ESTEE LAUDER COMPANIES INC
For the period ended Mar 31, 2024. Filed May 1, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 1, 2024
EL$110.06+2.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-02-05.
0001001250-24-000007
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-03-31; filed 2024-05-01.
0001001250-24-000049
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 223 previous paragraphs and 228 current paragraphs.
113 unchanged; 68 reworded; 44 added; 36 removed; 6 previous and 3 current paragraphs rearranged.
Tables are not compared: 31 previous and 31 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (44)
Current report
•Our skin care net sales increased 8% for the three months ended March 31, 2024, primarily driven by higher net sales from La Mer and Estée Lauder, reflecting higher net sales from our Asia travel retail business. The growth in Asia travel retail was driven by higher shipments reflecting significant sequential improvement in retail sales trends and continued progress in achieving targeted retailer inventory levels as well as lower shipments in the prior-year period due, in part, to transitory headwinds.
Current report
•Our makeup net sales increased 3% for the three months ended March 31, 2024, primarily reflecting higher net sales from Estée Lauder, within our Asia travel retail business, driven by higher shipments reflecting significant sequential improvement in retail sales trends and continued progress in achieving targeted retailer inventory levels as well as lower shipments in the prior-year period due, in part, to transitory headwinds, and higher net sales from Clinique, partially offset by lower net sales from Bobbi Brown.
Current report
•Our fragrance net sales were virtually flat for the three months ended March 31, 2024, including the unfavorable impact of foreign currency translation of 1%. Reported fragrance net sales reflected lower net sales from Estée Lauder, the unfavorable year-over-year impact of residual net sales in fiscal 2023 related to the transition of licenses due to the license terminations related to certain of our designer fragrances effective June 30, 2022, and lower net sales from TOM FORD, partially offset by higher net sales from Jo Malone London and Le Labo.
Current report
•Net sales in The Americas increased 3% for the three months ended March 31, 2024, primarily driven by an increase in net sales in Mexico, the United States, and Brazil. Net sales in Mexico and Brazil increased, primarily reflecting growth in makeup, led by M·A·C. The increase in net sales in the United States primarily reflected incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand and growth in fragrance, driven by our luxury fragrances, partially offset by a decline in makeup, driven by the unfavorable year-over-year impact resulting from the recognition of previously deferred revenue due to changes to the BACK 2 M·A·C take back program during the fiscal 2023 second quarter.
Current report
•Net sales in Europe, the Middle East & Africa increased 12% for the three months ended March 31, 2024, primarily driven by higher net sales from our Asia travel retail business. The growth in Asia travel retail was driven by higher shipments reflecting significant sequential improvement in retail sales trends and continued progress in achieving targeted retailer inventory levels as well as lower shipments in the prior-year period due, in part, to transitory headwinds.
Current report
•Net sales in Asia/Pacific decreased 1% for the three months ended March 31, 2024, primarily driven by the unfavorable impact of foreign currency translation of 5%, resulting in a decrease in net sales in mainland China, and lower net sales in Korea, attributable to the Dr.Jart+ travel retail business in Korea, and Australia, partially offsetting the net sales decrease in Asia/Pacific for the three months ended March 31, 2024 was an increase in net sales in Hong Kong SAR.
Current report
Further information about the Restructuring Program Component of the Profit Recovery Plan, is described in Notes to Consolidated Financial Statements, Note 3 – Charges Associated with Restructuring and Other Activities herein.
Current report
Reported net sales increased during the three months ended March 31, 2024, primarily driven by higher net sales in our Asia travel retail business. The growth in Asia travel retail was driven by higher shipments reflecting significant sequential improvement in retail sales trends and continued progress in achieving targeted retailer inventory levels as well as lower shipments in the prior-year period due, in part, to transitory headwinds.
Current report
Reported net sales was impacted by approximately $51 million and $54 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2024, respectively.
Current report
Reported net sales increased 5% for the three months ended March 31, 2024, driven by an increase from pricing of 10%, due to the favorable impact from strategic pricing actions and changes in mix, partially offset by the decrease from volume of 4% and the unfavorable impact from foreign currency translation of 1%.
Current report
Partially offsetting the increase in skin care net sales for the three months ended March 31, 2024 was lower net sales from Clinique, primarily driven by declines in serums and moisturizers.
Current report
Skin care net sales were impacted by approximately $34 million and $52 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2024, respectively.
Current report
Reported skin care net sales increased 8% for the three months ended March 31, 2024, driven by an increase from pricing of 14%, due to the favorable impact from strategic pricing actions and changes in mix, partially offset by the decrease from volume of 4% and the unfavorable impact from foreign currency translation of 2%.
Current report
Reported makeup net sales increased for the three months ended March 31, 2024, reflecting higher net sales from Estée Lauder and Clinique, combined, of approximately $55 million. The increase in net sales from Estée Lauder was primarily driven by our Asia travel retail business. The growth in Asia travel retail was driven by higher shipments reflecting significant sequential improvement in retail sales trends and continued progress in achieving targeted retailer inventory levels as well as lower shipments in the prior-year period due, in part, to transitory headwinds. Net sales from Clinique increased, primarily driven by the success of hero products.
Current report
Partially offsetting the increase in makeup net sales for the three months ended March 31, 2024 was lower net sales from Bobbi Brown, primarily driven by declines across the foundation, eye and lip subcategories.
Current report
Makeup net sales were impacted by approximately $10 million of unfavorable foreign currency translation for the three months ended March 31, 2024.
Current report
Reported makeup net sales increased 3% for the three months ended March 31, 2024, driven by an increase from pricing of 6%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix. Partially offsetting this increase was the decrease from volume of 2% and the unfavorable impact of foreign currency translation of 1%.
Current report
Reported makeup net sales decreased 2% for the nine months ended March 31, 2024, driven by the decrease from volume of 5%, partially offset by an increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
Current report
Reported fragrance net sales were virtually flat for the three months ended March 31, 2024, including the unfavorable impact of foreign currency translation of 1%. Reported fragrance net sales reflected lower net sales from Estée Lauder, the unfavorable year-over-year impact of residual net sales in fiscal 2023 related to the transition of licenses due to the license terminations related to certain of our designer fragrances effective June 30, 2022, and lower net sales from TOM FORD, combined, of approximately $33 million. Net sales from Estée Lauder decreased, primarily driven by lower net sales from the Beautiful, Estée Lauder Pleasures and Modern Muse product franchises. Net sales from TOM FORD decreased, primarily reflecting strong performance in the prior-year period within our Asia travel retail business. Partially offsetting these decreases were higher net sales from Jo Malone London and Le Labo, combined, of approximately $24 million. The increase in net sales from Jo Malone London for the three months ended March 31, 2024, was driven by the success of hero products and recent product launches. Net sales from Le Labo increased, primarily reflecting targeted expanded consumer reach, including the brand's launch in mainland China during the fiscal 2023 fourth quarter and success of hero products.
Current report
Fragrance net sales were impacted by approximately $7 million and $4 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2024, respectively.
Current report
Reported hair care net sales decreased 3% for the three months ended March 31, 2024, driven by the decrease from volume of 18%. This decrease was partially offset by the increase from pricing of 14%, due to the favorable impact from strategic pricing actions and changes in mix, and the favorable impact from foreign currency translation of 1%.
