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Estée Lauder Begins Long Recovery After Years of Sales Decline

Estée Lauder Begins Long Recovery After Years of Sales Decline

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Estée Lauder, the American multinational and the world’s second-largest cosmetics company after L’Oréal, has entered the early stages of a strategic turnaround after a prolonged period of underperformance. Known for its portfolio of skincare, makeup, fragrance, and haircare brands, including La Mer, Jo Malone London, Clinique, and Tom Ford Beauty, the group is responding to what has become a multi-year erosion in sales, margin, and market confidence.

The business has now posted its third consecutive year of revenue decline. Organic net sales fell by eight percent in fiscal 2025, with profitability dragged down by weaker demand in China, continued softness across its skincare and makeup categories, and a collapse in its once-lucrative travel retail segment. Full-year losses reached $785 million, and diluted earnings per share dropped 42 percent.

Travel retail, once a core distribution channel for Estée Lauder, now accounts for just 15 percent of total revenue, down from around one-third before the pandemic. Chinese consumers, previously the growth engine for many of its premium brands, are proving harder to convert. Meanwhile, a long-standing reliance on the grey-market “daigou” channel has left the group exposed as that market failed to recover post-COVID. In the US and Europe, the group continues to face heavy competition from newer, digitally native brands and changing consumer preferences, particularly among younger demographics.

Against this backdrop, the company has begun a deep operational reset. More than 3,200 roles have already been cut, with a further 3,800 under review, as part of its ‘Beauty Reimagined’ restructuring programme. The goal is to remove up to $1 billion in costs and streamline operations globally. Decentralisation is also under way, with full P&L accountability now being pushed to regional leadership teams to improve responsiveness and execution.

Digital channels are now playing a greater role in the group’s strategy. Online sales reached 31 percent of group revenue in 2025, the highest in the company’s history, supported by strong performance through Amazon’s Premium Beauty platform, TikTok Shop, and Southeast Asian e-commerce marketplaces like Shopee. While traditional department store performance continues to lag, the group has added nearly 40 freestanding stores focused on fragrance-led formats.

Brand-level innovation is beginning to show modest results. Clinique and MAC have both launched new product lines aimed at younger audiences, while Le Labo and Kilian Paris are helping to stabilise fragrance sales. Market share has started to recover in key regions, including China, Japan, and the United States.

The outlook remains cautious. Tariff pressures are expected to weigh on profits again in fiscal 2026, with the group estimating a $100 million impact, though mitigation efforts are already underway. Competition remains intense, and legacy brand performance is yet to fully stabilise.

Still, the direction of travel has shifted. Estée Lauder is no longer trying to restore its previous model. Instead, it is working to build a leaner, more regionally aligned business, better suited to today’s fragmented and fast-moving global beauty market.

#BusinessTurnaround #RetailStrategy #CosmeticsIndustry #K2BusinessPartners

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