The Estée Lauder Companies has unveiled plans to close 15% of its stores and concessions across its global real estate portfolio. Due to COVID-19 Directives, many retail stores across most countries, whether operated by the company or its customers, closed for some period of time and have experienced severely reduced consumer traffic as they re-open. The pandemic has rapidly accelerated macro trends in global prestige beauty that were expected over a longer time horizon. As a result, the company has announced a two-year initiative to rebalance investments to address the dramatic shifts in the distribution landscape and consumer behaviour post-COVID-19. This will include reducing Estée Lauder’s retail footprint, primarily in Europe, the Middle East & Africa and in North America, and increasing digital investments to reflect a dramatic shift in consumer shopping to online and omnichannel capabilities in the more productive brick-and-mortar footprint. This program is expected to position the company to better execute its long-term strategy while strengthening its financial flexibility. Post-COVID Business Acceleration Program will begin during the company’s fiscal 2021 first quarter. Specific initiatives are expected to be approved through the end of fiscal 2022 and completed through fiscal 2023.
Key actions include:
- Realignment of the company’s distribution network, reflecting certain department store closures and freestanding store rationalization while accelerating the shift to online. Further investment in digital capabilities, omnichannel, talent, and advertising and promotional activities to support continued share improvement and business acceleration.
- Implementing increased confident beauty practices at retail and adoption of new ways of working, in light of the ongoing pandemic.
- In connection with the Post-COVID Business Acceleration Program, at this time the company estimates a net reduction in the range of approximately 1,500 to 2,000 positions globally, primarily point of sale employees and related support staff in the areas that were the most disrupted, which is about 3% of its current workforce including temporary and part-time employees. This reduction takes into account the elimination of some positions, retraining and redeployment of certain employees, and investment in new positions in key areas like online.
- The company also estimates the closure of between 10-15% of its freestanding stores globally, as well as certain less productive department store counters that the company elects to close.
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. The second half also marked a period of profound pain as tragic events in the United States highlighted the systemic racial injustice that has plagued our society for far too long. In this challenging year, our multiple engines of growth strategy proved highly effective. We quickly pivoted to capture consumption online during COVID-19 as retail stores around the world temporarily closed. In this new fiscal year, we remain focused on the safety and well-being of our employees and consumers. 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. 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, 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.”