Current report
Reported hair care net sales decreased 5% for the nine months ended March 31, 2024, driven by the decrease from volume of 13%. This decrease was partially offset by the increase from pricing of 8%, due to the favorable impact from strategic pricing actions and changes in mix, and the favorable impact of foreign currency translation of 1%.
Current report
The increase in reported net sales in The Americas for the three months ended March 31, 2024 was primarily driven by an increase in net sales in Mexico, the United States, and Brazil, combined, of approximately $28 million. Net sales in Mexico and Brazil increased, primarily reflecting growth in makeup, led by M·A·C. The increase in net sales in the United States primarily reflected incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand and growth in fragrance, driven by our luxury fragrances, partially offset by a decline in makeup, driven by the unfavorable year-over-year impact resulting from the recognition of previously deferred revenue due to changes to the BACK 2 M·A·C take back program during the fiscal 2023 second quarter.
Current report
The increase in reported net sales in The Americas for the nine months ended March 31, 2024 was primarily driven by an increase in the United States, Mexico, and Brazil, combined, of approximately $108 million. The increase in net sales in the United States primarily reflected growth in fragrance, driven by our luxury fragrances, incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand, and higher net sales in skin care, led by The Ordinary, partially offset by the unfavorable year-over-year impact resulting from the recognition of previously deferred revenue due to changes to the BACK 2 M·A·C take back program during the fiscal 2023 second quarter and lower net sales in hair care, led by Aveda. Net sales in Mexico and Brazil increased, driven by growth in makeup, led by M·A·C.
Current report
Reported net sales increased in Europe, the Middle East & Africa for the three months ended March 31, 2024, primarily driven by higher net sales from our Asia travel retail business. The growth in Asia travel retail was driven by higher shipments reflecting significant sequential improvement in retail sales trends and continued progress in achieving targeted retailer inventory levels as well as lower shipments in the prior-year period due, in part, to transitory headwinds.
Current report
Reported net sales decreased in Europe, the Middle East & Africa for the nine months ended March 31, 2024, primarily driven by lower net sales from our Asia travel retail business. For the nine months ended March 31, 2024, Asia travel retail net sales declined, primarily driven by the actions that we and our retailers took to reset retailer inventory levels, including the response to changes in government regulatory and retailer policies during the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers.
Current report
Reported net sales in Europe, the Middle East & Africa increased 12% for the three months ended March 31, 2024, driven by an increase from pricing of 13%, due to the favorable impact from strategic pricing actions and changes in mix, partially offset by the decrease from volume of 1%.
Current report
Reported net sales decreased in Asia/Pacific for the three months ended March 31, 2024, primarily driven by the unfavorable impact of foreign currency translation of 5%, resulting in a decrease in net sales in mainland China, and lower net sales in Korea, led by the Dr.Jart+ travel retail business in Korea, and Australia, combined, of approximately $41 million. Partially offsetting the unfavorable impact of foreign currency translation in mainland China was higher net sales as a result of lower retail traffic in the beginning of the prior-year period due to the rise in COVID-19 cases. Net sales in Korea, led by the Dr.Jart+ travel retail business in Korea, decreased, reflecting the timing impact on Dr.Jart+ from new government regulations during the fiscal 2024 third quarter to further control unstructured market activity, as well as lower conversion. The decrease in net sales in Australia was primarily driven by an unfavorable impact due to timing of shipments compared to the prior-year period.
Current report
Reported net sales decreased in Asia/Pacific for the nine months ended March 31, 2024, reflecting lower net sales from mainland China, primarily driven by the impacts from the ongoing softness in overall prestige beauty reflecting subdued consumer confidence.
Current report
Reported net sales in Asia/Pacific decreased 1% for the three months ended March 31, 2024, driven by the decrease from volume of 7% and the unfavorable impact from foreign currency translation of 5%. Partially offsetting these decreases was an increase from pricing of 10%, due to the favorable impact from strategic pricing actions and changes in mix.
Current report
Reported net sales in Asia/Pacific decreased 5% for the nine months ended March 31, 2024, driven by the decrease from volume of 10% and the unfavorable impact from foreign currency translation of 3%. Partially offsetting these decreases was an increase from pricing of 8%, due to the favorable impact from strategic pricing actions and changes in mix.
Current report
The favorable change in operating expense margin for the three months ended March 31, 2024 was primarily driven by lower overall advertising and promotional expenses, due to disciplined expense management, while we continued to strategically invest in higher growth opportunities. Partially offsetting the favorable operating expense margin were higher store operating costs, driven by targeted expanded consumer reach.
Current report
Reported skin care operating income increased for the three months ended March 31, 2024, reflecting higher operating results from La Mer and Estée Lauder, combined, of approximately $222 million. The increase in operating income from La Mer was primarily driven by an increase in net sales. Operating income from Estée Lauder increased, primarily reflecting a decrease in cost of sales, due in part to lower freight and transportation costs and obsolescence charges as well as a decrease in promotional items, disciplined advertising and promotional expense management, and an increase in net sales. The increase in skin care operating income for the three months ended March 31, 2024 was partially offset by the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales.
Current report
Reported skin care operating income decreased for the nine months ended March 31, 2024, reflecting lower operating results from Estée Lauder and Clinique, combined, of approximately $322 million, primarily driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management. Also contributing to the decrease in operating results from Estée Lauder was lower shipping costs due to the decrease in net sales. Also contributing to the decrease in skin care operating income for the nine months ended March 31, 2024 was the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales.
Current report
Reported makeup operating income increased for the three months ended March 31, 2024, primarily reflecting higher operating results from Estée Lauder, Clinique, M·A·C, and TOM FORD, combined, of approximately $101 million. The increase in operating results from Estée Lauder was primarily driven by an increase in net sales and disciplined advertising and promotional expense management. Operating income from Clinique increased, primarily driven by an increase in net sales and a decrease in cost of sales, due in part to a decrease in promotional items. The increase in operating results from M·A·C was primarily driven by lower cost of sales reflecting lower freight and transportation costs compared to the prior-year period and disciplined advertising and promotional expense management. Operating results from TOM FORD increased, primarily driven by disciplined advertising and promotional expense management, lower cost of sales, due in part to lower obsolescence charges, and a decrease in royalty expense as a result of the fiscal 2023 fourth quarter acquisition of TOM FORD brand, partially offset by a decrease in net sales.
Current report
The increase in makeup operating income for the three months ended March 31, 2024 was partially offset by the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales.
Current report
Partially offsetting the increase in makeup operating income for the nine months ended March 31, 2024, was lower operating results from M·A·C, primarily driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management. Also partially offsetting the increase in makeup operating income for the nine months ended March 31, 2024 was the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales, and an increase in general and administrative expenses, reflecting higher employee-related costs, primarily driven by the increase to stock-based compensation related to the unfavorable year-over-year comparisons in the recognition of expenses, as well as adjustments related to our performance share units, and annual increases to salaries and wages, partially offset by lower incentive compensation.
