Estée Lauder Companies first-quarter earnings on Thursday laid bare the uphill journey incoming CEO Stéphane de La Faverie has ahead of him.

The beauty giant announced net sales had declined 4 percent to $3.36 billion, with a particularly painful 11 percent slide in China, and a 7 percent drop in skincare, its biggest category. It also trimmed its second-quarter sales outlook from flat to minus 8 to 6 percent. Earlier in the day, the company withdrew its 2025 guidance and cut dividend payments by 47 percent. Estée Lauder’s stock slid more than 20 percent to a 10-year low.

The results were more than the latest in a string of bad quarters – they represented a resetting of expectations that could all-but vanquish investor confidence that the company will find a quick solution to its growing list of problems, said Filippo Falorni, a director in Citi consumer’s practice, which downgraded its recommendation on Estée Lauder’s stock to neutral on Thursday. He said the company’s inability to foresee how much sales would drop in China was particularly concerning.

“Investors have already lost a lot of trust … but withdrawing the guidance is kind of the last straw,” he said.

Estée Lauder’s sales have fallen steadily since the start of 2023, led by ongoing softness in China, which makes up around a third of the company’s business, as well as a drag from the closely linked travel retail sector. It reported sales growth around 5 percent in May for the first time since the end of 2022, but couldn’t sustain the momentum. In early 2024, rival L’Oréal eclipsed it as the biggest prestige beauty company, while its core brands, which include cosmetics makers Too Faced, Tom Ford and Mac Cosmetics, were all cited as underperforming in Thursday’s earnings in the key US market.

“We are working hard to rebalance the company and avoid future overexposures to areas of the world that are too volatile,” said incumbent CEO Fabrizio Freda on a call with analysts. But as outgoing chief financial officer Tracey Travis said, “We obviously still have much more to do.”

De La Faverie’s appointment is the capstone on a company-wide shakeup that’s seen incumbent chief executive and chief financial officers Freda and Travis announce their retirements, William P. Lauder and Jane Lauder, two of the founder’s grandchildren, step down as executive chair and chief digital officer, respectively.

While he’s not the outside hire investors favoured, de La Faverie, who will take the top job on Jan. 1 after more than 13 years at Estée Lauder Companies, has prior experience at L’Oréal, so can bring some outside perspective. With the adjustment to the roles of Lauders Jane and William, the company now has less family control over its day-to-day operations. And, by cutting dividends, the company has more headroom for reinvestment in its brands outside of the covenants of the profit recovery plan.

Figuring out which brands are worth saving is step one. Olivia Tong, a managing director at Raymond James said she expected a “deep brand by brand assessment” to be a key early priority for de La Faverie.

“The company needs to make some hard decisions to better focus the portfolio towards long-term sustainable and profitable growth,” she said.

Fix the China Problem

First, de La Faverie will need to come up with a solution for China – or an alternative. Many international prestige brands have struggled as the country’s economy has faltered, with consumers increasingly seeking out domestic brands they feel offer better value for their money.

However, Lauder was hit harder than most, partly because China had become so key to its sales, but also because of its strategy. It hinged largely on daigou, a practice wherein customers on the Chinese mainland deputise others to purchase on their behalf in other nearby regions at a lower cost, and on travel retail outposts in the area, effectively doubling its exposure to volatile markets. Falorni also noted that the majority of its products are still made in the US, creating long lead times for shipping and forecasting. New distribution centres in the region have helped incrementally, and a production facility is set to open in Japan.

Falorni said while the market has been soft, there’s also been a shift in the market that favours mass, more affordable brands, while Estée Lauder Companies still measures itself as against other premium brands.

“They’re not willing to acknowledge [this shift],” he said, adding that cost savings are also necessary throughout the business given its performance. “Most businesses in their position would be much more aggressive on cost-cutting.”

Estée Lauder Companies plans to rebalance its regional growth, with Freda saying that its exposure to China has already reduced by 10 percent since the 2022 fiscal year. “Strategic reset is at the core [of our plan],” he said.

This can partly be achieved by right-sizing inventory levels, as well as continued improvement in its margins, which it has grown by a few percentage points. It’s also targeting key growth markets in regions like Latin America and other parts of Asia like Japan to increase overall diversity.

However, even offsetting the China decline, the company only grew sales 1 percent globally.

