The Estée Lauder Companies Reports Fiscal 2023 Results
- Achieved Fourth Quarter Net Sales Growth, As Expected
- Expect to Return to Organic Net Sales Growth and Deliver Progressive Margin Recovery in Fiscal 2024
- Full Year Net Sales Decreased 10% and Diluted EPS Decreased 57% to $2.79
- Organic Net Sales1 Decreased 6% and Adjusted Diluted EPS Fell 49% in Constant Currency
Full Year Net Sales Decreased
Organic Net Sales1 Decreased
Achieved Fourth Quarter Net Sales Growth, As Expected
Expect to Return to Organic Net Sales Growth and Deliver Progressive Margin Recovery in Fiscal 2024
The Company reported net earnings3 of
Fabrizio Freda, President and Chief Executive Officer said, “We returned to organic sales growth in the fourth quarter, delivering our outlook. Momentum continued in the markets of EMEA and
For full-year fiscal 2023, we delivered organic sales growth and prestige beauty share gains in many developed and emerging markets, but
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 of 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 3 for reconciliations to GAAP. |
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2 The Company’s emerging markets are |
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3 Net earnings attributable to The Estée Lauder Companies Inc. which excludes net earnings attributable to redeemable noncontrolling interests for the fiscal years ended June 30, 2023 and 2022, and net earnings attributable to noncontrolling interests for the fiscal year ended June 30, 2022. |
For fiscal year 2024, we expect to return to organic sales growth and deliver sequentially improving margin throughout the year, leveraging the strong equity and desirability of our brands. We are focused on driving momentum in markets that are thriving and re-accelerating growth in
Business Update
In the fiscal 2023 fourth quarter, net sales returned to growth, increasing
For the full fiscal year ended June 30, 2023, the operating environment continued to be disrupted by the impact of the COVID-19 pandemic. Most notably, the pace of recovery in
Elsewhere, the recovery from the COVID-19 pandemic progressed across markets globally over the course of the fiscal year as restrictions lifted. In the West, the Company’s recovery from the pandemic continued with strong organic net sales growth in nearly all markets in EMEA and in
In
Finally, the Company’s business was also pressured by the strong
Fiscal 2023 Results
Reported net sales decreased
Royalty revenue from the acquisition of the TOM FORD brand is reflected in the Other product category and in The
Reconciliation between GAAP and Non-GAAP Net Sales Growth
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Year Ended
|
|
As Reported-GAAP |
(10 |
)% |
Impact of acquisitions, divestitures and brand closures, net |
1 |
|
Impact of foreign currency translation |
4 |
|
Returns associated with restructuring and other activities |
— |
|
Organic, Non-GAAP |
(6 |
)% |
(1)Percentages are calculated on an individual basis |
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”)
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Year Ended June 30 |
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2023 |
2022 |
Growth |
||||||
As Reported EPS - GAAP |
$ |
2.79 |
$ |
6.55 |
|
(57 |
)% |
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Non-GAAP |
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||||||
Restructuring and other charges |
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.18 |
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.31 |
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|||
Change in fair value of acquisition-related stock options (less the portion attributable to
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|
.05 |
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(.12 |
) |
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|||
Other intangible asset impairments |
|
.44 |
|
.50 |
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|||
Adjusted EPS - Non-GAAP |
$ |
3.46 |
$ |
7.24 |
|
(52 |
)% |
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Impact of foreign currency translation on earnings per share |
|
.26 |
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|||||
Adjusted Constant Currency EPS - Non-GAAP |
$ |
3.72 |
$ |
7.24 |
(49 |
)% |
Net sales and operating income in nearly all of the Company’s product categories and regions were impacted by a stronger
Total reported operating income was
-
Fiscal 2023:
of other intangible asset impairments related to Dr.Jart+, Too Faced and Smashbox, combined, as well as$207 million of restructuring and other charges and$85 million related to the change in fair value of DECIEM acquisition-related stock options.$22 million -
