Estee Lauder To Cut 2,000 Jobs, Close 15% Of Stores Amid Coronavirus-Related Sales Drop

Estee Lauder (EL) said on Thursday that it would cut 1,500 to 2,000 jobs as a result of a dip in fiscal 2020 sales due to temporary retail closures during the coronavirus pandemic. The company made the announcement as it released its fiscal 2020 earnings report.

The job cuts are expected to affect about 3% of its workforce globally and will align with closures of 10% to 15% of its freestanding stores that are underperforming.

Estee Lauder said that the layoffs would include temporary and part-time employees by eliminating some positions in areas that were most disrupted by the coronavirus pandemic. The company expects to take a $400 million to $500 million charge for the job cuts once implemented and other COVID-19 measures to yield a savings of $300 million to $400 million before taxes.

“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,” Fabrizio Freda, president and CEO, said in a statement.

For the quarter ending June 30, Estee Lauder reported net sales of $2.43 billion, down 32%, compared to $3.59 billion a year ago. Net loss was $460 million compared to net earnings of $160 million and diluted earning per share of 43 cents in Q4 2019.

Estee Lauder reported net sales of $14.29 billion for fiscal 2020, down 4% from $14.86 billion a year ago. Net sales decreased 3% compared to fiscal 2019, which was driven by retail store closure during the pandemic. However, the company did see an offset by what it called a “tremendous acceleration online.”

Estee Lauder said locations around the globe have reopened, but traffic has been severely reduced. The company said in the Americas, about 20% of stores still were closed at the end of June after shutting their doors temporarily in March.

Makeup sales for the company declined in all brands expect the La Mer and By Kilian lines, with foundation and lip products taking the biggest hit. Estee Lauder’s fragrance sales also decreased as well as its hair care lines Aveda and Bumble because of salon closures. The company saw strong sales of its Aveda’s Nutriplenish products.

Estee Lauder said it has $2.28 billion cash on hand and expects to see strong consumer demand for “high-quality products” despite the coronavirus pandemic. The company is targeting a 6% to 8% sales growth but said it is refraining from giving any specific guidance on its sales or EPS at this time because of the “uncertainty around the timing, speed and duration of the recovery from the adverse impacts of COVID-19.”

“In this new fiscal year, we remain focused on the safety and well-being of our employees and consumers,” Freda said. “Our sense of urgency to act on our recently announced racial equity commitments is strong. 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, which includes the exciting launch this month of Estée Lauder’s new Advanced Night Repair. We expect sales trends to improve sequentially each quarter.”

Shares of Estee Lauder were trading at $197.78 as of noon EDT, down $14.72 or 6.93%.