Fix the US Problem

Estée Lauder Companies also has issues on its home turf. Sales declined 2 percent in the US in its first-quarter earnings, with many of its core premium brands such as Too Faced and Mac Cosmetics cited as softening. Clinique, which launched on Amazon in March, was a bright spot, but Travis said the Estée Lauder Companies’ overall market share in the US has progressively declined over the last year.

Beauty companies like Coty, L’Oréal and Unilever’s prestige arm have all raised concerns over a slowdown in the US, but Estée Lauder Companies is also facing issues with its channel mix and brand offering. Historically reliant on department stores, it was slower to deepen its relationship with speciality stores like Sephora and Ulta Beauty, and it faces stiff competition from trending brands like Shiseido-owned skincare line Drunk Elephant, L’Oréal-backed skincare maker Cerave and a raft of indies like cosmetics brands Saie, Kosas and Westman Atelier which are popular with consumers.

It has taken steps to stem its losses, partly by debuting seven brands including its titular Estée Lauder line on Amazon, and introducing Clinique to Ulta Beauty, all of which Freda said were performing well.

Still, de La Faverie will need to be mindful of not diluting the brand equity of its portfolio — a fine line with increased distribution.

Fix the Brand Problem

Regional woes aside, de La Faverie’s biggest mission might be that of revitalising the company’s portfolio. Skincare makes up almost half of its overall sales, partly because of its reliance on China where it’s a top category, but fragrance and body care are more buoyant categories in the overall beauty market. Its hair care division has consistently underperformed, with the natural-inspired line Aveda name-checked as underperforming in salons, likely against more modern competitors such as K18, Olaplex and Kérastase.

While some brands like Too Faced and Mac Cosmetics have big social media followings, its brands lack the huge engagement competitor brands like Dior Beauty, Cerave and E.l.f Cosmetics get. De La Faverie will need to find ways to build affection and stickiness for its core brands, and make them products shoppers consider core replenishment items, not occasional treats. A stronger value proposition is needed as aspirational customers retreat in the US. Rebuilding value shouldn’t be around promotional bundles or discounts, but instead investment in the brands to make their offerings feel truly “worth it”.

The company also needs to examine its portfolio divesting unsalvageable brands and investing more in trending lines, like the fragrance makers By Kilian, Le Labo and newly-launched Balmain Beauty. Its biggest and best-known lines, including Mac Cosmetics, could also use some new thinking.

One thing the company and its investors are in alignment on: the business needs to get faster, and fresher.

“We need brand builders, but we need also people that will act with urgency, speed, courage to make the needed changes,” said Freda.

Ironically, that speed and urgency could be a long time coming, given the depth of the company’s issues and the choice of an internal hire for the top job.

“Any turnaround is going to be a multi-year journey,” said Falorni.

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Stéphane de La Faverie will succeed Fabrizo Freda on Jan. 1 2025 as chief executive of Estée Lauder Companies, the company confirmed today.

de La Faverie has been with Estée Lauder Companies for over 13 years, serving in various leadership roles, mostly recently as executive group president, a position she held for two years. Before joining the company in 2011, he served as a senior vice president at L’Oréal. Additionally, William P. Lauder will step down from his current role as executive chairman, but remain chair of the board of directors.

His appointment confirms rumours from Monday, when the Wall Street Journal reported he had been selected.

It also puts to bed years of speculation. After Estée Lauder’s stock price began a continued slide in 2022, analysts began to question Freda’s leadership, which quickly led to questions over who would succeed him in the top executive role. Its stock is down more than 35 percent since the start of the year; its 2024 forecast, announced in August, missed analyst expectations again.

While the founding Lauder family own 38 percent of the common stock; they control 86 percent of voting rights, and analysts surmised that the family would prefer an internal candidate.

In partnership with Jane Lauder, the chief data officer who announced on Monday she would step down from her role and was thought to also be in contention for the top job, de La Faverie has been leading the Estée Lauder’s “profit growth and recovery plan” since 2023, designed to reboot the company’s flagging performance, with a focus on rebuilding core brand equity and improving its performance in Asia, a stubborn drag on its results.