Fiscal 2022:
of other intangible asset impairments related to Dr.Jart+ and GLAMGLOW, combined, and$241 million of restructuring and other charges, partially offset by$144 million of income related to the change in fair value of DECIEM acquisition-related stock options.$55 million -
The unfavorable impact of foreign currency translation of
.$126 million
Results by Product Category
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Year Ended June 30 |
|||||||||||||||||||||
|
Net Sales |
Percentage Change(1) |
Operating
|
Percentage
|
||||||||||||||||||
($ in millions) |
2023 |
2022 |
Reported
|
Impact of
|
Impact of
|
Organic
|
2023 |
2022 |
Reported
|
|||||||||||||
Skin Care |
$ |
8,202 |
|
$ |
9,886 |
|
(17 |
)% |
— |
% |
3 |
% |
(14 |
)% |
$ |
1,204 |
|
$ |
2,753 |
|
(56 |
)% |
Makeup |
|
4,516 |
|
|
4,667 |
|
(3 |
) |
— |
|
4 |
|
— |
|
|
(22 |
) |
|
133 |
|
(100 |
+) |
Fragrance |
|
2,512 |
|
|
2,508 |
|
— |
|
9 |
|
4 |
|
14 |
|
|
440 |
|
|
456 |
|
(4 |
) |
Hair Care |
|
653 |
|
|
631 |
|
3 |
|
— |
|
3 |
|
6 |
|
|
(34 |
) |
|
(28 |
) |
(21 |
) |
Other |
|
54 |
|
|
49 |
|
10 |
|
(28 |
) |
4 |
|
(13 |
) |
|
6 |
|
|
— |
|
100 |
|
Subtotal |
$ |
15,937 |
|
$ |
17,741 |
|
(10 |
)% |
1 |
% |
4 |
% |
(6 |
)% |
$ |
1,594 |
|
$ |
3,314 |
|
(52 |
)% |
Returns/charges
|
|
(27 |
) |
|
(4 |
) |
|
|
|
|
|
(85 |
) |
|
(144 |
) |
|
|||||
Total |
$ |
15,910 |
|
$ |
17,737 |
|
(10 |
)% |
1 |
% |
4 |
% |
(6 |
)% |
$ |
1,509 |
|
$ |
3,170 |
|
(52 |
)% |
(1)Percentages are calculated on an individual basis |
|
The product category net sales commentary below reflects organic performance, excluding the negative impacts which are reflected in the preceding table.
Skin Care
-
Skin Care net sales fell
14% , primarily reflecting the challenges inAsia travel retail, including the slower than anticipated recovery from the COVID-19 pandemic, as previously mentioned. Net sales declined for Estée Lauder, La Mer and Dr.Jart+, partially offset by strong growth from The Ordinary, M·A·C and Bobbi Brown Cosmetics.-
Estée Lauder, La Mer and Dr.Jart+ net sales declined, primarily due to the challenges in
Asia travel retail. Net sales from Estée Lauder and La Mer increased inAsia/Pacific , benefiting from Estée Lauder’s Revitalizing Supreme+ franchise line of products and The Moisturizing Soft Cream from La Mer. -
Strong double-digit net sales growth from The Ordinary reflected growth across every region and benefited from the continued strength from hero products, successful innovation, such as New! Multi-Peptide Lash & Brow Serum and the Multi-Peptide Eye Serum, the brand’s launch into
India and theMiddle East in fiscal 2023 and specialty-multi growth. - Net sales from M·A·C rose strong double digits owing to the launch of the Hyper Real franchise line of products in the fiscal 2023 third quarter.
- The continued strength from hero products, such as Vitamin Enriched Face Base and Soothing Cleansing Oil, fueled double-digit net sales growth from Bobbi Brown Cosmetics.
-
Estée Lauder, La Mer and Dr.Jart+ net sales declined, primarily due to the challenges in
-
Skin Care operating income decreased, primarily reflecting the decline in net sales from
Asia travel retail, partially offset by the year-over-year decrease of other intangible asset impairments of .$141 million
Makeup
-
Makeup net sales were virtually flat compared to the prior year and performance increased sequentially each quarter, to growth of
13% in the fiscal 2023 fourth quarter, reflecting growth in most markets as they continued to evolve in recovery and as usage occasions increased, offset by the challenges inAsia travel retail, including the slower than anticipated recovery from the COVID-19 pandemic, as previously mentioned. Net sales growth from M·A·C and Clinique was offset by the declines from Estée Lauder, TOM FORD and La Mer.- Double-digit net sales growth from M·A·C benefited from hero products and recent launches, particularly in the face, lip and eye subcategories. The increase in net sales also reflected the benefit from changes to the brand’s take back loyalty program made in the fiscal 2023 second quarter.
- Net sales growth from Clinique reflected increases across every region, benefiting from strength in the lip, face and eye subcategories.
-
Net sales from Estée Lauder and La Mer were unfavorably impacted by the challenges in
Asia travel retail, partially offset by double-digit net sales growth in the markets of EMEA. -
TOM FORD net sales declined also owing to
Asia travel retail, but grew double digits inAsia/Pacific and in the markets of EMEA.
