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After disappointing sales in airports and in Asia, Estée Lauder sees its costs and stocks soar. The cosmetics brand has now decided to take firm action and cut more than 3,000 jobs.
Decreasing sales
Estée Lauder plans to sack up to 5 % of all employees, accounting for 3,150 jobs. The restructuring will cost the cosmetics manufacturer more than half a billion euros, but the company expects to gain double that in operating profit. Consequently, the brand’s stock market valuation shot up after the news.
The main reason for the reorganisation is the disappointing performance in Asia, especially in the ‘travel retail’ segment. Estée Lauder, whose portfolio also includes Clinique, aims to cut costs and inventories and improve working capital.
However, the company did make progress in the past six months, according to CEO Fabrizio Freda. In the previous quarter, net profit nevertheless fell from 394 to 313 million dollars (290 million euros). Sales dropped 7.4 % to 4.28 billion dollars (almost four billion euros), mainly in the skin care and make-up categories. In the region Asia-Pacific, there was even an 8 % drop in sales. Still, those results were better than analysts had expected. In the second half of the broken financial year, Estée Lauder is also counting on double-digit organic growth again.
