Estee Lauder shares soar after earnings beat and plans to lay off thousands of workers
07 Feb 2024 --- Estee Lauder’s restructuring plans sent the stock soaring this week after the cosmetics giant said it would retrain and redeploy some employees while cutting up to 3,000 jobs, representing 3% to 5% of its workforce.
The owner of brands such as Clinique, MAC and Tom Ford promises to become a “leaner” company that is more agile and capable of adapting to the latest beauty trends, often from social media.
While reporting a 43% drop in adjusted earnings for the fiscal second quarter, the earnings release was better than analysts expected. CEO Fabrizio Fredo said he was keeping an eye on China
“We delivered our organic sales outlook and exceeded expectations for profitability. The Ordinary and La Mer in Skin Care, Clinique in Makeup, Le Labo and Jo Malone London in Fragrance performed strongly. Many developed and emerging markets worldwide continued to grow organically and at retail. While mainland China and Asia travel retail declined, our retail sales trended ahead of organic sales, and these businesses are poised to return to organic sales growth in the second half.”
On an analysts call Freda also admitted to seeing “a small reduction in market share” in China during its fiscal second quarter but is confident the second half of the current fiscal year will show “strong organic sales growth.” He also expects the company’s Profit Recovery Plan to produce positive results in the next fiscal year.
Estee Lauder stock soars after plan to cut thousands of jobs.Flat fragrance sales
Estee Lauder reported flat fragrance sales in its latest quarter, with “hero” brands such as Le Labo, Tom Ford and Jo Malone doing their best to offset a decline on the Estee Lauder side. Skin care net sales fell 10% due to weaker demand in China.
The report follows a string of companies experiencing strong fragrance sales since last year as many shoppers sought solace in “affordable luxuries” such as cosmetics and fragrances, helping companies post record sales and profits.
Luxury brand profits
It’s been a mixed bag for earnings this year, with companies such as LVMH proving wealthier consumers have been relatively immune to the effects of a high inflationary environment. At the same time, “affordable luxuries” like cosmetics and fragrances helped boost its bottom line.
LVMH posted solid results in its fourth quarter, with annual growth in its perfume and cosmetics division soaring 11% year-over-year.
The stock jumped higher on the news, with many analysts seeing LVMH’s results as a sign the luxury goods space may not experience the sharp downtown previously expected.
By Anita Sharma