The duo have already enacted several changes, including brand refreshes and marketing revamps on top brands like Mac Cosmetics and Clinique, and bringing some of its brands, such as Lab Series and Bumble and Bumble, onto Amazon to help the company transition from its historical over-reliance on department stores. ELC has also opened a new production facility in Asia to help streamline its ordering and inventory management.

In a statement, William P. Lauder said, “Stéphane’s deep-rooted industry and operational expertise, and his collaborative and dynamic approach, make him the ideal CEO to move us forward with speed, and urgency,” adding that his strategic vision drive long-term, transformational new approaches for the company.

Stay tuned to BoF for updates on this developing story.

Estée Lauder Companies’ succession strategy is shaping up.

According to a report in The Wall Street Journal, Stéphane de La Faverie has been selected as Estée Lauder Companies new chief executive officer. Estée Lauder Companies declined to comment on the report, though earlier on Monday, it confirmed that Jane Lauder, the company’s chief digital officer and another name thought to be in close contention for the top role, was set to step down by the end of 2024.

Rumours around succession have been swirling since 2022, when Estée Lauder’s stock price began a continued slide and analysts began to question Freda’s leadership de La Faverie and Jane Lauder quickly emerged as top contenders.

de La Faverie has been with Estée Lauder Companies for over 13 years, serving in various leadership roles, mostly recently as executive group president, a position he held for two years. Before joining the company in 2011, he served as a senior vice president at L’Oréal.

In partnership with [Jane] Lauder, de La Faverie has been leading the Estée Lauder’s “profit growth and recovery plan” since 2023, designed to reboot the company’s flagging performance, with a focus on rebuilding core brand equity and improving its performance in Asia, a stubborn drag on its results.

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A To-Do List for Estée Lauder’s Next CEO

Whoever steps into Fabrizio Freda’s Italian loafers in June 2025 has a big job on their hands, as the American beauty conglomerate battles softened demand internationally and on its home turf. Kickstarting meaningful growth will mean a fresh China strategy, channel and category overhauls, and generating some much needed buzz.

Many international fashion and beauty brands are hedging their bets on China, where a faltering luxury market has an economic slowdown.

But those warning signs haven’t deterred niche British fragrance brand Perfumer H. In early 2025, it will open a four-story, 4,000-square-foot store in Shanghai’s fashionable French Concession, near stores like streetwear maker Supreme. In addition to the sales floor, the store will also include a film screening area, a candle refilling station, a tea room and space for an artist in residence.

Despite not yet having a physical presence in China, Harris said the brand has reason to believe its new shop will resonate in the market. Perfumer H’s scents, such as Ink (with notes of vetiver and black pepper), Rainwood (which smells like juniper) and Moss (with notes of grapefruit and patchouli), all $190, are already popular with Chinese customers making purchases overseas.

“I don’t fear anything, really,” said co-founder and perfumer Lyn Harris. “I can feel people [in China] want the product, and we offer something special and unique.”

China may be the world’s second-biggest beauty market (after the US), but lately, it’s been posing headaches for international beauty brands. In the post-pandemic era, local brands often come out on top over global names, and China is seeing a slower economy recovery, compounded by government crackdowns on excessive wealth and softer consumer spending. Muted demand caused LVMH-owned retailer Sephora to cut 10 percent of staff in August, while overexposure in the market has dragged down earnings for conglomerates like Estée Lauder Companies and Shiseido.

The Chinese fragrance market is still a nascent one, with customers more comfortable shopping for skincare and cosmetics. According to market insights firm Digital Luxury Group, Chinese consumers are still in the early development stage with fragrance, and just beginning to build habits around consumption and usage — which could mean they’re more malleable, and that behaviour and uptake could still evolve.

Harris is resolute that there’s plenty of opportunity. She and co-founder Christophe Michel are hoping that a combination of innovative products and experiential elements to the store will increase their chances of success. Their bet is also on the wider power of brick and mortar, as the company plans to have 10 points of sale in China by 2028.

“We offer something really special and unique … we’re giving an experience,” said Harris.

Experience and Emotion

There’s precedent for Perfumer H’s confidence. Gen-Z and Millennial shoppers are not only voracious consumers of fragrance, but prioritise spending on experiences. Many consumer brands have seen success adding lifestyle or experiential elements to their retail outposts — think Ralph Lauren’s “Ralph’s” cafés, or Glossier’s purpose-designed selfie areas.

