The Estée Lauder Companies Reports Fiscal 2023 First Quarter Results
The Estée Lauder Companies reported Q1 fiscal 2023 net sales of $3.93 billion, down 11% YoY, with diluted EPS falling 28% to $1.35. Organic net sales decreased 5%, reflecting ongoing challenges from COVID restrictions in China and inflationary pressures. Despite these setbacks, adjusted EPS was $1.37, slightly above expectations. The company anticipates continued headwinds into Q2 but expects growth to resume in the second half of the fiscal year. The quarterly dividend was raised, reflecting confidence in long-term growth opportunities.
- Adjusted diluted EPS of $1.37 exceeded expectations, indicating better performance than projected.
- Strong double-digit organic net sales growth in fragrance and hair care categories.
- Optimistic outlook for gradual sales recovery in the second half of fiscal 2023.
- Net sales decreased 11% YoY, significantly impacted by COVID-19 restrictions in China.
- Diluted EPS fell 28% compared to the previous year, reflecting ongoing financial pressures.
- Forecast for Q2 projects net sales decline between 19% and 17%.
Net Sales Decreased
Organic
Headwinds Will Continue to Pressure Second Quarter; Strong Growth Expected to Gradually Resume in the Second Half of Fiscal 2023
The Company reported net earnings of
“Fragrance and Hair Care each rose double digits organically, and Makeup’s renaissance continued to realize its promise in markets reopening.
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1 Organic net sales represents net sales excluding returns associated with restructuring and other activities; non-comparable impacts of acquisitions, divestitures and brand closures; as well as the impact from foreign currency translation. The Company believes that the Non-GAAP measure of organic net sales growth provides year-over-year sales comparisons on a consistent basis. See page 2 for reconciliations to GAAP.
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Freda concluded, “For fiscal 2023, we are lowering our outlook primarily to reflect tighter inventory management in
Business Update
The COVID-19 pandemic continued to disrupt the Company’s operating environment through the fiscal 2023 first quarter, including COVID-related restrictions in
During the quarter, the Company’s business was also negatively impacted by inflationary pressures and recession concerns, which caused certain retailers in
Fiscal 2023 First Quarter Results
Product category and geographic region net sales commentary reflect organic performance.
Reconciliation between GAAP and Non-GAAP Net Sales Growth (Unaudited) |
||
|
|
|
|
Three Months Ended
|
|
As Reported - GAAP(1) |
(11 |
)% |
|
|
|
Organic, Non-GAAP(2) |
(5 |
)% |
Impact of the license terminations related to certain of the Company’s designer fragrances |
(1 |
) |
Impact of foreign currency translation |
(4 |
) |
Returns associated with restructuring and other activities |
(1 |
) |
As Reported - GAAP(1) |
(11 |
)% |
(1)Includes returns associated with restructuring and other activities |
||
(2)Organic net sales growth represents net sales growth excluding returns associated with restructuring and other activities; non-comparable impacts of acquisitions, divestitures and brand closures (the license terminations related to certain of the Company’s designer fragrances); as well as the impact of foreign currency translation. |
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Adjusted diluted net earnings per common share excludes restructuring and other charges and adjustments as detailed in the following table.
Reconciliation between GAAP and Non-GAAP - Diluted Net Earnings Per Share (“EPS”) (Unaudited) |
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|
|
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|
Three Months Ended |
|||||
|
|
|
||||
|
2022 |
2021 |
Growth |
|||
As Reported EPS - GAAP(1) |
$ |
1.35 |
$ |
1.88 |
(28 |
)% |
|
|
|
|
|||
Non-GAAP |
|
|
|
|||
Restructuring and other charges |
|
.02 |
|
.01 |
|
|
Adjusted EPS - Non-GAAP |
$ |
1.37 |
$ |
1.89 |
(28 |
)% |
Impact of foreign currency translation on earnings per share |
|
.06 |
|
|
||
Adjusted Constant Currency EPS - Non-GAAP |
$ |
1.43 |
$ |
1.89 |
(24 |
)% |
(1)Includes restructuring and other charges |
|
|
||||
Net sales and operating income in the Company’s product categories and regions were unfavorably impacted by a stronger
Total reported operating income was
Results by Product Category (Unaudited) |
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|
|
|
|
|
|
|
|||||||||||
|
Three Months Ended |
|||||||||||||||||
|
|
Percentage Change |
Operating
|
Percentage
|
||||||||||||||
($ in millions) |
2022 |
2021 |
Reported
|
Constant
|
2022 |
2021 |
Reported
|
|||||||||||
|
$ |
2,104 |
|
$ |
