ESTEE LAUDER COMPANIES INC
For the period ended Sep 30, 2024. Filed Oct 31, 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.
Sep 30, 2024 · Filed Oct 31, 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 2024-03-31; filed 2024-05-01.
0001001250-24-000049
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-10-31.
0001001250-24-000177
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 228 previous paragraphs and 192 current paragraphs.
85 unchanged; 66 reworded; 40 added; 77 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 31 previous and 28 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 (40)
Current report
•Our skin care net sales decreased 7% for the three months ended September 30, 2024, primarily driven by lower net sales from La Mer and Estée Lauder. Net sales from La Mer decreased, primarily driven by lower net sales in our Asia travel retail business, due to lower replenishment orders reflecting (i) the challenging retail environment, including worsened consumer sentiment in China, (ii) travelers diverting spending towards experiences, which continued to dampen conversion for beauty products and (iii) inventory pressure given the further retail market deceleration. The decrease in net sales from Estée Lauder was primarily driven by lower net sales in mainland China, reflecting the impacts from further softening in overall prestige beauty in mainland China, due in large part to worsened consumer sentiment.
Current report
•Our makeup net sales decreased 2% for the three months ended September 30, 2024, primarily reflecting lower net sales from M·A·C, and to a lesser extent, Too Faced and Smashbox. The decrease in net sales from M·A·C was primarily driven by lower net sales in North America, reflecting softness in the brand's retail sales, resulting in lower replenishment orders, and lower net sales in the Middle East reflecting ongoing business disruption. Partially offsetting the decrease in makeup net sales was higher net sales from Clinique and, to a lesser extent, Estée Lauder.
Current report
•Our fragrance net sales decreased 1% for the three months ended September 30, 2024, reflecting lower net sales from TOM FORD, Clinique, and Estée Lauder. Net sales from TOM FORD decreased, primarily driven by lower net sales in North America, reflecting softness in the brand's retail sales, resulting in lower replenishment orders. The decrease in net sales from Clinique reflected lower replenishment orders in our global travel retail business and in other parts of Europe, the Middle East & Africa primarily due to lower demand. Net sales from Estée Lauder decreased, primarily driven by lower net sales across our product portfolio. Partially offsetting the decrease in fragrance net sales were higher net sales from Le Labo and Kilian Paris.
Current report
•Net sales in The Americas decreased 2% for the three months ended September 30, 2024, primarily reflecting lower net sales in North America and Mexico. The decrease in net sales in North America reflected the challenges from M·A·C, Aveda, TOM FORD, Too Faced and Smashbox. Partially offsetting these pressures in North America was the launch of seven brands to-date in Amazon's U.S. Beauty store. Net sales in Mexico decreased, primarily driven by the unfavorable impact of foreign currency translation.
Current report
•Net sales in Europe, the Middle East & Africa decreased 2% for the three months ended September 30, 2024, primarily driven by lower net sales from our Asia travel retail business and the United Kingdom. Asia travel retail net sales declined, due to lower replenishment orders reflecting (i) the challenging retail environment, including worsened consumer sentiment in China, (ii) travelers diverting spending towards experiences, which continued to dampen conversion for beauty products and (iii) inventory pressure given the further retail market deceleration. Partially offsetting the decrease in net sales in Europe, the Middle East & Africa were higher net sales in Germany, the Nordic countries and Russia.
Current report
•Net sales in Asia/Pacific decreased 11% for the three months ended September 30, 2024, primarily driven by lower net sales from mainland China and Hong Kong SAR, reflecting worsened consumer sentiment. This drove further softening in overall prestige beauty in mainland China and low conversion rates among traveling consumers in Hong Kong SAR.
Current report
Talcum Litigation Settlement Agreements
Current report
From the end of August 2024 through October 2024, we reached agreements with certain plaintiff law firms (collectively, the “talcum litigation settlement agreements”) for: (i) the resolution of pending cosmetic talcum powder matters handled by those firms as well as (ii) a process for resolving potential future cosmetic talcum powder claims expected to be brought on behalf of plaintiffs by those firms from January 1, 2025 through December 31, 2029, with annual capped amounts per year for each participating law firm. To account for the talc litigation settlement agreements, we recorded a charge of $159 million for the three months ended September 30, 2024 for the amount agreed to settle these current and potential future claims.
Current report
Further information about the talcum litigation settlement agreements, is described in Notes to Consolidated Financial Statements, Note 8 – Commitments and Contingencies herein.
