As speculation continues to swirl over the future of the Estée Lauder Cos.’ longtime chief executive officer Fabrizio Freda, other changes are afoot at the beauty company.
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Sources say that Tracey Travis, executive vice president and chief financial officer, will exit the publicly listed company later this year, while Freda’s final outstanding financial incentive will end in one year.
In an internal memo sent to employees on Tuesday that was obtained by WWD, Travis did not speak of her impending departure but did note that Jane Lauder, executive vice president of enterprise marketing and chief data officer, and Stéphane de La Faverie, executive group president, have been named “co-executive leaders” of the company’s newly named Profit Recovery and Growth Plan (PRGP).
They are tasked with the implementation of the plan, which is expected to drive incremental operating profit of $1.1 billion to $1.4 billion. They each will continue to report to Freda.
Travis has been in her current position since 2012, with oversight of global finance, accounting, investor relations, information technology, and strategy and new business development. Previously, she was senior vice president of finance and chief financial officer at Ralph Lauren Corp.
Her leaving follows another big departure: Deirdre Stanley, executive vice president and general counsel, left the company in April, having joined in 2019.
This all comes as pressure continues to mount over the future of Freda, who has been at the helm of Lauder since 2009.
Freda, who will celebrate his 67th birthday on Aug. 31, is in the last year of his official incentivization pay from ELC, Securities and Exchange Commission filings showed.
According to the terms of his employment agreement, the president and CEO, who is technically an employee at will and not under contract, will receive incentivization in September 2025, provided the cumulative operating income goal is met as of June 30, 2025.
Freda needed to remain in his position through at least June 30, 2024, to satisfy the service requirement. WWD understands that from now, he needs the company to perform well in order to receive this award, but he does not need to be CEO.
Freda’s total pay package for the fiscal year 2023 was $21.8 million, compared with $25.48 million in 2022 and $65.9 million in 2021. According to WWD’s research , he was the second-highest paid beauty CEO last year, after Coty’s Sue Nabi.
While the board and the Lauder family continue to publicly express their support for Freda, there are said to be discussions within the family over his future at the company. Their opinion matters greatly — the Lauder family overall owns 35 percent of the company’s total common stock and about 84 percent of the outstanding voting power.
Chairman emeritus Leonard Lauder, who turned 91 in March, stepped down from the board in November, but remains a significant shareholder of the company, and has the right to designate two directors. His son, William P. Lauder, occupies one of those seats and is executive chairman. Gary M. Lauder, his youngest son and the managing director of Lauder Partners LLC, a Silicon Valley-based venture capital firm, now occupies the second seat.
In a joint statement, Charlene Barshefsky, presiding director of the board, and William P. Lauder said: “The board of directors fully supports Fabrizio as ceo and his plan to accelerate growth, rebuild profitability, and increase speed to market through the execution of the Profit Recovery and Growth Plan. The board has a long-established process for succession planning which includes assessing potential leaders, internally and externally, in order to drive the long-term success of the company for all its stockholders.”
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But many analysts believe it has been slow on its feet to do anything. WWD understands that an external executive search firm has yet to be hired.
In a recent note, HSBC analyst Erwan Rambourg said: “Freda has had a strong track record over his 15 year tenure; however, the last three years have been problematic and, as such, we would have expected management changes to be more explicit by now.”
In an interview with WWD, Oliver Chen, an analyst at Cowen, added: “All great companies need to think about this as far in advance as possible. I have always thought that ELC needs more speed and agility, so whatever leadership comes next should be focused on driving speed and driving innovation and driving relevance to younger customers.”
While many analysts are advocating for an external candidate, there is much speculation around internal options. De La Faverie and Jane Lauder are said to be contenders, as was Travis at one point.
An alternative option, said multiple sources, would be to add a chief operating officer role to the C-suite and put in place a more gradual succession plan. The company used to have a chief operating officer, but Freda, William Lauder and the board nixed this position once Freda assumed the top job.
Whoever enters or exits the C-suite next, one thing is certain: the company has much work to do to claw back market share that it lost as the Chinese market and travel retail failed to bounce back post-pandemic.
For the quarter ended March 31 , the company said it has reached an inflection point, but analysts cautioned that the recovery won’t be linear, with Lauder needing to jump-start sales in mainland China and its home market, where it is being surpassed by rivals and indie brands.
Indeed, while Lauder’s travel retail sales category finally returned to growth after seven consecutive quarters of decline and the company made inroads in driving down inventory levels in Asia travel retail, net sales in mainland China were lower than expected and in North America they were flat.
That performance is expected to result in more senior-level departures in the months to come. One source said: “I guess the question is, who’s going to pay the price for it? Someone, somewhere is going to pay the price. So you might see some other executives leaving.”
Other layoffs are expected to happen as part of the PRGP, with the company reporting in February that it would be reducing its 62,000-strong global workforce by between 3 and 5 percent. This will be carried out over the next two-and-a-half years.
Under the PRGP, Lauder is also unveiling Fueling the Journey, a program in which it evaluated overhead costs and identified levers to drive greater efficiencies across the business. Specific initiatives will continue to be implemented this year, according to the memo.
“Over the course of the PRGP, we will continue to build a leaner, more agile organization that can allocate resources and make decision more efficiently,” said the memo, cosigned by Travis and Michael O’Hare, executive vice president, global human resources.
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