-
Makeup operating income declined, primarily reflecting lower net sales and the year-over-year increase of other intangible asset impairments of
, partially offset by disciplined expense management.$107 million
Fragrance
-
Fragrance net sales rose
14% , reflecting double-digit growth across every region and led by TOM FORD, Estée Lauder and Le Labo.- TOM FORD net sales rose in nearly every market, owing to continued strength from hero product franchises like Noir Extreme and Ombre Leather and benefiting from successful innovation, such as TOM FORD Noir Extreme Parfum.
- Net sales growth from Estée Lauder reflected the success from existing product franchises, such as Beautiful and Estée Lauder Pleasures.
-
Le Labo net sales rose strong double digits, fueled by growth in every region and benefiting from continued strength from hero product franchises, such as Santal 33 and Another 13, and targeted expanded consumer reach, including the successful launch into mainland
China at the end of the fiscal 2023 fourth quarter. -
Net sales declined from Jo Malone London, reflecting the challenges in
Asia travel retail, partially offset by double-digit net sales growth inAsia/Pacific .
- Fragrance operating income decreased, driven primarily by foreign currency translation, strategic investments to support brick-and-mortar recovery and the expansion of freestanding stores, partially offset by higher sales.
Hair Care
-
Hair Care net sales rose
6% , primarily reflecting growth from both The Ordinary, due to the recent launch of the brand’s hair care products, and Aveda.-
Aveda’s net sales growth primarily reflected the fiscal 2023 launch of the brand in mainland
China and strength in EMEA.
-
Aveda’s net sales growth primarily reflected the fiscal 2023 launch of the brand in mainland
-
Hair Care operating results declined reflecting strategic investments to support Aveda’s launch in mainland
China and key shopping moments, partially offset by higher net sales.
Results by Geographic Region
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|
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Year Ended June 30 |
||||||||||||||||||||||
|
Net Sales |
Percentage Change(1) |
Operating
|
Percentage
|
|||||||||||||||||||
($ in millions) |
2023 |
2022 |
Reported
|
Impact of
|
Impact of
|
Organic
|
2023 |
2022 |
Reported
|
||||||||||||||
The |
$ |
4,518 |
|
$ |
4,623 |
|
(2 |
)% |
2 |
% |
— |
% |
— |
% |
$ |
(73 |
) |
$ |
1,159 |
|
(100 |
+)% |
|
|
|
6,225 |
|
|
7,681 |
|
(19 |
) |
1 |
|
3 |
|
(16 |
) |
|
843 |
|
|
1,360 |
|
(38 |
) |
|
|
|
5,194 |
|
|
5,437 |
|
(4 |
) |
— |
|
8 |
|
4 |
|
|
824 |
|
|
795 |
|
4 |
|
|
Subtotal |
$ |
15,937 |
|
$ |
17,741 |
|
(10 |
)% |
1 |
% |
4 |
% |
(6 |
)% |
$ |
1,594 |
|
$ |
3,314 |
|
(52 |
)% |
|
Returns/charges
|
|
(27 |
) |
|
(4 |
) |
|
|
|
|
|
(85 |
) |
|
(144 |
) |
|
||||||
Total |
$ |
15,910 |
|
$ |
17,737 |
|
(10 |
)% |
1 |
% |
4 |
% |
(6 |
)% |
$ |
1,509 |
|
$ |
3,170 |
|
(52 |
)% |
|
(1)Percentages are calculated on an individual basis |
|
The geographic region net sales commentary below reflects organic performance, excluding the negative impacts which are reflected in the preceding table.
The
-
Net sales were flat compared to the prior year, reflecting strong double-digit growth in
Latin America and benefiting from growth in Fragrance and Makeup. This was offset by a decline inthe United States due to the slower than anticipated pace of the Company’s improvement at retail, primarily impacting Skin Care, and the tightening of inventory by certain retailers in the first half of fiscal 2023.-
In
Latin America , net sales grew double digits in nearly every market and product category, led byBrazil and Makeup, respectively. Net sales inBrazil benefited from exclusive activations during key shopping moments, new product launches and double-digit growth across all channels of distribution. - Estée Lauder and Le Labo drove double-digit growth in Fragrance and the increase in Makeup net sales benefited from M·A·C growth.
- In Skin Care, double-digit net sales growth from The Ordinary was offset by the decline in net sales across several other brands. Strong net sales growth from The Ordinary reflected the continued success of hero products and innovation, as well as strong social media activations.
