Estee Lauder's stock is experiencing a significant decline following the announcement of a major organizational restructuring under the new "Beauty Reimagined" vision led by President and CEO Stéphane de La Faverie. The company plans to consolidate its regional structure into four geographic clusters to enhance efficiency and agility, effective April 1, 2025. This restructuring aims to create a flatter, leaner organization with simplified operations, which includes the consolidation of EMEA, UK&I, and Emerging Markets under Nadine Graf, and the creation of an Americas cluster under Tara Simon and Amber English. The restructuring also involves reorganizing brands into category clusters under Jane Hertzmark Hudis as Executive VP, Chief Brand Officer.
The strategic overhaul is part of Estee Lauder's effort to restore sustainable sales growth and achieve a solid double-digit adjusted operating margin over the next few years. However, the market appears to be reacting negatively to the immediate implications of these changes, as the company reported a 6% decline in net sales for the fiscal second quarter ended December 31, 2024. The operating margin also saw a significant drop to -14.5% from 13.4% in the prior-year period, primarily due to $861 million in goodwill and other intangible asset impairments. These financial results, coupled with the sweeping organizational changes, have likely contributed to investor concerns about the company's near-term performance.
Estee Lauder (EL) shares are down 7.3% to $76.7257 as of 8:43 am on February 4th, from its previous close of $82.77 on February 3rd.