NEW YORK — A buyout offer to employees at the Estée Lauder Cos. has been warmly received, according to Dan Brestle, chief operating officer. But its impact is expected to be slight, considering the large scope of the company’s overall streamlining effort, which includes centralized purchasing, consolidation of R&D and upgrading software systems.
Lauder had a similar program in 2002. Brestle said the buyout offer was inspired, in part, by a need to streamline the personnel structure of a company that exploded from five to 23 brands within the last decade.
The number of eligible employees amounts to about 5,000, all in the U.S. The deadline is Nov. 28. But not everyone who applies for the buyout will be accepted, Brestle cautioned. There has to a be a net savings involved; for instance, if the job in question is no longer necessary and can be eliminated. Brestle estimated that, by the beginning of the year, the company should know how many people will be involved.
The employee program is only a small part of the cost-saving effort as the business environment continues to deteriorate, particularly in department stores.
During a conference call with investors last month, William Lauder, chief executive officer, detailed the company’s plans to increase profitability with a cost-savings initiative that could yield $45 million in fiscal 2006. The move is a response to a tough retail environment fostered by the impact of the Federated-May merger, higher energy costs and lower-than-expected sales.
The most visible piece of the effort is the Estée Lauder Cos.’s decision to sell Stila, which it acquired in 1999. The company is currently in talks with potential buyers of the brand, which industry sources estimate generates between $35 million to $45 million in U.S. retail sales. At the time of the announcement, Lauder said the company will continue to evaluate low-performing brands.
“We have undertaken some serious belt-tightening by aggressively identifying projects and costs that do not critically need to take place this fiscal year,” Lauder told investors during the call.
Former ceo Leonard Lauder, who serves as chairman and is a significant stockholder, is taking personal action to trim costs. At his request, the company will reduce his annual salary 20 percent from $1.8 million to $1.44 million, for the fiscal years beginning on or after July 1, 2005.