Estee Lauder leapt Monday to lead the S&P 500 after announcing layoffs and a new restructuring plan during its Q2 earnings beat. Meanwhile, ELF Beauty eyed a new all-time-high ahead of its Q3 report late Tuesday.
Estee Lauder reported a 43% adjusted earnings drop to 88 cents per share, after four quarters of accelerating declines and beating FactSet estimates of 54 cents. Net sales fell 7% to $4.28 billion, but came in above forecasts of $4.19 billion.
Estee Lauder reported an 8% decrease in organic net sales which it attributed to challenges in Asia travel retail and ongoing softness in prestige beauty brands in mainland China. The decline also reflected 1% impact due to business disruptions in Israel and the Middle East.
Estee Lauder Restructuring Plan
Estee Lauder expects to return to "strong" organic sales growth in the second half of fiscal 2024, which will expand on its profitability from the first half of the year.
The cosmetic company also announced a new restructuring program to begin in Q3 as part of its Profit Recovery Plan in 2025 and 2026. The plan will focus on rebuilding more sustainable profitability and support sales growth acceleration while lowering its cost base and reducing overhead expenses, as well as investing in key consumer-facing activities. Estee Lauder expects the initiative to improve gross margins and its expense base.
Estee Lauder plans to reduce its workforce by 3% to 5% as part of the restructuring plan, and will retrain and redeploy some employees. The company expects to restructuring charges of $500 million to $700 million, but will yield annual gross benefits of $350 million to $500 million. Estee Lauder now sees the Profit Recovery Plan driving $1.1 billion to $1.4 billion in incremental operating profit, up from the prior forecast of $800 million to $1 billion.
Outlook
The cosmetics maker gave a wide outlook for Q3 adjusted earnings, expecting anywhere from an 18% drop to a 3% gain. Estee Lauder projected GAAP earnings between 35-46 cents per share, compared to 43 cents per share last year. The company guided a 3% to 5% increase in Q3 net sales, which will include another 1% headwind due to disruptions in the Middle East.
FactSet analysts expect Q3 adjusted earnings of 81 cents per share on 3.1% revenue growth to $3.87 billion.
EL Stock
EL Stock spiked 12% Monday to its highest level since September and led the S&P 500 during daily trade.
Estee Lauder pushed strongly above its 50-day moving average and is closing in on its 200-day line.
ELF Beauty
IBD Leaderboard member ELF Beauty reports Q3 results late Tuesday.
FactSet forecasts a 19% earnings increase to 57 cents per share, slowing for the third consecutive period after four quarters of triple-digit gains. Analysts expect a 63% spike in revenue to a record $238.9 million, after averaging about 77% sales growth the last three quarters.
ELF stock rebounded Monday to a record high intraday after sliding more than 4% in early trade.
Last week, ELF Beauty hit an all-time high after breaking out Friday above a three-weeks-tight entry at 164.71.
Shares of the cosmetics brand has run up nearly 18% this year following a cup-base breakout in early December.
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