Estée in Distress

Estée Lauder
Estée Lauder Companies’s strategic missteps, on some level, stem from a fundamental misunderstanding of how “luxury” is defined by the average American consumer. Photo: Ron Galella, Ltd./Contributor
Rachel Strugatz
February 7, 2024

On Monday, The Estée Lauder Companies reported what seemed like jejune or even slightly bleak earnings: Sales declined for a sixth consecutive quarter, net sales dropped by seven percent, and the management team announced a restructuring plan to lay off up to 5 percent of its workforce, or roughly 3,100 positions. And yet, this not-good-but-could-be-worse performance delighted Wall Street analysts. The stock jumped 12 percent, itself an indication of the current state of affairs at America’s largest family-controlled beauty conglomerate. 

Yes, yes, obviously the last few years have been fraught and complex at Estée for various reasons. Lauder has ignored how and where Americans shop for beauty. The company was reluctant to participate in the “specialty retail” channel (Sephora and Ulta Beauty operate close to 2,000 doors in the Americas) until it was practically too late. MAC Cosmetics, for example, didn’t enter Ulta until 2017, a good decade after many of its competitors were already there. By then, department stores—where Estée Lauder, MAC Cosmetics, Clinique, and Bobbi Brown thrived for decades—were in the midst of steep decline. And I’m not even getting into the company’s overreliance on the Asian market, where a weak travel retail business and the reselling of unregulated products continue to pose problems. (The latter led to the filing of a class-action lawsuit on January 22 alleging that ELC misled investors about revenue guidance last year.) In fiscal 2023, net sales were down 10 percent and net earnings totaled just $1 billion, down from $2.4 billion a year earlier.