Estee Lauder Cos. is cutting jobs and closing stores as part of its multiyear restructuring plan on account of the impact of the coronavirus pandemic on the cosmetics industry.
The beauty giant plans to reduce its workforce by 1,500 to 2,000 jobs worldwide, or about 3% of total staff, and also boost its digital operations after pandemic lockdowns hit demand for makeup. Most of these cuts will involve store employees and support workers.
As part of the two-year initiative, the management will also shutter 10% to 15% of Estee Lauder’s free-standing stores and eliminate some department-store beauty counters as consumers shift to more online purchases. The firm expects to take restructuring and other pretax charges of between $400 Mn and $500 Mn.
Chief Executive Officer Fabrizio Freda stated, “We are better aligning our brick-and-mortar footprint to improve productivity and invest for growth.”
He added the company enters its new fiscal year with “cautious optimism.”
The cuts follow the many measures the company has been taking to preserve cash to manage the business during the pandemic. Measures including employee furloughs, temporary salary reductions, and cuts to capital investments have resulted in nearly $1.1 Bn in savings. The cuts reflect the severity of the pandemic’s impact on the beauty industry. Overall, cosmetics sellers have fared better than other non-essential retailers, such as apparel and fashion accessories.
In the fourth quarter that ended June 30, net sales fell 32% to $2.43 Bn. The firm further expects net sales in the current period to fall by 12% to 13%, indicating the toll the pandemic has taken on the industry.