Estée Lauder cuts up to 10k employees and raises forecast. What about the stock?

American cosmetics giant Estée Lauder, owner of cosmetics and skin care brands La Ma and The Ordinary, on May 1 announced plans to eliminate up to 3,000 more jobs worldwide as part of an accelerated restructuring program. Thus, the total number of staff reductions could affect up to 10,000 employees, the company said in its release.

Estée Lauder also raised its full-year earnings forecast, which supported its shares: they rose more than 13% in Ma. 1 trading, but then slowed to about 3%.

Estée Lauder in the report for the third quarter of fiscal year 2026, which ended March 31, reported plans to cut up to 3,000 more jobs and save an additional $200 million to accelerate the implementation of the business recovery program. Thus, the total number of layoffs could affect up to 10,000 employees - against the previous plan of 7,000 announced a year ago, the company said. This should increase Estée Lauder's annual savings to $1 billion-$1.2 billion before taxes against the previous estimate of $0.8 billion-$1 billion.

And more than 70% of additional reductions will fall on the staff of department stores, the company said. This is part of the strategy of Estée Lauder CEO Stéphane de La Faverie (headed the company in January 2025), which involves moving Estée Lauder sales to online and faster-growing channels such as Amazon and TikTok Shop, Bloomberg notes.

Estée Lauder has a total workforce of about 57,000 as of June 30, 2025, according to the company's latest annual report.

- Estée Lauder's third-quarter revenue rose 5% year-over-year to $3.71 billion, beating analysts' estimates of $3.69 billion, according to LSEG data cited by Reuters. Adjusted earnings came in at $0.88 per share versus expectations of $0.65.

- Organic sales in China grew 6% year-on-year during the same time. Estée Lauder's competitors - L'Oréal, Procter & Gamble and LVMH - had earlier also reported strong sales of premium cosmetics in the Chinese market, reinforcing expectations of a recovery for the U.S. company in a region where Estée Lauder had previously lagged, Bloomberg notes.

At the same time, Estée Lauder's sales in the Americas, including the US, did not grow in the final quarter. The company is under pressure in its home market due to high competition from numerous cosmetics startups.

- By category, Estée Lauder perfume products showed the strongest sales growth, with sales up 10% year-on-year in the third quarter, while other categories - skincare, makeup and hair products - saw little or no growth.

- Against this backdrop, Estée Lauder raised its earnings forecast for the remainder of the fiscal year: the company now expects adjusted earnings in the range of $2.35-$2.45 per share, above analysts' estimates. In February, Estée Lauder forecast adjusted earnings of $2.05-$2.25 per share by the end of the fiscal year. The company also expects organic revenue growth through fiscal 2026 of 3%, the upper end of its February forecast.

That said, the forecast is based on the assumption that the geopolitical situation will not worsen and related risks - including US President Donald Trump's administration's duties, consumer sentiment and problems in the Middle East - will not intensify after Ma 2026.

- For the next fiscal year, which will end in June 2027, Estée Lauder expects organic revenue growth of 3-5%, while analysts forecast this figure at around 3.7%.

Shares of Estée Lauder rose by more than 13% in trading on May 1, but then slightly reduced the growth rate and at the time of publication added about 3% relative to the closing level on Ma. 30. Since the beginning of the year, the company's securities have lost almost 25%, while the S&P 500 index has added about 5%.

"The increase in planned employee cuts may indicate that in the context of a possible merger [with Spanish cosmetics giant Puig], Estée Lauder will be able to cut more positions on its side while retaining Puig employees," Reuters quoted analyst Skye Kanaves of eMarketer as saying. On March 23, it was reported that Estée Lauder and Puig, which owns designer brands such as Jean Paul Gaultier, Rabanne (formerly Paco Rabanne) and Dries Van Noten, were in talks about a possible merger. Estée Lauder did not comment on the deal during a Friday conference call with analysts, while Puig said talks are ongoing, Bloomberg reports.

Estée Lauder's financial results confirm that "the worst is over as business restructuring measures are starting to take effect and the company is gradually moving in the right direction," said RBC Capital Markets analyst Nick Mody.

The Estée Lauder and Puig deal "has obvious strategic logic given Puig's strong position in perfumery, higher growth and margins," said Raymond James analyst Olivia Tong. "However, we are cautious about Estée Lauder's ability to realize such a large transaction at the same time as undertaking its own transformation," she added.

In general, Wall Street looks at Estée Lauder shares moderately positively: the majority of analysts covering the company's shares take a neutral stance and advise to keep the company's securities in the portfolio (15 out of 28 experts hold this opinion). 12 analysts advise to buy Estée Lauder shares, and only one - to sell. The average target price of Wall Street analysts for Estée Lauder shares implies their growth by almost 25% relative to the last closing price.

This article was AI-translated and verified by a human editor