Estée Lauder CEO Fabrizio Freda to Retire, Beauty Company’s Full-year Outlook Below Wall Street Expectations
Kathryn Hopkins
5 min read
Fabrizio Freda, the chief executive officer of the Estée Lauder Cos. who has been at the helm since 2009, will retire at the end of next year, the company said Monday as it released a downbeat outlook for 2025.
Freda will continue to lead the beauty company, whose brands include La Mer, Mac, Clinique, Tom Ford and many more, until a successor is appointed.
According to an internal company memo by William P. Lauder, executive chairman of the board, and seen by WWD, the board of directors is “well advanced” in its CEO succession planning process and has considered a number of candidates.
The news of Freda’s impending retirement comes after it was confirmed in July that Tracey T. Travis, executive vice president and chief financial officer, will retire in June 2025. She will be succeeded by Akhil Shrivastava, effective Nov. 1.
The company enjoyed many years of success under Freda, riding the wave of the Chinese beauty boom, as well as a focus on hero products. He also oversaw a number of high profile acquisitions, like Deciem and Tom Ford.
This resulted in a share price jump from $16.75 in 2009 when Freda became CEO to a peak of more than $370 in January 2022, giving it a market capitalization of more than $133 billion.
But the company struggled to bounce back after the pandemic as the Asia travel retail market and its Chinese business did not recover as quickly as it hoped. At the same time, analysts have pointed to a recent lack of innovation, as well as weakness in its home market of the U.S. On Monday, Lauder’s share price closed down 2.2 percent to $92.85.
Fiscal 2025 is lining up to be another tricky year, too, despite the company’s work through its Profit Recovery and Growth Plan to rev up the business and drive incremental operating profit of $1.1 billion to $1.4 billion.
In its latest earnings report released Monday, Lauder said reported and organic net sales are forecast to range between a decrease of 1 percent to an increase of 2 percent in its fiscal 2025, versus the prior year. Analysts had penciled in growth of more than 5 percent.
Adjusted diluted net earnings per common share are expected to increase between 7 percent and 15 percent and range between $2.78 and $2.98, below Wall Street forecasts of $3.97.
A big part of the issue is further expected declines in prestige beauty in China next year, while North America is softening as well.
“We are cognizant that overall global prestige beauty growth has tempered in recent months as reflected in the current declines in mainland China and Asia travel retail, particularly Hainan,” said Travis during an earnings call. “Prestige beauty has also moderated in some of our major markets like North America. And while we believe we have the right priorities for growth, we are also mindful of the level of variability that continues to exist in many of our markets.”
For fiscal 2024, net sales fell 2 percent to $15.61 billion, while organic net sales also slipped 2 percent.
Within that, skin care, which makes up the majority of the business, dropped 3 percent, primarily due to ongoing softness in overall prestige beauty in mainland China. Net sales from Estée Lauder, Clinique and Dr.Jart+ declined. La Mer and The Ordinary were bright spots, both growing.
La Mer
Makeup net sales decreased 1 percent, fragrance net sales increased 2 percent and hair care declined 4 percent.
As for who could follow in Freda’s footsteps, the board said it has considered many highly qualified internal and external candidates. But industry sources speculated it will most likely be an internal executive.
Jane Lauder, executive vice president of enterprise marketing and chief data officer, and Stéphane de La Faverie, group president, are said to be contenders, per industry sources.
They were recently named “co-executive leaders” of the company’s Profit Recovery and Growth Plan. They are tasked with the implementation of the plan and will each continue to report to Freda.
During the call with analysts, Freda said he would be very involved in helping the board with its search for his successor, which he stressed is well underway.
“The successor has to be obviously a great leader and understand the key elements of our company,” he said. “We are a growth company, and we are a global company so obviously being able to drive growth globally and being able to continue reshaping the cost structure of the company in the proper way that will become even more leverageable with future growth, are going to be essential characteristics. The options that the board has developed all have these characteristics.”
In a note to investors, TD Cowen analyst Oliver Chen said: “New leadership needs to have a background conducive to digital and direct-to-consumer innovation, new brand and M&A execution capabilities, and a bias for speed and agility. Furthermore, we believe the company needs to continue to build out more responsive supply chain capabilities.”
Freda, who turns 67 later this month, called his 16 years at the company a “true honor and privilege.”
“Together we have transformed the company in beautiful ways and we have set new standards for excellence,” he said. “As we manage for the long term, now is the right time to look ahead to the next generation of leadership for this great company.”
William P. Lauder said that on a personal note, Freda has been an “incredible partner” to him and other members of the Lauder family. “He understands the uniqueness of this family business and has used our long-term focus and principle of patient capital as a point of strength as he has transformed the business to meet evolving consumer aspirations.”
