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Estee Lauder Had Troubled Earnings for the Quarter

It looks like people are setting aside their beauty expenditures to give more room to essentials.

After stocks surged following a forecasted bountiful earnings season, Estee Lauder failed to live up to expectations.

Analysts predicted that Estee would have better earnings this quarter as more people have to stay inside their homes, thereby having the time to prioritize self-care.

Experts failed to consider that majority of the countries are undergoing a recession, resulting in a high unemployment rate.

With this, people are more inclined to save up than spend their cash on high-end products.

Sales of the brand’s lipstick slumped due to the requirement to wear a mask. Nevertheless, the company’s skincare line is still the most prominent performer, with $7.38 billion in sales.

Estee Lauder reported $14.29 billion net sales for the fiscal year ending on June 30, 2020. This is a 4% drop from the figures present last year, at $14.86 billion.

All things being equal, net sales had decreased by 3% resulting from store closures during lockdowns. Although this is a much conservative decline balanced by the acceleration in online sales.

Stocks fell by 5.3% in the premarket stock trading after the reported $462 million net loss from a $157 million net profit in the same period last year. The per-share price fell almost $15 to $198.27.

The adjusted loss translates to 53 cents per share, way below analyst predictions of 16 cents/share.

Still, it declared a dividend of 48 cents per share to be given on September 15. So far, Estee Lauder recorded a 3% year-to-date gain in the stock market index S&P 500.

 

Estee Lauder Will Let Go of 2,000 Workers

Following the shortfall, Estee Lauder announced that it would let go of 1,500 to 2,000 employees or 3% of its workforce. This is under the firm’s post-COVID Business Acceleration Program.

The roles will mainly come from point-of-sale employees and related support services.

If things go as planned, the beauty conglomerate will be shutting down unprofitable stores and beauty counters and investing more in digitization.

Similarly, it will allocate more resources on cross-channel content strategy, talent acquisition, advertising, and promotion.

Estee Lauder will close about 10% to 15% of its freestanding international branches and capitalize on online platforms to continuously cater to cross-border customers.

The reconstruction comes in a hefty sum of $400 million to $500 million, but long term yields will offset the initial investment.



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