Penetration of fragrance in the Chinese market is lower than categories such as skincare and cosmetics, due to cultural preferences that favour smelling clean rather than perfumed, but the market is showing early rumblings of growth. Per local press, the local luxury department store chain SKP opened a new outpost in the Chinese city of Wuhan in July that featured 40 fragrance brands, while conglomerates like L’Oréal and Estée Lauder Companies have tapped homegrown indie labels like To Summer and Melt Season for investment.

Perfumer H’s China effort is being launched in partnership with a local distributor, who will also assist with local press, marketing and communications, which should relieve staffing pressure on the company and reduce the likelihood of it getting lost in translation. Much of the flagship space will be dedicated to Shanghai-based artisans, like a ceramist selling hand-crafted objets or a bakery offering preserves and oils.

Still, it’s a premium brand: in addition to its core range of perfumes, Perfumer H also offers refillable candles and fine fragrances in hand-blown glass bottles, which sell for over $700. Harris is a seasoned perfumer who previously created scents for niche brands like Vyrao and Cire Trudon (Perfumer H is her sophomore brand; she previously launched the premium line Miller Harris in 2000 and exited in 2013).

Harris believes her pedigree, on top of the brand’s unique assortment including candles, teas and incense, will help win over local consumers. “They like my style of perfumery,” Harris said — especially her emphasis on quality.

Channel Mixing

China is just one part of Perfumer H’s global ambitions. By early 2025, the brand will launch in top Australian beauty retailer Mecca, unveil a new store in Tokyo, and open another under franchise in Seoul.

Currently, the label operates three stores in London, including a new Mayfair flagship, and it has a presence in multi-brand retailers like Arts + Science and Tomorrowland in Japan, Sans in South Africa, as well as its own stores in Hong Kong, Macau and Taipei through a mixture of wholesale and franchising,

While many niche perfume brands prefer to lean on solely on wholesale to grow their customer base, Harris and Michel opened dedicated stores as soon as possible because “it builds up your community instantly,” said Harris.

The brand is backed by Fable Investments, the venture firm spun out of Brazilian conglomerate Natura by former Aesop executives. (The firm took a stake in 2022, and increased it in May 2023.)

Harris is well aware that the Chinese customers, like their international contemporaries, are looking for value. Where do fragrances with hand-blown glass bottles that cost as much as a mid-range smartphone fit into that?

“They’re not just going to buy for the sake of it anymore,” said Harris. “And that’s great. That’s the customer we want.”

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The wheels of change continue to turn at Estée Lauder Companies.

Jane Lauder — the granddaughter of Estée Lauder, the company’s founder — will step down from her role as chief digital officer and executive vice president of enterprise marketing at the end of this year, the company confirmed to The Business of Beauty on Monday.

The company is undergoing a raft of executive changes as it shores up its succession strategy. Chief financial officer Tracey T. Travis will step down on November 1, while chief executive officer Fabrizio Freda is set to retire next June. A successor to Freda has yet to be named.

Lauder has occupied her dual role since 2020, and was named as a co-leader of the company’s profit recovery plan in July alongside executive group president Stéphane de la Faverie. She previously worked as a global brand president at various ELC brands, including the skincare lines Clinique and Origins. She will retain her board seat, though her departure will mean the Lauder family no longer hold any roles in the company’s quotidian operations.

Investors have been calling for a shake-up in the company’s leadership since 2022. The aftermath of the pandemic laid bare how reliant the company had been on the Chinese market and department stores, and its slow recovery, downward revisions to its outlook and tepid sales growth have seen its stock price slide by around 80 percent since the end of 2022.

The company will report quarterly earnings on Thursday.

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A To-Do List for Estée Lauder’s Next CEO

Whoever steps into Fabrizio Freda’s Italian loafers in June 2025 has a big job on their hands, as the American beauty conglomerate battles softened demand internationally and on its home turf. Kickstarting meaningful growth will mean a fresh China strategy, channel and category overhauls, and generating some much needed buzz.

L’Oréal’s third-quarter sales, announced Tuesday, had an unwelcome surprise: its dermatological beauty division, which operates buzzy and viral skincare brands like Cerave and Skinceuticals, hugely missed analyst expectations; it grew 0.8 percent to $1.77 billion against estimates of 11 percent.

