USA. The Estée Lauder Companies has updated its response to the COVID-19 global health emergency.
The beauty giant has announced that it is making global donations, adapting retail and manufacturing operations, and enhancing financial flexibility and liquidity to optimise its cost structure amid the crisis.
It said that the cost-control measures will ensure long-term support for its employees, consumers, stockholders and communities.
“I am confident that the actions we are taking will enable us to effectively navigate through this challenging environment with agility and position us well for the recovery, much as we are starting to see in our Asia/Pacific region as stores reopen” — The Estée Lauder Companies President and Chief Executive Officer Fabrizio Freda
As reported in our popular ‘Love in the time of Coronavirus’ column, the company donated US$2 million to Doctors without Borders and joined the NYC Covid-19 Response & Impact Fund.
It also donated US$800,000 to China’s relief efforts through the Red Cross Society of China, Give2Asia and the Shanghai Charity Foundation; in addition to supplying US$1.4 million worth of medical supplies to the China Women’s Development Foundation.
The company’s flagship Estée Lauder brand has also donated 2 million surgical masks for frontline workers in New York; while Clinique supplied 50,000 skincare products to doctors and nurses across the city.
As reported, MAC Cosmetics has repurposed its long-standing Viva Glam campaign to support 250 COVID-19 relief organisations in the US. It has also made an initial donation of US$10 million to front line programmes such as Project Angel Food and Partners in Health that help high-risk communities in the United States.
The company has also deployed its production sites in the US, UK, and Belgium to produce hand sanitiser for high-need groups and medical workers globally.
The Estée Lauder Companies has modified company-wide business practices — guided by advice from various government and healthcare authorities or ‘COVID-19 Directives’ — to temporary close all non-essential businesses amid social distancing and quarantine protocols implemented worldwide.
As a result of the COVID-19 Directives, the company closed most retail stores in the Americas, Europe, Middle East and Africa in mid-March. With air travel grinding to a halt, the company’s travel retail business has also been greatly impacted. However, it noted that online sales are accelerating globally and that many retail stores have been reopening in Asia Pacific as the viral crisis eases in its original epicentre.
The company’s production facilities will continue to operate on reduced capacities.
The Estée Lauder Companies has also taken a number of actions to increase liquidity and optimise its cost structure, giving priority to growth and cash generation.
It announced a wave of top level salary reductions effective from 1 May through 31 October 2020. These include a -50% salary reduction for Executive Chairman William P. Lauder and President & Chief Executive Officer Fabrizio Freda, a -30% salary reduction for the Executive Leadership Team, and a -10-20% salary reduction for other management. It also announced a nearly -100% salary reduction for Chairman Emeritus Leonard A. Lauder and Chairman Clinique Laboratories LLC Chairman Ronald S. Lauder.
In addition, the Board of Directors will forego cash retainers through November 2020.
According to the company, regional decisions for point-of-sale employees — in locations which are experiencing slow recovery — will include unpaid temporary leaves of absence, which will allow them to maintain healthcare benefits and continued access to COVID-19 support.
Other cost reduction measures include optimising advertising and promotion spend, delaying capital investments, restricting business travel, and ceasing non-essential hires and services.
The company has also issued a US$700 million aggregate principal amount of 2.6% Senior Unsecured Notes which are due in 2030; and borrowed the full amount under its US$1.5 billion revolving credit facility. It has also temporarily suspended share repurchases of its Class A Common Stock and suspended the next quarterly cash dividend on its Class A and Class B Common Stock, which were set to be paid in June 2020.
In a statement, The Estée Lauder Companies President and Chief Executive Officer Fabrizio Freda said, “As COVID-19 has expanded globally in recent weeks, we remain first and foremost focused on the health and well-being of our employees, beauty advisors and consumers. As a company, we are continuing to find meaningful ways to lend our support as the world fights this health crisis. We are also taking actions to optimise our cost structure, in light of ongoing temporary store closures in many regions, and to enhance our liquidity during this unprecedented time.”
Freda added, “I am inspired by the continued resilience, collaboration, creativity, and—most importantly—heart of our employees, which are guided by our company values. In this moment, their commitment and the desirability of our brands and their hero franchises are leading to an acceleration of our online sales growth. I am confident that the actions we are taking will enable us to effectively navigate through this challenging environment with agility and position us well for the recovery, much as we are starting to see in our Asia Pacific region as stores reopen.”
