Estee Lauder, the renowned US-based luxury beauty and skin care company, has initiated a significant round of layoffs, cutting 2,600 employees as part of a broader plan to eliminate up to 7,000 jobs globally. This move comes in response to a sharp 10% drop in sales during the third quarter of the 2025 fiscal year, reflecting the mounting challenges faced by the company in a shifting global market. The layoffs, which represent about 11% of Estee Lauder’s total workforce, are a central element of the company’s ongoing restructuring strategy aimed at restoring profitability and driving future growth.
In February 2025, the firm first declared its plan to start a massive personnel reduction, raising its initial estimates of employment cuts from 3,000 to a goal range of 5,800 to 7,000 positions. By the end of fiscal 2026, the reorganization should be finished. Estee Lauder has already authorized $623 million for severance fees, and the entire restructure is expected to result in one-time charges of up to $1.6 billion. In spite of these initial expenses, the business expects to save up to $1 billion a year, which will be put back into areas that interact with customers and new product development to promote steady sales growth.
Sales Decline and Profit Drop Highlight Industry Challenges:
The decision to reduce its workforce comes amid a challenging period for Estee Lauder, as the company grapples with declining demand in key markets. For the third quarter, Estee Lauder reported net sales of $3.55 billion, marking a 10% decrease from the previous year. Net profit fell dramatically to $306 million, down from $531 million in the same period last year-a 42% decline. The company’s stock has reflected this turbulence, dropping 20% in 2025, significantly underperforming the broader S&P 500 index.
A major factor behind the sales slump is the ongoing weakness in the Asia-Pacific region, particularly in China, which accounted for over 31% of Estee Lauder’s overall sales in fiscal 2024. The company’s travel retail business, especially at airports and tourist destinations in China and Korea, has been hit hard by shifts in duty-free business models and subdued consumer sentiment. Estee Lauder expects this trend to continue, forecasting a wider double-digit net sales decline in its global travel retail business for the fourth quarter. In the Americas, sales have also been sluggish, with organic net sales dropping by 5%, attributed to weak retail performance and declining consumer confidence.
Despite the overall decline, Estee Lauder’s adjusted earnings per share for the quarter came in at 65 cents, surpassing analyst expectations of 31 cents. However, the company has revised its outlook for the full year, projecting adjusted earnings per share of $1.39 for 2025, down sharply from $2.59 in 2024.
Strategic Shifts and Initiatives for Recovery:
In response to these challenges, Estee Lauder is not only reducing its workforce but also implementing a series of strategic shifts to streamline operations and enhance competitiveness. The company is consolidating its procurement processes and re-evaluating suppliers to adopt a more competitive approach to spending. These measures are designed to improve operating margins and free up capital for reinvestment in areas that directly engage consumers.
CEO Stéphane de La Faverie has emphasized the company’s commitment to transforming its operating model to become leaner, faster, and more agile. The restructuring, branded internally as the “Beauty Reimagined” plan, aims to position Estee Lauder as the most consumer-centric prestige beauty company globally. Alongside cost-cutting, the company is accelerating product innovation, with new launches such as MAC’s Nudes collection and Jo Malone’s new body spray, as well as expanding its retail footprint with new Le Labo stores in China and the US.
Estee Lauder’s leadership believes these moves will help restore sustainable sales growth and achieve a solid double-digit adjusted operating margin over the next few years. The company’s gross margin has already improved by 310 basis points in the third quarter as a result of its cost-saving efforts.
Conclusion:
As it looks to bounce back from the present slump, Estee Lauder has a difficult road ahead of it. For the entire fiscal year 2025, the business expects an 8% to 9% drop in net sales. The global travel retail segment is expected to be further impacted by ongoing changes in retailer strategy and the persistently low demand from Chinese consumers. Although the business expects the adjusted gross margin to stay strong at about 73.5%, it admits that shifting consumer habits and economic concerns will continue to put its resilience to the test.
While the layoffs and restructuring are difficult steps, Estee Lauder’s leadership remains focused on restoring profitability and positioning the company for long-term growth. The impact of these measures will be closely watched by industry analysts and stakeholders as the luxury beauty giant navigates one of the most challenging periods in its recent history.
