Jakarta, CNBC Indonesia – The world beauty products company, Estee Lauder, plans to lay off 3 percent to 5 percent of its employees worldwide. Launching from Reutersthis employee cut was carried out to increase margins which are currently declining due to customers in China starting to reduce purchases of expensive luxury products.
For information, according to records as of June 2023, Estee Lauder has around 62 thousand employees worldwide.
The Chinese government's policy of easing activity restrictions after the Covid-19 pandemic has apparently still not been able to increase Chinese people's demand or interest in expensive cosmetics.
However, the same report stated that this decision to lay off actually caused Estee Lauder's shares to jump by 19 percent.
Estee Lauder CEO, Fabrizio Freda, revealed that his company had seen the phenomenon of decreasing demand for products in China throughout the second quarter of 2023.
Meanwhile, Estee Lauder reported that net sales in the Asia-Pacific region fell 7 percent and overall margins fell 60 basis points in the second quarter of 2023.
Meanwhile, one of the factors causing the decline in sales of cosmetic products high end is the proliferation of local Chinese brands that local people can choose from.
“There are many local Chinese brands emerging. Many of these brands have decent quality and Chinese consumers are now more willing to try these (local) products than before,” said Luxury Goods Portfolio Manager at Tema ETF, Javier Gonzalez Lastra, quoted on Wednesday (7/2/2024).
Apart from layoffs in China, Estee Lauder will also cut its annual profit forecast for the second time because its business in the United States (US) is also slowing.
Reportedly, organic net sales in the Americas fell by 1 percent in the quarter, compared to 6 percent growth in the previous quarter.
Currently, the US company estimates full-year adjusted earnings per share in 2024 between US$2.08 to US$2.23 or around IDR 32,596 to IDR 34,946 (assuming an exchange rate of IDR 15,671/US$), compared to the US $2.17 to US$2.42 or around Rp. 34,008 to Rp. 37,926 previously.
Estee expects additional operating profit of between US$1.1 billion to US$1.4 billion or around IDR 17.24 trillion to IDR 21.94 trillion from efforts in the 2025 and 2026 fiscal years, up from US$800 million or around IDR 12.54 trillion to US $1 billion or around Rp. 15.67 trillion was previously estimated.
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