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.