Current report
Reported fragrance operating income decreased for the three months ended March 31, 2024, reflecting lower operating results from TOM FORD and Le Labo, combined, of approximately $12 million. The decrease in operating income from TOM FORD was primarily driven by a decrease in net sales, higher cost of sales, due in part to an increase in promotional items, higher advertising and promotional expenses and an increase in general and administrative expenses, as the brand continues to invest in and support the growth of the business, partially offset by a decrease in royalty expense as a result of the fiscal 2023 fourth quarter acquisition of TOM FORD brand. Operating income from Le Labo decreased, primarily driven by higher advertising and promotional activities to support the growth of the business, higher store operating costs and higher selling expenses, due to targeted expanded consumer reach, partially offset by an increase in net sales. Also contributing to the decrease in fragrance operating income for the three months ended March 31, 2024 was the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales.
Current report
Reported hair care operating loss remained virtually flat for the three months ended March 31, 2024. reflecting the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales, offset by an increase in the operating results from Aveda and Bumble and bumble, combined, of approximately $11 million. Operating results from Aveda increased, primarily driven by disciplined advertising and promotional expense management, lower general and administrative expenses, partially offset by a decrease in net sales. The increase in operating results from Bumble and bumble was driven by a decrease in cost of sales, primarily reflecting the favorable impact of product mix and a decrease in promotional activities due to disciplined expense management, and an increase in net sales.
Current report
Reported hair care operating results decreased for the nine months ended March 31, 2024, primarily reflecting the decrease in net sales and the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales, partially offset by the benefit from disciplined advertising and promotional expense management.
Showing the first 40 of 44 passages. Open the source sections for the rest.
Removed paragraphs (36)
Previous report
•Our skin care net sales declined 10% for the three months ended December 31, 2023, primarily driven by lower net sales from Estée Lauder and Clinique. The decrease in net sales from Estée Lauder primarily reflected the impacts from the ongoing softness in overall prestige beauty in mainland China. Also contributing to the decrease in net sales from Estée Lauder and primarily driving the decrease in net sales from Clinique, was a decline in our Asia travel retail business, primarily due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels, including the response to changes in government and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers. Partially offsetting the decrease in skin care net sales were higher net sales from The Ordinary, reflecting growth in every geographic region.
Previous report
•Our makeup net sales decreased 8% for the three months ended December 31, 2023, primarily driven by lower net sales from M·A·C and Estée Lauder. Net sales from M·A·C decreased, primarily driven by the phasing out of select products in preparation for new product launches and the unfavorable year-over-year impact resulting from the recognition of previously deferred revenue due to changes to the BACK 2 M·A·C take back program during the fiscal 2023 second quarter. Net sales from Estée Lauder decreased, primarily due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels and lower conversion of travelers to consumers. Partially offsetting the makeup net sales decrease were higher net sales from Clinique, primarily driven by new product launches and continued success of hero products.
Previous report
•Net sales in The Americas remained virtually flat for the three months ended December 31, 2023, primarily driven by higher net sales in Latin America, led by Brazil and Mexico, primarily driven by growth in makeup and benefiting from the success of holiday and key shopping moments. These increases were partially offset by lower net sales in the United States, primarily driven by the unfavorable year-over-year impact resulting from the recognition of previously deferred revenue due to changes to the BACK 2 M·A·C take back program during the fiscal 2023 second quarter, partially offset by incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of $15 million.
Previous report
•Net sales in Europe, the Middle East & Africa decreased 13% for the three months ended December 31, 2023, primarily driven by our Asia travel retail business. The decline in our Asia travel retail business was primarily due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels, including the response to changes in government and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers.
Previous report
The total net sales decrease was impacted by approximately $8 million of favorable and $3 million of unfavorable foreign currency translation for the three and six months ended December 31, 2023, respectively.
Previous report
Reported net sales decreased 7% for the three months ended December 31, 2023, driven by the decrease from volume of 12%, partially offset by an increase from pricing of 4% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
Previous report
Reported net sales decreased 9% for the six months ended December 31, 2023, driven by the decrease from volume of 13%, partially offset by an increase from pricing of 3% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
Previous report
Reported skin care net sales decreased for the three months ended December 31, 2023, reflecting lower net sales from Estée Lauder and Clinique, combined, of approximately $261 million. The decrease in net sales from Estée Lauder primarily reflected the impacts from the ongoing softness in overall prestige beauty in mainland China. Also contributing to the decrease in net sales from Estée Lauder and primarily driving the decrease in net sales from Clinique, was a decline in our Asia travel retail business. This decline was primarily due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels, including the response to changes in government and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers. Also contributing to the decline in net sales from Clinique was the impacts from the ongoing softness in overall prestige beauty in mainland China.
Previous report
The skin care net sales decrease was impacted by approximately $1 million and $18 million of unfavorable foreign currency translation for the three and six months ended December 31, 2023, respectively.
Previous report
Reported skin care net sales decreased 16% for the six months ended December 31, 2023, driven by the decrease from volume of 19%, partially offset by an increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
Previous report
The makeup net sales decrease was impacted by approximately $6 million and $10 million of favorable foreign currency translation for the three and six months ended December 31, 2023, respectively.
Previous report
Reported makeup net sales decreased 8% for the three months ended December 31, 2023, driven by a decrease from volume of 11%, partially offset by the increase from pricing of 2% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
Previous report
Reported makeup net sales decreased 4% for the six months ended December 31, 2023, driven by a decrease from volume of 7%, partially offset by the increase from pricing of 3% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
Previous report
Partially offsetting the increases in fragrance net sales for the three and six months ended December 31, 2023 were lower net sales from Estée Lauder and the unfavorable year-over-year impact of residual net sales in fiscal 2023 related to the transition of licenses due to the license terminations related to certain of our designer fragrances effective June 30, 2022, combined, of approximately $36 million and $44 million, respectively. The decrease in net sales from Estée Lauder for the three months ended December 31, 2023 was driven by an unfavorable impact due to timing of holiday shipments compared to the prior-year period. The decrease in net sales from Estée Lauder for the six months ended December 31, 2023 was primarily driven by business disruptions in Israel and other parts of the Middle East.
Previous report
The hair care net sales decrease was impacted by approximately $1 million and $2 million of favorable foreign currency translation for the three and six months ended December 31, 2023, respectively.
Previous report
Reported hair care net sales decreased 5% for the three months ended December 31, 2023, driven by the decrease from volume of 12%. This decrease was partially offset by the increase from pricing of 6%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix, and the favorable impact of foreign currency translation of 1%.
Previous report
The increase in reported net sales in The Americas for the three months ended December 31, 2023 was primarily driven by an increase in net sales in Latin America, led by Brazil and Mexico, of approximately $19 million. The increase in net sales in Brazil and Mexico was led by growth in makeup and benefited from the success of holiday and key shopping moments. Partially offsetting the increase in net sales in The Americas for the three months ended December 31, 2023 was a decrease in net sales in the United States, primarily driven by the unfavorable year-over-year impact resulting from the recognition of previously deferred revenue due to changes to the BACK 2 M·A·C take back program during the fiscal 2023 second quarter, partially offset by incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of $15 million.
Previous report
The increase in reported net sales in The Americas for the six months ended December 31, 2023 was driven primarily by increased net sales in the United States, Brazil and Mexico, combined, of approximately $80 million. The increase in net sales in the United States primarily reflected strong performance by The Ordinary, as well as growth in fragrance, led by Jo Malone London, TOM FORD, and Le Labo, and incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of $32 million. Partially offsetting the increase in net sales in the United States was the unfavorable year-over-year impact resulting from the recognition of previously deferred revenue due to changes to the BACK 2 M·A·C take back program during the fiscal 2023 second quarter. The increase in net sales in Brazil and Mexico was led by growth in makeup and benefited from the success of holiday and key shopping moments.
