It’s time for a makeover for the troubled Estee Lauder

Never underestimate a woman’s desire for beauty. That was the motto of Estée Lauder, founder of the beauty empire.

Lauder, who died in 2004, saw that even when the economy was in crisis, women were buying cosmetics and perfumes.

This was true during the 2008 financial crisis, when women spent more on beauty than ever before. But now that old adage is being put to the test.

The firm, whose brands include Mac and Clinique, has warned that its annual sales are likely to fall as Chinese shoppers shy away from its high-end lipsticks and mascaras.

The announcement came alongside news that Italian boss Fabrizio Freda is retiring after 15 years at the top.

Over the past 18 months, cosmetics have been hit by the problems affecting the luxury industry as a whole. The super-rich can still indulge themselves, but many of those in the “mass affluent” category (wealthy, but not excessively so) have been cutting back on their spending.

This follows a change of fortune for China’s emerging nouveau riche, who had embarked on designer shopping sprees in the world’s fashion capitals.

But the world’s second-largest economy has been hit by a debt crisis in its property sector as Western consumers struggle with inflation and high interest rates.

The post-pandemic “revenge spending” trend — where people squandered money saved during COVID-19 lockdowns after not having the opportunity to splurge — has lost steam.

All of this has left beauty bosses scratching their heads over how to navigate this brave new world.

Estee Lauder, which is listed on the New York Stock Exchange, has seen its shares fall 40 percent in the past year.

So could a boardroom reshuffle put things back in order?

Freda, 66, oversaw blockbuster acquisitions including Tom Ford and the upmarket skincare brand Deciem. Her mission was to break into China’s lucrative cosmetics market with Western brands.

His work has seen the company’s value soar, peaking at $370 a share in late 2021, giving it a market value of £100bn, up from £25bn today.

But the momentum proved unsustainable and last year the group unveiled a major restructuring plan, including cutting thousands of jobs and focusing on high-end brands such as La Mer, which sells 100ml face cream and night balm for £640.

Susannah Streeter of investment platform Hargreaves Lansdown said the size of Estee Lauder’s empire – dozens of brands in more than 150 countries – had been “more of a curse than a blessing”.

He added: “While smaller, more agile companies have been able to shift strategy more quickly in the face of cautious consumers in China and cost-of-living pressures in Europe and North America, Estee Lauder has been a slower ship to turn around.”

Analysts are more optimistic about French rivals. Sales have risen at Sephora, LVMH’s chain of beauty boutiques, and there is strong demand for anti-wrinkle injections at Galderma, a high-end skincare firm partly owned by L’Oreal.

Danni Hewson, an analyst at stockbroking firm AJ Bell, says the stakes at Estee Lauder are higher.

“There is no guarantee that the Chinese consumer will come back in the same way,” he said. “An external appointment would bring new perspectives, new ideas, new energy.”

Despite those calls, the founder’s granddaughter, Jane Lauder, 51, is seen as a leading candidate for chief executive.

The heiress is executive vice president and chief data officer of the group, and her appointment would follow a tradition of family leadership.