A 13% jump in Estee Lauder Companies Inc (NYSE:EL, ETR:ELAA)'s share price after the cosmetics giant unveiled job cuts to shore up profitability on Monday was dubbed “overly optimistic” by Jefferies analysts.
“We need to see improvement in China and travel retail to get off the sidelines,” the bank added, as it reiterated a ‘Hold’ rating for the firm in a note.
Estee Lauder unveiled plans to cut up to 3,100 jobs in Monday’s second-quarter earnings release, as a rebound within its Chinese business remained sluggish on dampened consumer demand.
This is part of a bolstered profit recovery plan, which Estee Lauder said would “better position the company to restore stronger, and more sustainable, profitability”.
Such plan was estimated to generate between US$350 and US$500 million in pre-tax savings, with this then set to be reinvested into consumer-facing areas of the business.
Overall sales and earnings for the period had beaten expectations, at US$4.28 billion and US$0.87 respectively.
However, Jefferis noted this was “as expected” given the company’s “easy guidance,” with the figures marking a decline on last year’s second quarter.
Jefferies estimated Estee Lauder would see full-year sales growth of between minus 1% and 1% for the full year following the results, with adjusted earnings per share likely sitting between US$2.08 and US$2.23.
Shares climbed 13% to US$151.40.