Previous report
Reported net sales decreased in Europe, the Middle East & Africa for the three and six months ended December 31, 2023, primarily driven by lower net sales from our Asia travel retail business. The decrease in net sales from our Asia travel retail business was primarily due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels, including the changes in government and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers. While these efforts continue, as a result of actions taken to date our retailer inventory levels have decreased.
Previous report
Reported net sales in Europe, the Middle East & Africa decreased 13% for the three months ended December 31, 2023, driven by the decrease from volume of 21%. This decrease was partially offset by the increase from pricing of 7%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix, and the favorable impact from foreign currency translation of 1%.
Previous report
Reported net sales in Europe, the Middle East & Africa decreased 19% for the six months ended December 31, 2023, driven by the decrease from volume of 23%. This decrease was partially offset by the increase from pricing of 3%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix, and the favorable impact from foreign currency translation of 1%.
Previous report
Reported net sales decreased in Asia/Pacific for the three and six months ended December 31, 2023, primarily reflecting the impacts from the ongoing softness in overall prestige beauty in mainland China.
Previous report
Partially offsetting the decrease in gross margin for the three months ended December 31, 2023 was a favorable impact from our mix of business, primarily driven by brand mix, reflecting the favorable impact from the shift of manufacturing production volume from third-party manufacturers to our own facilities for The Ordinary, and decreased sales of our lower margin skin care product sets compared to the prior-year period. These favorable impacts within our mix of business were partially offset by higher costs associated with promotional items.
Previous report
The favorable change in operating expense margin for the three months ended December 31, 2023 was partially offset by the impact of the decrease in net sales, as well as higher selling costs and store operating costs as we continue to invest in our business including through increased demonstration expenses and targeted expanded consumer reach, while also decreasing certain expenses through disciplined expense management.
Previous report
Reported skin care operating income decreased for the three months ended December 31, 2023, reflecting lower operating results from Estée Lauder and, to a lesser extent, Clinique, combined, of approximately $146 million, primarily driven by decreases in net sales, partially offset by disciplined advertising and promotional expense management.
Previous report
Reported skin care operating income decreased for the six months ended December 31, 2023, reflecting lower operating results from Estée Lauder and La Mer, combined, of approximately $523 million. The decrease in operating results from Estée Lauder was primarily driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management. Operating results from La Mer decreased, primarily driven by the decrease in net sales and investments in advertising and promotional activities.
Previous report
The decrease in skin care operating income for the three and six months ended December 31, 2023 also included higher obsolescence charges primarily due to excess inventory on hand driven by lower than expected demand primarily within our travel retail business and mainland China, and for the six months ended December 31, 2023, higher employee-related costs, including an increase in stock-based compensation expense, partially offset by lower incentive compensation, as discussed above.
Previous report
Partially offsetting the increase in makeup operating income for the three months ended December 31, 2023 and primarily driving the decrease in makeup operating income for the six months ended December 31, 2023 were lower results from M·A·C and Estée Lauder, combined, of approximately $54 million and $86 million, respectively. In both periods, the decrease in operating income from M·A·C was primarily driven by a decrease in net sales, partially offset by lower advertising and promotional expenses, due to timing of advertising activities and disciplined expense management. Operating income from Estée Lauder decreased for the three and six months ended December 31, 2023, primarily driven by a decrease in net sales, partially offset by lower advertising and promotional expenses due to disciplined expense management.
Previous report
The increase in makeup operating income for the three months ended December 31, 2023 was also partially offset by higher obsolescence charges primarily due to excess inventory on hand driven by lower than expected demand primarily within our travel retail business and mainland China.
Previous report
The decrease in makeup operating income for the six months ended December 31, 2023 also reflected higher obsolescence charges primarily due to excess inventory on hand driven by lower than expected demand primarily within our travel retail business and mainland China, as well as higher employee-related costs, including an increase in stock-based compensation expense, partially offset by lower incentive compensation, as discussed above.
Previous report
Reported fragrance operating income decreased for the three months ended December 31, 2023, reflecting the unfavorable year-over-year impact of residual net sales in the prior-year period associated with the license terminations related to certain of our designer fragrances effective June 30, 2022 and lower results from Estée Lauder, combined, of approximately $19 million. The decrease in operating income from Estée Lauder was primarily driven by decreases in net sales, partially offset by lower advertising and promotional expenses due to disciplined expense management.
Previous report
Reported hair care operating results decreased for the three and six months ended December 31, 2023, primarily driven by lower results from Aveda and Bumble and bumble, combined, of approximately $5 million and $12 million, respectively, reflecting decreases in net sales. Partially offsetting the lower results from Aveda in both periods was disciplined advertising and promotional expense management. Also contributing to the decrease in hair care operating income for the six months ended December 31, 2023 were higher employee-related costs, including an increase in stock-based compensation expense, partially offset by lower incentive compensation, as discussed above.
Previous report
Partially offsetting the decrease in operating results in The Americas for the six months ended December 31, 2023, was higher results from Canada, driven by lower cost of sales reflecting the favorable impact from the shift of manufacturing production volume from third-party manufacturers to our own facilities for The Ordinary and an increase in net sales.
Previous report
Partially offsetting the decrease in operating income in Europe, the Middle East & Africa for the three months ended December 31, 2023 were higher results from Russia, primarily due to an increase in net sales as we continue selling a limited selection of products to retailers in Russia, as well as a decrease in expenses as a result of our scaled down operations, including the closure of all of our freestanding stores.
Previous report
Reported operating income increased in Asia/Pacific for the three months ended December 31, 2023, primarily driven by higher results in Korea, led by the Dr.Jart+ travel retail business in Korea, primarily reflecting the favorable year-over-year impact of the fiscal 2023 second quarter other intangible asset impairment relating to Dr. Jart+ of $100 million.
Previous report
(16)Consists of $1,000 million principal and unamortized debt discount of $5 million.
Reworded paragraphs (68)
Previous wording
We manufacture, market and sell beauty products including those in the skin care, makeup, fragrance and hair care categories, which are distributed in approximately 150 countries and territories. The following table is a comparative summary of operating results for the three and six months ended December 31, 2023 and 2022, and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies for all periods presented. Products and services that do not meet our definition of skin care, makeup, fragrance and hair care have been included in the “other” category. During the fiscal 2024 second quarter, we identified and corrected misclassifications of net sales and operating income between certain of our product categories in our Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three and six months ended December 31, 2023 and 2022. See Note 13 – Segment Data and Related Information for additional details.
Current wording
We manufacture, market and sell beauty products including those in the skin care, makeup, fragrance and hair care categories, which are distributed in approximately 150 countries and territories. The following table is a comparative summary of operating results for the three and nine months ended March 31, 2024 and 2023, and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies for all periods presented. Products and services that do not meet our definition of skin care, makeup, fragrance and hair care have been included in the “other” category. During the fiscal 2024 second quarter, we identified and corrected misclassifications of net sales and operating income between certain of our product categories in our Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three and nine months ended March 31, 2023. See Note 14 – Segment Data and Related Information for additional details.
Previous wording
•Our hair care net sales declined 5% for the three months ended December 31, 2023, primarily attributable to lower net sales from Aveda, reflecting a decline in North America, in the salon channel and in our online business.
