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Can the new sales coach of "The Mystery of Blue Sea" lead Est é e Lauder out of its predicament?

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During the transition period of CEO handover, Est é e Lauder Group is facing significant performance pressure. On November 5th, a reporter from Beike Finance of the New Beijing News learned that cosmetics giant Est é e Lauder released its first quarter financial report for the fiscal year 2025 ending on September 30, 2024. During the reporting period, Est é e Lauder Group achieved net sales of 3.361 billion US dollars, a year-on-year decrease of 4.46% from 3.518 billion US dollars; Net loss of 156 million US dollars.
Est é e Lauder stated that the main reason for the net profit loss was the legal fees totaling $159 million generated by the "talc lawsuit settlement agreement," which included current and potential future claims filed by certain plaintiff law firms. In addition, it is also related to some expenses incurred from the restructuring project in the company's "Profit Recovery and Growth Plan (PRGP)".
Net sales of skin care business decline by 7%, Asia Pacific market continues to be under pressure
According to data, Est é e Lauder Group began implementing the "Profit Recovery and Growth Plan" in the 2024 fiscal year, aiming to increase gross profit margins, reduce the company's cost base, reinvest in activities targeting key consumers, and improve flexibility and market responsiveness to accelerate sales growth and profit margin recovery. At the company level, this plan "helps to increase investment in its brands and markets, combine local demand, and win more consumers
When evaluating the financial data for the first quarter of the 2025 fiscal year, Fabrizio Freda, President and CEO of Est é e Lauder Group, said, "Despite the headwinds in the Asian tourism retail industry being greater than expected, the performance of the first quarter is basically in line with the adjusted outlook. Our 'profit recovery and growth plan' has driven the expansion of gross profit margin, but to some extent, it has been offset by operational deleveraging
From the performance of last quarter, the net sales of four major businesses of Estee Lauder Group, namely skin care, cosmetics, perfume and hair care, declined.
Image/screenshot of Est é e Lauder website

Among them, the skin care business recorded a net sales revenue of 1.529 billion US dollars, a decrease of 7% compared to the same period last year, mainly due to the double-digit decline of its brands La Mer and Est é e Lauder. In addition, the low conversion rate of Asia's tourism retail business also affected the sales of some brand products to a certain extent. However, at the same time, Est é e Lauder pointed out that "the nighttime skincare products of Sea Blue Mystery have exceeded expectations in the Asia Pacific region and have shown strong appeal in the Chinese market
In terms of makeup business, net sales decreased by 2% to 1.038 billion US dollars during the reporting period. Although the Clinique brand achieved double-digit growth thanks to sales growth and continuous innovation in segmented lip products, it was partially offset by the decline in performance of the M.A.C. and Too Faced brands. In addition, due to expenses related to the settlement agreement of the talc powder lawsuit, the operating loss of the cosmetics business increased to $185 million.
In the field of hair care, Est é e Lauder Group recorded net sales of $139 million in the last quarter, a decrease of 6% compared to the same period last year. The group's analysis pointed out that the decline in net sales was mainly affected by the poor performance of hair care brand Aveda, and also reflected problems such as improper scheduling of salon channel shipments. Thanks to reduced advertising and promotional activities, the operating losses of the hair care business have narrowed.
Compared with the above three businesses, the net sales of the perfume business declined by the smallest margin -1% to $630 million. Estee Lauder explained that the decline of perfume business was related to the challenges of global tourism retail business. In addition, the increased advertising and promotional activities to support new product launches and targeted expansion of consumer coverage have also led to an increase in sales expenses.
Regionally speaking, during the reporting period, Est é e Lauder Group experienced a decline in net sales in the Americas, Europe, Middle East and Africa (EMEA), and Asia Pacific markets. Among them, the net sales of the Americas and EMEA markets were 1.187 billion US dollars and 1.23 billion US dollars respectively, both of which decreased by 2% year-on-year. The net sales in the Asia Pacific market continued the downward trend of the 2024 fiscal year, decreasing by 11% year-on-year to $944 million.
Withdrawing the performance outlook for the fiscal year 2025, can the new 'leader' break through?
Given the complex industry environment, unpredictable turning points in the Asian tourism retail market, and changes in executive turnover, Est é e Lauder Group stated in its report that it has withdrawn its full year performance outlook for fiscal year 2025 and only released its second quarter performance forecast for fiscal year 2025.
For the performance of the second quarter of the 2025 fiscal year, Est é e Lauder Group believes that a series of economic stimulus measures introduced by China will bring medium to long-term growth to the beauty industry, but there is still some volatility in the short term, and it is expected that the stimulus measures will not lead to performance gains in the second quarter. Compared with the same period last year, the overall net sales of the group in the second quarter will decrease by 6% -8%.
It is worth noting that in the face of performance growth difficulties, Est é e Lauder Group, which is in a critical period of transformation, is about to welcome a new "leader" - just before the release of its financial report, the group announced the appointment of St é phane de La Faverie as the new president, CEO, and board member, effective from January 1, 2025. St é phane de La Faverie will replace Fu Yide, who will retire in June next year and has been working at Est é e Lauder Group for 16 years. Fu Yide will continue to support the work of St é phane de La Faverie in the coming months to ensure a seamless transition. As President and CEO, St é phane de La Faverie will report directly to the company's board of directors.
According to the information, St é phane de La Faverie is a veteran in the beauty industry with 25 years of industry experience. He joined Estee Lauder Group in 2011 and is currently responsible for managing the expansion and development of many brands, including Estee Lauder, Zu Malone, Le Labo and other brands. He has played a key role in strengthening the perfume product portfolio and the implementation of the company's profit recovery and growth plan. Before joining Est é e Lauder Group, he worked for L'Oreal Group.
Est é e Lauder stated that St é phane de La Faverie has further driven the brand to attract diverse consumer groups and expand its influence in the high-end beauty market in China through strategies such as product focus, digital priority, and high growth channels. Having worked with St é phane for many years, I am delighted to welcome him as the next President and CEO of the company starting from January 1, 2025. I believe that his profound knowledge and outstanding abilities, as well as his ability to combine inspiration and insight, will quickly and flexibly drive the company forward, "said Fu Yide in the first quarter financial report of the 2025 fiscal year.
From the selection of the new CEO, Est é e Lauder Group still attaches great importance to the Chinese market and brand business, and whether this "beauty veteran" can help the group reverse its decline after taking office remains to be tested by the market and time.
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