-
In
-
Operating income in The
Americas decreased, primarily reflecting of lower intercompany royalty income due to the decline in income from the Company’s travel retail business; higher cost of sales, including obsolescence charges and changes in the mix of business; the decline in net sales; the year-over-year increase of other intangible asset impairments of$670 million ; and the unfavorable impact from the year-over-year change in fair value of DECIEM acquisition-related stock options of$96 million .$77 million
-
Net sales decreased
16% , primarily due to the challenges inAsia travel retail, including the slower than anticipated recovery from the COVID-19 pandemic, as previously mentioned, partially offset by net sales growth in nearly all markets.-
Global travel retail net sales decreased double digits, reflecting the aforementioned challenges that led to lower product shipments primarily to retailers in
Hainan andKorea . Travel retail net sales grew strong double digits in EMEA and TheAmericas , benefiting from the increase in domestic and international travel compared to the prior year as well as increased activations, in-store staffing, and advertising. -
The increase in net sales from developed markets was driven by the
United Kingdom ,France ,Germany ,Spain andItaly , benefiting from increases across all product categories driven by innovation and brand activations. -
Net sales increased double digits in nearly all emerging markets in the region4 , led by
India .
-
Global travel retail net sales decreased double digits, reflecting the aforementioned challenges that led to lower product shipments primarily to retailers in
-
Operating income decreased, driven by the decline in net sales, partially offset by
of lower intercompany royalty expense due to the decline in income from the Company’s travel retail business.$670 million
4 Emerging markets in EMEA are
-
Net sales increased
4% , with growth increasing to36% in the fiscal 2023 fourth quarter from7% in the third quarter, and reflecting double-digit growth in most markets and increases in every product category as markets recovered from eased COVID-related restrictions compared to the prior year. Also contributing to the rise in net sales were successful brand activations, new product launches and the strategic focus on luxury Fragrance and Skin Care. Hong Kong SAR and Macau SAR, mainlandChina ,Australia andJapan led net sales growth.-
Net sales in mainland
China increased, returning to strong growth in the second half of fiscal 2023 after low retail traffic as a result of COVID-related restrictions and the rise in COVID cases challenged the business primarily in the first half of fiscal 2023. - Double-digit net sales growth from La Mer, M·A·C, Jo Malone London and TOM FORD, drove net sales growth in the region, as did strong growth from Le Labo.
-
Net sales in mainland
-
Operating income increased, primarily due to the year-over-year decrease in other intangible asset impairment of
relating to Dr.Jart+, partially offset by the unfavorable impact from foreign currency translation.$130 million
Cash Flows
-
For the twelve months ended June 30, 2023, net cash flows provided by operating activities were
, compared with$1.73 billion in the prior year, reflecting lower earnings before taxes, excluding non-cash items, partially offset by the favorable impact in working capital needs.$3.04 billion -
Capital Expenditures were
compared to$1.00 billion in the prior year driven by the timing of investments. The Company ended the year with$1.04 billion in cash and cash equivalents after returning$4.03 billion cash to stockholders through dividends and share repurchases during the twelve month period.$1.20 billion -
On April 28, 2023, the Company completed the acquisition of the TOM FORD brand. The amount paid by the Company at closing, approximately
, was funded by cash on hand and proceeds from the issuance of commercial paper, and approximately$2.28 billion received from Marcolin S.p.A. (a continuing TOM FORD licensee). An additional aggregate amount of$250 million in deferred payments, at$300 million 5% interest per annum, to the sellers becomes due from the Company beginning in July 2025. -
In May 2023, the Company completed a public offering of
, consisting of$2.00 billion aggregate principal amount of its$700 million 4.375% Senior Notes, aggregate principal amount of its$700 million 4.650% Senior Notes and aggregate principal amount of its$600 million 5.150% Senior Notes. The Company used proceeds from this offering for general corporate purposes, including to repay outstanding commercial paper as it matured.
Fourth Quarter Results
-
For the three months ended June 30, 2023, the Company reported net sales of
, a$3.61 billion 1% increase compared with in the prior-year period. Organic net sales increased$3.56 billion 4% . -
Organic net sales grew
4% , owing to strong growth inAsia/Pacific as markets continued to progress in recovery and benefiting from double-digit growth in every product category. In EMEA, net sales declined, due to the challenges inAsia travel retail, partially offset by growth in nearly all markets. Net sales in TheAmericas were virtually flat, reflecting strong double-digit growth inLatin America , offset by the decline inNorth America primarily driven by the slower than anticipated pace of the Company’s improvement at retail. -
Net loss5 was
, and diluted net loss per share was$33 million $.09 . In the prior-year period, the Company reported net earnings5 of and diluted net earnings per share of$52 million $.14 . -
During the three-months ended June 30, 2023, the Company recorded restructuring and other charges and expense relating to the change in fair value of DECIEM acquisition-related stock options that, combined, resulted in an unfavorable impact of
($76 million less the portion attributable to redeemable noncontrolling interest and net of tax), equal to$60 million $.16 per diluted share, as detailed on page 17. The prior-year period results include restructuring and other charges, other intangible asset impairments and expense relating to the change in fair value of DECIEM acquisition-related stock options that, combined, resulted in an unfavorable impact of ($128 million less the portion attributable to redeemable noncontrolling interest and net of tax), equal to$101 million $.28 per diluted share, as detailed on page 17. -
Excluding restructuring and other charges and adjustments referred to in the previous bullet, adjusted diluted net earnings per common share for the three months ended June 30, 2023 was
$.07 , a decrease from adjusted diluted net earnings per common share of$.42 in the three months ended June 30, 2022. Adjusted diluted net earnings per common share was$.11 in constant currency.
