The Estee Lauder Companies announces Post-COVID cost-cutting plan as Q42020 sales dive 32 percent

The Estee Lauder Companies announces Post-COVID cost-cutting plan as Q42020 sales dive 32 percent

THE WHAT? The Estee Lauder Companies has announced its results for the final quarter and full year of fiscal 2020. A sharp 32 percent sales decrease in the final quarter contributed to an overall 4 percent drop in sales for the year, for a total of US$14.29 billion.  

THE DETAILS Skin care was the saving grace for FY2020 in terms of category growth, rising 13 percent yoy on a reported basis, while all other sectors lost ground. Make-up was the worst performer with sales plummeting by 18 percent.

Asia Pacific was the strongest performing region, with sales rising 15 percent (reported) on 2019 figures, to US$4,238 million, The Americas, in contrast, saw net sales dive 20 percent while Europe, the Middle East & Africa stood relatively steady, dipping 3 percent.

As a result of the pandemic rapidly accelerating macro trends in global prestige beauty, the company has announced a two-year initiative, named the Post-COVID Business Acceleration Program, to reduce its retail footprint, and increase digital investments. Starting in the first quarter of fiscal 2021, the company will seek to realign its distribution network, closing some 10-15 percent of its freestanding stores and reducing headcount by some 3 percent (which equates to some 1,500 to 2,000 jobs globally).

THE WHY? Fabrizio Freda, President and Chief Executive Officer said, “Fiscal 2020 was a year without parallel, as we delivered record sales and exceptionally strong adjusted EPS growth in our first half and navigated with agility through an unprecedented pandemic in our second half.

“We enter fiscal 2021 with cautious optimism, given the vibrancy of our skin care portfolio, acceleration in Asia/Pacific, momentum online globally, and robust innovation pipeline. We expect sales trends to improve sequentially each quarter.

“Our strategic priorities for fiscal 2021 rightly balance investment in these engines with cost discipline amid the ongoing pandemic. Through the Post-COVID Business Acceleration Program announced today, we are better aligning our brick-and-mortar footprint to improve productivity and invest for growth. We are well-positioned to drive growth as the market dynamics support it, yet remain equally mindful of the effects of COVID-19 on consumers, the retail sector and economics, in general, as well as geopolitical uncertainty.”