2,449 |
|
(14 |
)% |
(11 |
)% |
$ |
530 |
|
$ |
717 |
|
(26 |
)% |
Makeup |
|
1,052 |
|
|
1,174 |
|
(10 |
) |
(6 |
) |
|
16 |
|
|
91 |
|
(82 |
) |
Fragrance |
|
607 |
|
|
609 |
|
— |
|
5 |
|
|
133 |
|
|
131 |
|
2 |
|
Hair Care |
|
158 |
|
|
148 |
|
7 |
|
11 |
|
|
(12 |
) |
|
2 |
|
(100 |
+) |
Other |
|
14 |
|
|
13 |
|
8 |
|
8 |
|
|
— |
|
|
— |
|
— |
|
Subtotal |
$ |
3,935 |
|
$ |
4,393 |
|
(10 |
)% |
(6 |
)% |
$ |
667 |
|
$ |
941 |
|
(29 |
)% |
Returns/charges associated with |
|
|||||||||||||||||
restructuring and other activities |
|
(5 |
) |
|
(1 |
) |
|
|
|
(6 |
) |
|
(6 |
) |
|
|||
Total |
$ |
3,930 |
|
$ |
4,392 |
|
(11 |
)% |
(7 |
)% |
$ |
661 |
|
$ |
935 |
|
(29 |
)% |
Organic Net Sales Growth - Reconciliation to GAAP (Unaudited) |
||||||||
|
Three Months Ended 2022 vs. 2021 |
|||||||
|
Organic
|
Impact of
|
Impact of
|
|
||||
|
(11 |
)% |
— |
% |
(3 |
)% |
(14 |
)% |
Makeup |
(6 |
) |
— |
|
(4 |
) |
(10 |
) |
Fragrance |
18 |
|
(12 |
) |
(6 |
) |
— |
|
Hair Care |
11 |
|
— |
|
(4 |
) |
7 |
|
Other |
8 |
|
— |
|
— |
|
8 |
|
Subtotal |
(5 |
)% |
(1 |
)% |
(4 |
)% |
(10 |
)% |
Returns associated with restructuring and other activities |
|
|
|
(1 |
) |
|||
Total |
(5 |
)% |
(1 |
)% |
(4 |
)% |
(11 |
)% |
(1)Organic net sales growth represents net sales growth excluding returns associated with restructuring and other activities; non-comparable impacts of acquisitions, divestitures and brand closures (the license terminations related to certain of the Company’s designer fragrances); as well as the impact of foreign currency translation. |
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-
Skin care net sales declined
11% , primarily reflecting the impacts of the prolonged COVID-related restrictions inHainan , including the tightening of inventory by certain retailers, and in mainlandChina . The tightening of inventory by certain retailers inthe United States also negatively impacted the category’s growth. Net sales growth from La Mer,Bobbi Brown and The Ordinary was offset by declines fromEstée Lauder , Dr.Jart+ and Origins. - Growth from La Mer reflected increases in hero products, including the upgrade to The Treatment Lotion and Crème de la Mer, and targeted expanded consumer reach.
-
Bobbi Brown net sales grew double digits across every region, driven by increases in hero products, including Soothing Cleansing Oil and Vitamin Enriched Face Base, and targeted expanded consumer reach. - Hero products drove net sales growth from The Ordinary.
-
Net sales from
Estée Lauder , Dr.Jart+ and Origins declined, reflecting challenges due to the COVID-related restrictions inChina , including those impacting travel retail. Strong innovation fromEstée Lauder , including the launches of Re-Nutriv Ultimate Diamond Transformative Brilliance Serum and the new Advanced Night Repair Eye Supercharged Gel-Creme Synchronized Multi-RecoveryEye Cream , partially offset the decline in net sales. - Skin care operating income decreased, reflecting the decline in net sales, partially offset by disciplined expense management.
Makeup
-
Makeup net sales decreased
6% , primarily reflecting the ongoing COVID-related restrictions impacting travel retail inHainan and mainlandChina , partially offset by the progression of the makeup renaissance as usage occasions increased in many markets. The decline in net sales also reflected a difficult comparison due to the timing of shipments in the prior-year period when certain retailers secured earlier shipments for holiday. Net sales growth from M·A·C was offset by declines fromEstée Lauder andTom Ford Beauty . - M·A·C high single-digit net sales growth was driven by hero products, such as Studio Fix foundation and Matte Lipstick, the recent launches of M·A·CStack mascara and Powder Kiss Velvet Blur Slim Stick lipstick, and the recovery in brick-and-mortar, as the brand’s high-touch services drove conversion.
-
Net sales from
Estée Lauder andTom Ford Beauty were negatively impacted by the decline in retail traffic and travel due to the COVID-related restrictions. -
Net sales grew strong double digits in both
Southeast Asia and in the emerging markets inEurope , theMiddle East &Africa . - Makeup operating income decreased, primarily reflecting lower net sales, partially offset by disciplined expense management.
Fragrance
- Net sales grew in every region and across all brands that sell fragrances, driven by continued desirability of the Company’s luxury and artisanal fragrance portfolio and strategic expansion of freestanding stores. The Company achieved strong growth despite global supply constraints, particularly of glass.
- The license terminations related to certain of the Company’s designer fragrances was dilutive to reported net sales growth by approximately 12 percentage points.