As the Company disclosed on July 18, 2023, it identified a cybersecurity incident involving an unauthorized third party that gained access to some of the Company’s systems. After becoming aware of the incident, the Company proactively took down some of its systems, initiated an investigation with leading third-party cybersecurity experts and began coordinating with law enforcement. The Company began bringing its systems back online within days, which limited the incident’s impact on the Company’s operations. Based on the information available to date, the Company believes the incident is contained.
Outlook for Fiscal 2024 First Quarter and Full Year
The Company enters the fiscal year with the continued focus on accelerating balanced and profitable growth across regions, brands, product categories and channels. The rebalancing of inventory in
5 Net loss/earnings attributable to The Estée Lauder Companies Inc. for the three months ended June 30, 2023 and 2022, which excludes net earnings/loss attributable to redeemable noncontrolling interests for the three months ended June 30, 2023 and 2022, and net loss attributable to noncontrolling interests for the three months ended June 30, 2022.
The Company remains optimistic by the prospects and future growth in global prestige beauty, and, with its multiple engines of growth and strong brand equity, believes it is well-positioned to drive diversified growth across its portfolio.
The full year outlook reflects the following assumptions and expectations:
-
Sequential net sales growth improvement quarterly, reflecting the rebalancing of inventory in
Asia travel retail given the slower than anticipated improvement in retail sales inHainan as a result of the post-COVID transition to and renewed focus on selling to individual travelers as well as the tightening of inventory by retailers and the gradual return of travel toKorea with the recent approval of group tours. - Full-year gross margin expansion primarily driven by strategic price increases, discount reductions and lower obsolescence charges, partially offset by manufacturing under-absorption. Contraction in the first half of fiscal 2024 is expected to be more than offset by expansion in the second half.
-
Sequential operating margin improvement quarterly throughout fiscal 2024, with greater expansion in the second half of fiscal year 2024 due to the cadence of the improvement of the
Asia travel retail business. -
The cybersecurity incident is expected to have an immaterial impact to net sales and a dilutive impact to net earnings per common share of approximately
$.07 for the fiscal 2024 first quarter and full year. -
Full-year effective tax rate of approximately
27% . -
Net cash flows provided by operating activities are forecast to be between
and$1.7 billion , assuming the Company achieves the results described below.$1.8 billion -
Capital expenditures are expected to be approximately
6% of projected sales to support supply chain investments, as well as continued investments in customer facing capital, including stores and online, and information technology. - Quarterly dividend remains at the current amount and the share repurchase program remains suspended as the Company focuses on deleveraging post the TOM FORD acquisition and prepares for the remaining payment for DECIEM anticipated in May 2024.
The Company continues 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. The Company is also mindful of inflationary pressures on our cost base and is monitoring the impact on consumer preferences.
Full Year Fiscal 2024
Sales Outlook
-
Reported net sales are forecasted to increase between
5% and7% versus the prior year. This range includes:-
Using June 30, 2023 spot rates for fiscal 2024, a
1% headwind due to foreign currency translation is expected.
-
Using June 30, 2023 spot rates for fiscal 2024, a
-
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 increase between
6% and8% .
Earnings per Share Outlook
-
Reported diluted net earnings per common share are projected to be between
and$3.43 .$3.70 -
Excluding restructuring and other charges, diluted net earnings per common share are projected to be between
and$3.50 .$3.75
-
Excluding restructuring and other charges, diluted net earnings per common share are projected to be between
-
Adjusted diluted net earnings per common share are expected to increase between
4% and12% on a constant currency basis. Currency exchange rates are volatile and difficult to predict. Using June 30, 2023 spot rates for fiscal 2024:-
The foreign currency translation equates to about
$.11 of dilution to net earnings per share.
-
The foreign currency translation equates to about
First Quarter Fiscal 2024
Sales Outlook
-
Reported and organic net sales are forecasted to decrease between
12% and10% versus the prior-year period.
