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Over the course of 2023, shares of the Estee Lauder company have plummeted over 50%. That’s a serious issue for the future of the company itself, and also for the heirs to the business’ fortune. Approximately 35% of the company’s shares are held by the Lauder family, who also have around 80% of the voting power. However, the family is divided in whether they want to support the turn-around plan created by CEO Fabrizio Freda.
Leonard Lauder has recently left the company’s board at the age of 90, and he is strongly against Freda. However, his son William is offering his support for the current CEO. Since the family can’t decide whether to approve the plan or not, it may be very difficult for the plan (or any other) to move ahead. Along with the internal arguments between family members the company is facing a lot of significant challenges.
These include a significant dependence on China for products and a slow adaptation of popular social media platforms such as TikTok. Additionally, the Estee Lauder brand still has a strong reliance on department stores, many of which are closing up and moving their operations online. The company isn’t “with it” when it comes to how cosmetics are sold in today’s modern world, and that’s showing in the market share they’re losing to other brands.
The strategy designed by Freda is focused around reducing inventory and clearing out unsold products, and this is expected to happen in late March and again in late June of 2024. The tests of this position will provide important information as to whether Freda is on the right track, but the plan doesn’t have much chance of seeing success if the family can’t agree on allowing it to go forward.
Estee Lauder was once one of the most popular and well-known makeup and beauty brands, but now the goal will be to salvage what they can of the brand and try to find a way to move it forward. The changing beauty market means the company will likely have to make rapid and significant changes in order to have a chance at a strong and successful future.
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