-
Tom Ford Beauty net sales grew strong double digits, powered by launches, such as Noir Extreme Parfum and Ebene Fume, as well as organic growth in existing hero franchises likeOud Wood and Ombre Leather. -
Jo Malone London net sales grew high single digits primarily driven by strength in colognes, particularly in hero franchises, as well as strength in home and bath & body. The Night Collection and the fiscal 2022 Brit Collection also contributed to growth. -
Net sales from
Le Labo rose strong double digits, primarily reflecting growth in brick-and-mortar, and targeted expanded consumer reach. Growth was driven by hero fragrances, such as Santal 33, as well as the annual City Exclusives collection. - Increased productive distribution in select retailers and the success of the Clinique Happy franchise line of products drove double-digit growth from the brand.
- Fragrance operating income increased, driven primarily by disciplined expense management.
Hair Care
-
Hair care net sales rose
11% , reflecting growth in every region and brand. -
Aveda’s net sales growth reflected strength in
Europe , theMiddle East &Africa , the launch of the brand in mainlandChina , the continued success of its hero franchises, including Botanical Repair, and the launch of the Color Control franchise line of products. - Net sales from DECIEM benefited from the recent launch of The Ordinary’s hair care products.
- Hair care operating results decreased, reflecting strategic investments to support innovation, partially offset by higher net sales.
Results by (Unaudited) |
||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
|
Three Months Ended |
|||||||||||||||||
|
|
Percentage Change |
Operating
|
Percentage
|
||||||||||||||
($ in millions) |
2022 |
2021 |
Reported
|
Constant
|
2022 |
2021 |
Reported Basis |
|||||||||||
The |
$ |
1,123 |
|
$ |
1,194 |
|
(6 |
)% |
(7 |
)% |
$ |
125 |
|
$ |
254 |
|
(51 |
)% |
|
|
1,682 |
|
|
1,873 |
|
(10 |
) |
(6 |
) |
|
334 |
|
|
465 |
|
(28 |
) |
|
|
1,130 |
|
|
1,326 |
|
(15 |
) |
(7 |
) |
|
208 |
|
|
222 |
|
(6 |
) |
Subtotal |
$ |
3,935 |
|
$ |
4,393 |
|
(10 |
)% |
(6 |
)% |
$ |
667 |
|
$ |
941 |
|
(29 |
)% |
Returns/charges associated with restructuring and |
||||||||||||||||||
other activities |
|
(5 |
) |
|
(1 |
) |
|
|
|
(6 |
) |
|
(6 |
) |
|
|||
Total |
$ |
3,930 |
|
$ |
4,392 |
|
(11 |
)% |
(7 |
)% |
$ |
661 |
|
$ |
935 |
|
(29 |
)% |
Organic Net Sales Growth - Reconciliation to GAAP (Unaudited) |
||||||||
|
Three Months Ended |
|||||||
|
Organic
|
Impact of
|
Impact of
|
|
||||
The |
(3 |
)% |
(4 |
)% |
1 |
% |
(6 |
)% |
|
(5 |
) |
(1 |
) |
(4 |
) |
(10 |
) |
|
(7 |
) |
— |
|
(8 |
) |
(15 |
) |
Subtotal |
(5 |
)% |
(1 |
)% |
(4 |
)% |
(10 |
)% |
Returns associated with restructuring and other activities |
|
|
|
(1 |
) |
|||
Total |
(5 |
)% |
(1 |
)% |
(4 |
)% |
(11 |
)% |
(1)Organic net sales growth represents net sales growth excluding returns associated with restructuring and other activities; non-comparable impacts of acquisitions, divestitures and brand closures (the license terminations related to certain of the Company’s designer fragrances); as well as the impact of foreign currency translation. |
||||||||
The
-
Net sales declined
3% , driven by a difficult comparison to the prior-year period when some retailers inthe United States secured orders earlier for holiday due to global logistics constraints, as well as the negative impact in the current year from tighter inventory management by certain retailers. - The license terminations related to certain of the Company’s designer fragrances contributed approximately 4 percentage points to the decline in reported net sales.
-
In
Latin America , net sales grew double digits, fueled by growth in the Makeup category. -
Operating income in The
Americas decreased, reflecting the decline in net sales while the Company continued to support strategic investments in advertising and promotional activities.
-
Net sales declined
5% , primarily due to the continued challenges from the COVID-related restrictions affecting travel retail inHainan . - The license terminations related to certain of the Company’s designer fragrances contributed approximately 1 percentage point to the decline in reported net sales.
-
Double-digit net sales growth from DECIEM drove the increase in net sales in the
United Kingdom . -
Net sales from most emerging markets in the region increased, led by
India , theMiddle East andTurkey , driven by growth in the makeup category. Developed markets also grew, led bySpain ,Italy andGermany . -
Global travel retail net sales decreased double digits, reflecting the ongoing travel restrictions in
China that led to reduced travel, particularly toHainan . Travel retail net sales grew inEurope , theMiddle East &Africa and TheAmericas , benefiting from increased resumption of professional and personal travel compared to the prior-year period. - Operating income decreased, driven by the decline in net sales, partially offset by disciplined expense management.