Current report
Reported net sales decreased for the three months ended September 30, 2024, reflecting a decrease in net sales in all product categories, primarily driven by skin care. The decrease in skin care net sales was primarily driven by lower net sales from La Mer and Estée Lauder.
Current report
By region, reported net sales decreased for the three months ended September 30, 2024, reflecting lower net sales across all regions, primarily driven by Asia/Pacific. The decrease in net sales in Asia/Pacific was primarily driven by lower net sales from mainland China and Hong Kong SAR.
Current report
Reported net sales were impacted by approximately $18 million of favorable foreign currency translation for the three months ended September 30, 2024.
Current report
Reported net sales decreased 4% for the three months ended September 30, 2024, driven by the decrease from volume of 8%. Partially offsetting this decrease was an increase from pricing of 3% 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 report
Reported skin care net sales decreased for the three months ended September 30, 2024, reflecting lower net sales from La Mer and Estée Lauder, combined, of approximately $117 million. Net sales from La Mer decreased, primarily driven by declines in our Asia travel retail business, due to lower replenishment orders reflecting (i) the challenging retail environment, including worsened consumer sentiment in China, (ii) travelers diverting spending towards experiences, which continued to dampen conversion for beauty products and (iii) inventory pressure given the further retail market deceleration. The decrease in net sales from Estée Lauder was primarily driven by declines in mainland China, reflecting the impacts from further softening in overall prestige beauty in mainland China, due in large part to worsened consumer sentiment.
Current report
Skin care net sales were impacted by approximately $13 million of favorable foreign currency translation for the three months ended September 30, 2024.
Current report
Reported skin care net sales decreased 7% for the three months ended September 30, 2024, driven by the decrease from volume of 8%. Partially offsetting this decrease was an increase from pricing of 1%, 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 report
Reported makeup net sales decreased for the three months ended September 30, 2024, reflecting lower net sales from M·A·C, and to a lesser extent, Too Faced and Smashbox, combined, of approximately $55 million. The decrease in net sales from M·A·C was primarily driven by lower net sales in North America, reflecting softness in the brand's retail sales, resulting in lower replenishment orders, and lower net sales in the Middle East reflecting ongoing business disruption. Net sales from Too Faced decreased, primarily driven by North America, reflecting lower net sales in the lip and mascara subcategories. Net sales from Smashbox decreased, primarily driven by North America, reflecting lower net sales in the foundation, concealer and lip subcategories.
Current report
Makeup net sales were impacted by approximately $2 million of favorable foreign currency translation for the three months ended September 30, 2024.
Current report
Reported makeup net sales decreased 2% for the three months ended September 30, 2024, driven by the decrease from volume of 9%. Partially offsetting this decrease was an increase from pricing of 6% due to the favorable impact from strategic pricing actions and changes in mix.
Current report
Reported fragrance net sales decreased for the three months ended September 30, 2024, reflecting lower net sales from TOM FORD, Clinique, and Estée Lauder, combined, of approximately $29 million. Net sales from TOM FORD decreased, primarily driven by lower net sales in North America, reflecting softness in the brand's retail sales, resulting in lower replenishment orders. The decrease in net sales from Clinique was primarily due to lower replenishment orders in our global travel retail business and in other parts of Europe, the Middle East & Africa, primarily due to lower demand. Net sales from Estée Lauder decreased, primarily driven by lower net sales across its fragrance portfolio.
Current report
Reported hair care net sales decreased for the three months ended September 30, 2024, driven by lower net sales from Aveda and to a lesser extent, The Ordinary, combined, of approximately $9 million. The decrease in net sales from Aveda was driven by the timing of shipments and continued softness in our North America salon channel and our direct-to-consumer business.
Current report
Reported hair care net sales decreased 6% for the three months ended September 30, 2024, driven by the decrease from volume of 5% and a decrease from pricing of 1%, due to changes in mix, partially offset by the favorable impact from strategic pricing actions.
Current report
Reported net sales in The Americas decreased for the three months ended September 30, 2024, primarily reflecting lower net sales in North America and Mexico, combined, of approximately $18 million. The decrease in net sales in North America reflected the challenges from M·A·C, Aveda, TOM FORD, Too Faced and Smashbox as previously mentioned. Partially offsetting these pressures in North America was the launch of seven brands to-date in Amazon's U.S. Premium Beauty store. Net sales in Mexico decreased, primarily driven by the unfavorable impact of foreign currency translation.
