The Estée Lauder Companies has launched a multi-year initiative named Leading Beauty Forward that will better leverage its cost structure and free resources to invest in future growth.
The company says that the initiative is designed to enhance the Company’s go-to-market capabilities, reinforce its leadership in global prestige beauty and create sustainable value.
ELC is proactively anticipating long-term industry trends and positioning its brands in more promising and faster growing areas, said President and Chief Executive Officer Fabrizio Freda.
“We are launching this initiative from a position of exceptional strength,” noted Freda. “Leading Beauty Forward should further position us better to continue winning on a complex global stage and generate savings to help sustain our long-term sales growth and margin progress.
Leading Beauty Forward will begin during the Company’s fiscal 2016 fourth quarter, with specific initiatives being approved through the end of fiscal 2019, to be completed through fiscal 2021. The initiative will include restructuring select corporate functions that support the Company’s brands, channels and geographies through global and regional shared services as well as investing in brand growth with new products, social media, communications, in-store merchandising, point-of-sale activities and advertising.
The Company expects implementing these initiatives could cost between $600 million and $700 million, before taxes, consisting of employee-related costs, asset write-offs and other costs. ELC also estimates that the initiative will eliminate about 2.5% of its current workforce, approximately 900 to 1,200 positions globally.
“Reallocating resources to new capabilities and higher-growth areas, and lowering our cost base will regrettably include selective workforce reductions in certain areas of the Company. We will make difficult decisions about affected employees with sensitivity, consistent with the values of our Company and will make a concerted effort to retrain and redeploy employees wherever possible,” said Freda.
Once fully implemented, Leading Beauty Forward is expected to yield annual net benefits of between $200 million and $300 million, before tax, of which a portion is expected to be reinvested in future initiatives to drive sustainable, profitable sales growth. This action should not affect the Company’s previously communicated operating margin goals through fiscal 2018, and is expected to deliver additional benefits thereafter.