-
Net sales declined, due to the ongoing COVID-related restrictions impacting brick-and-mortar in
Greater China and Dr.Jart+ travel retail inKorea . -
In other markets in
Asia/Pacific , COVID recovery drove strong net sales growth in most countries, led byThailand ,Malaysia andJapan . InKorea , double-digit growth from nearly all brands was more than offset by the decline from Dr.Jart+’s travel retail business. - Net sales declined in skin care and makeup, reflecting the ongoing COVID-19 restrictions, and were only partly offset by net sales growth from fragrance and hair care in the region.
- Operating income decreased, driven by the decline in net sales, partially offset by disciplined expense management.
Cash Flows
-
For the three months ended
September 30, 2022 , net cash flows used for operating activities were$650 million $81 million -
Capital Expenditures decreased to
$152 million $205 million Japan . -
The Company ended the quarter with
$2.94 billion $0.33 billion
Outlook for Fiscal 2023 Second Quarter and Full Year
The Company expects the remainder of the fiscal year to be pressured by the temporary disruptions due to headwinds from the COVID-19 restrictions in
The full year outlook reflects the following assumptions and expectations:
-
Ongoing tightening of inventory by certain of our retailers in
Asia travel retail and inthe United States . -
A more tempered expectation on the timing of traffic recovery in travel retail in
Hainan to the second half of the fiscal year. - Increased productive distribution throughout the year to retailers that provide new consumer reach and continued strategic entry into new countries for some of our brands.
- The mitigation of most inflationary pressures through strategic price increases, mix optimization and cost savings in other areas.
- Incremental savings from the Post-COVID Business Acceleration Program and reinvestment in advertising and capabilities.
-
Full-year effective tax rate of approximately
25% .
The Company is mindful of ongoing risks related to the COVID-19 pandemic as well as risks related to the effects of the global macro environment, including the risk of recession; foreign currency volatility; increasing inflationary pressures; supply chain disruptions; social and political issues; regulatory matters, including the imposition of tariffs and sanctions; geopolitical tensions; and global security issues. The Company is also mindful of inflationary pressures on our cost base and consumer behaviors.
Second Quarter Fiscal 2023
Sales Outlook
-
Reported net sales are forecasted to decrease between
19% and17% versus the prior-year period. This range includes the negative impacts from tighter inventory management in travel retail in response to the decreased traffic driven by COVID-related restrictions, foreign currency translation of7% as well as an additional unfavorable impact from certain foreign currency transactions in key international travel retail locations of2% , and the termination of the Company’s license agreements for the Donna Karan New York,DKNY ,Michael Kors ,Tommy Hilfiger and Ermenegildo Zegna product lines effectiveJune 30, 2022 . -
Organic net sales, which excludes returns associated with restructuring and other activities; non-comparable impacts from acquisitions, divestitures and brand closures; as well as the impact of foreign currency translation, are forecasted to decrease between
11% and9% . This includes the negative impact related to foreign currency transactions, noted above.
Earnings per Share Outlook
Despite the forecasted decrease in net sales, the Company plans to continue to make strategic investments to drive long-term growth, including investments in advertising, innovation, its innovation center in
-
Reported diluted net earnings per common share are projected to be between
$1.14 $1.26 $1.19 $1.29 -
Adjusted diluted earnings per common share are expected to decrease between
54% and50% on a constant currency basis. Currency exchange rates are volatile and difficult to predict. Usingmid-October 2022 spot rates for the second quarter of fiscal 2023:-
The negative foreign currency translation impact equates to about
$.20 of diluted earnings per share. -
The impact from certain foreign currency transactions in key international travel retail locations, which is included in the constant currency decline of
54% to50% , is expected to negatively impact adjusted diluted earnings per common share growth by7% .
-
The negative foreign currency translation impact equates to about
Full Year Fiscal 2023
The Company expects its first-half results to be negatively impacted by the ongoing challenges from the COVID-related restrictions affecting
Sales Outlook
-
Reported net sales are forecasted to decrease between
8% and6% versus the prior-year period. This range includes:- Tighter inventory management in travel retail in response to the decreased traffic driven by COVID-related restrictions.
-
A negative
6% due to foreign currency translation, as well as an additional2% due to certain foreign currency transactions in key international travel retail locations. -
The negative impact of
1% from the termination of the Company’s license agreements for the Donna Karan New York,DKNY ,Michael Kors ,Tommy Hilfiger and Ermenegildo Zegna product lines effectiveJune 30, 2022 . -
A negative impact of
1% related to returns associated with restructuring and other activities.
-
Organic net sales, which excludes returns associated with restructuring and other activities; non-comparable impacts from acquisitions, divestitures and brand closures; as well as the impact of foreign currency translation, are forecasted to be flat to increase by
2% . This includes the negative impact related to foreign currency transactions, noted above.
