Estée Lauder is planning to cut up to 2,000 jobs worldwide as it shuts stores and department store beauty counters after a slump in sales and profits during the coronavirus pandemic.
The makeup, skincare and perfume company, which also owns brands such as Joe Malone, Clinique, La Mer and MAC, said it intended to shut between 10% and 15% of its freestanding stores, with job cuts amounting to about 3% of its global workforce - mostly in stores as well as related support roles.
The cuts are expected to save the company up to $400m (£300m) a year. Estée Lauder revealed net profits more than halved to $680m in the year to June. The fall came despite the group making $800m worth of savings including cuts to advertising, travel and a recruitment freeze. A quarterly dividend due in June was also ditched.
While online sales surged during the pandemic, this did not fully offset the temporary closure of retail outlets around the world, Estée Lauder said. Sales were also hit by the reduction in air travel, which affected trade at airports.
Fabrizio Freda, its chief executive, said the group had delivered record sales and earnings growth in the first half of the financial year . But then the coronavirus crisis hit its business, owing to the closure of offices and retailers as well as significant decline in social gatherings, the company added. Demand for skin care was resilient, with sales up by a quarter for core products from Estée Lauder and La Mer. However, sales of makeup, haircare and fragrance all fell while beauty counters and salons were closed for weeks.
Physical distancing rules meant that close contact beauty treatments, such as facials, makeovers and eyebrow grooming, which are key parts of the sales pitch in department store beauty halls’, only resumed on 15 August in England. Many beauty halls remain closed.
Sales of lipstick, which is traditionally counted as a comforting purchase in hard times, have fallen during the crisis partly as a result of the need to wear masks in many public places.
The Estée Lauder figures reflect changes across the industry.The UK health & beauty chain Boots plans to shed 4,000 jobs – the equivalent of 7% of its workforce – despite strong online growth. The beauty group L’Oreal, said its sales decreased by more than 11% in the first half of this year.
Estée Lauder said the pandemic had accelerated changes in where consumers shop, what they value, why they purchase products and how they engage with brands.
These latest job cuts came as the US reported a 135,000 increase in the number of people seeking unemployment benefits. Claims rose to 1.1m last week, compared with an expected fall to 925,000, evidence that many employers continued to slash jobs as coronavirus affects the economy. A rising number of people who have lost jobs said they consider their loss to be permanent.
source https://www.theguardian.com/business/2020/aug/20/estee-lauder-plans-to-cut-up-to-2000-jobs-globally-profits-dive-coronavirus
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