2020-08-24 16:25:03

Estee Lauder To Cut 2,000 Jobs After Reporting a Loss

2020-08-24 16:25:03

The Estée Lauder Companies reported its Fiscal 2020 Earnings today -- and is implementing a hiring freeze, furloughs and more to reduce expenses due to Covid-19's impact.

The company posted a 32% decline in sales in the fourth quarter -- and will cut approximately 1,500 to 2,000 positions. The Estée Lauder Cos. also expects to close between 10-15% of its freestanding stores globally.

The lay offs will be primarily point of sale employees and related support staff "in the areas that were the most disrupted," the company states, which is about 3% of its current workforce including temporary and part-time employees.

A statement says net sales decreased by 4% to $14.29 billion for the fiscal year ended June 30, 2020. Excluding the impact of currency translation, net sales decreased 3%. The company also reported net earnings of $0.68 billion, compared with net earnings of $1.79 billion last year.

The company says it is also reducing advertising and promotion expenses, and has already temporarily reduced salaries for senior executives and other management employees. Cash retainers for the Board of Directors were also temporarily eliminated. "Combined, these resulted in approximately $800 million of savings from its planned spending prior to the pandemic in the last five months of fiscal 2020," a statement says.

Fabrizio Freda Makes a Statement

Fabrizio Freda, president and chief executive officer says, “Fiscal 2020 was a year without parallel, as we delivered record sales and exceptionally strong adjusted EPS growth in our first half and navigated with agility through an unprecedented pandemic in our second half."

Freda continues, "The second half also marked a period of profound pain as tragic events in the United States highlighted the systemic racial injustice that has plagued our society for far too long."

He notes that the Estée Lauder brand grew double-digits for the third consecutive year, and its skin care category grew -- and was further boosted by the acquisition of Dr. Jart+. Freda adds, "And our online channel surged," says Freda. "We quickly pivoted to capture consumption online during Covid-19 as retail stores around the world temporarily closed.”

Retail Store Closures Caused the Decline

The decline in sales was driven by retail store closures as a result of the global spread of Covid-19, which was partially offset by the rise in online sales, Estée Lauder Cos. states. 

In the U.S., the company's retail stores began closing in March and by the end of June, approximately 20% of the stores remained closed. In Europe, the Middle East & Africa, retail stores began closing in early March, and 15% of the stores remained closed at the end of June. In Asia/Pacific, nearly all retail stores have re-opened after many stores closed for most of February through April 2020. Travel retail also continues to be impacted, as air travel has been curtailed, globally. 

Consumers Prefer Skin Care & Hair Care Over Makeup & Fragrance

In addition to retail store closures, consumer preferences have changed -- and this is further impacting business, especially for MAC and Too Faced Cosmetics.

Estée Lauder Cos. states, "Covid-19 and its wide-ranging impacts have influenced consumer preferences..due to the closures of offices, retail stores and other businesses and the significant decline in social gatherings. The demand for skin care and hair care products has been more resilient than the demand for makeup and fragrance."

The company adds, "Within skin care, the demand for products in hero franchises has remained strong, driving double-digit growth at the Estée Lauder brand during the fourth quarter of fiscal 2020."