Current report
Reported net sales decreased in Europe, the Middle East & Africa for the three months ended September 30, 2024, primarily reflecting lower net sales from our Asia travel retail business, due to lower replenishment orders reflecting (i) the challenging retail environment, including worsened consumer sentiment in China, (ii) travelers diverting spending towards experiences, which continued to dampen conversion for beauty products and (iii) inventory pressure given the further retail market deceleration.
Current report
Partially offsetting the decrease in Europe, the Middle East & Africa in fiscal 2024 was higher net sales in Germany, the Nordic countries and Russia, combined, of approximately $29 million. The increase in net sales from Germany was driven by the favorable year-over-year impact relating to the timing of shipments. Net sales from the Nordic countries increased, primarily driven by the favorable year-over-year impact relating to the expansion of The Ordinary towards the end of the fiscal 2024 first quarter. The increase in net sales from Russia was primarily driven by growth in fragrance and makeup.
Current report
Reported net sales decreased in Asia/Pacific for the three months ended September 30, 2024, primarily driven by lower net sales from mainland China, and Hong Kong SAR, combined, of approximately $105 million, reflecting worsened consumer sentiment. This drove further softening in overall prestige beauty in mainland China and low conversion rates among traveling consumers in Hong Kong SAR..
Current report
The increase in gross margin for the three months ended September 30, 2024 was driven by lower obsolescence charges, due to a reduction in excess inventory. Also contributing to the increase in gross margin was the favorable impact from manufacturing costs and other, reflecting the impact in the three months ended September 30, 2024 from the recognition of manufacturing variances associated with reduced manufacturing volumes on our standard cost within cost of sales in the fiscal 2024 third quarter, as well as favorability in cost management, partially offset by the impact of inflation on our costs.
Current report
These increases were partially offset by an unfavorable impact from our mix of business, driven by the impact of lower net sales, including the change in category mix reflecting a decrease in skin care net sales which typically have higher margins than other product categories. These increases in mix of business were partially offset by the benefit of strategic pricing actions.
Current report
Higher selling expenses in the fiscal 2025 first quarter were driven by continued investments in our business, including in support of new product launches and targeted expanded consumer reach.
Current report
Reported skin care operating income increased for the three months ended September 30, 2024, reflecting favorability in cost of sales across the category, including lower obsolescence charges compared to the prior-year period due to a reduction in excess inventory, as well as higher operating results from Clinique, primarily driven by a decrease in cost of sales, due in part, to a decrease in promotional items, and lower advertising and promotional expenses due to the timing of advertising and promotional activities compared to the prior-year period.
Current report
Partially offsetting the increase in reported skin care operating income for the three months ended September 30, 2024 was lower operating results from La Mer, driven by a decrease in net sales, partially offset by lower cost of sales.
Current report
Reported makeup operating loss increased for the three months ended September 30, 2024, primarily reflecting the talcum litigation settlement agreements of $159 million, as well as lower operating results from M·A·C and Too Faced, combined, of approximately $23 million. The decrease in operating results from M·A·C was primarily driven by a decrease in net sales, partially offset by a decrease in cost of sales, including lower obsolescence charges compared to the prior-year period due to a reduction in excess inventory, and lower advertising and promotional expenses due to disciplined expense management and the timing of advertising and promotional activities compared to the prior-year period. Operating results from Too Faced decreased, primarily driven by a decrease in net sales.
Current report
Reported fragrance operating income decreased for the three months ended September 30, 2024, reflecting lower operating results from TOM FORD, and to a lesser extent, Jo Malone London, combined, of approximately $32 million. Operating income from TOM FORD decreased, primarily driven by a decrease in net sales, higher advertising and promotional activities to support new product launches and targeted expanded consumer reach, and higher selling expenses also driven by targeted expanded consumer reach. The decrease in operating results from Jo Malone London was primarily driven by an increase in selling expenses and store operating costs to support new product launches and targeted expanded consumer reach.
Current report
Reported hair care operating loss decreased during the three months ended September 30, 2024, primarily reflecting lower cost of sales, including lower obsolescence charges compared to the prior-year period due to a reduction in excess inventory, lower general and administrative expenses, and a decrease in advertising and promotional activities, partially offset by a decrease in net sales.
Current report
Reported operating loss in The Americas decreased for the three months ended September 30, 2024, primarily reflecting lower operating losses in North America, of approximately $20 million. The decrease in operating loss was primarily driven by lower cost of sales, including lower obsolescence charges compared to the prior-year period due to a reduction in excess inventory, and a favorable year-over-year impact relating to net intercompany activity, largely offset by the talcum litigation settlement agreements of $159 million.