Earnings per Share Outlook
Despite the forecasted decrease in net sales, the Company plans to continue to make strategic investments to drive long-term growth, including investments in advertising, innovation, its innovation center in
-
Reported diluted net earnings per common share are projected to be between
$5.01 $5.21 $5.25 $5.40 -
Adjusted diluted earnings per common share are expected to decrease between
21% and19% on a constant currency basis. Currency exchange rates are volatile and difficult to predict. Usingmid-October 2022 spot rates for fiscal 2023:-
The negative foreign currency translation impact equates to about
$.44 of diluted earnings per share. -
The impact from certain foreign currency transactions in key international travel retail locations, which is included in the constant currency decline of
21% to19% , is expected to negatively impact adjusted diluted earnings per common share growth by10% .
-
The negative foreign currency translation impact equates to about
Reconciliation between GAAP and Non-GAAP - Net Sales Growth (Unaudited) |
||||
|
|
|
||
|
Three Months Ending |
Twelve Months Ending |
||
|
|
|
||
As Reported - GAAP(1) |
( |
%) |
( |
%) |
|
|
|
||
Organic, Non-GAAP(2) |
( |
%) |
|
% |
Impact of the license terminations related to certain of our designer |
|
|
||
fragrances |
(1 |
) |
(1 |
) |
Impact of foreign currency translation |
(7 |
) |
(6 |
) |
Returns associated with restructuring and other activities |
— |
|
(1 |
) |
As Reported - GAAP(1) |
( |
%) |
( |
%) |
(1)Includes returns associated with restructuring and other activities |
||||
(2)Organic net sales growth represents net sales growth excluding returns associated with restructuring and other activities; non-comparable impacts of already announced acquisitions, divestitures and brand closures (the license terminations related to certain of our designer fragrances); as well as the impact of foreign currency translation. |
||||
(F)Represents forecast |
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Reconciliation between GAAP and Non-GAAP - Diluted Net Earnings Per Share (“EPS”) (Unaudited) |
|||||||||
|
|
|
|
|
|
|
|||
|
Three Months Ending |
Twelve Months Ending |
|||||||
|
|
|
|
|
|||||
|
2022(F) |
2021 |
Growth |
2023(F) |
2022 |
Variance |
|||
Forecasted/As Reported EPS - GAAP(1) |
|
$ |
2.97 |
( |
|
$ |
6.55 |
|
( |
|
|
|
|
|
|
|
|||
Non-GAAP |
|
|
|
|
|
|
|||
Restructuring and other charges |
.03 - .05 |
|
.03 |
|
.19 - .24 |
|
.31 |
|
|
Change in fair value of acquisition-related stock |
|||||||||
options (less the portion attributable to |
|||||||||
redeemable noncontrolling interest) |
— |
|
.01 |
|
— |
|
(.12 |
) |
|
|
|||||||||
impairments |
— |
|
— |
|
— |
|
.50 |
|
|
Forecasted/Adjusted EPS - Non-GAAP |
|
$ |
3.01 |
( |
|
$ |
7.24 |
|
( |
Impact of foreign currency translation |
.20 |
|
|
.44 |
|
|
|||
Forecasted/Adjusted Constant Currency EPS - |
|||||||||
Non-GAAP |
|
$ |
3.01 |
( |
|
$ |
7.24 |
|
( |
(1)Includes restructuring and other charges and adjustments |
|||||||||
(F)Represents forecast |
|||||||||
Conference Call
Cautionary Note Regarding Forward-Looking Statements
Statements in this press release, in particular those in “Outlook,” as well as remarks by the CEO and other members of management, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may address our expectations regarding sales, earnings or other future financial performance and liquidity, other performance measures, product introductions, entry into new geographic regions, information technology initiatives, new methods of sale, our long-term strategy, restructuring and other charges and resulting cost savings, and future operations or operating results. These statements may contain words like “expect,” “will,” “will likely result,” “would,” “believe,” “estimate,” “planned,” “plans,” “intends,” “may,” “should,” “could,” “anticipate,” “estimate,” “project,” “projected,” “forecast,” and “forecasted” or similar expressions.