Current wording
•Our hair care net sales declined 3% for the three months ended March 31, 2024, primarily attributable to lower net sales from Aveda, driven by declines in North America, primarily reflecting softness in the salon and direct-to-consumer channels.
Previous wording
We have experienced, and are expecting to continue to experience, challenges within our Asia travel retail business, as well as the ongoing softness in overall prestige beauty in mainland China, as well as further business disruption in Israel and other parts of the Middle East. Net sales from Israel and the Middle East accounted for approximately 2% of consolidated net sales in each of fiscal 2023 and the first quarter of fiscal 2024. These challenges are collectively expected to negatively impact net sales and profitability, including an unfavorable impact to our effective tax rate from changes to our geographical mix of earnings. We have also experienced, and are expecting to continue to experience, under absorption of manufacturing variances due to lower production volumes. As a result of continuing to operate at a reduced capacity, we expect to recognize the impact of reduced manufacturing volumes on our standard cost within cost of sales in the fiscal 2024 third quarter. Additionally, we are continually evaluating our inventory position and actions we may take to reduce the balance, which could result in increased charges in future periods.
Current wording
We have experienced challenges within our business, including in our Asia travel retail business, and we expect volatility to continue. We have experienced, and are expecting to continue to experience, ongoing softness in overall prestige beauty in mainland China, as well as further business disruption in Israel and other parts of the Middle East. Net sales from Israel and the Middle East accounted for approximately 2% of consolidated net sales in each of fiscal 2023 and the first quarter of fiscal 2024. These challenges are collectively expected to impact net sales and profitability, including impacts to our effective tax rate from changes to our geographical mix of earnings. We have also experienced, and are expecting to continue to experience, under absorption of manufacturing variances due to lower production volumes, and will be recognizing the impact of reduced manufacturing volumes on our standard cost within cost of sales for the remainder of fiscal 2024. Additionally, we are continually evaluating our inventory position and actions we may take to reduce the balance, which could result in increased charges in future periods.
Previous wording
As initially disclosed on July 18, 2023, we identified a cybersecurity incident in which an unauthorized third party gained access to some of our systems. Our investigation into the cybersecurity incident is complete. We determined that the unauthorized third party obtained some data from our systems, including consumer and employee data. We continue to take steps to enhance the security of our systems and coordinate with law enforcement authorities. We provided notification to governmental authorities in certain jurisdictions and also notified, and will continue to notify, affected individuals where required by law.
Current wording
As initially disclosed on July 18, 2023, we identified a cybersecurity incident in which an unauthorized third party gained access to some of our systems. Our investigation into the cybersecurity incident is complete. We determined that the unauthorized third party obtained some data from our systems, including consumer and employee data. We continue to take steps to enhance the security of our systems and coordinate with law enforcement authorities. We provided notification to governmental authorities in certain jurisdictions and also notified affected individuals where required by law.
Previous wording
The incident did not have a material impact on net sales and was $.01 and $.07 dilutive to earnings per common share for the three and six months ended December 31, 2023, respectively, and based on this information is not expected to have a material impact on net sales and is expected to be dilutive approximately $.07 to earnings per common share for the fiscal 2024 full year.
Current wording
The incident did not have a material impact on net sales and had less than a $0.01 dilutive impact to the three months ended March 31, 2024 and was $.08 dilutive to earnings per common share for the nine months ended March 31, 2024, and based on this information is not expected to have a material impact on net sales and is expected to be dilutive approximately $.07 to earnings per common share for the fiscal 2024 full year, after reflecting the benefit of insurance recoveries in April 2024.
Previous wording
In connection with the restructuring program, at this time we estimate a net reduction in the range of approximately 1,800 to 3,000 positions globally, which is about 3-5% of our positions including temporary and part-time employees as of June 30, 2023. This reduction takes into account the elimination of some positions as well as retraining and redeployment of certain employees in select areas.
Current wording
In connection with the restructuring program, as of March 31, 2024, we estimate a net reduction in the range of approximately 1,800 to 3,000 positions globally, which is about 3-5% of our positions including temporary and part-time employees as of June 30, 2023. This reduction takes into account the elimination of some positions as well as retraining and redeployment of certain employees in select areas.
Previous wording
Reported net sales decreased during the three and six months ended December 31, 2023, primarily driven by declines in our Asia travel retail business, primarily due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels, including the response to changes in government and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers, as well as the impacts from the ongoing softness in overall prestige beauty in mainland China.
Current wording
Reported net sales decreased during the nine months ended March 31, 2024, primarily reflecting lower net sales from our Asia travel retail business and in mainland China. For the nine months ended March 31, 2024, Asia travel retail net sales declined, primarily driven by the actions that we and our retailers took to reset retailer inventory levels, including the response to changes in government regulatory and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers. In mainland China, net sales declined, primarily driven by the impacts from the ongoing softness in overall prestige beauty reflecting subdued consumer confidence.
Previous wording
Returns associated with restructuring and other activities are not allocated to our product categories or geographic regions because they result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select corporate functions and go-to-market structures. Accordingly, the following discussions of Net sales by Product Categories and Geographic Regions exclude the impact of returns associated with restructuring and other activities for the three and six months ended December 31, 2023 of $1 million, and for the three and six months ended December 31, 2022 of $1 million and $6 million, respectively.
Current wording
Returns associated with restructuring and other activities are not allocated to our product categories or geographic regions because they result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select corporate functions and go-to-market structures. Accordingly, the following discussions of Net sales by Product Categories and Geographic Regions exclude the impact of returns associated with restructuring and other activities for the nine months ended March 31, 2024 of $1 million, and for the three and nine months ended March 31, 2023 of $4 million and $10 million, respectively.
Previous wording
Reported hair care net sales decreased 6% for the six months ended December 31, 2023, driven by the decrease from volume of 11%. This decrease was partially offset by the increase from pricing of 5%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix, and the favorable impact of foreign currency translation of 1%.
Current wording
Reported net sales decreased 5% for the nine months ended March 31, 2024, driven by the decrease from volume of 10%, partially offset by an increase from pricing of 5% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
Previous wording
Partially offsetting the increase in operating income for the three months ended December 31, 2023 was lower operating results from mainland China, primarily driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management.
Current wording
Reported skin care net sales increased for the three months ended March 31, 2024, primarily driven by higher net sales from La Mer and Estée Lauder, combined, of approximately $164 million, reflecting higher net sales in our Asia travel retail business. The growth in Asia travel retail was driven by higher shipments reflecting significant sequential improvement in retail sales trends and continued progress in achieving targeted retailer inventory levels as well as lower shipments in the prior-year period due, in part, to transitory headwinds. The increase in net sales from La Mer and Estée Lauder for the three months ended March 31, 2024 also reflected the success of hero products and new product launches. Partially offsetting the increase in net sales from Estée Lauder was a decrease in net sales in mainland China, primarily driven by the impacts from the ongoing softness in overall prestige beauty reflecting subdued consumer confidence.
Previous wording
Reported skin care net sales decreased for the six months ended December 31, 2023, reflecting lower net sales from Estée Lauder, La Mer, and Clinique, combined, of approximately $726 million, primarily driven by the declines in our Asia travel retail business, primarily due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels, including the response to changes in government and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers, as well as declines in mainland China, reflecting the impacts from the ongoing softness in overall prestige beauty.