Current report
Partially offsetting the decrease in operating loss in The Americas for the three months ended September 30, 2024 was lower operating results in Mexico, reflecting a decrease in net sales and higher selling expenses, partially offset by lower cost of sales.
Current report
Reported operating income decreased in Europe, the Middle East & Africa for the three months ended September 30, 2024, primarily driven by lower results from our travel retail business and the United Kingdom, combined, of approximately $54 million. The decrease in operating income from our travel retail business was primarily due to a decrease in net sales and an unfavorable year-over-year impact of net intercompany activity, partially offset by disciplined advertising and promotional expense management. Operating income decreased in the United Kingdom, primarily driven by an increase in cost of sales, higher advertising and promotional expenses to support key campaigns, and an unfavorable year-over-year impact of net intercompany activity.
Current report
Interest expense decreased for the three months ended September 30, 2024, primarily reflecting a lower average debt balance compared to the prior-year period. Interest income and investment income, net decreased, primarily reflecting a lower average cash balance compared to the prior-year period, partially offset by higher interest rates compared to the prior-year period.
Current report
The decrease in the effective tax rate of 840 basis points was primarily attributable to the impact of the discrete treatment of the charge associated with the talcum litigation settlement agreements and charges associated with restructuring and other activities recorded in the first quarter of fiscal 2025. The loss before income taxes in the first quarter of fiscal 2025 increased the impact of these discrete items on the effective tax rate.
Current report
The change in net cash flows used for operating activities was primarily driven by the loss before tax for the three months ended September 30, 2024, excluding non-cash items, and an unfavorable change in operating assets and liabilities variances, reflecting an unfavorable change in other accrued and noncurrent liabilities, accounts payable and inventory and promotional merchandise, partially offset by a favorable change in accounts receivable.
Removed paragraphs (77)
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous 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.
Previous report
Cybersecurity Incident Disclosed in July 2023
Previous report
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 report
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 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.
Previous report
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 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.
Previous 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%.
Previous report
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 report
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 report
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 report
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 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.
Previous report
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 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.
Previous 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.
Previous report
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 report
Makeup net sales were impacted by approximately $10 million of unfavorable foreign currency translation for the three months ended March 31, 2024.
Previous 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%.
Previous 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.
Previous report
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 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.
Previous report
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 report
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 report
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 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%.
Previous 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%.
Previous report
We strategically time our new product launches by geographic market, which may account for differences in regional sales growth.
Previous 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.
Previous 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.
Previous report
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 report
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 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.
Previous 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.
Previous report
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.
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Reworded paragraphs (66)
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 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.
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 months ended September 30, 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 months ended September 30, 2023. See Note 13 – Segment Data and Related Information for additional details.
Previous wording
The following table presents certain consolidated earnings data as a percentage of net sales:
Current wording
The following table presents certain consolidated earnings (loss) data as a percentage of net sales:
Previous wording
We are a leader in prestige beauty, which combines the repeat purchase and relative affordability of consumer goods with high quality products and services. Within prestige beauty, we are diversified by product category, geography, brand, product sub-category, channel, consumer segment and price point. We also leverage consumer analytics and insights with agility by deploying our brands to fast growing and profitable opportunities. These analytics and insights, combined with our creativity, inform our innovation to provide a broad, locally-relevant and inclusive range of prestige products allowing us to compete effectively for a greater share of a consumer's beauty routine. Elements of our strategy are described in the Overview on pages 30-32 of our Annual Report on Form 10-K for the year ended June 30, 2023, as well as below.
Current wording
We are a leader in prestige beauty, which combines the repeat purchase and relative affordability of consumer goods with high quality products and services. Within prestige beauty, we are diversified by product category, geography, brand, product sub-category, channel, consumer segment and price point. We also leverage consumer analytics and insights by deploying our brands to grow sales and pursue profitable opportunities. These analytics and insights, combined with our creativity, inform our innovation to provide a broad, locally-relevant and inclusive range of prestige products with the aim of competing effectively for a greater share of a consumer's beauty routine. Elements of our strategy are described below, as well as in the Overview on page 31 of our Annual Report on Form 10-K for the year ended June 30, 2024.
Previous 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.
Current wording
•Our hair care net sales decreased 6% for the three months ended September 30, 2024, primarily attributable to lower net sales from Aveda and to a lesser extent, The Ordinary. The decrease in net sales from Aveda was primarily driven by the timing of shipments and continued softness in our North America salon channel and our direct-to-consumer business.
