efficiently.
These actions are part of what Estee Lauder calls its “profit recovery and growth plan.” The company expects to complete the plan by 2027, with most of the changes happening in 2025 and 2026.
Stock drop and CEO’s optimism
Despite the cuts and restructuring, the leadership in Estee Lauder remains bullish about the prospects. CEO Stephane de La Faverie said there was much work to be done but he had faith in the strategy. He commented that the initiative “Beauty Reimagined” will help in achieving long-term success.
The stock market nonetheless reacted against the news. Estee Lauder’s stock plunged by more than 17% on Tuesday after it announced job cuts and second-quarter financial results. The sharp plunge reflected investor concern about an array of difficulties facing the New York company and the effect of the restructuring.
Other beauty brands that are popular and belong to Estee Lauder include MAC, Clinique, Too Faced, and Bobbi Brown. This firm is trying to take gigantic steps to compete while under a financial squeeze.
The Estee Lauder Company intends to restore profits with the announced job cuts and new cost-saving strategies, placing it in an advantageous position for long-term growth. The coming years will indeed be crucial for the company to work out its turnaround and meet the challenges posed by the change in the world economy.
