Estée Lauder, the renowned beauty company, has recently announced a significant decrease in profits and plans to undertake various measures to address the challenges brought on by the COVID-19 pandemic. With travel restrictions and store closures impacting sales, the company has experienced a decline in demand for its high-end makeup brands.

During the lockdown period, Estée Lauder observed a strong demand for skincare products as consumers focused on self-care at home. However, the demand for makeup products has declined as more individuals adapt to remote work and spend less time outside. This shift in consumer behavior has resulted in a 32% decrease in sales for Estée Lauder during the fourth quarter.

To navigate the changing market landscape, Estée Lauder intends to make strategic adjustments to its business operations. The company plans to cut approximately 1,500 to 2,000 jobs, equivalent to around 3% of its global workforce. Additionally, it anticipates closing 10% to 15% of its freestanding stores to align with consumers’ increasing preference for online beauty shopping and changing preferences.

The impact of the pandemic has particularly affected Estée Lauder’s makeup brands like M.A.C. and Too Faced, which have seen reduced sales due to lower demand for foundations and lip products. Overall, Estée Lauder’s makeup brands have experienced an 18% drop in annual sales, which reverses the 5% growth witnessed in the first half of the year.

Estée Lauder’s forecast for the first quarter of the upcoming fiscal year falls below analysts’ expectations. The company expects an adjusted profit per share between 80 cents and 85 cents, compared to the estimated $1.22. Additionally, it predicts a 12% to 13% decline in sales, surpassing the projected 11.42% drop.

In the fourth quarter, Estée Lauder reported a 32% decrease in net sales, reaching $2.43 billion, slightly missing the estimated $2.45 billion. Excluding items, the company reported a larger than expected loss of 53 cents per share. However, despite the challenges faced, Estée Lauder has reinstated its quarterly dividend payment, which had been suspended in April.

The current situation presents both long-term challenges and opportunities for Estée Lauder. With consumers continuing to prioritize skincare and online shopping, the company needs to adapt its product offerings and retail strategies to meet these evolving trends. By taking proactive measures such as store closures and streamlining operations, Estée Lauder aims to navigate the uncertain market conditions and position itself for future success.

Relevant Links:
1. Forbes: Why is Estée Lauder in Cutting Mode? Here’s the Real Reason
2. Business of Fashion: Estée Lauder Cuts Jobs, Store Closures Amidst Covid-19 Challenges