Estée Lauder to cut 2.5% of staff in cost-saving scheme

Q3 2016 is on track for strong full year results as Leading Beauty Forward initiative launches

Estée Lauder has announced the launch of a new cost-saving scheme, Leading Beauty Forward, which will see between 900 and 1,200 members of staff cut from its workforce.

The company shared the plans alongside its financial results for Q3 2016 which showed strong sales growth and put it firmly on track to meet its overall 2016 targets.

Sales for the quarter ending 31 March 2016 reached $2.66bn, up 3% on the same period last year while net earnings dropped slightly from $272.1m in 2015 to $265.6m this year, but much of this decrease was caused by currency fluctuations.

Fabrizio Freda, President and CEO at Estée Lauder, said: “Our results this quarter were again highlighted by strong top line growth in our international business, driven by higher sales in virtually every market we serve. We are particularly pleased with the acceleration of both our e-commerce business and social media initiatives, which are helping to drive brand engagement around the world.”

Freda also noted that the company’s “flexible business model” was helping to deliver better-than-forecast results and reiterated Estée Lauder’s commitment to investing in its brands in order to foster further growth. He added: “We are reiterating our expectation for adjusted constant currency sales growth of 7-8% and earnings per share growth of 10-12%, before charges for the 2016 fiscal year.”

Sales of skin care products decreased across the Estée Lauder and Clinique brands, partially caused by slowing sales in the Asian/Pacific region. This was offset by increased sales for Origins and La Mer.

In cosmetics, MAC, Smashbox and Tom Ford all reported double-digit growth, while Bobbi Brown also boosted sales. Estée Lauder also saw significant gains thanks to its Double Wear range.

Jo Malone and Tom Ford boosted fragrance sales, with expansion in department stores and travel retail partially responsible. Estée Lauder said this was partially offset by lower sales in other designer fragrances.

The Leading Beauty Forward initiative is expected to launch in Q4 2016. The scheme will see Estée Lauder reduce costs, redesign the company’s brand and restructure corporate functions. The company will also invest in its growth through new products, social media, communications and other advertising. The initiative is expected to boost revenue by $200-$300m before tax.

Freda also said that the initiative would also see some redundancies within the group. He added: “Reallocating resources to new capabilities and higher-growth areas, and lowering our cost base will regrettably include selective workforce reductions in certain areas of the Company. We will make difficult decisions about affected employees with sensitivity, consistent with the values of our Company and will make a concerted effort to retrain and redeploy employees wherever possible.”

Estée Lauder said that around 2.5% of the company's global workforce would face redundancy, with some employees offered retraining or redeployment.

Companies