Factors that could cause actual results to differ materially from our forward-looking statements include the following:
(1) |
increased competitive activity from companies in the skin care, makeup, fragrance and hair care businesses; |
|
(2) |
the Company’s ability to develop, produce and market new products on which future operating results may depend and to successfully address challenges in the Company’s business; |
|
(3) |
consolidations, restructurings, bankruptcies and reorganizations in the retail industry causing a decrease in the number of stores that sell the Company’s products, an increase in the ownership concentration within the retail industry, ownership of retailers by the Company’s competitors or ownership of competitors by the Company’s customers that are retailers and our inability to collect receivables; |
|
(4) |
destocking and tighter working capital management by retailers; |
|
(5) |
the success, or changes in timing or scope, of new product launches and the success, or changes in timing or scope, of advertising, sampling and merchandising programs; |
|
(6) |
shifts in the preferences of consumers as to where and how they shop; |
|
(7) |
social, political and economic risks to the Company’s foreign or domestic manufacturing, distribution and retail operations, including changes in foreign investment and trade policies and regulations of the host countries and of |
|
(8) |
changes in the laws, regulations and policies (including the interpretations and enforcement thereof) that affect, or will affect, the Company’s business, including those relating to its products or distribution networks, changes in accounting standards, tax laws and regulations, environmental or climate change laws, regulations or accords, trade rules and customs regulations, and the outcome and expense of legal or regulatory proceedings, and any action the Company may take as a result; |
|
(9) |
foreign currency fluctuations affecting the Company’s results of operations and the value of its foreign assets, the relative prices at which the Company and its foreign competitors sell products in the same markets and the Company’s operating and manufacturing costs outside of |
|
(10) |
changes in global or local conditions, including those due to volatility in the global credit and equity markets, natural or man-made disasters, real or perceived epidemics, supply chain challenges, inflation, or increased energy costs, that could affect consumer purchasing, the willingness or ability of consumers to travel and/or purchase the Company’s products while traveling, the financial strength of the Company’s customers, suppliers or other contract counterparties, the Company’s operations, the cost and availability of capital which the Company may need for new equipment, facilities or acquisitions, the returns that the Company is able to generate on its pension assets and the resulting impact on funding obligations, the cost and availability of raw materials and the assumptions underlying the Company’s critical accounting estimates; |
|
(11) |
impacts attributable to the COVID-19 pandemic, including disruptions to our global business; |
|
(12) |
shipment delays, commodity pricing, depletion of inventory and increased production costs resulting from disruptions of operations at any of the facilities that manufacture the Company’s products or at the Company’s distribution or inventory centers, including disruptions that may be caused by the implementation of information technology initiatives, or by restructurings; |
|
(13) |
real estate rates and availability, which may affect the Company’s ability to increase or maintain the number of retail locations at which the Company sells its products and the costs associated with the Company’s other facilities; |
|
(14) |
changes in product mix to products which are less profitable; |
|
(15) |
the Company’s ability to acquire, develop or implement new information and distribution technologies and initiatives on a timely basis and within the Company’s cost estimates and the Company’s ability to maintain continuous operations of such systems and the security of data and other information that may be stored in such systems or other systems or media; |
|
(16) |
the Company’s ability to capitalize on opportunities for improved efficiency, such as publicly-announced strategies and restructuring and cost-savings initiatives, and to integrate acquired businesses and realize value therefrom; |
|
(17) |
consequences attributable to local or international conflicts around the world, as well as from any terrorist action, retaliation and the threat of further action or retaliation; |
|
