Estee Lauder is slashing up to 2,000 jobs and closing up to 15% of its stores globally. Company eyes growth in skin and hair care as makeup sales fall.

  • Estée Lauder announced its "Post-COVID Business Acceleration Program" on Thursday, a plan that involves a series of sweeping cuts in order to account for sales slumps during the pandemic. 
  • As part of the plan, up to 2,000 jobs will be slashed and up to 15% of freestanding global stores will be permanently shuttered. 
  • However, CEO Estee Lauder CEO Fabrizio Freda said in a call with investors on Thursday he is confident that growing categories like skincare will bolster the company moving forward. 
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Beauty giant Estée Lauder is slashing up to 2,000 jobs and permanently closing up to 15% of its total stores due to sales slumps amid the pandemic. 

The company reported a 4% decrease in annual sales for the fiscal year ending on June 30 on Thursday, while at the same time announcing its "Post-COVID Business Acceleration Program," a two-year initiative designed to "rebalance investments to address the dramatic shifts in the distribution landscape and consumer behavior post-COVID-19."

According to a post on the Estée Lauder website, the plan involves a series of sweeping reductions, including cutting between 1,500 and 2,000 positions, "primarily point of sale employees and related support staff in the areas that were the most disrupted."

The plan will also involve the permanent closure of between 10-15% of its international freestanding stores, "as well as certain less productive department store counters that the company elects to close," the post reads. 

Like many sectors of the retail industry, cosmetics have taken a hit due to shifting consumer demand, record unemployment rates, and the economic recession. Product categories lipstick have especially struggled, given the widespread use of masks that conceal the lips, though beauty companies including Estée Lauder have found bright spots in skincare and eye makeup. 

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

In a call with investors yesterday, Estée Lauder CEO Fabrizio Freda said skincare has "performed exceptionally well." Freda said that while the lipstick index — a term coined by Estee Lauder chairman Leonard Lauder in 2001 to explain the growth and resilience of lipstick sales during economic decline — may be obsolete, it has instead switched categories to skincare. 

"Somebody was asking me if the lipstick index is finished … [the] concept was that beauty is a resilient category, both in situations of crisis like this one and in particular situation of recession risk, because they are affordable purchases for indulging and taking care of yourself," Freda said on the call. "Consumers really love their routines. Now this has remained exactly true also in this crisis. What has changed is the category."

 

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