Investing.com -- In a note this week, Barclays (LON: BARC ) outlined the steps Estee Lauder (NYSE: EL ) needs to take to get the business back on track.
The bank stressed that a renewed focus on premium innovation, digital transformation, and supply chain optimization is essential for a turnaround.
According to Barclays, one of the main priorities for the company must be to “invest to re-accelerate sales.”
“Estee Lauder is in a challenging spot, trying to reinvest and concurrently rebuild profitability. We'd argue focusing on the top line and reinvesting in burgeoning growth provides more long-term value over time than improving margins via cost cutting,” said the bank.
However, they add that it will take time, to re-establish the company as a leader in the prestige beauty industry.
Barclays also says Estee Lauder should change its organizational structure to promote accountability, noting that similar changes have been a “key unlock across the most successful CPG companies in our space.
“This takes time and iteration to implement successfully and reap rewards,” wrote the Barclays analysts.
The bank also highlighted innovation as another key factor that could boost the company, stating that, more than ever, “consumers are looking for a constant stream of newness.”
Furthermore, the bank believes Estee Lauder should reposition toward the fastest-growing channels globally, noting that its decision to enter Amazon (NASDAQ: AMZN ) Premium Beauty in the US in 2024 was “a clear indication the company is now serious about expanding into the fastest growing, and profitable, channels.”
Elsewhere, the bank said the company should increase the speed, frequency, and effectiveness of its digital marketing and re-establish M&A as a core competency.