(18) |
the timing and impact of acquisitions, investments and divestitures; and |
|
(19) |
additional factors as described in the Company’s filings with the |
The Company assumes no responsibility to update forward-looking statements made herein or otherwise.
ELC-F
ELC-E
CONSOLIDATED STATEMENT OF EARNINGS (Unaudited) |
||||||||
|
|
|
|
|||||
|
Three Months Ended
|
Percentage
|
||||||
($ in millions, except per share data) |
2022 |
2021 |
||||||
Net sales(A) |
$ |
3,930 |
|
$ |
4,392 |
|
(11 |
)% |
Cost of sales(A) |
|
1,023 |
|
|
1,057 |
|
(3 |
) |
Gross profit |
|
2,907 |
|
|
3,335 |
|
(13 |
) |
Gross margin |
|
74.0 |
% |
|
75.9 |
% |
|
|
|
|
|
|
|||||
Operating expenses |
|
|
|
|||||
Selling, general and administrative(B) |
|
2,244 |
|
|
2,394 |
|
(6 |
) |
Restructuring and other charges(A) |
|
2 |
|
|
6 |
|
(67 |
) |
Total operating expenses |
|
2,246 |
|
|
2,400 |
|
(6 |
) |
Operating expense margin |
|
57.2 |
% |
|
54.6 |
% |
|
|
|
|
|
|
|||||
Operating income |
|
661 |
|
|
935 |
|
(29 |
) |
Operating income margin |
|
16.8 |
% |
|
21.3 |
% |
|
|
|
|
|
|
|||||
Interest expense |
|
46 |
|
|
42 |
|
10 |
|
Interest income and investment income, net |
|
15 |
|
|
4 |
|
100 |
+ |
Other components of net periodic benefit cost |
|
(3 |
) |
|
1 |
|
(100 |
+) |
Other income |
|
— |
|
|
1 |
|
(100 |
) |
Earnings before income taxes |
|
633 |
|
|
897 |
|
(29 |
) |
Provision for income taxes |
|
143 |
|
|
202 |
|
(29 |
) |
Net earnings |
|
490 |
|
|
695 |
|
(29 |
) |
Net earnings attributable to noncontrolling interests |
|
— |
|
|
(1 |
) |
100 |
|
Net earnings attributable to redeemable noncontrolling interest |
|
(1 |
) |
|
(2 |
) |
50 |
|
Net earnings attributable to |
$ |
489 |
|
$ |
692 |
|
(29 |
)% |
|
|
|
|
|||||
Net earnings attributable to |
|
|
|
|||||
Basic |
$ |
1.37 |
|
$ |
1.91 |
|
(29 |
)% |
Diluted |
$ |
1.35 |
|
$ |
1.88 |
|
(28 |
)% |
|
|
|
|
|||||
Weighted-average common shares outstanding |
|
|
|
|||||
Basic |
|
357.9 |
|
|
362.2 |
|
|
|
Diluted |
|
361.4 |
|
|
367.9 |
|
|
|
|
|
|
|
|||||
(A)In
|
||||||||
(B)For the three months ended |
||||||||
Returns and Charges Associated With Restructuring and Other Activities and Other Adjustments (Unaudited) |
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended |
||||||||||||||
|
Sales
|
Cost of
|
Operating Expenses |
Total |
After
|
Diluted
|
|||||||||
(In millions, except per share data) |
Restructuring
|
Other Charges/
|
|||||||||||||
PCBA Program |
|
5 |
|
(1 |
) |
|
2 |
|
— |
|
6 |
|
4 |
|
.02 |
Change in fair value of acquisition-related stock |
|||||||||||||||
options |
|
— |
|
— |
|
|
— |
|
1 |
|
1 |
|
1 |
|
— |
Total |
$ |
5 |
$ |
(1 |
) |
$ |
2 |
$ |
1 |
$ |
7 |
$ |
5 |
$ |
.02 |
|
Three Months Ended |
||||||||||||||
|
Sales
|
Cost of
|
Operating Expenses |
Total |
After Tax |
Diluted
|
|||||||||
(In millions, except per share data) |
Restructuring
|
Other Charges/
|
|||||||||||||
Leading |
$ |
— |
$ |
— |
|
$ |
1 |
$ |
3 |
$ |
4 |
$ |
3 |
$ |
.01 |
PCBA Program |
|
1 |
|
(1 |
) |
|
— |
|
2 |
|
2 |
|
2 |
|
— |
Total |
$ |
1 |
$ |
(1 |
) |
$ |
1 |
$ |
5 |
$ |
6 |
$ |
5 |
$ |
.01 |
This earnings release includes some non-GAAP financial measures relating to charges associated with restructuring and other activities and adjustments, as well as organic net sales. Included herein are reconciliations between the non-GAAP financial measures and the most directly comparable GAAP measures for certain consolidated statements of earnings accounts before and after these items. The Company uses certain non-GAAP financial measures, among other financial measures, to evaluate its operating performance, which represent the way the Company conducts and views its 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 operating performance from period-to-period. In the future, the Company expects to incur charges or make adjustments similar in nature to those presented herein; 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 the Company considers the non-GAAP measures useful in analyzing its 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 GAAP.
The Company operates on a global basis, with the majority of its net sales generated outside
Reconciliation of Certain Consolidated Statements of Earnings Accounts Before and After Returns, Charges and Other Adjustments (Unaudited) |
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Three Months Ended |
|
|||||||||||||||||||||||||
|
2022 |
2021 |
% Change |
||||||||||||||||||||||||
($ in millions, except per
|
As
|
Returns/
|
Non-
|
Impact of
|
Non-
|
As
|
Returns/
|
Non-
|
Non-
|
Non-
|
|||||||||||||||||
Net sales |
$ |
3,930 |
|
$ |
5 |
|
$ |
3,935 |
|
$ |
176 |
$ |
4,111 |
|
$ |