Current wording
Reported skin care net sales decreased for the nine months ended March 31, 2024, reflecting lower net sales from Estée Lauder and Clinique, combined, of approximately $572 million, primarily driven by declines in our Asia travel retail business and in mainland China. For the nine months ended March 31, 2024, Asia travel retail net sales declined, primarily driven by the actions that we and our retailers took to reset retailer inventory levels, including the response to changes in government regulatory and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers. In mainland China, net sales declined, primarily driven by the impacts from the ongoing softness in overall prestige beauty reflecting subdued consumer confidence.
Previous wording
Partially offsetting these decreases in skin care net sales for the three and six months ended December 31, 2023 were higher net sales from The Ordinary, driven by growth in every geographic region, reflecting continued success of hero products, new product launches and successful performance during holiday and key shopping moments.
Current wording
Partially offsetting these decreases in skin care net sales for the nine months ended March 31, 2024 were higher net sales from The Ordinary, driven by growth in every geographic region, reflecting continued success of hero products, new product launches and targeted expanded consumer reach.
Previous wording
Reported net sales in Asia/Pacific decreased 8% for the three months ended December 31, 2023, driven by the decrease from volume of 13% and the unfavorable impact from foreign currency translation of 1%. Partially offsetting these decreases was the increase from pricing of 6%, due to the favorable impact from strategic pricing actions and changes in mix.
Current wording
Reported skin care net sales decreased 9% for the nine months ended March 31, 2024, driven by the decrease from volume of 15% and the unfavorable impact of foreign currency translation of 1%. Partially offsetting these decreases was an increase from pricing of 6%, due to the favorable impact from strategic pricing actions and changes in mix.
Previous wording
Reported makeup net sales decreased for the three and six months ended December 31, 2023, reflecting lower net sales from M·A·C and Estée Lauder, combined, of approximately $101 million and $123 million, respectively. In both periods, net sales from M·A·C decreased, primarily due to the phasing out of select products in preparation for new product launches and the unfavorable year-over-year impact resulting from the recognition of previously deferred revenue due to changes to the BACK 2 M·A·C take back program during the fiscal 2023 second quarter. Also contributing to the decrease in net sales from M·A·C and primarily driving the decrease in net sales from Estée Lauder for the three and six months ended December 31, 2023 was a decline in our Asia travel retail business. This decline was primarily due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels and lower conversion of travelers to consumers. The decrease in net sales from M·A·C and Estée Lauder were partially offset in both periods by the success of new product launches.
Current wording
Reported makeup net sales decreased for the nine months ended March 31, 2024, reflecting lower net sales from M·A·C and Estée Lauder, combined, of approximately $88 million. Net sales from M·A·C decreased, primarily due to the unfavorable year-over-year impact resulting from the recognition of previously deferred revenue due to changes to the BACK 2 M·A·C take-back program during the fiscal 2023 second quarter, the phasing out of select products in preparation for new product launches, partially offset by the success of new product launches. The decrease in net sales from Estée Lauder was primarily driven by a decline in our Asia travel retail business. For the nine months ended March 31, 2024, Asia travel retail net sales declined, primarily driven by the actions that we and our retailers took to reset retailer inventory levels, including the response to changes in government regulatory and retailer policies during the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers. Also partially offsetting the decrease in net sales from Estée Lauder was the success of recent product launches.
Previous wording
Partially offsetting the makeup net sales decrease for the three and six months ended December 31, 2023 were higher net sales from Clinique, primarily driven by continued success of hero products and new product launches.
Current wording
Partially offsetting the makeup net sales decrease for the nine months ended March 31, 2024 were higher net sales from Clinique, primarily driven by the success of hero products.
Previous wording
Reported fragrance net sales were flat for the three months ended December 31, 2023, primarily reflecting higher net sales from Le Labo and Jo Malone London, combined, of approximately $29 million, and increased for the six months ended December 31, 2023, primarily reflecting higher net sales from Le Labo, Jo Malone London and TOM FORD, combined, of approximately $70 million. Net sales from Le Labo increased in both periods, reflecting growth of hero products, including the successful City Exclusives collection, new product launches, successful performance during holiday and key shopping moments and targeted expanded consumer reach due to the brand's launch in mainland China during the fiscal 2023 fourth quarter. The increase in net sales from Jo Malone London for the three and six months ended December 31, 2023, was driven by new product launches and successful performance during holiday and key shopping moments. The increase in net sales from TOM FORD for the six months ended December 31, 2023, reflected the continued success of Signature and Private Blend fragrances and expanded distribution.
Current wording
Reported fragrance net sales increased for the nine months ended March 31, 2024, primarily driven by higher net sales from Le Labo and Jo Malone London, combined, of approximately $82 million. Net sales from Le Labo increased, primarily reflecting growth of hero products, including the successful City Exclusive collection, targeted expanded consumer reach, including the brand's launch in mainland China during the fiscal 2023 fourth quarter, and new product launches. Net sales from Jo Malone London increased, primarily driven by the success of hero products.
Previous wording
•Our fragrance net sales were flat for the three months ended December 31, 2023, primarily driven by higher net sales from Le Labo and Jo Malone London. Net sales from Le Labo increased, reflecting growth of hero products, new product launches and targeted expanded consumer reach due to the brand's launch in mainland China during the fiscal 2023 fourth quarter. The increase in net sales from Jo Malone London was primarily driven by new product launches. Partially offsetting the increase in fragrance net sales was lower net sales from Estée Lauder and the unfavorable year-over-year impact of residual net sales in fiscal 2023 related to the transition of licenses due to the license terminations related to certain of our designer fragrances effective June 30, 2022. The decrease in net sales from Estée Lauder for the three months ended December 31, 2023 was driven by an unfavorable impact due to timing of holiday shipments compared to the prior-year period.
Current wording
Partially offsetting the increase in fragrance net sales for the nine months ended March 31, 2024, was the unfavorable year-over-year impact of residual net sales in fiscal 2023 related to the transition of licenses due to the license terminations related to certain of our designer fragrances effective June 30, 2022, and lower net sales from Estée Lauder, combined, of approximately $72 million. The decrease in net sales from Estée Lauder for the nine months ended March 31, 2024 was driven by lower net sales from the Beautiful product franchise.
Previous wording
Reported net sales in Asia/Pacific decreased 7% for the six months ended December 31, 2023, driven by the decrease from volume of 12% and the unfavorable impact from foreign currency translation of 2%. Partially offsetting these decreases was the increase from pricing of 7%, due to the favorable impact from strategic pricing actions and changes in mix.
Current wording
Reported fragrance net sales were virtually flat for the three months ended March 31, 2024, driven by the decrease from volume of 7% and the unfavorable impact from foreign currency translation of 1%. These decreases were partially offset by an increase from pricing of 7%, due to the favorable impact from strategic pricing actions and changes in mix.
Previous wording
Reported fragrance net sales increase 3% for the six months ended December 31, 2023, driven by the increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix. This increase was partially offset by the decrease from volume of 1%.
Current wording
Reported fragrance net sales increased 2% for the nine months ended March 31, 2024, driven by an increase from pricing of 5%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix. This increase was partially offset by the decrease from volume of 3%.
