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Estee Lauder Initiates Major Turnaround Plan Amid Significant Revenue Decline

Cosmetics powerhouse Estee Lauder is embarking on an extensive multi-year turnaround initiative, estimated to incur costs between $1.2 billion and $1.6 billion. This strategic effort comes in response to a dramatic drop in its stock prices, which have plummeted over 80% from the peak value of $371.86 recorded in 2022.

In a recent post-earnings call regarding the company’s fiscal year 2025 second quarter, CEO Stéphane de la Faverie candidly stated, “Simply said, we lost our agility.” He emphasized that the company failed to swiftly embrace growth opportunities across various channels, markets, and price tiers, resulting in slower-than-expected new customer acquisition. Furthermore, he pointed out that a lack of innovation has often left the company trailing behind emerging trends.

Estee Lauder, known for its extensive brand portfolio that includes Clinique, MAC, and Jo Malone, reported a 6% decline in second-quarter revenues, falling to $4 billion from $4.3 billion during the same period last year. Notably, the skincare category, which constitutes the company’s largest segment, saw sales drop by 12%.

De la Faverie, who recently took on the role of CEO after more than 15 years of leadership continuity, has been tasked with revitalizing the company. In February, he unveiled a comprehensive action plan dubbed “Beauty Reimagined,” aimed at reinstating sustainable sales growth for the brand.

Industry stakeholders perceived the need for change. Jon Tenan, a managing director at Baird, remarked, “We all knew a shakeup was coming and needed. So it’s good to see that it’s here.” The initiative includes substantial cost-saving measures, with a restructuring plan that could result in the loss of up to 7,000 jobs, representing 11% of Estee Lauder’s workforce of 62,000, which even extends to executive positions in the C-suite.

In a bid to bolster financial flexibility for the restructuring process, the company made the rare decision to cut its dividend nearly in half last October. Analysts suggest that such a drastic move reflects a recognition that revenue declines may persist longer than previously anticipated. Linda Bolton Weiser, a senior analyst at D.A. Davidson, commented, “In retrospect, they probably did the right thing.”

For those seeking a deeper understanding of Estee Lauder’s challenges and its strategic plan for recovery, an accompanying video provides further insights into this significant corporate transition.

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