Estee Lauder cuts unprofitable brand

By Simon Pitman

- Last updated on GMT

Related tags Cosmetics Estée lauder companies Brand management

Estee Launder has ceased distribution of its Prescriptive brand as part of moves to enhance the profitability of the company.

The company says it will cease global wholesale distribution of the brand by January 2010, adding that customers will still be able to buy the products online after this date, while stocks last.

The products, which include an extensive range of color cosmetics, skin care and fragrance, are currently only distributed in the US, Canada, the UK, Ireland and Australia

The company says that the product line no longer fits in with its quest to develop products that have the ability to be turned around in order to give them an improved return on investment.

Weaker brands feeling the pinch

However, the global economic downturn has led to increased competition in the personal care market place, forcing many lesser known and weaker brands into tough times that has led many to the brink of extinction.

Estee Lauder said that after thoroughly studying the long-term viability of the brand it found it no longer represented a workable business prospect, especially given the current economic environment.

Although the company has not announced any formal job losses, it says that it would like to find as many alternative positions in other areas of its business for those workers who will be affected by the closure.

Redirecting resources to imperatives

“We believe that the difficult decision relating to Prescriptives will allow us to redirect our resources to key strategic imperatives where we see the highest growth potential,”​ said Fabrizio Freda, Estee Lauder CEO.

The company said that the business closure would not affect the net sales and earnings forecasts for the end of the year, but did say that it expects to absorb charges of between $35 - $40m in connection with the business closure.

These charges are also within the budget range for total restructuring charges that the company expects to incur during the course of 2010, but are not included in the forecasts for fiscal earnings in the first quarter of 2010.

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