Fabrizio Freda: “We believe that the difficult decision relating to Prescriptives will allow us to redirect our resources to key strategic imperatives where we see the highest growth potential”
US. The Estée Lauder Companies has announced that it will close the global wholesale distribution of its Prescriptives brand by 31 January 2010. The brand will continue to sell on-line to US customers only at www.prescriptives.com while inventory lasts.
Prescriptives products are currently sold domestically in the US, Canada, the UK, Ireland and Australia.
The decision to close Prescriptives, while major, is not unexpected. When Fabrizio Freda took over as President and Chief Executive Officer in July, several underperforming brands were put on watch; Prescriptives was widely regarded to be among those under close scrutiny.
In a statement the company said: “A core component of The Estée Lauder Companies’ corporate strategy is to evaluate, and where possible, turn around underperforming brands with the goal of improving return on investment. After a thorough analysis of the Prescriptives brand, management concluded that the brand’s long term business model is no longer viable given the current market environment. The Company is committed to placing as many impacted employees as possible in open positions within the Company.”
Freda himself noted: “We believe that the difficult decision relating to Prescriptives will allow us to redirect our resources to key strategic imperatives where we see the highest growth potential. Ultimately this action allows us to focus on those areas which we expect to benefit the Company, our shareholders and business partners. We intend to work closely with our retail partners and continue to communicate with our consumers to ensure a seamless transition.”
For Prescriptives consumer support, toll-free numbers have been set up in North America (1-877-819-2968, English, Spanish and French speaking), the UK (0800 088 4168) and the Republic of Ireland (1800 936 080).
The Estée Lauder Companies’ previously disclosed estimated ranges for fiscal 2010 net sales and earnings per share, before charges associated with restructuring activities, remain unchanged as a result of this business decision.
The Company also expects to take charges associated with restructuring activities of between US$35 million to US$40 million in connection with this action. These charges are within the range of overall charges the Company previously estimated it would take in fiscal 2010 in connection with its long-term strategic plan.
The recording of charges will depend on when decisions are made and the relevant accounting criteria are met. Such charges are not included in the Company’s fiscal 2010 earnings per share projections for the first quarter or the full year.
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