Previous wording
Reported hair care net sales decreased for the three and six months ended December 31, 2023, driven by lower net sales from Aveda, primarily reflecting a decline in North America, in the salon channel and in our online business.
Current wording
Reported hair care net sales decreased for the three and nine months ended March 31, 2024, driven by lower net sales from Aveda, driven by declines in North America, primarily reflecting softness in the salon and direct-to-consumer channels.
Previous wording
Fragrance net sales were impacted by approximately $2 million and $3 million of favorable foreign currency translation for the three and six months ended December 31, 2023, respectively.
Current wording
Hair care net sales were impacted by approximately $1 million and $3 million of favorable foreign currency translation for the three and nine months ended March 31, 2024, respectively.
Previous wording
Net sales in The Americas were impacted by approximately $2 million of unfavorable foreign currency translation for the six months ended December 31, 2023.
Current wording
Net sales in The Americas were impacted by approximately $3 million and $1 million of favorable foreign currency translation for the three and nine months ended March 31, 2024, respectively.
Previous wording
Reported net sales in The Americas increased 1% for the three months ended December 31, 2023, driven by the impact from the royalty revenue from the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of 1% and the increase from volume of 1%. These increases were partially offset by a decrease from pricing of 1%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions.
Current wording
Reported net sales in The Americas increased 3% for the three months ended March 31, 2024, driven by an increase from pricing of 7%, due to the favorable impact from strategic pricing actions and changes in mix, and the impact from the royalty revenue from the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of 1%. These increases were partially offset by a decrease from volume of 6%.
Previous wording
Reported net sales in The Americas increased 4% for the six months ended December 31, 2023, driven by the increase from volume of 3% and the impact from the royalty revenue from the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of 1%. The impact from pricing was virtually flat, due to the unfavorable impact from changes in mix, offset by strategic pricing actions.
Current wording
Reported net sales in The Americas increased 3% for the nine months ended March 31, 2024, driven by an increase from pricing of 2%, due to the favorable impact of strategic pricing actions, partially offset by changes in mix, and the impact from the royalty revenue from the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of 1%. The impact from volume was virtually flat.
Previous wording
Partially offsetting the decrease in Europe, the Middle East & Africa for the six months ended December 31, 2023 were higher net sales in the United Kingdom, primarily driven by strong performance by The Ordinary.
Current wording
Partially offsetting the decrease in Europe, the Middle East & Africa for the nine months ended March 31, 2024 were higher net sales in the United Kingdom, primarily driven by strong performance by The Ordinary.
Previous wording
Net sales in Europe, the Middle East & Africa were impacted by approximately $23 million and $52 million of favorable foreign currency translation for the three and six months ended December 31, 2023, respectively.
Current wording
Net sales in Europe, the Middle East & Africa were impacted by approximately $1 million and $53 million of favorable foreign currency translation for the three and nine months ended March 31, 2024, respectively.
Previous wording
Reported skin care net sales decreased 10% for the three months ended December 31, 2023, driven by the decrease from volume of 16%, partially offset by an increase from pricing of 6%, due to the favorable impact from strategic pricing actions and changes in mix.
Current wording
Reported net sales in Europe, the Middle East & Africa decreased 10% for the nine months ended March 31, 2024, driven by the decrease from volume of 17%. This decrease was partially offset by the increase from pricing of 6%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix, and the favorable impact from foreign currency translation of 1%.
Previous wording
Partially offsetting the net sales decrease in Asia/Pacific for the three and six months ended December 31, 2023 was an increase in net sales in Hong Kong SAR, primarily driven by the resumption of travel from mainland China to Hong Kong SAR due to the lifting of travel restrictions.
Current wording
Partially offsetting the net sales decrease in Asia/Pacific for the three and nine months ended March 31, 2024 was an increase in net sales in Hong Kong SAR, primarily driven by the resumption of travel from mainland China to Hong Kong SAR due to the lifting of travel restrictions which began during the fiscal 2023 third quarter.
Previous wording
Net sales in Asia/Pacific were impacted by approximately $15 million and $53 million of unfavorable foreign currency translation for the three and six months ended December 31, 2023, respectively.
Current wording
Net sales in Asia/Pacific were impacted by approximately $55 million and $108 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2024, respectively.
Previous wording
Gross margin decreased to 73.0% and 71.5% for the three and six months ended December 31, 2023, respectively, as compared with 73.6% and 73.8% in the prior-year periods.
Current wording
Gross margin increased to 71.9% and decreased to 71.6% for the three and nine months ended March 31, 2024, respectively, as compared with 69.1% and 72.4% in the prior-year periods.
Previous wording
The decrease in gross margin for the six months ended December 31, 2023 reflected unfavorable impacts from higher manufacturing costs and other, driven primarily by the under absorption of manufacturing variances due to lower production volumes in the second half of fiscal 2023, partially offset by the favorable impact from a change in deferral period as well as favorability in freight and transportation costs, and higher obsolescence charges, primarily due to excess inventory on hand driven by lower than expected demand primarily within our travel retail business and mainland China.
Current wording
The increase in gross margin for the three months ended March 31, 2024 reflected the favorable impact from our mix of business, primarily driven by the increase in skin care net sales, strategic pricing actions, and the favorable impact from the shift of manufacturing production volume from third-party manufacturers to our own facilities and increased automation for The Ordinary. Obsolescence charges decreased for the three months ended March 31, 2024, primarily reflecting increased charges in the prior-year period due to lower demand, as well as our progress to reduce excess inventory. The unfavorable impacts from manufacturing costs and other was driven primarily by the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales, partially offset by favorability in freight and transportation costs.
Previous wording
The decrease in gross margin for the three months ended December 31, 2023 reflected higher obsolescence charges, primarily due to excess inventory on hand, both driven by the lower than expected demand primarily within our travel retail business and mainland China, and the unfavorable impacts from higher manufacturing costs and other, driven primarily by the under absorption of manufacturing variances due to lower production volumes in the second half of fiscal 2023, partially offset by the favorable impact from a change in our manufacturing variance deferral period as well as favorability in freight and transportation costs.
Current wording
The decrease in gross margin for the nine months ended March 31, 2024 reflected unfavorable impacts from higher manufacturing costs and other, driven primarily by the under absorption of manufacturing variances due to lower production volumes in the second half of fiscal 2023 as well as the impact from the recognition of reduced manufacturing volumes on our standard cost within cost of sales in the fiscal 2024 third quarter, partially offset by favorability in freight and transportation costs. The favorable impact from our mix of business was primarily driven by strategic pricing actions, and the favorable impact from the shift of manufacturing production volume from third-party manufacturers to our own facilities and increased automation for The Ordinary.
Previous wording
Operating expenses as a percentage of net sales was 59.6% and 62.9% for the three and six months ended December 31, 2023, respectively, as compared with 61.6% and 59.5% in the prior-year periods.
Current wording
Operating expenses as a percentage of net sales was 58.4% and 61.4% for the three and nine months ended March 31, 2024, respectively, as compared with 61.2% and 60.0% in the prior-year periods.
Previous wording
The unfavorable change in operating expense margin for the six months ended December 31, 2023 was driven by the impact of the decrease in net sales and higher general and administrative expenses, as well as higher selling expenses and store operating costs as we continue to invest in our business including through increased demonstration expenses and targeted expanded consumer reach, while also decreasing certain expenses through disciplined expense management. The increase in general and administrative expense, including stock-based compensation, reflected higher employee-related costs, primarily driven by the unfavorable year-over-year comparisons in the recognition of expenses and adjustments related to our performance share units, restricted stock units, as well as annual increases to salaries and wages, partially offset by lower incentive compensation.
