Estée Lauder: What the Lauder family's operations exit means for brand

Estée Lauder (EL) stock is sinking Thursday after the beauty company withdrew its 2025 guidance and slashed its quarterly dividend by 47%. The dramatic move comes amid leadership changes and ongoing challenges in the Chinese market, with Stéphane de La Faverie set to assume the mantles of president and CEO on January 1, 2025.

Former LVMH North America Chairman Pauline Brown joins Catalysts to discuss the company's leadership transition.

"This is a failure of governance by the board," she stated, emphasizing that the issue extends beyond individual leadership to the broader challenge of managing executive succession and business pipelines.

Brown argues that the CEO change should have occurred "much sooner," describing the current leadership as being on a "downward slope" since 2021. "I don't blame the market for reacting as it is," she tells Julie Hyman and Brad Smith.

The leadership transformation goes beyond the CEO position. Family members Jane and William Lauder — the grandchildren of the company's founders and namesakes Estée and Joseph Lauder — are stepping away from their operational roles, which Brown believes could fundamentally alter the company's long-term trajectory. Jane served as the brand's chief data officer and executive vice president of enterprise marketing, while William served as executive chairman.

Jane and William will continue to serve on the company's board alongside Gary Lauder and Ronald Lauder (Jane's father). Leonard Lauder will remain as chairman emeritus of the board.

"I don't know if the company can stay intact as we've known it over the last few decades," Brown tells Yahoo Finance.

To watch more expert insights and analysis on the latest market action, check out more Catalysts here.

This post was written by Angel Smith

Video Transcript

Finally, Estee Lauder withdrawing its 2025 guidance cutting its quarterly dividend by 47% citing uncertainty in Asia markets and previously announced C Suite shake up the company's new Ceo Stephane de la Fre will assume the role on January 1st.

According to our next guest, he's got a work cut out for, he's got his work cut out for him.

I think she's not the only one who thinks that Pauline Brown is former chair of LV Mh North America, Pauline.

It's always good to see you.

Um Estee Lauder is just uh it's a tough situation.

I think it's, it's safe to say the stock was already down sharply going into these numbers and then you get this unexpected pullback of capital return shareholders, I guess, just give us your sort of top line view of what's going on here.

Well, um I think first of all, this is, this one breaks my heart.

I spent nearly a decade of my career, very formative decade uh at Estee Lauder.

Um I think uh the, this is a failure of governance by the board.

Uh not dissimilar from what we've recently seen at Disney where it isn't simply about who's in charge, but it's about who's in the pipeline and smooth transitions from one CEO to the next.

Clearly, this was not a smooth transition.

Um I think the former or outgoing CEO Fabrizio Freda, he did a terrific job for the 1st 1011 years of his 15 year tenure.

But the fact is uh since its high water mark in 2021 going into 2022 it has been on a downward slope ever since.

And I think the decision to make this transition should have happened much sooner, should have happened in a much more thoughtful and uh seamless way.

Um And so I don't blame the market for reacting as it is.

The stock is right now actually hovering around 70 from a high point of 370.

I mean, that is a massive fall and it is not just about China.

I'm sorry to say, you know, that's so interesting and we'll come back to that, you know, how, how significant is it that you don't have a person that's part of the family leading this company anymore and really just more involved in some of the strategic direction I believe is what they said.

Yeah.

Well, when, when I worked there, I actually worked for the first nonfamily member who was appointed CEO I think the difference was not whether the person at the helm was a family member or not, but whether other family members were deeply involved.

What's significant here is not simply that Stefan Le Favre is not, not a family member, but that all of the family members have stepped out of their executive role.

So Jane Lauder, who was a close contender for the CEO has said she is recusing herself from all operating responsibilities.

She will remain on the board and William Lauder who's been executive chairman is also leaving.

Um So how significant is it?

I think symbolically and practically, it's quite significant.

Um And uh it's one, it's, it's, it's one that I'll be watching very closely.

I don't know in the absence of the family involvement, whether the company can stay intact.

Uh As we've known it over the last few decades.