Estee Lauder raises FY19 restructuring charges to $900M-$950M from $600-$700M
Global prestige beauty is continuing to perform exceptionally well and is estimated to grow 5% to 6% during the fiscal year. The Company expects to grow ahead of the industry. Last quarter, the Company disclosed it was conducting a review of certain testing related to product advertising claims support. The review is ongoing and, based on the review to date, the Company does not believe that this matter will be material. For fiscal 2019, there are two items expected to negatively impact sales growth. The Company has adopted the new revenue recognition accounting standard using a modified retrospective adoption method, which means fiscal year 2018 is not restated. As fiscal 2019 is the transition year for this accounting change, the year-over-year growth rate will be reduced as a result of adopting this new standard. The recent strengthening of the U.S. dollar is also expected to negatively impact growth. In May 2016, the Company announced its Leading Beauty Forward initiative to build on its strengths and better leverage its cost structure. The Company previously estimated that Leading Beauty Forward would result in related restructuring and other charges totaling between $600 million and $700 million, before taxes. After reviewing additional potential initiatives and the progress of previously approved initiatives under Leading Beauty Forward, the Company now expects restructuring and other charges to be between $900 million and $950 million, before taxes. The Company is also revising its previous estimate of annual net benefits of between $200 million and $300 million, before taxes. After its full implementation, the Company now expects Leading Beauty Forward to yield annual net benefits of between $350 million and $450 million, before taxes. These savings can be used to improve margin, mitigate risk and invest in future growth initiatives. The Company is also mindful of risks related to social and political issues, geopolitical tensions, regulatory matters, including the imposition of tariffs, global security issues, currency volatility and economic challenges affecting consumer spending in certain countries and travel corridors. The Company is also cautious of the decline in retail traffic, primarily related to certain brick-and-mortar stores in the United States and the United Kingdom.