Estee Lauder to Cut 3% to 5% of Its Employees after Sales, Profit Slide in Its Most Recent Quarter

The Estee Lauder section of the Nordstrom flagship store is seen during a media preview in New York, US, October 21, 2019. (Reuters)
The Estee Lauder section of the Nordstrom flagship store is seen during a media preview in New York, US, October 21, 2019. (Reuters)
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Estee Lauder to Cut 3% to 5% of Its Employees after Sales, Profit Slide in Its Most Recent Quarter

The Estee Lauder section of the Nordstrom flagship store is seen during a media preview in New York, US, October 21, 2019. (Reuters)
The Estee Lauder section of the Nordstrom flagship store is seen during a media preview in New York, US, October 21, 2019. (Reuters)

Estee Lauder is cutting 3% to 5% of its global workforce as part of a restructuring program that aims to increase profits and become more nimble in a challenging international environment.

The layoffs were announced Monday as the New York cosmetic giant reported falling profits and revenue in the second quarter, and trimmed its annual profit forecast.

Business was dragged down by sluggish sales in China as well as disruptions in Israel and other parts of the Middle East.

The downsizing, which will affect as many as 3,100 workers, will be made by July, Estee Lauder said. The company employed 62,000 workers worldwide, according to its latest regulatory filing.

The company, whose brands include Clinique, Tom Ford and La Mer, said it expects to take restructuring and other charges of between $500 million and $700 million, before taxes, consisting of employee-related costs, contract terminations, asset write-offs and other costs associated with implementing the initiative.

Estee Lauder expects the restructuring program to deliver annual savings of between $350 million and $500 million, before taxes, Estee Lauder said.

The company now expects the job cuts and the broader restructuring plan to drive incremental operating profit of $1.1 billion to $1.4 billion over the next few years. That's an increase from the $800 million to $1 billion announced late last year.

The company posted sales of $4.28 billion during the quarter ended Dec. 31. That was down 7% from $4.62 billion in the year-ago period. It earned profits of $313 million, or 87 cents for the period, down from $394 million, or $1.09 per share, in the year-ago period. Adjusted profit per share results were 88 cents, which far exceeded the per-share earns of 54 cents that Wall Street was expecting, according to FactSet. It also topped revenue expectations.

Estee Lauder now sees adjusted earnings of $2.08 to $2.23 a share for the year, down from a prior forecast of $2.17 to $2.42. Analysts expected earnings per share for the current fiscal year to be $2.32 announced in November.

Estee Lauder joins a growing list of companies that have announced layoffs in recent weeks including some well-known household names like Amazon, Google and UPS. Yet American businesses and other employers added a blistering 353,000 jobs in January — the largest surge in hiring in a year even as the US Federal Reserve raised interest rates repeatedly to cool the US economy and tame inflation.

Estee Lauder's share rose $17.80, or more than 13%, to $151.92 per share in late morning trading.



Hermes 2Q Sales Rise 13% on Continued Appetite for High-End Luxury

People stand with Hermes shopping bags as they wait at a traffic light in Tsim Sha Tsui, a bustling shopping hotspot, in Hong Kong, China December 5, 2023. (Reuters)
People stand with Hermes shopping bags as they wait at a traffic light in Tsim Sha Tsui, a bustling shopping hotspot, in Hong Kong, China December 5, 2023. (Reuters)
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Hermes 2Q Sales Rise 13% on Continued Appetite for High-End Luxury

People stand with Hermes shopping bags as they wait at a traffic light in Tsim Sha Tsui, a bustling shopping hotspot, in Hong Kong, China December 5, 2023. (Reuters)
People stand with Hermes shopping bags as they wait at a traffic light in Tsim Sha Tsui, a bustling shopping hotspot, in Hong Kong, China December 5, 2023. (Reuters)

Birkin-bag maker Hermes reported a 13% rise in second-quarter sales on Thursday, demonstrating the continued appetite from wealthy shoppers for its luxury handbags, even as less affluent consumers pull back.

Sales at the French luxury group grew to 3.7 billion euros ($4.02 billion), a 13% organic sales rise that strips out currency fluctuations. The figure was in line with analyst expectations, according to a Visible Alpha consensus.

Operating profit for the first half was 3.1 billion euros, compared to a forecast from consensus provider Visible Alpha for 3.2 billion.

One of the most steady performers in the luxury goods sector -- even as economic conditions worsen -- the French group's results stand out after a string of disappointing earnings updates from peers which have raised investor concern about uncertain prospects for the sector in the coming months.

Hermes' famously classic designs and tight management of production and stock have helped reinforce the label's aura of exclusivity, and CEO Axel Dumas told reporters the company had seen "no big interruption in trends".

However, he said Hermes was seeing slightly less traffic with aspirational clients, which was impacting higher volume products like fashion accessories.