Previous wording
Our global distribution capability and operations allow us to focus on targeted expanded consumer reach wherever consumer demographics and trends are attractive. Our regional organizations, and the expertise of our people there, enable our brands to be more locally and culturally relevant in both product assortment and communications. We are evolving the way we connect with our consumers in stores, online and where they travel, including by expanding our digital and social media presence and the engagement of global and local influencers to amplify brand or product stories. We tailor implementation of our strategy by market to drive consumer engagement and embrace inclusion and cultural diversity. We continuously strengthen our presence in large, image-building core markets, while broadening our presence in emerging markets.
Current wording
Our global distribution capability and operations allow us to focus on targeted expanded consumer reach wherever consumer demographics and trends are attractive. Our regional organizations, and the expertise of our people there, enable our brands to be more locally and culturally relevant in both product assortment and communications. We are continually evolving the way we connect with our consumers in stores, online and where they travel, including by expanding our digital and social media presence and the engagement of global and local influencers to amplify brand or product stories. We tailor implementation of our strategy by market to drive consumer engagement and embrace inclusion and cultural diversity. We strive to strengthen our presence in large, image-building core markets, while broadening our presence in emerging markets.
Previous 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.
Current wording
We have experienced challenges within our business, including in our Asia travel retail business, and we expect volatility and uncertainty to continue including inventory pressure in Asia travel retail given the further retail market deceleration. We have experienced, and are expecting to continue to experience, weakness in overall prestige beauty due in large part to worsened consumer sentiment in China, which is also expected to impact Asia travel retail. Looking ahead, we are cautiously optimistic about the potential medium- to long-term growth opportunities presented by the new economic stimulus measures in China, but volatility and uncertainty remain elevated in the near-term. In North America, we are experiencing ongoing competitive pressures along with the continued slowdown in prestige beauty growth. We also expect further business disruption in Israel and other parts of the Middle East. Net sales from Israel and the Middle East accounted for approximately 2% and 3% of consolidated net sales in fiscal 2024 and the first quarter of fiscal 2025, respectively. 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.
Previous wording
We believe that the best way to increase long-term stockholder value is to continue providing superior products and services in the most efficient and effective manner while recognizing shifts in consumers’ behaviors and shopping practices. Accordingly, our long-term strategy has numerous initiatives across geographic regions, product categories, brands, channels of distribution and functions designed to grow our sales, provide cost efficiencies, leverage our strengths and make us more productive and profitable. We plan to build upon and leverage our history of outstanding creativity and innovation, high quality products and services, and engaging communications while investing for long-term sustainable growth.
Current wording
We believe that the best way to increase long-term stockholder value is to provide superior products and services in the most efficient and effective manner while recognizing shifts in consumers’ behaviors and shopping practices. Accordingly, our long-term strategy has numerous initiatives across geographic regions, product categories, brands, channels of distribution and functions designed to grow our sales, provide cost efficiencies, leverage our strengths and make us more productive and profitable. We plan to build upon and leverage our history of outstanding creativity and innovation, high quality products and services, and engaging communications while investing for long-term sustainable growth.
Previous wording
We continue to monitor the effects of the global macro environment, including the risk of recession; currency volatility; inflationary pressures; supply chain challenges; social and political issues; regulatory matters, including the imposition of tariffs and sanctions; geopolitical tensions; and global security issues. For example, the strengthening of the U.S. dollar could negatively impact results within Europe, the Middle East & Africa due to pricing pressures on our retail customers and consumers in key international travel retail locations. Additionally, we continue to monitor the geopolitical tensions between the United States and China, which could have a material adverse effect on our business. We are also mindful of inflationary pressures on our cost base and are monitoring the impact on consumer preferences. A decline in net sales and profitability may adversely impact the goodwill and other intangible assets associated with our brands, as well as long-lived assets, potentially resulting in impairments.
Current wording
We continue to monitor the effects of the global macro environment, including the risk of recession; currency volatility; inflationary pressures; supply chain challenges; social and political issues; competitive pressures; legal and regulatory matters, including the imposition of tariffs and sanctions; geopolitical tensions; and global security issues. For example, the geopolitical tensions between the United States and China could have a material adverse effect on our business. We are also mindful of inflationary pressures on our cost base and are monitoring the impact on consumer preferences, and the impact of changes being made in the organization, including those related to the Profit Recovery and Growth Plan. Declines in net sales and profitability may adversely impact the goodwill and other intangible assets associated with our brands, as well as long-lived assets, potentially resulting in impairments.
Previous wording
Restructuring Program Component of the Profit Recovery Plan
Current wording
Restructuring Program Component of the Profit Recovery and Growth Plan
Previous wording
As previously communicated on November 1, 2023, we launched a Profit Recovery Plan to help progressively rebuild our profit margins in fiscal years 2025 and 2026.