Earnings per Share Outlook
-
Reported diluted net earnings per common share are projected to be between (
$.34 ) and ($.23 ).-
Excluding restructuring and other charges, diluted net earnings per common share are projected to be between (
$.31 ) and ($.21 ).
-
Excluding restructuring and other charges, diluted net earnings per common share are projected to be between (
-
Adjusted diluted net earnings per common share are expected to be between (
$.29 ) and ($.19 ) on a constant currency basis. Currency exchange rates are volatile and difficult to predict. Using June 30, 2023 spot rates for fiscal 2024:-
The foreign currency translation equates to about
$.02 of dilution to net earnings per share.
-
The foreign currency translation equates to about
Reconciliation between GAAP and Non-GAAP - Net Sales Growth
|
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||
|
Three Months Ending |
Twelve Months Ending |
||
|
September 30, 2023(F) |
June 30, 2024(F) |
||
As Reported - GAAP |
( |
%) |
|
% |
Impact of acquisitions, divestitures and brand closures |
— |
— |
||
Impact of foreign currency translation |
— |
1 |
||
Returns associated with restructuring and other activities |
— |
— |
||
Organic, Non-GAAP |
( |
%) |
|
% |
(F)Represents forecast |
Reconciliation between GAAP and Non-GAAP - Diluted Earnings Per Share (“EPS”)
|
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Three Months Ending |
Twelve Months Ending |
|||||||||||
|
September 30 |
June 30 |
|||||||||||
|
2023(F) |
2022 |
Growth |
2024(F) |
2023 |
Variance |
|||||||
Forecasted/As Reported EPS - GAAP |
|
) | $ |
1.35 |
( |
|
$ |
2.79 |
|
||||
|
|
|
|
|
|
|
|||||||
Non-GAAP |
|
|
|
|
|
|
|||||||
Restructuring and other charges |
.02 - .03 |
|
.02 |
|
.05 - .07 |
|
.18 |
|
|||||
Change in fair value of acquisition-related
|
— |
|
— |
|
— |
|
.05 |
|
|||||
Other intangible asset impairments |
— |
|
— |
|
— |
|
.44 |
|
|||||
Forecasted/Adjusted EPS - Non-GAAP |
|
) | $ |
1.37 |
( |
|
$ |
3.46 |
|
||||
Impact of foreign currency translation |
.02 |
|
|
.11 |
|
|
|||||||
Forecasted/Adjusted Constant Currency EPS -
|
|
) | $ |
1.37 |
( |
|
$ |
3.46 |
|
||||
(F)Represents forecast |
Conference Call The Estée Lauder Companies will host a conference call at 9:30 a.m. (ET) today, August 18, 2023 to discuss its results. The dial-in number for the call is 877-883-0383 in the
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 the Company’s 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, the Company’s 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. Although the Company believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, actual results may differ materially from the Company’s expectations.
Factors that could cause actual results to differ from expectations include, without limitation:
(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 the Company’s 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 the Company’s 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 technology, including operational technology and websites, on a timely basis and within the Company’s cost estimates; to maintain continuous operations of our new and existing information technology; and to secure the data and other information that may be stored in such technologies 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 Securities and Exchange Commission, including its Annual Report on Form 10-K for the fiscal year ended June 30, 2022. |
The Company assumes no responsibility to update forward-looking statements made herein or otherwise. |
The Estée Lauder Companies Inc. is one of the world’s leading manufacturers, marketers and sellers of quality skin care, makeup, fragrance and hair care products, and is a steward of luxury and prestige brands globally. The Company’s products are sold in approximately 150 countries and territories under brand names including: Estée Lauder, Aramis, Clinique, Lab Series, Origins, M·A·C, La Mer, Bobbi Brown Cosmetics, Aveda, Jo Malone London, Bumble and bumble, Darphin Paris, TOM FORD, Smashbox, AERIN Beauty, Le Labo, Editions de Parfums Frédéric Malle, GLAMGLOW, KILIAN
ELC-F
ELC-E
CONSOLIDATED STATEMENT OF EARNINGS
|
|||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||
|
Three Months Ended
|
Percentage
|
|
Year Ended
|
Percentage
|
||||||||||||
($ in millions, except per share data) |
2023 |
2022 |
|
2023 |
2022 |
||||||||||||
Net sales(A) |
$ |
3,609 |
|
$ |
3,561 |
|
1 |
% |
|
$ |
15,910 |
|
$ |
17,737 |
|
(10 |
)% |
Cost of sales(A) |
|
1,163 |
|
|
1,031 |
|
13 |
|
|
|
4,564 |
|
|
4,305 |
|
6 |
|
Gross profit |
|
2,446 |
|
|
2,530 |
|
(3 |
) |
|
|
11,346 |
|
|
13,432 |
|
(16 |
) |
Gross margin |
|
67.8 |
% |
|
71.0 |
% |
|
|
|
