MW Estée Lauder to cut up to 7,000 jobs as China and duty-free sales stay weak

By Steve Gelsi

Cosmetics company has already approved the lay off of 3,200 people, and may reduce head count by another 3,800, with expects restructuring charges of up to $1.6 billion

Estée Lauder posted a wider loss due partly to severance costs as its sales fell 3% in Asia/Pacific in the fourth quarter.

Estée Lauder Co.'s stock dropped in early trading Wednesday after the beauty products maker warned of a full-year profit miss and said it was cutting up to 7,000 jobs, as it continues to face headwinds from its China business, lower sales at duty-free shops and tariffs.

Estée Lauder said it has approved 3,200 job cuts as of Aug. 13, with severance and other charges of $747 million, but it may ultimately lay off another 2,600 to 3,800 people. The total number of job cuts could represent up to about 12% of the company's workforce as of June 30.

All told, the company expects restructuring and other changes to range from $1.2 billion and $1.6 billion for employee costs, asset-related costs, contract terminations and other costs.

Estée Lauder's stock $(EL)$ dropped 8.5% in premarket trading. If the losses hold through the session, it would be the stock's biggest drop since it fell 9% on April 4.

The restructuring will generate $800 million to $1 billion of annual cost savings to boost its operating margin and "fuel reinvestment in consumer-facing areas to drive sustainable sales growth," the company said.

Looking ahead, Estée Lauder said it expects about $100 million in tariff-related headwinds to affect its fiscal 2026 profitability as it weighs potential price increases.

For fiscal 2026, Estée Lauder said it expects adjusted profit of $1.90 to $2.10 a share, below the current FactSet consensus estimate of $2.20 a share.

For the fiscal fourth quarter to June 30, Estée Lauder said it faced sales "deterioration" mostly due to a double-digit percentage decline in its global travel retail business, which includes sales of luxury items at duty-free shops in airports and cruise terminals. The company also cited softness in mainland China from "ongoing subdued consumer sentiment and tighter inventory management by some retailers."

Sales of its skin-care products - its largest line of business - fell 16% in the fourth quarter to $1.71 billion, while makeup dropped 11% to $982 million.

The company's fourth-quarter loss widened to $546 million, or $1.51 a share, from a loss of $284 million, or 79 cents a share, in the year-ago quarter. The latest quarter included $527 million of combined restructuring intangible asset impairment charges, or about $1.12 a share.

On an adjusted basis, which excludes nonrecurring items, earnings per share fell to 9 cents from 64 cents in the year-ago period and matched the FactSet consensus.

Revenue dropped 12% to $3.41 billion but came in ahead of the analyst estimate of $3.39 billion.

Its Asia/Pacific sales fell 3% to $1.17 billion, while Middle East and Africa sales fell 22% to $1.29 billion and its Americas sales dropped 6% to $949 million.

The company said it decided to cut its exposure to reseller activity, which also impacted revenue.

"Retailer shifts in strategies toward more profitable duty free business models in both Korea and mainland China...led to lower replenishment orders," the company said.

On the plus side, Estée Lauder said it's expecting a return of mid-single-digit sales growth in China, as well as improved shipments as it reduces its exposure to reseller activity.

Chief Executive Stéphane de La Faverie said Estée Lauder has faced "continued volatility" but it sees signs of momentum, with plans to grow organic sales in fiscal 2026 after three years of declines.

-Steve Gelsi

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August 20, 2025 08:57 ET (12:57 GMT)

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