Current wording
As previously communicated on November 1, 2023, we launched the Profit Recovery and Growth Plan ("PRGP"), to help progressively rebuild our profit margins in fiscal years 2025 and 2026.
Previous wording
The Profit Recovery Plan is focused on rebuilding stronger, more sustainable profitability, supporting sales growth acceleration and increasing speed and agility. The plan is designed to improve gross margin, lower the cost base and reduce overhead expenses, while increasing investments in key consumer-facing activities. Upon completion of this plan, we expect to have improved our gross margin and expense base to drive greater operating leverage for the future.
Current wording
The PRGP is focused on rebuilding stronger, more sustainable profitability, supporting sales growth acceleration and increasing speed and agility. The plan is designed to improve gross margin, lower the cost base and reduce overhead expenses, while increasing investments in key consumer-facing activities. Upon completion of this plan, we expect to have improved our gross margin and expense base to drive greater operating leverage for the future.
Previous wording
As a component of the Profit Recovery Plan, on February 5, 2024, we announced a two-year restructuring program. The restructuring program’s main focus includes the reorganization and rightsizing of certain areas of our business as well as simplification and acceleration of processes. We committed to this course of action on February 1, 2024.
Current wording
As a component of the PRGP, on February 5, 2024, we announced a two-year restructuring program. The restructuring program’s main focus includes the reorganization and rightsizing of certain areas of our business as well as simplification and acceleration of processes. We committed to this course of action on February 1, 2024.
Previous 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.
Current wording
In connection with the restructuring program, as of September 30, 2024, we continue to 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
Once fully implemented, we expect the restructuring program to yield annual target gross benefits of between $350 million and $500 million, before taxes, a portion of which is expected to be reinvested in consumer-facing activities. The net benefits are in addition to the between $800 million and $1,000 million previously communicated as part of the Profit Recovery Plan.
Current wording
Once fully implemented, we expect the restructuring program to yield annual target gross benefits of between $350 million and $500 million, before taxes, a portion of which is expected to be reinvested in consumer-facing activities. The net benefits of the PRGP, which includes the restructuring program, are expected to be between $1,100 million and $1,400 million.
Previous wording
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 wording
Further information about the Restructuring Program Component of the Profit Recovery and Growth Plan, is described in Notes to Consolidated Financial Statements, Note 3 – Charges Associated with Restructuring and Other Activities herein.
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 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.
Current wording
Returns 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. For the three months ended September 30, 2024 and 2023, there were no returns associated with restructuring and other activities.
Previous 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.
Current wording
Partially offsetting the makeup net sales decrease for the three months ended September 30, 2024 were higher net sales from Clinique and, to a lesser extent, Estée Lauder, combined, of approximately $34 million. Net sales from Clinique increased across all geographic regions, driven by the success of hero products. Net sales from Estée Lauder increased, primarily driven by higher net sales in the foundation, concealer and corrector subcategories.
Previous 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.
Current wording
Partially offsetting the reported fragrance net sales decrease for the three months ended September 30, 2024, were higher net sales from Le Labo and Kilian Paris, combined, of approximately $18 million. Net sales from Le Labo increased, primarily reflecting targeted expanded consumer reach, growth of hero products and new product launches. The increase in net sales from Kilian Paris reflected the success of new product launches.
Previous wording
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 wording
Reported fragrance net sales decreased 1% for the three months ended September 30, 2024, driven by the decrease from volume of 7%. Partially offsetting this decrease was an increase from pricing of 6% due to the favorable impact from strategic pricing actions and changes in mix.
Previous 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.
Current wording
Net sales in The Americas were impacted by approximately $11 million of unfavorable foreign currency translation for the three months ended September 30, 2024.
Previous 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.
Current wording
Reported net sales in The Americas decreased 2% for the three months ended September 30, 2024, driven by the decrease from volume of 6% and the unfavorable impact from foreign currency translation of 1%. These decreases were partially offset by an increase from pricing of 5%, due to the favorable impact of strategic pricing actions.
Previous 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.
Current wording
Net sales in Europe, the Middle East & Africa were impacted by approximately $23 million of favorable foreign currency translation for the three months ended September 30, 2024.
Previous wording
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 wording
Reported net sales in Europe, the Middle East & Africa decreased 2% for the three months ended September 30, 2024, driven by the decrease from volume of 4%, partially offset by the favorable impact from foreign currency translation of 2%. The impact of pricing was flat compared to the prior-year period.