71.3 |
% |
|
75.7 |
% |
|
||
|
|
|
|
|
|
|
|
||||||||||
Operating expenses |
|
|
|
|
|
|
|
||||||||||
Selling, general and administrative(B) |
|
2,420 |
|
|
2,334 |
|
4 |
|
|
|
9,575 |
|
|
9,888 |
|
(3 |
) |
Restructuring and other charges(A) |
|
31 |
|
|
92 |
|
(66 |
) |
|
|
55 |
|
|
133 |
|
(59 |
) |
Impairment of other intangible assets(C) |
|
— |
|
|
25 |
|
(100 |
) |
|
|
207 |
|
|
241 |
|
(14 |
) |
Total operating expenses |
|
2,451 |
|
|
2,451 |
|
— |
|
|
|
9,837 |
|
|
10,262 |
|
(4 |
) |
Operating expense margin |
|
67.9 |
% |
|
68.8 |
% |
|
|
|
61.8 |
% |
|
57.9 |
% |
|
||
|
|
|
|
|
|
|
|
||||||||||
Operating income (loss) |
|
(5 |
) |
|
79 |
|
(100 |
+) |
|
|
1,509 |
|
|
3,170 |
|
(52 |
) |
Operating income (loss) margin |
|
(0.1 |
)% |
|
2.2 |
% |
|
|
|
9.5 |
% |
|
17.9 |
% |
|
||
|
|
|
|
|
|
|
|
||||||||||
Interest expense |
|
99 |
|
|
42 |
|
100 |
+ |
|
|
255 |
|
|
167 |
|
53 |
|
Interest income and investment income, net |
|
53 |
|
11 |
|
100 |
+ |
|
|
131 |
|
|
30 |
|
100 |
+ |
|
Other components of net periodic benefit cost |
|
(3 |
) |
|
— |
|
(100 |
) |
|
|
(12 |
) |
|
(2 |
) |
(100 |
+) |
Other income |
|
— |
|
|
— |
|
— |
|
|
|
— |
|
|
1 |
|
(100 |
) |
Earnings (loss) before income taxes |
|
(48 |
) |
|
48 |
|
(100 |
+) |
|
|
1,397 |
|
|
3,036 |
|
(54 |
) |
Provision for income taxes |
|
(16 |
) |
|
(2 |
) |
(100 |
+) |
|
|
387 |
|
|
628 |
|
(38 |
) |
Net earnings (loss) |
|
(32 |
) |
|
50 |
|
(100 |
+) |
|
|
1,010 |
|
|
2,408 |
|
(58 |
) |
Net loss (earnings) attributable to noncontrolling interests |
|
— |
|
|
1 |
|
(100 |
) |
|
|
— |
|
|
(7 |
) |
100 |
|
Net loss (earnings) attributable to redeemable
|
|
(1 |
) |
|
1 |
|
(100 |
+) |
|
|
(4 |
) |
|
(11 |
) |
64 |
|
Net earnings (loss) attributable to The Estée Lauder
|
$ |
(33 |
) |
$ |
52 |
|
(100 |
+) |
|
$ |
1,006 |
|
$ |
2,390 |
|
(58 |
)% |
|
|
|
|
|
|
|
|
||||||||||
Net earnings (loss) attributable to The Estée Lauder
|
|
|
|
|
|
|
|
||||||||||
Basic |
$ |
(.09 |
) |
$ |
.15 |
|
(100 |
+) |
|
$ |
2.81 |
|
$ |
6.64 |
|
(58 |
)% |
Diluted |
$ |
(.09 |
) |
$ |
.14 |
|
(100 |
+) |
|
$ |
2.79 |
|
$ |
6.55 |
|
(57 |
)% |
|
|
|
|
|
|
|
|
||||||||||
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
||||||||||
Basic |
|
358.3 |
|
|
358.0 |
|
|
|
|
357.9 |
|
|
360.0 |
|
|
||
Diluted |
|
358.3 |
|
|
361.6 |
|
|
|
|
360.9 |
|
|
364.9 |
|
|
||
|
|
|
|
|
|
|
|
(A)In August 2020, the Company announced a two-year restructuring program, Post-COVID Business Acceleration Program (the “PCBA Program”), designed to realign its business to address the dramatic shifts to its distribution landscape and consumer behaviors in the wake of the COVID-19 pandemic. The PCBA Program will help improve efficiency and effectiveness by rebalancing resources to growth areas of prestige beauty. It will further strengthen the Company by building upon the foundational capabilities in which the Company has invested. The PCBA Program’s main areas of focus include accelerating the shift to online with the realignment of the Company’s distribution network reflecting freestanding store and certain department store closures, with a focus on |
||||
|
|
|
|
|
(B)For the three and twelve months ended June 30, 2023, the Company recorded |
||||
|
||||
C)During the fiscal 2023 second quarter, given the lower-than-expected results in the overall business, the Company revised the internal forecasts relating to its Smashbox reporting unit. The Company concluded that the changes in circumstances in the reporting unit triggered the need for an interim impairment review of its trademark intangible asset. The remaining carrying value of the trademark intangible asset was not recoverable and the Company recorded an impairment charge of
During the fiscal 2023 second quarter, the Dr.Jart+ reporting unit experienced lower-than-expected growth within key geographic regions and channels that continue to be impacted by the spread of COVID-19 variants, resurgence in cases, and the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the financial performance of the reporting unit. In addition, due to macro-economic factors, Dr.Jart+ has experienced lower-than-expected growth within key geographic regions. The Too Faced reporting unit experienced lower-than-expected results in key geographic regions and channels coupled with delays in future international expansion to areas that continue to be impacted by COVID-19. As a result, the Company revised the internal forecasts relating to its Dr.Jart+ and Too Faced reporting units. Additionally, there were increases in the weighted average cost of capital for both reporting units as compared to the prior year annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2022.
