estee lauder (EL) soared early Monday after announcing layoffs and new restructuring plans during strong second-quarter earnings. Elf Beauty, meanwhile, fell from new highs ahead of its third-quarter report late Tuesday.
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Estée Lauder reported adjusted earnings fell 43% to 88 cents a share, after four quarters of accelerating profit declines and beating FactSet estimates of 54 cents. Net sales fell 7% to $4.28 billion, but beat expectations of $4.19 billion.
Estée Lauder reported an 8% decline in organic net sales. This is believed to be due to challenges in travel retail in Asia and the continued weakness of luxury beauty brands in mainland China. The decline also reflected a 1% impact from business interruptions in Israel and the Middle East.
Estée Lauder’s restructuring plan
Estée Lauder expects organic sales to return to “solid” growth in the second half of 2024, with profitability expanding compared to the first half.
The cosmetics company also announced a new restructuring program starting in the third quarter as part of its profit recovery plan for 2025 and 2026. The plan will focus on rebuilding more sustainable profitability and helping accelerate sales growth, while lowering the cost base and reducing overhead. We are also investing in important consumer-facing activities. Estée Lauder expects this initiative to improve its gross margin and expense base.
Estée Lauder plans to reduce its workforce by 3% to 5% as part of its restructuring plan, and plans to retrain and redeploy some employees. The company expects to incur restructuring costs of $500 million to $700 million, with annual gross profits expected to be $350 million to $500 million. Estée Lauder now expects its profit recovery plan to increase operating income by $1.1 billion to $1.4 billion, up from previous expectations of $800 million to $1 billion.
Outlook
The cosmetics maker gave a wide-ranging outlook for third-quarter adjusted profit, predicting a decline of 18% to a rise of 3%. Estée Lauder had expected GAAP earnings of 35 to 46 cents per share, compared to last year’s GAAP earnings of 43 cents per share. The company expects third-quarter net sales to increase 3% to 5%, which will include an additional 1% headwind from the turmoil in the Middle East.
Analysts at FactSet expect third-quarter adjusted earnings to be 81 cents per share and revenue to rise 3.1% to $3.87 billion.
EL stock
EL stock soared 14% early Monday on news of the reorganization, hitting its highest since September.
Estée Lauder is well above its 50-day moving average and approaching its 200-day line.
elf beauty
IBD leaderboard members elf beauty (ELF) will report third-quarter results later Tuesday.
FactSet expects earnings to rise 19% to 57 cents a share, the third straight quarter of slowing after four straight quarters of triple-digit earnings. Sales have averaged about 77% growth over the past three quarters, and analysts expect sales to rise 63% to his $238.9 million, an all-time high.
ELF stock fell more than 4% early Monday, erasing premarket gains on the Estée Lauder news.
Last week, Elf Beauty hit an all-time high after breaking above its three-week tight entry of 164.71 on Friday.
Shares of the company’s cosmetics brand rose nearly 18% through Feb. 2, following a cup-based breakout in early December.
Follow Harrison Miller on X/Twitter for stock news and updates. @IBD_Harrison
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