The division had been a blockbuster since it was formed in 2022, growing more than 20 percent each quarter and becoming a key area for the French conglomerate. But in the second quarter, it missed expectations for the first time, with growth slowing to 10.8 percent compared to analyst expectations of 17.4 percent.

The segment’s decline contributed to 3.4 percent like-for-like sales growth overall, missing estimates of 6 percent, compounded by a not unexpected — but equally unwelcome — 6.5 percent sales contraction in China. In the aftermath of the report, the company’s share price dropped 3.7 percent, having already plummeted 20 percent since June.

Chief executive Nicolas Hieronimus said deceleration in the US was the “biggest culprit” for the dermatological beauty division’s poor performance on a call with analysts on Tuesday, reiterating a message from its half-year August earnings, though he also noted a slowdown in product innovation. An unfavourable comparison basis with the previous year, which included a one-time insurance payout also dragged on results, but even offsetting that, “It’s lower than the previous quarters without a shadow of a doubt,” said Hieronimus.

Softened spending in the US has been noted by L’Oréal’s peers, including Coty and the prestige beauty arm of personal care giant Unilever. But what’s more unique to L’Oréal’s dermatological division is its reliance on ailing American drug stores, a primary point of distribution for its Vichy, Cerave and La Roche Posay lines. In July, CVS reported a 5.1 percent drop in front-of-store revenues, Walgreens’ retail sales decreased 3.5 percent in its 2024 fiscal year, while Rite Aid emerged from bankruptcy in September after a year under administration.

The distinction of dermatologist-approved or at least clinically proven products is also no longer unique to L’Oréal. Competitive efforts by incumbents and the entrance of more indie brands are destabilising its grip.

Molly Wylenzek, an analyst at Jefferies, noted dermatological beauty was growing in other markets, describing the US as the most penetrated market for clinical skincare in the world. “It could be a channel issue, it could be saturation … maybe we’re reaching a natural ceiling,” she said.

Shifting Sands

L’Oréal created the dermatological beauty unit from the ashes of its former “active cosmetics division,” divesting poorer-performing natural skincare lines Sanoflore and Decléor and investing heavily in clinically-backed brands such as Cerave, Skinceuticals, and Skinbetter Science, which it acquired in 2022. The unit is diverse in terms of price: a Cerave cleanser might be as little as $14, while a Skinceuticals serum is as much as $150.

The move was perfectly timed; post-pandemic brands with a clinical pedigree skyrocketed in popularity, and the group invested heavily in dermatologist outreach, ensuring that its products would be recommended by and distributed in doctor’s offices. In 2021, Cerave claimed the title of most dermatologist-recommended brand from longtime holder Neutrogena.

In its second-quarter earnings in August, Hieronimus cited increased competition as a reason for its slowdown in addition to his first warnings about drugstore decline. Brands like Estée Lauder-owned The Ordinary and independent British label Byoma can compete on price — and increasingly, on buzz — and focus distribution solely on retailers like Target and Ulta Beauty, but for the likes of Vichy and Cerave, mass drugstores are the biggest channel. Neil Saunders, managing director at analytics firm GlobalData, said stores like Target have done a better job of curating the customer experience than drugstores, which have increasingly been keeping products behind locked glass doors.

Hieronimus and L’Oréal chief financial officer Christophe Babule said in markets other than the US, dermatological beauty had performed better, with Europe, Asia and Australia all noted as regions with more positive progress.

“In markets where dermatological skincare is really nascent, [L’Oréal] are building the market from the ground up,” said Wylenzek, adding that she thinks low double-digit growth for the division by year-end is realistic, buoyed by non-US markets. “A rising tide lifts all boats … but the US is no longer contributing to the rising tide,” she said.

To beat the slump and regain the all-important US foothold, L’Oréal needs to keep investing in splashy marketing and new products – and also to avoid losing its competitive edge, especially with fickle Gen-Z shoppers. A new Cerave shampoo line and body care range are on the horizon, Hieronimus added.

“There’s a few young Gen-Z consumers in the US that left [L’Oreal brands] to try a few other brands,” said Hieronimus. “It’s up to us to recruit them.”

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Ruuby, the British on-demand beauty services provider founded by entrepreneur Venetia Archer in 2016 has raised $2.6 million in an investment round led by Manchester-based investor Praetura Ventures.