Previous 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.
Current wording
Net sales in Asia/Pacific were impacted by approximately $6 million of favorable foreign currency translation for the three months ended September 30, 2024.
Previous wording
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 wording
Reported net sales in Asia/Pacific decreased 11% for the three months ended September 30, 2024, driven by the decrease from volume of 15%. Partially offsetting this decrease was an increase from pricing of 4%, 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 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.
Current wording
Gross margin increased to 72.4% for the three months ended September 30, 2024, as compared with 69.6% in the prior-year period.
Previous 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.
Current wording
Operating expenses as a percentage of net sales was 76.0% for the three months ended September 30, 2024, as compared with 66.8% in the prior-year period.
Previous 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.
Current wording
The decrease in reported operating margin for the three months ended September 30, 2024 was primarily driven by a decrease in net sales and an increase in operating expense margin, partially offset by an increase in gross margin, as 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 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.
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 (loss) by Product Categories and Geographic Regions exclude the impact of charges associated with restructuring and other activities for the three months ended September 30, 2024 and 2023 of $106 million and $2 million, respectively.
Previous wording
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 wording
Partially offsetting the decrease in reported makeup operating results for the three months ended September 30, 2024 was higher operating results from Clinique, primarily driven by an increase in net sales.
Previous wording
Reported operating income increased in Asia/Pacific for the three months ended March 31, 2024, primarily driven by higher results in mainland China and Hong Kong SAR, combined, of approximately $37 million. The increase in operating results from mainland China was primarily driven by disciplined advertising and promotional expense management, partially offset by higher store operating costs, driven by an unfavorable comparison from a commission rebate benefit received in the prior-year period. Operating results in Hong Kong SAR increased, primarily driven by an increase in net sales.
Current wording
Reported operating income decreased in Asia/Pacific for the three months ended September 30, 2024, primarily driven by lower results in mainland China and Hong Kong SAR, combined, of approximately $55 million. The decrease in operating results from mainland China was primarily driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management. Operating results in Hong Kong SAR decreased, primarily driven by a decrease in net sales.
Previous wording
The provision for income taxes represents U.S. federal, foreign, state and local income taxes. The effective rate differs from the federal statutory rate primarily due to the effect of state and local income taxes, the tax impact of share-based compensation, the taxation of foreign income and income tax reserve adjustments, which represent changes in our net liability for unrecognized tax benefits including tax settlements and lapses of the applicable statutes of limitations. Our effective tax rate will change from quarter-to-quarter based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes, tax reserve adjustments, the tax impact of share-based compensation, the interaction of various global tax strategies and the impact from certain acquisitions. In addition, changes in judgment from the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of change.
Current wording
The provision or benefit for income taxes represents U.S. federal, foreign, state and local income taxes. The effective rate differs from the federal statutory rate primarily due to the effect of state and local income taxes, the tax impact of stock-based compensation, the taxation of foreign income and income tax reserve adjustments, which represent changes in our net liability for unrecognized tax benefits including tax settlements and lapses of the applicable statutes of limitations. Our effective tax rate will change from quarter-to-quarter based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes, tax reserve adjustments, the tax impact of stock-based compensation, the interaction of various global tax strategies and the impact from certain acquisitions. In addition, changes in judgment from the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of change.
Previous wording
NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.
Current wording
NET EARNINGS (LOSS) ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.
Previous wording
We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period, or do not reflect the Company’s underlying ongoing business, provides transparency for such items and helps investors and others compare and analyze our operating performance from period to period. In the future, we expect to incur charges or adjustments similar in nature to those presented below; however, the impact to the Company’s results in a given period may be highly variable and difficult to predict. Our non-GAAP financial measures may not be comparable to similarly titled measures used by, or determined in a manner consistent with, other companies. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. The following tables present Net sales, Operating income and Diluted net earnings per common share adjusted to exclude the impact of charges associated with restructuring and other activities; the change in fair value of acquisition-related stock options; other intangible asset impairments; and the effects of foreign currency translation.
Current wording
We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period, or do not reflect the Company’s underlying ongoing business, provides transparency for such items and helps investors and others compare and analyze our operating performance from period to period. In the future, we expect to incur charges or adjustments similar in nature to those presented below; however, the impact to the Company’s results in a given period may be highly variable and difficult to predict. Our non-GAAP financial measures may not be comparable to similarly titled measures used by, or determined in a manner consistent with, other companies. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. The following tables present Net sales, Operating income and Diluted net earnings per common share adjusted to exclude the impact of charges associated with restructuring and other activities; talcum litigation settlement agreements; the change in fair value of acquisition-related stock options; and the effects of foreign currency translation.
