Estée Lauder sinks nearly 20% on weak quarterly sales; plans to slash up to 7,000 jobs

Core Viewpoint - Estée Lauder announced a major restructuring plan involving the reduction of up to 7,000 jobs, approximately 10% of its workforce, due to ongoing demand weakness, resulting in a nearly 20% drop in its shares [1][3]. Financial Performance - The company expects third-quarter profit to fall significantly below expectations, particularly affected by challenges in its Asia travel retail business, especially in Korea and China [2][6]. - Estée Lauder reported a net earnings loss of $590 million for the second quarter, compared to a profit of $313 million the previous year, with revenue declining to $4 billion from $4.3 billion [7]. - The company anticipates a net sales drop of 10% to 12% for the three months ending March 31, worse than the 6.8% decline predicted by analysts [5]. Restructuring and Strategic Changes - The restructuring plan includes job cuts and is expected to incur costs between $1.2 billion and $1.6 billion [8][11]. - CEO Stéphane de La Faverie emphasized the need for the company to improve agility and capitalize on growth opportunities, focusing on quicker delivery of trendy products to consumers [5][8]. - The company is reorganizing its structure into four geographic groups and categorizing its brands into segments such as skin care and makeup [9][10]. Market Challenges - Estée Lauder has faced a decline in sales growth in China, which represented about 25% of its sales in 2024, due to high unemployment and a preference for local brands [4]. - The company has struggled with weak demand for its high-end products and increased competition from rivals like L'Oréal, which has been more responsive to market trends [3][4].