The investment is part of the Northern Powerhouse Investment Fund which seeks to provide capital to businesses throughout the north of England, where access to institutional investment is often lower.

Ruuby has raised $9 million in funding and generated $22 million in sales to date.

Primarily app-based, Ruuby allows customers to book beauty services including hairstyling, makeup application and massages, as well as injectables to a location of their choosing. Since its inception, the business has delivered nearly 500,000 services and has over 150,000 users, as well as 3,000 beauty professionals on board.

In a statement, Archer said monies raised will be used to increase its presence in France and Switzerland, as well as increasing its reach across the UK with plans to hire more staff in Manchester and Liverpool.

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Refy Bets the Indie Beauty Boom Isn’t Over Yet

Despite a slowdown in the M&A pipeline and rising pressure on indie brands, British cosmetics company Refy thinks it can buck the trend and become a breakout star. Pulling it off will require careful calibration to help it broaden its presence without denting its status.

Yse, the prestige skincare brand founded by the American model Molly Sims, has received an investment from early-stage private equity firm Willow Growth Partners, the company announced Friday.

Terms of the deal were not disclosed, though Willow Growth Partners invests in brands that generate between $1 million to $5 million in revenue, with a typical cheque size of around $750,000 to $1.25 million. It has previously backed Gen-Alpha skincare brand Bubble, clean cosmetics brand Kosas and supplement brand Perelel.

Pronounced “wise”, Yse was founded in 2023 with a range of products priced between $40 to $90 designed for Gen-X women and mature skin.

In a statement, Willow Growth Partners co-founders Deborah Benton and Amanda Schutzbank said that women over the age of 40 often have high disposable income and are looking for skincare products that offer targeted solutions for mature skin. “Simply put, they are looking for alternatives to their moms’ legacy brands,” said Benton and Schutzbank.

Yse will use the funding to help facilitate an entry into wholesale next year.

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How Gen X Became Beauty’s Next Big Consumer

Mature consumers have long been ignored by the beauty industry. Now a small but growing number of emerging brands are responding to the needs of those over the age of 45 in a bid to cash in on their $15 trillion spending power.

Révive has a new owner.

The ultra-luxury skincare line founded by Dr. Gregory Brown in 1997 has been acquired for an undisclosed amount by Chinese conglomerate S’Young Group, Révive’s chief executive Elana Drell-Szyfer confirmed in a social media post Thursday.

Révive sells skincare products like its $194 Moisturizing Night Renewal Cream and $775 Peau Magnifique Serum in retailers such as Space NK and Neiman Marcus. It also has a presence on Amazon’s dedicated luxury storefront.

The deal comes amid a flurry of activity in the beauty sector. Private equity firm TSG took a majority stake in influencer-founded in August; L Catterton acquired Latvian body care brand Stenders in September; while premium line Dr. Dennis Gross was acquired by Shiseido at the end of 2023.

Révive’s sale is the second disposal this year from private equity group Tengram Capital Partners’ beauty portfolio, after it sold HRB Brands, (a group that owned brands like the affordable hair care line Alberto VO5) to Italian personal care firm Sodalis Group.

Révive’s new owner, Jiangsu-based S’Young Group has been working to expand beyond its business as a local distribution and e-commerce partner for international brands through acquisitions.

In 2022, it purchased the premium French skincare line Evidens de Beauté, and made a minority investment in Pier Augé, another luxury French skincare line.

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How Amazon Fits Into the New Beauty Playbook

The mega e-commerce player is set to become the biggest beauty retailer in the US, but its complexity and inflexibility is a turn-off for many brands with premium positioning. If they don’t bite the bullet, the losses will add up.

Walgreens Boots Alliance Inc plans to close 14 percent of its US stores to cut costs as consumers pull back spending.

The drugstore chain said Tuesday it will shutter around 1,200 outlets over the next three years, with 500 closures slated for 2025. The shares surged 14 percent at the open of trading in New York.

The company also issued profit guidance for 2025 that met Wall Street estimates.

Adjusted earnings will be in the range of $1.40 to $1.80 a share in the year ending Aug. 31, 2025, Walgreens said Tuesday, in line with the $1.73 average estimate from analysts surveyed by Bloomberg.

