In a bold move to rejuvenate its market presence, Estée Lauder Companies (ELC) has unveiled a comprehensive restructuring plan to counter recent sales declines and position the company for sustainable growth. Announced on February 4, 2025, this initiative, dubbed “Beauty Reimagined,” reflects ELC’s commitment to evolving with the dynamic beauty industry landscape.
Strategic Organisational Changes
Under the leadership of newly appointed President and CEO Stéphane de La Faverie, ELC is set to implement significant organizational shifts effective April 1, 2025.
The company will streamline its regional operations into four geographic clusters:
- EMEA/UK&I/Emerging Markets
- Americas (including Latin America)
- Mainland China
- Asia-Pacific (excluding mainland China) with Travel Retail Worldwide
This consolidation aims to enhance efficiency, foster agility, and better align with consumer trends across diverse markets.
In tandem with regional restructuring, ELC plans to reorganize its brand portfolio into distinct category clusters encompassing makeup, fragrance, skincare, and haircare. This strategic grouping is designed to accelerate innovation, reduce time-to-market for new products, and strengthen operational synergies across brands.
Workforce Optimisation
As part of the restructuring, ELC anticipates a net reduction of 5,800 to 7,000 positions globally, equating to approximately 10% of its workforce. This decision, expected to be substantially complete by the end of fiscal year 2027, is driven by the need to adapt to changing market dynamics and consumer behaviours. The company projects that these efforts will yield annual savings of $800 million to $1 billion, bolstering profit margins and facilitating further reinvestment.
Financial Performance and Outlook
The restructuring announcement follows a challenging fiscal second quarter for ELC, during which net sales decreased by 6% to $4 billion. The decline was primarily attributed to underperformance in the Asia-Pacific region, notably due to weak travel retail in South Korea and subdued consumer sentiment in China. Despite these setbacks, the fragrance category experienced a 2% net sales increase, driven by luxury brands like Le Labo.
Looking ahead, ELC has tempered its profit outlook, anticipating earnings per share of 24 to 34 cents for the third fiscal quarter, significantly below analysts’ projections. The company acknowledges the need for a strategic reset to navigate ongoing challenges and capitalise on emerging opportunities.
Embracing Innovation and Consumer-Centric Strategies
Central to the “Beauty Reimagined” plan is a renewed focus on consumer engagement and innovation. ELC intends to amplify investments in consumer-preferred, high-growth channels and enhance its digital capabilities, including integrating artificial intelligence to target consumers better and optimize supply chains. By aligning more closely with evolving consumer preferences and shopping behaviours, ELC aims to regain its competitive edge in the prestige beauty market.
Leadership Vision
CEO Stéphane de La Faverie, who assumed his role in 2024, has emphasised the need for agility and innovation in an increasingly competitive market. His leadership marks a shift towards a more consumer-centric, digital-first strategy to reestablish ELC’s dominance in the beauty industry.
With this bold restructuring plan, Estée Lauder is making a decisive effort to reshape its future, ensuring long-term resilience and renewed growth in an ever-evolving global beauty market.
