Estée Lauder (EL.N) is recapturing a bit of its glow. The cosmetics company behind Clinique, Bobbi Brown and Tom Ford unveiled plans to slash as much as 5% of its 62,000-person workforce and redouble efforts to shore up supply chains, raise prices and add luxury to its brands. These belated initiatives gave the shares a 13% boost on Monday, but things are still pretty ugly for boss Fabrizio Freda.
It has been a long slog. An inventory glut stuffed up the duty-free stores, contributing to a 60% tumble in the stock price from its December 2021 peak and a stark divergence with rival L’Oreal (OREP.PA). The latest results suggest problems in China, and Asian airport shops, are more than just a blip. At least Estée Lauder now expects incremental operating profit of $1.1 billion to $1.4 billion, up from an earlier $800 million to $1 billion and inching its way back to the $3.5 billion from a couple years ago.
There’s much work to do. Although some acquisitions are paying off, such as perfume and body lotion maker Le Labo, Estée Lauder is broadly struggling to keep up with hot brands such as elf Beauty (ELF.N). Developing new products, especially in skincare, will take time, and the company has been caught flat-footed as it clears stockpiles and builds a new plant in Japan. The makeover so far covers up only so much.
(By Sharon Lam)
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