Estée Lauder’s CEO Addresses Struggles with Major Announcement
According to The Street, Estée Lauder (EL) is on the hunt for a new CEO following the announcement of Fabrizio Freda’s retirement, set to take effect at the end of June 2025. Freda has been with the renowned beauty company since 2008, initially serving as president before stepping into the CEO role in 2009, succeeding William Lauder, the son of Leonard Lauder, heir to the Estée Lauder Companies.
Allegations of Family Division
Despite being one of the highest-paid CEOs in the beauty sector and the longest-serving leader outside the Lauder family, Freda has been at the center of rumors regarding a potential rift within the Lauder family. Allegedly, family members have been divided over Freda’s management style and the company’s performance, creating tensions among them. However, the family has publicly refuted these claims to various media outlets.
The family’s alleged dissatisfaction, particularly amid recent sales declines, has fueled speculation about Freda’s potential dismissal, making his upcoming retirement a point of interest for many analysts. The Lauder family remains heavily involved in the company, owning approximately 38% of Estée Lauder and holding about 86% of the voting power, emphasizing their desire to maintain the business as a family-run enterprise.
Declining Q4 Earnings Report
On Monday, Estée Lauder released its Q4 earnings report for 2024, revealing a concerning 2% decrease in net sales compared to the previous year. The company’s net earnings plummeted from $1.01 billion in 2023 to just $390 million this year, resulting in net earnings per common share declining to $1.08 from $2.79 reported last year.
The company’s stock has also suffered, falling around 43% over the past year, with an additional 5% drop in early trading on Tuesday. Performance across key product categories showed declines: skin care sales dropped by 4%, haircare decreased by 4%, and makeup sales fell by 1%.
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Estée Lauder attributed these declines primarily to reduced sales in China, one of its major growth markets, alongside a decrease in travel to Asia throughout 2024. In North America, flat net sales were largely driven by decreased demand for makeup products.
Freda’s Restructuring Plan Ahead of Retirement
In February, Freda outlined a restructuring plan aimed at reversing the company’s declining sales trajectory, enlisting consulting firm Alvarez & Marsal for guidance. This plan includes a target for more than 60% of sales to come from international markets and a 5% reduction in workforce.
Despite these alarming figures, Freda has been instrumental in driving growth during his tenure as CEO. He has diversified Estée Lauder’s distribution channels and successfully acquired well-known brands like Tom Ford, Le Labo, and Deciem.
Looking forward, Estée Lauder anticipates growth in the prestige global beauty market, projecting a 2% to 3% increase in 2025 and a return to positive sales by 2026. The company plans to focus on emerging markets and expand its distribution channels to enhance sales, as highlighted in its Q4 report.
Conclusion
In the face of disappointing sales and profit forecasts for fiscal 2025, Freda expressed optimism about the company’s future. “While our sales and profit outlook for fiscal 2025 is disappointing, this year we will make important strides as we implement our strategy reset to continue rebalancing regional growth, deliver improved annual profitability, and strengthen go-to-market and innovation capabilities in response to a more competitive market,” he stated in the earnings report. As Estée Lauder prepares for a leadership transition, the company’s ability to navigate these challenges will be critical to its future success.
