Cosmetics company Estée Lauder has announced the expansion of its Profit Recovery Plan for fiscal years 2025 and 2026 to include a restructuring program. In connection with the restructuring program, Estée Lauder estimates a net reduction of approximately 3 to 5 percent of its positions by June 30, 2023.
Upon completion of this plan, the company expects to have improved its gross margin and expense base to drive greater operating leverage for the future.
Commenting on the restructuring plan and outlook, Fabrizio Freda, the company’s president and chief executive officer said: “Today we have announced that we are further expanding our Profit Recovery Plan, which benefits fiscal years 2025 and 2026, to include a restructuring program. 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.”
Review of Estée Lauder’s Q2 and H1 results
The company reported net sales of 4.28 billion dollars for its second quarter, a decline of 7 percent, while organic net sales fell 8 percent, reflecting challenges in Asia travel retail as well as ongoing softness in overall prestige beauty in mainland China. Second quarter net earnings of 313 million dollars compared to 394 million dollars in the prior-year period. Diluted net earnings per common share were 87 cents compared with 1.09 dollars in the prior-year period, while adjusted diluted net earnings per common share declined to 88 cents.
The company said that the decrease in the second quarter also reflects a 1 percent headwind due to business disruptions in Israel and other parts of the Middle East. Partially offsetting these pressures, organic net sales grew in several markets in Asia/Pacific and Europe, the Middle East & Africa, as well as in nearly every market in Latin America.
For the six months period, the company reported net sales of 7.80 billion dollars, a 9 percent decrease and organic net sales decreased of 9 percent, primarily driven by Asia travel retail and mainland China.
Net earnings for the first half were 344 million dollars and diluted net earnings per share were 95 cents compared to 883 million dollars and 2.45 dollars, respectively, in the prior year. The company’s adjusted diluted net earnings per common share of 98 cents, declined 65 percent in constant currency.
Estée Lauder announces forecast for FY24
For the third quarter of 2024, reported net sales are forecasted to increase between 3 percent and 5 percent versus the prior-year period. Organic net sales are forecasted to increase between 4 percent to 6 percent.
Reported diluted net earnings per common share for the quarter are projected to be between 35 cents and 46 cents, while diluted net earnings per common share are projected to be between 36 cents and 46 cents. Adjusted diluted net earnings per common share are expected to range between a decrease of 18 percent and an increase of 3 percent on a constant currency basis.
For fiscal year 2024, the company’s reported and organic net sales are forecasted to range between a decrease of 1 percent to an increase of 1 percent versus the prior-year period.
Reported diluted net earnings per common share are projected to be between 2.04 dollars and 2.20 dollars and diluted net earnings per common share are projected to be between 2.08 dollars and 2.23 dollars. Adjusted diluted net earnings per common share are expected to decrease between 38 percent and 34 percent on a constant currency basis.