(Feb 4): Estée Lauder Cos said it plans to eliminate between 5,800 and 7,000 positions in a corporate restructuring meant to return the flagging company to sales growth under its new CEO.

The owner of the Clinique and MAC brands projected revenue will fall more than expected in the current quarter but said it would hold off on providing a full-year financial outlook due to “evolving global uncertainty” in a statement on Tuesday.

The company is forecasting net sales to fall between 10% and 12% in the three months ending on March 31. Analysts had expected a 6.8% decline, according to an average of estimates compiled by Bloomberg. Its guidance for adjusted earnings per share also missed estimates and the company is expecting adjusted earnings per share to decline in the current quarter.

The company also cited ongoing challenges in its duty-free business in Asia and subdued consumer sentiment in China and Korea, anticipating “continued volatility and low visibility in the near term”. It warned of volatility related to potential tariff increases globally, without specifically calling out the whiplash of tariff policies unleashed this week by US President Donald Trump.

The results underscore the challenges facing Stéphane de La Faverie, who took over as CEO on Jan 1. The iconic beauty conglomerate has lost market share in the US and lost out to brands sold by competitor L’Oreal SA and smaller upstarts, which have been faster to react to social media trends. Estée Lauder’s sales in China have dropped.

The company’s shares dropped 8% in premarket trading in New York. Its stock has declined 45% over the last 12 months.

“While we are not satisfied with our third quarter outlook, it primarily reflects weak retail sales trends in our Asia travel retail business, which deteriorated in our second quarter driven by Korea,” de La Faverie said. Sales in its duty-free business will decline in the current quarter by a “strong double-digit” percentage.

To reverse the slump, de La Faverie said Tuesday he will focus on gaining market share in the high-end cosmetics market by getting new products to shoppers faster and marketing them better. He’ll also expand the company’s existing turnaround plan to address a decline in sales volume since it was first announced by his predecessor, Fabrizio Freda, in Nov 2023.

The company said the restructuring is aimed at reorganising and rightsizing parts of the business and helping speed up certain processes through outsourcing some services and ending some supplier relationships. It expects to incur restructuring charges between US$1.2 billion (RM5.33 billion) and US$1.6 billion for contract terminations and other costs.

“The expanded plan is designed to further transform the company’s operating model to fund a return to sales growth and restore a solid double-digit adjusted operating margin over the next few years and continue to manage external volatility, such as potential tariff increases globally,” the company said in the statement.

De La Faverie’s vision for reviving the company he now helms is similar to what Freda said he planned to do before he stepped down. The difference is that de La Faverie is expanding the size of the turnaround plan as well as changing the executives who will implement it.

He plans to make changes to his executive team, with more details set to be announced Tuesday, according to a transcript of a video message from the CEO.

“We will rapidly expand our brand portfolio presence to win prestige beauty share and regain our leadership position as we focus on all high-growth areas,” de La Faverie said in his message. These areas include “geographies, channels, price tiers, categories and consumers”, he added.

“We will enable our small and mid-size brands to significantly accelerate growth, profitably,” he said, while pledging to strengthen its large brands.

Rich Zannino, lead independent director of Estée Lauder’s board, said in a statement that de La Faverie’s plan “will better align the business with the rapidly evolving beauty consumer, create a more agile and innovative organisation, and transform” the company’s operating model. “The Board and I are confident in this plan.”

De La Faverie and other company executives are scheduled to speak with analysts later on Tuesday. Wall Street will be keen to hear details about his plan, dubbed “Beauty Reimagined”, and more about how it differs from that of Freda.

Estée Lauder is working with Evercore Inc to review its portfolio of beauty brands, which also includes Smashbox, Tom Ford and Aveda, Bloomberg News reported last month.

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