Estée Lauder (EL) is on the lookout for a new CEO after announcing Fabrizio Freda's upcoming retirement, which will take place at the end of June 2025.
Freda has been with the beauty company since 2008 when he was first hired as president. The following year, he became CEO, taking over for William Lauder, son of Leonard Lauder, heir to the Estée Lauder Companies.
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The Lauder rumored family division
Despite being among the highest-paid CEOs in the beauty industry and the longest to hold this position outside of the immediate family, Freda has been rumored to be at the center of the supposed Lauder family feud.
Allegedly, the Lauder family has been split over Freda's handling of the company for years, which has caused a rift between its members. Yet, the family has publicly denied the allegations to media outlets multiple times.
The family's unconfirmed dissatisfaction due to declining sales recently unchained rumors of the potential dismissal of long-term CEO Freda to increase the company's revenue, making his retirement an expected announcement for some.
The Lauder family is still highly involved and insists on maintaining their beauty empire as a family company; they own approximately 38% of the company and have about 86% of the voting power.
Estée Lauder Q4 earnings report
On Monday, Estée Lauder published its 2024 earnings report for Q4, showing a 2% decrease in net sales compared to the previous year.
Net earnings went from $1.01 billion in 2023 to $390 million this year and net earnings per common share declined to $1.08 compared to $2.79 reported last year.
The company's stock also decreased around 43% compared to the previous year and is down another 5% in early market trading Tuesday.
As for its top categories, skin care declined by 4%, haircare by 4%, and makeup by %1.
According to the beauty company, this decline is primarily due to a decrease in sales in China, one of the company's major growth markets, and a lack of travel to Asia in 2024.
Meanwhile, flat net sales performance in North America was driven by the decline in the demand for makeup.
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Freda's restructuring plan before his departure
In February, Freda revealed a restructuring plan to increase the company's net sales and hired the consulting firm Alvarez & Marsal as his advisors. To reach this goal, Freda wants to focus on deriving more than 60% of sales from outside the U.S. and reduce the workforce by 5%.
Despite an alarming overall decline, Freda was key to the company's growth during his tenure as CEO. He diversified Estée Lauder's distribution channels and acquired renowned brands like Tom Ford, Le Labo, and Deciem.
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As for the near future of Estée Lauder, the company expects prestige global beauty to grow by 2%- 3% in 2025 and return to positive numbers by 2026. It plans to do so by focusing on the growth of emerging markets and expanding distribution channels to drive higher sales, as stated in its Q4 reports.
"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 to elevate our execution in response to a more competitive market," said Freda in the earnings report.
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