Current wording
The unfavorable change in operating expense margin for the nine months ended March 31, 2024 was driven by higher store operating costs and selling expenses as we continue to invest in our business including through targeted expanded consumer reach and increased demonstration expenses, as well as an increase in stock-based compensation, primarily driven by the unfavorable year-over-year comparisons in the recognition of expenses, and adjustments related to our performance share units. The unfavorable impact of advertising, merchandising, sampling and product development expenses was driven by the decrease in net sales.
Previous wording
The increase in reported operating margin for the three months ended December 31, 2023 was primarily driven by a decrease in operating expense margin, partially offset by a decrease in net sales and a decrease in gross margin, discussed above.
Current wording
The increase in reported operating margin for the three months ended March 31, 2024 was primarily driven by an increase in net sales, an increase in gross margin, and a decrease in operating expense margin, discussed above.
Previous wording
The decrease in reported operating margin for the six months ended December 31, 2023 was primarily driven by a decrease in net sales, decrease in gross margin and the increase in operating expense margin, discussed above.
Current wording
The decrease in reported operating margin for the nine months ended March 31, 2024 was primarily driven by a decrease in net sales, decrease in gross margin and the increase in operating expense margin, discussed above.
Previous wording
Charges associated with restructuring and other activities are not allocated to our product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business. Accordingly, the following discussions of Operating income by Product Categories and Geographic Regions exclude the impact of charges associated with restructuring and other activities for the three and six months ended December 31, 2023 of $8 million and $10 million, and for the three and six months ended December 31, 2022 of $9 million and $15 million, respectively.
Current wording
Charges associated with restructuring and other activities are not allocated to our product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business. Accordingly, the following discussions of Operating income by Product Categories and Geographic Regions exclude the impact of charges associated with restructuring and other activities for the three and nine months ended March 31, 2024 of $18 million and $28 million, and for the three and nine months ended March 31, 2023 of $18 million and $33 million, respectively.
Previous wording
Partially offsetting the decrease in skin care operating income for the three and six months ended December 31, 2023 was the favorable year-over-year impact of the fiscal 2023 second quarter other intangible asset impairment related to Dr.Jart+ of $100 million, as well as higher results from The Ordinary, primarily driven by an increase in net sales. Also contributing to the increase in operating results from The Ordinary for the three months ended December 31, 2023 was a decrease in cost of sales primarily driven by the favorable impact from the shift of manufacturing production volume from third-party manufacturers to our own facilities for The Ordinary, partially offset by higher shipping costs to support key shopping moments. The increase in operating results from The Ordinary for the six months ended December 31, 2023 also reflected an increase in advertising and promotional activities and general and administrative expenses as the brand continues to invest and support the growth of the business.
Current wording
Partially offsetting the decrease in skin care operating income for the nine months ended March 31, 2024 was the favorable year-over-year impact of the fiscal 2023 second quarter other intangible asset impairment related to Dr.Jart+ of $100 million, as well as higher operating results from The Ordinary, primarily driven by an increase in net sales and a decrease in cost of sales due in part to the favorable impact from the shift of manufacturing production volume from third-party manufacturers to our own facilities, increased automation within such facilities, and lower obsolescence charges. Partially offsetting the increase in operating income from The Ordinary was an increase in advertising and promotional activities as the brand continues to invest and support the growth of the business.
Previous wording
Partially offsetting the decrease in operating income in makeup for the six months ended December 31, 2023 was the favorable year-over-year impact of other intangible asset impairments related to Too Faced and Smashbox of $107 million and higher operating results from TOM FORD and Clinique, combined, of approximately $31 million. The increase in operating results from Clinique for the six months ended December 31, 2023 was primarily driven by the increase in net sales. The increase in operating results from TOM FORD for the six months ended December 31, 2023 reflected a decrease in royalty expense as a result of the fiscal 2023 fourth quarter acquisition of TOM FORD brand and an increase in net sales.
Current wording
Reported makeup operating income increased for the nine months ended March 31, 2024, primarily reflecting the favorable year-over-year impact of other intangible asset impairments related to Too Faced and Smashbox of $107 million, and higher results from Clinique and TOM FORD, combined, of approximately $70 million. The increase in operating income from Clinique was primarily driven by an increase in net sales. Operating income from TOM FORD increased, primarily driven by lower cost of sales due in part to lower freight and transportation costs compared to the prior-year period and a decrease in royalty expense as a result of the fiscal 2023 fourth quarter acquisition of TOM FORD brand.
Previous wording
Partially offsetting the fragrance operating decrease for the six months ended December 31, 2023 was higher operating results from Le Labo, primarily driven by an increase in net sales, partially offset by higher advertising and promotional activities to support new product launches, an increase in selling expenses due to increased demonstration expenses compared to the prior-year period and increased store operating costs, due to targeted expanded consumer reach.
Current wording
Partially offsetting the fragrance operating income decrease for the three months ended March 31, 2024, was higher operating results from Jo Malone London, primarily driven by an increase in net sales and lower cost of sales due to a shift in product mix to colognes, which typically have higher margins, partially offset by an increase in selling expenses due to an increase in demonstration expenses compared to the prior-year period and higher store operating costs due to targeted expanded consumer reach.
Showing the first 40 of 68 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
(7)Consists of $650 million principal, unamortized debt discount of $2 million and debt issuance costs of $5 million.
Current report — wording carried from elsewhere
(9)Consists of $700 million principal, unamortized debt discount of $1 million and debt issuance costs of $4 million.
Current report — wording carried from elsewhere
(13)Consists of $700 million principal, unamortized debt discount of $1 million and debt issuance costs of $3 million.
Rearranged previous paragraphs (6)
Previous report — wording carried elsewhere
•Net sales in Asia/Pacific decreased 8% for the three months ended December 31, 2023, primarily reflecting the impacts from the ongoing softness in overall prestige beauty in mainland China, partially offset by higher net sales in Hong Kong SAR, primarily driven by the resumption of travel from mainland China to Hong Kong SAR due to the lifting of travel restrictions.
Previous report — wording carried elsewhere
Reported fragrance net sales were flat for the three months ended December 31, 2023, driven by the increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix. This increase was partially offset by the decrease from volume of 4%.
Previous report — wording carried elsewhere
Reported makeup operating income increased for the three months ended December 31, 2023 primarily reflecting the favorable year-over-year impact of other intangible asset impairments related to Too Faced and Smashbox of $107 million, and higher results from Clinique, primarily driven by an increase in net sales.
Previous report — wording carried elsewhere
Partially offsetting the fragrance operating income decrease for the three months ended December 31, 2023 were higher results from Jo Malone London, primarily driven by an increase in net sales and lower advertising and promotional expenses due to the timing of advertising activities compared to the prior-year period and disciplined expense management.
Previous report — wording carried elsewhere
(8)Consists of $700 million principal, unamortized debt discount of $1 million and debt issuance costs of $4 million.
Previous report — wording carried elsewhere
(12)Consists of $700 million principal, unamortized debt discount of $1 million and debt issuance costs of $3 million.