(Bloomberg) -- Estée Lauder Cos. named longtime company veteran Stéphane de La Faverie as chief executive officer, betting that the insider can execute the sweeping turnaround that Wall Street wants.
De La Faverie, 50, will take the helm of the cosmetics company on Jan. 1, succeeding Fabrizio Freda, who has been CEO since 2009. Freda, 67, said earlier this year that he planned to retire next June.
The transition, which was reported earlier this week by the Wall Street Journal, comes as Estée Lauder faces pressure to bolster its falling market share in the US and sluggish sales in China. The New York-based company’s shares had fallen 39% this year through Tuesday’s trading.
Estée Lauder also announced Wednesday that William Lauder, a grandson of the founder, is stepping down as executive chairman but will remain board chair. Jane Lauder, one of the founder’s granddaughters, plans to step aside from her executive role at the end of the year, according to an internal company memo seen by Bloomberg News. It will be the first time since the company was founded more than 75 years ago that a member of the Lauder family hasn’t been involved in the day-to-day management of the business.
“The Lauder family intends to remain meaningful stockholders” and will “focus more on the overall strategic direction” of the company, the company told employees in a separate memo.
De La Faverie joined Estée Lauder in 2011 and for years led its namesake brand. Internally, he’s considered the driver behind the company’s strong growth in high-end fragrances in recent years, including Le Labo, Kilian Paris and Editions de Parfums Frederic Malle. He has been on the executive leadership team since 2014 and is currently one of two executive group presidents at the company, overseeing around half its brands.
Linda Bolton Weiser, an analyst at DA Davidson, said de La Faverie’s years of experience at Estée Lauder may help him implement changes quicker than an outside CEO would be able to do, according to a research note issued earlier this week after reports circulated about his promotion.
Challenges Ahead
He’ll inherit multiple challenges from his predecessor. Demand in China has been slow to come back since the pandemic, especially at duty-free stores, a key sales driver for Estée Lauder brands. The company has also been losing market share on its home turf in recent years to big rivals such as L’Oréal SA as well as cosmetic upstarts that have been more nimble at navigating social media trends.
Estée Lauder said in a statement that de La Faverie has played a “key role” implementing the turnaround plan started by Freda, which includes cost cuts, fewer discounts and promotions, and seizing on social-media beauty trends.
However, some Wall Street analysts worry that the insider won’t implement the bigger fixes needed to revitalize sales.
“Some in the investor community were likely hoping for an external hire who could lend a fresh perspective and make more dramatic changes to the organization,” TD Cowen analyst Oliver Chen wrote in a research note. “We believe the stock could continue to trade sideways until results improve materially under de La Faverie.”
Barclays analyst Lauren Lieberman said in an interview that the incoming CEO relied heavily on China when expanding the Estée Lauder brand, mirroring the broader missteps at the company, with “growth that was too limited in scope.”
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