Previous wording
The following tables provide reconciliations between these non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Current wording
The following table provides reconciliations between these non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Previous wording
The following tables reconcile the change in net sales by product category and geographic region, as reported, to the change in net sales excluding the effects of foreign currency translation:
Current wording
The following table reconciles the change in net sales by product category and geographic region, as reported, to the change in net sales excluding the effects of foreign currency translation:
Previous wording
The following tables reconcile the change in operating results by product category and geographic region, as reported, to the change in operating income excluding the impact of other intangible asset impairments and the change in fair value of acquisition-related stock options:
Current wording
The following table reconciles the change in operating results by product category and geographic region, as reported, to the change in operating income excluding the impact of talcum litigation settlement agreements and the change in fair value of acquisition-related stock options:
Previous wording
Our principal sources of funds historically have been cash flows from operations, borrowings pursuant to our commercial paper program, borrowings from the issuance of long-term debt and committed and uncommitted credit lines provided by banks and other lenders in the United States and abroad. At March 31, 2024, we had cash and cash equivalents of $3,701 million compared with $4,029 million at June 30, 2023. Our cash and cash equivalents are maintained at a number of financial institutions. To mitigate the risk of uninsured balances, we select financial institutions based on their credit ratings and financial strength, and we perform ongoing evaluations of these institutions to limit our concentration risk exposure.
Current wording
Our principal sources of funds historically have been cash flows from operations, borrowings pursuant to our commercial paper program, borrowings from the issuance of long-term debt and committed and uncommitted credit lines provided by banks and other lenders in the United States and abroad. At September 30, 2024, we had cash and cash equivalents of $2,350 million compared with $3,395 million at June 30, 2024. Our cash and cash equivalents are maintained at a number of financial institutions. To mitigate the risk of uninsured balances, we select financial institutions based on their credit ratings and financial strength, and we perform ongoing evaluations of these institutions to limit our concentration risk exposure.
Previous wording
Based on past performance and current expectations, we believe that cash on hand, cash generated from operations, available credit lines and access to credit markets will be adequate to support seasonal working capital needs, currently planned business operations, information technology enhancements, capital expenditures, acquisitions, dividends, stock repurchases, restructuring initiatives, commitments and other contractual obligations on both a near-term and long-term basis. In April 2024, we notified the minority interest holders that we are exercising our option to purchase the remaining interests in DECIEM, pursuant to the terms of the net Put (Call) Option for a purchase price based on the performance of DECIEM. This will result in the settlement of the DECIEM stock options and the redeemable noncontrolling interest balances during the fiscal 2024 fourth quarter.
Current wording
Based on past performance and current expectations, we believe that cash on hand, cash generated from operations, available credit lines and access to credit markets will be adequate to support seasonal working capital needs, currently planned business operations, information technology enhancements, capital expenditures, acquisitions, dividends, stock repurchases, restructuring initiatives, commitments and other contractual obligations on both a near-term and long-term basis.
Previous wording
The Tax Cuts and Jobs Act (“TCJA”) resulted in the Transition Tax on unrepatriated earnings of our foreign subsidiaries and changed the tax law in ways that present opportunities to repatriate cash without additional U.S. federal income tax. During the fiscal 2023 fourth quarter, we changed our assertion regarding our ability and intent to indefinitely reinvest undistributed earnings from certain foreign subsidiaries. We continue to analyze the indefinite reinvestment assertion on our remaining applicable foreign earnings. We do not believe that continuing to reinvest these remaining applicable foreign earnings impairs our ability to meet our domestic debt or working capital obligations. If these reinvested earnings were repatriated into the United States as dividends, we would be subject to state income taxes and applicable foreign taxes in certain jurisdictions.
Current wording
The Tax Cuts and Jobs Act resulted in the Transition Tax on unrepatriated earnings of our foreign subsidiaries and changed the tax law in ways that present opportunities to repatriate cash without additional U.S. federal income tax. We continue to analyze the indefinite reinvestment assertion on our applicable foreign earnings. We do not believe continuing to reinvest these applicable foreign earnings impairs our ability to meet our domestic debt or working capital obligations. If these reinvested earnings were repatriated into the United States as dividends, we would be subject to state income taxes and applicable foreign taxes in certain jurisdictions.
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Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
Fragrance net sales were impacted by approximately $3 million of favorable foreign currency translation for the three months ended September 30, 2024.