Although the beauty industry took a brutal hit in 2020 during the peak of the COVID-19 pandemic, it has reported massive growth in the last few years, outperforming other retail sectors and delivering over $100 billion in revenue worldwide.
However, the increase in demand for beauty products and continuous sales increases in the sector don’t apply to all companies.
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Over the last few quarters, Estée Lauder, one of the world’s leading manufacturers of skincare, makeup, fragrance, and hair products, has struggled financially, delivering consecutive quarters of disappointing sales declines.
Related: Estée Lauder’s struggling CEO makes a major announcement
According to its latest earnings release, Estée Lauder’s sales decreased by 6% compared to the same time last year. Almost all its categories reported negative sales growth, with skincare representing the steepest decline of 12%.
The company attributes this huge decline in skincare sales to the challenging retail environment in Asia/Pacific and subdued consumer sentiment in mainland China. This region was the least profitable of all, reporting an 11% decrease in sales.
Estée Lauder skincare products are popular around the world but this has not helped the company increase revenue over the past couple of years.
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Estée Lauder unveils its new restructuring plan to get the company back to profitable numbers
On Tuesday, Estée Lauder ( (EL) ) reported its second-quarter earnings results for fiscal 2025 and unveiled the launch of ‘Beauty Reimagined,’ the company’s restructuring plan.
This plan aims to return the company to sustainable sales growth and double-digit adjusted operating margin so that it can manage external volatility, such as President Donald Trump’s proposed tariff increases.
Related: E.l.f Beauty launches unexpected deal with a struggling retail store chain
To successfully complete the Beauty Reimagined plan, Estée Lauder will focus on expanding its presence across high-growth channels, markets, and media, increasing advertising spending, and optimizing marketing programs while eliminating low-return investments. The company will also drive innovation by re-evaluating key supplier relationships, improving the efficiency of its supply chain to minimize excess inventory, creating new luxury price tiers, and being more selective with its outsourcing services to promote quality products.
Estée Lauder will begin executing this turnaround plan in 2025 and expects to complete it by 2027. The company estimates the plan will cost around $1.2 billion and $1.6 billion , and will yield annual gross benefits between $800 million and $1 billion.
“While we recognize there is much work to do, we are confident that Beauty Reimagined is the way to realize our ambition,” said Estée Lauder CEO Stéphane de La Faverie. “We are significantly transforming our operating model to be leaner, faster, and more agile, while taking decisive actions to expand consumer coverage, step-change innovation, and increase consumer-facing investments to better capture growth and drive profitability,” he added.
Estée Lauder shocks its workforce by announcing massive layoffs to enact its turnaround plan
Although the Beauty Reimagined plan reflects Estée Lauder’s faith in its business, the company also delivered some shocking news along with the optimistic restructuring plan announcement.
Estée Lauder revealed its plans to cut between 5,800 and 7,000 jobs globally as part of its restructuring plan, which nearly doubles the 3,000 job layoffs it announced the year prior during its second-quarter earnings release.
Estée Lauder’s previous failed restructuring plan under its former CEO
Before Stéphane de La Faverie was appointed as the CEO of Estée Lauder in January of this year, Fabrizio Freda had held the position since 2009.
In February 2024, former CEO Freda revealed a restructuring plan to increase the company’s net sales. The plan focused on generating more than 60% of sales from outside the U.S. and reducing the workforce by 5%.
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However, this restructuring plan failed before it could even be completed. It was not moving at the expected pace and was ineffective in turning around or reducing the company’s declining sales.
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