4,392 |
|
$ |
1 |
|
$ |
4,393 |
|
(10 |
)% |
(6 |
)% |
Cost of sales |
|
1,023 |
|
|
1 |
|
|
1,024 |
|
|
30 |
|
1,054 |
|
|
1,057 |
|
|
1 |
|
|
1,058 |
|
|
|
||
Gross profit |
|
2,907 |
|
|
4 |
|
|
2,911 |
|
|
146 |
|
3,057 |
|
|
3,335 |
|
|
— |
|
|
3,335 |
|
(13 |
)% |
(8 |
)% |
Gross margin |
|
74.0 |
% |
|
|
74.0 |
% |
|
|
74.4 |
% |
|
75.9 |
% |
|
|
75.9 |
% |
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Operating expenses |
|
2,246 |
|
|
(3 |
) |
|
2,243 |
|
|
115 |
|
2,358 |
|
|
2,400 |
|
|
(6 |
) |
|
2,394 |
|
(6 |
)% |
(2 |
)% |
Operating expense |
|||||||||||||||||||||||||||
margin |
|
57.2 |
% |
|
|
57.0 |
% |
|
|
57.4 |
% |
|
54.6 |
% |
|
|
54.5 |
% |
|
|
|||||||
Operating income |
|
661 |
|
|
7 |
|
|
668 |
|
|
31 |
|
699 |
|
|
935 |
|
|
6 |
|
|
941 |
|
(29 |
)% |
(26 |
)% |
Operating income |
|||||||||||||||||||||||||||
margin |
|
16.8 |
% |
|
|
17.0 |
% |
|
|
17.0 |
% |
|
21.3 |
% |
|
|
21.4 |
% |
|
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Provision for income |
|||||||||||||||||||||||||||
taxes |
|
143 |
|
|
2 |
|
|
145 |
|
|
7 |
|
152 |
|
|
202 |
|
|
1 |
|
|
203 |
|
(29 |
)% |
(25 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Net earnings |
|||||||||||||||||||||||||||
attributable to The |
|||||||||||||||||||||||||||
|
|||||||||||||||||||||||||||
|
$ |
489 |
|
$ |
5 |
|
$ |
494 |
|
$ |
24 |
$ |
518 |
|
$ |
692 |
|
$ |
4 |
|
$ |
696 |
|
(29 |
)% |
(26 |
)% |
Diluted EPS |
$ |
1.35 |
|
$ |
.02 |
|
$ |
1.37 |
|
$ |
.06 |
$ |
1.43 |
|
$ |
1.88 |
|
$ |
.01 |
|
$ |
1.89 |
|
(28 |
)% |
(24 |
)% |
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, except where noted) |
||||||
|
|
|
|
|||
|
|
|
|
|||
($ in millions) |
(Audited) |
|||||
ASSETS |
|
|
|
|||
|
|
|
|
|||
Cash and cash equivalents |
$ |
2,938 |
$ |
3,957 |
$ |
3,995 |
Accounts receivable, net |
|
2,156 |
|
1,629 |
|
2,265 |
Inventory and promotional merchandise |
|
3,018 |
|
2,920 |
|
2,633 |
Prepaid expenses and other current assets |
|
754 |
|
792 |
|
593 |
Total current assets |
|
8,866 |
|
9,298 |
|
9,486 |
Property, plant and equipment, net |
|
2,654 |
|
2,650 |
|
2,358 |
Operating lease right-of-use assets |
|
1,858 |
|
1,949 |
|
2,113 |
Other assets |
|
6,611 |
|
7,013 |
|
7,623 |
Total assets |
$ |
19,989 |
$ |
20,910 |
$ |
21,580 |
|
|
|
|
|||
LIABILITIES AND EQUITY |
|
|
|
|||
|
|
|
|
|||
Current debt |
$ |
266 |
$ |
268 |
$ |
281 |
Accounts payable |
|
1,392 |
|
1,822 |
|
1,485 |
Operating lease liabilities |
|
340 |
|
365 |
|
371 |
Other accrued liabilities |
|
3,273 |
|
3,360 |
|
3,182 |
Total current liabilities |
|
5,271 |
|
5,815 |
|
5,319 |
Long-term debt |
|
5,107 |
|
5,144 |
|
5,267 |
Long-term operating lease liabilities |
|
1,781 |
|
1,868 |
|
2,073 |
Other noncurrent liabilities |
|
1,505 |
|
1,651 |
|
1,964 |
Total noncurrent liabilities |
|
8,393 |
|
8,663 |
|
9,304 |
Redeemable noncontrolling interest |
|
808 |
|
842 |
|
842 |
Total equity |
|
5,517 |
|
5,590 |
|
6,115 |
Total liabilities and equity |
$ |
19,989 |
$ |
20,910 |
$ |
21,580 |
|
|
|
|
|||
SELECT CASH FLOW DATA (Unaudited) |
||||||
|
|
|
||||
|
Three Months Ended
|
|||||
($ in millions) |
2022 |
2021 |
||||
Net earnings |
$ |
490 |
|
$ |
695 |
|
Adjustments to reconcile net earnings to net cash flows from operating |
||||||
activities: |
|
|
||||
Depreciation and amortization |
|
178 |
|
|
183 |
|
Deferred income taxes |
|
(53 |
) |
|
(57 |
) |
Other items |
|
69 |
|
|
94 |
|
Changes in operating assets and liabilities: |
|
|
||||
Increase in accounts receivable, net |
|
(579 |
) |
|
(583 |
) |
Increase in inventory and promotional merchandise |
|
(229 |
) |
|
(178 |
) |
Decrease (increase) in other assets, net |
|
3 |
|
|
(19 |
) |
Decrease in accounts payable and other liabilities, net |
|
(529 |
) |
|
(216 |
) |
Net cash flows used for operating activities |
$ |
(650 |
) |
$ |
(81 |
) |
|
|
|
||||
Other Investing and Financing Sources (Uses): |
|
|
||||
Capital expenditures |
$ |
(152 |
) |
$ |
(205 |
) |
Settlement of net investment hedges |
|
138 |
|
|
58 |
|
Payments to acquire treasury stock |
|
(110 |
) |
|
(557 |
) |
Dividends paid |
|
(215 |
) |
|
(192 |
) |
Proceeds from current debt, net |
|
249 |
|
|
3 |
|
Repayments and redemptions of long-term debt, net |
|
(254 |
) |
|
(4 |
) |
View source version on businesswire.com: https://www.businesswire.com/news/home/20221102005035/en/
Investors:
rmancini@estee.com
Media:
jimarvin@estee.com
Source:
FAQ
What were Estée Lauder's Q1 fiscal 2023 earnings results?
What factors affected Estée Lauder's sales performance in Q1?
What is Estée Lauder's outlook for the second half of fiscal 2023?
How does the Q1 performance affect Estée Lauder's future guidance?
