Uncovering Surprising Information about Estée Lauder Companies: One Fascinating Fact You Shouldn't Ignore.
At first glance, The Esteé Lauder Companies (EL dropping by 1.28%) might appear to be a straightforward business. It's a global powerhouse in the cosmetics and personal care industry, tagging itself as a leader in "global prestige beauty." With a market cap of $28 billion, Esteé Lauder is among the largest cosmetics firms globally, boasting impressive industry-leading gross margins due to its high-end branding.
However, the stock has taken a nose dive in recent years. It hit an all-time high of $372 per share at the beginning of 2022, but dropped sharply from there, losing 79% of its peak value by December 17, 2024. So, it seems that consumers have lost interest in luxury-branded cosmetics during the inflation crisis, right?
Wrong. Esteé Lauder has a hidden ace up its sleeve. Despite the plunging stock, the company could be on the verge of a strong comeback, and the falling share prices should follow suit. The secret weapon is digital technology.
PRGP: Esteé Lauder's Strategic Transformation Plan
Under new management, Esteé Lauder is pulling out all the stops to orchestrate a transformation. Known as the profit recovery and growth plan (PRGP), this isn't your typical cost-cutting program. Esteé Lauder places immediate cost savings low on the list of priorities, focusing instead on enhancing successful business operations.
This means increased marketing budgets for luxury skincare products and high-end fragrances. A significant portion of the advertising budget has been shifted from traditional TV and newspaper ads to highly targeted digital channels. Social media plays an essential role in the updated marketing policy, while the most influential tool is data-driven advertising with the assistance of artificial intelligence (AI).
The Fusion of Analog Beauty and AI Brains
Yes, you can think of Esteé Lauder as an AI company without sounding off-base. The company has teamed up with tech giant Microsoft (MSFT dropping by 1.31%) to develop data analytics tools based on fashion-related social trends and accelerate new product development.
An internal AI chatbot provides Esteé Lauder teams with easy access to the company's vast product catalog and assists in creating effective marketing campaigns. Advanced AI systems are also supporting cosmetics development, offering ways to "enhance customer engagement" and improve product selection.
These platforms started with text-based applications, but Esteé Lauder has already moved on to more advanced technology. In October 2023, the company announced a partnership with Amazon, setting up a store-within-a-store with virtual tryout tools for different foundation shades.
A Positive Outlook
Implemented in November 2023, the PRGP program has already started to yield positive results for Esteé Lauder. According to the first-quarter 2025 report, the program has contributed to widening gross profit margins due to reduced manufacturing costs and a more diverse product mix.
Looking forward, the AI-focused ambition could help Esteé Lauder accelerate product development, reduce costs, and provide a new suite of makeup-selection tools for customers. This is good news for a struggling luxury brand, as long as the new management team can successfully execute the ambitious plan. With support from tech giants like Amazon and Microsoft, Esteé Lauder appears to be heading in the right direction.
Revenues have taken a hit recently, but the company may have reached the nadir of that downtrend. Wall Street analysts expect full-year earnings to level off at $1.58 per share in fiscal year 2025, escalating to approximately $2.75 per share in 2026. This potential recovery aligns with the AI-assisted turnaround plan, which could significantly boost the collapsing stock price.
The company's focus on investing in digital technology, such as shifting advertising budgets to targeted digital channels and partnering with tech giants like Microsoft, is expected to boost revenues and potentially reverse the stock's downtrend.esteé Lauder's new financial strategy, known as the PRGP, is projected to increase marketing budgets for luxury skincare and fragrances, with a significant portion going towards data-driven advertising and AI technology.
