Back in January the company revised its expected forecast of 2-3 percent sales growth for the upcoming quarter, to a 6 percent slide following poor preliminary figures.
Today the company said that net sales fell 6 percent to $2.04bn, but taking a strong dollar into consideration the overall fall was a more dramatic 12 percent.
Net income tumbles 30 percent
In line with this, net income fell by 30 percent to $158m, down from $224.1m in the same period a year earlier.
In light of the result, the company has implemented a turnaround plan, which will see it cutting roughly 6 percent of its global workforce and implementing a freeze on hiring over the course of the next two years.
Referring to the restructuring as its four year strategy, the company also outlined its intention to grow sales by 1 percent above the figure for the global prestige beauty market and intends to generate more than 60 percent of sales outside the domestic market.
Cutting costs by up to $550m
The company also aims to cut costs by €450m to $550m, through improving cost of goods, organizational resizing and geographical realignments.
It estimates that the cost of the restructuring exercise will cost it between $350m and $450m over the course of the next few years, while savings will be reinvested with the aim of fueling growth and global market share.
The news has raised industry eyebrows, as to date the company’s restructuring plan is the most far-reaching of any cosmetics player since the global economic downturn kicked in.
Boom and then bust
In recent years it is has been premium cosmetics companies such as Estee Lauder that have most benefited from economic prosperity as increased consumer spending power led many to ‘upgrade’ their cosmetic products.
However, now that consumer spend has been impacted by the credit crunch and the ensuing economic downturn, it is premium players that are the first ones to feel the pinch.
Indeed premium category rival Elizabeth Arden also announced today that its sales for the holiday quarter slipped by 12.4 percent to $370m, after taking currency exchange rates into consideration.
Although the company has not announced a restructuring plan, it did state that it would be accelerating its existing cost savings program, which would include ‘headcount reductions’.