Estée Lauder Reports 6% Decline in Net Sales and $590 Million Loss in Q2 Fiscal 2025

The Estée Lauder Companies Inc. reported a significant decline in financial performance for the second quarter of fiscal 2025, ending December 31, 2024. The company recorded net sales of $4.004 billion, a decrease of 6% compared to $4.279 billion in the same period last year. This decline was primarily driven by a 12% drop in skin care sales, which fell to $1.921 billion from $2.173 billion, and a 1% decrease in makeup sales. The company also reported a net loss attributable to The Estée Lauder Companies Inc. of $590 million, or $(1.64) per diluted share, compared to net earnings of $313 million, or $0.87 per diluted share, in the prior year.

The financial results reflect a challenging retail environment, particularly in Asia, where consumer sentiment has been subdued. The Americas region saw a 2% decline in net sales, while Europe, the Middle East, and Africa experienced a 6% decrease. The Asia/Pacific region reported an 11% drop in sales, primarily due to lower performance in mainland China, Korea, and Hong Kong SAR. The company attributed these declines to various factors, including changes in consumer behavior and competitive pressures.

In terms of operational changes, Estée Lauder has initiated a Profit Recovery and Growth Plan (PRGP) aimed at rebuilding profit margins and enhancing operational efficiency. This includes a restructuring program that is expected to result in a reduction of approximately 5,800 to 7,000 positions globally, representing about 9-11% of its workforce. The restructuring is projected to incur charges between $1.2 billion and $1.6 billion before taxes, with anticipated annual gross benefits of $800 million to $1 billion once fully implemented.

The company also faced significant impairment charges during the quarter, totaling $861 million related to goodwill and other intangible assets, primarily from the TOM FORD and Too Faced brands. This contributed to an operating loss of $580 million for the quarter, compared to an operating income of $574 million in the prior year. The company’s total assets decreased to $19.76 billion from $21.68 billion as of June 30, 2024, reflecting the impact of these impairments and operational challenges.

Looking ahead, Estée Lauder anticipates continued volatility and uncertainty in the market, particularly in Asia, and is focused on executing its strategic initiatives to drive growth and improve profitability. The company remains committed to enhancing its product offerings and expanding its market presence while navigating the complexities of the current economic landscape.