Fourth-quarter earnings were $0.39 a share, beating analysts’ average estimate of $0.36 a share. The ailing drugstore chain beat analysts’ expectations — a sign that its aggressive cost-cutting measures are starting to pay off.

“The decisive decision to shutter a large cohort of underperforming stores is a positive in a narrative where the expectations are exceedingly low,” said Jonathan Palmer, an analyst with Bloomberg Intelligence. However, the larger question is how the closures ultimately improves the profitability of the US retail pharmacy segment and the timing of a turnaround, he said.

$3 Billion Loss

In the fourth quarter, the company also posted a $3 billion loss, which mostly included tax charges related to opioid liabilities and a write down of an investment in a Chinese pharmacy chain.

The company said in a filing that it would redeploy the majority of the workforce in stores that are closed.

Walgreens’ retail division has struggled as budget-conscious consumers turn to online retailers like Amazon and discount giants Dollar General and Costco. Competitive pressures led the Deerfield, Illinois-based company to lower full-year guidance for the second consecutive quarter in June and announce store closures, which caused its shares to plunge.

Walgreens’ US retail pharmacy unit posted fourth-quarter revenue of $29.5 billion, exceeding analysts’ expectations of $27.5 billion.

Headwinds in 2025

Chief executive officer Tim Wentworth had previously cautioned that he expects headwinds to persist into 2025. In a statement Tuesday, he said Walgreens is focused on optimising its store footprint, controlling operating costs, improving cash flow, and addressing reimbursement models.

“This turnaround will take time, but we are confident it will yield significant financial and consumer benefits over the long term,” he said.

The US health-care unit, which includes VillageMD, reported revenue of $2.1 billion, in line with analysts’ estimates. Under former chief executive Rosalind Brewer, Walgreens invested $5.2 billion in primary-care provider VillageMD, enabling it to open hundreds of doctors’ offices in its drugstores. This move aligns with the company’s broader strategy to shift away from its retail roots and expand into more lucrative areas of health care.

Walgreens’ international business generated sales of $6 billion, slightly above analysts’ expectations of $5.8 billion. While the company had revived discussions last year about potentially selling the Boots chain, it has since shelved plans for an initial public offering. Wentworth reaffirmed his commitment to investing in Boots and unlocking its potential.

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Inside Drugstores’ Expanded Beauty Department Strategy

Walgreens and CVS have added beauty services, more expensive products and new indie and DTC brands, in an attempt to compete with online and specialty beauty stores.

Nails Inc, the British nail care company founded in 1999 by entrepreneur Thea Green has been acquired by private equity firm Pacific World Corporation, the company announced Monday. Financial terms of the deal were not disclosed.

In addition to its range of premium nail care products, Nails Inc also has a sister brand called Holler & Glow which makes affordable bath and body products. The acquisition will see both brands refocus on the north American market, which represents 50 percent of combined revenues.

In a statement, Bart J. deBie, managing director at Prospect Capital, Pacific World Corporation’s parent company, said the business sees “incredible potential” in Nails Inc, praising its commitment to “fast and agile product innovation.”

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The Soho House of Nail Salons

Majesty’s Pleasure, which opened this week in New York City, wants to offer nail services and eventually, other beauty offerings to a clientele that wants a social outlet as much as they do a fresh manicure.

Cosmetics company Revlon has named Michelle Peluso its new chief executive officer, effective November 4. Peluso replaces Liz Smith, who served as interim chief executive from August 2023, and will return to her role as executive chair. Peluso will also join the company’s board.

Peluso arrives from CVS Health, where she was chief customer and experience officer. She was previously chief marketing officer at IBM and Citi, and also sits on the Nike board.

In addition to its eponymous affordable cosmetics line, Revlon owns brands such as the skincare line Elizabeth Arden and the nail care lines CND and Cutex. In May 2023, the company emerged from bankruptcy proceedings after cutting more than $2.7 billion in debt and handing control of the company to its lenders.

In a statement, Peluso said her goal was to unlock the growth potential of its brands, describing it as an “important time” in the company’s history.

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Revlon Emerges From Bankruptcy After Lender Takeover

Chief executive officer Debra Perelman said in a statement that Revlon is stronger after bankruptcy and well positioned for long-term growth.