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Layoffs of 3% to 5%! Est é e Lauder: There are no major adjustment plans in the Chinese market

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Recently, the news of international beauty giant Est é e Lauder announcing a 3% to 5% layoff has attracted attention. Subsequently, the topic of # Est é e Lauder announcing layoffs # has become a hot topic on Weibo, with over 40 million views as of the time of publication. Netizens have expressed that "Est é e Lauder has started to lay off employees" and "whether to lower prices".
Affected by this, Est é e Lauder rose nearly 19% during trading on February 5th Eastern Time, ultimately closing at $150.28 per share, up 12.05%, and its total market value surged overnight to $53.877 billion.
Layoffs of 3% to 5%
There are no major adjustment plans in the Chinese market
On February 5th, Est é e Lauder Group announced that it will further expand its profit recovery plans for the fiscal years 2025 and 2026, including restructuring measures of 3% to 5% layoffs. According to official disclosure, this layoff will involve 1860 to 3100 employees. The restructuring plan will begin in the third quarter of fiscal year 2024, and specific measures are expected to be completed by the end of fiscal year 2026.
Est é e Lauder stated that the plan aims to increase gross profit margin, reduce cost base, and reduce indirect costs, while increasing investment in key consumer oriented activities. The focus is to restore stronger and sustainable profitability and accelerate future performance growth.
According to media reports, Est é e Lauder has stated that the group currently has no major adjustment plans in the Chinese market. The profit recovery plan will help empower the Chinese team and better adapt to the development status of the Chinese market.
In addition, Est é e Lauder expects that the restructuring plan will generate a total of $500 million to $700 million in pre tax restructuring and other expenses. At the same time, the company's operating profit is expected to increase to $1.1 billion to $1.4 billion.
Sales revenue and net profit both decreased
Strong performance of multiple brands in the Chinese market
On the same day, Est é e Lauder Group released its second quarter financial report for the 2024 fiscal year.
According to the latest financial report, Est é e Lauder's sales and net profit have both declined. Data shows that as of December 31, 2023, the net sales for the second quarter were $4.28 billion, a 7% decrease from $4.62 billion in the same period last year, and the net profit was $313 million, a 18.39% decrease from $394 million in the same period last year. The main reason for the decline in performance is the weakness of Asian tourism retail and the high-end beauty market in mainland China.
By product category, the revenue of the skincare business decreased by 10%, with net sales of Est é e Lauder, Clinique, and Origins decreasing, and The Order, La Mer, and M A. C performs strongly. The revenue of cosmetics business fell by 8%, while the sales of perfume business remained flat. The decline of Estee Lauder brand was offset by the growth of Le Labo and Jo Malone London. The hair care business decreased by 6%, mainly due to Aveda's reflection of the weak North American market.
From a market perspective, the revenue from the Americas market is 1.242 billion US dollars; The revenue from the European, Middle Eastern, and African markets is 1.589 billion US dollars; The revenue of the Asia Pacific market, where the Chinese market is located, is 1.449 billion US dollars. Est é e Lauder Group stated that it continued to gain market share in China in the second quarter, with several brands performing strongly and achieving double-digit growth, including La Mer, Tom Ford, Jo Malone, and Le Labo, which continued to show positive growth momentum. In addition, Estee Lauder's net sales on Tiktok more than doubled during the Double 11.
"Chinese consumers have always been our main driving force for growth," said Fan Jiayu, President and CEO of Est é e Lauder Group in China. The group is confident in China's long-term development and will continue to invest in the Chinese market.
Looking ahead, Est é e Lauder Group stated that it will be committed to rebuilding sustainable and profitable long-term growth models in various regions, categories, brands, and channels. It is expected that organic net sales will resume double-digit growth in the second half of fiscal year 2024.
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