The Company concluded that the changes in circumstances in the reporting units, along with increases in the weighted average cost of capital, triggered the need for interim impairment reviews of their trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of Dr.Jart+’s and Too Faced’s long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed interim impairment tests for the trademarks and a recoverability test for the long-lived assets as of November 30, 2022. The Company concluded that the carrying value of the trademark intangible assets exceeded their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows and recorded an impairment charge of
For the twelve months ended June 30, 2023, other intangible asset impairment charges were
During the fiscal 2022 third quarter, given the lower-than-expected results from international expansion to areas that continue to be impacted by COVID-19, the Company made revisions to the internal forecasts relating to its GLAMGLOW reporting unit. The Company concluded that the changes in circumstances in the reporting unit triggered the need for an interim impairment review of its trademark intangible asset.
During the fiscal 2022 third quarter, given the lower-than-expected growth within key geographic regions and channels for Dr.Jart+ that continue to be impacted by the spread of COVID-19 variants and resurgence in cases and the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the financial performance of the brand, the lower than expected growth in key retail channels for DECIEM, and the lower than expected results from international expansion to areas that continue to be impacted by COVID-19 for Too Faced, the Company made revisions to the internal forecasts relating to its Dr.Jart+, DECIEM and Too Faced reporting units.
The Company concluded that the changes in circumstances in the reporting units triggered the need for interim impairment reviews of their trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of Dr.Jart+’s, DECIEM’s and Too Faced’s long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed interim impairment tests for the trademarks and a recoverability test for the long-lived assets as of February 28, 2022. The Company concluded that the carrying amounts of the long-lived assets were recoverable. For the Dr.Jart+ reporting unit, the Company also concluded that the carrying value of the trademark intangible asset exceeded its estimated fair value and recorded an impairment charge. For the Too Faced and DECIEM reporting units, as the carrying values of the trademarks did not exceed their estimated fair values the Company did not record impairment charges. After adjusting the carrying values of the trademarks, the Company completed interim quantitative impairment tests for goodwill. As the estimated fair value of the Dr.Jart+, DECIEM and Too Faced reporting units were in excess of their carrying values, the Company concluded that the carrying amounts of the goodwill were recoverable and did not record a goodwill impairment charge related to these reporting units.
During the fiscal 2022 fourth quarter, based on the Company’s annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2022, the Company determined that the carrying value of the Dr.Jart+ trademark exceeded its fair value. This determination was made based on updated internal forecasts. Given the lower-than-expected growth within key geographic regions and channels that continued to be impacted by the spread of COVID-19 variants, the resurgence in cases, regional lockdowns and the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the financial performance of the brand, we made revisions to the internal forecasts relating to the Dr.Jart+ reporting unit. These changes in circumstances were also indicators that the carrying amounts of their respective long-lived assets may not be recoverable. The Company concluded that the carrying value of the trademark intangible asset exceeded its estimated fair value. The Company concluded that the carrying amount of the long-lived assets were recoverable. For the three months ended June 30, 2022, the Company recognized other intangible asset impairment charges of
The total other intangible asset impairment charges recorded for the twelve months ended June 30, 2022 were |
Returns and Charges Associated With Restructuring and Other Activities and Other Adjustments
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||
|
Three Months Ended June 30, 2023 |
||||||||||||||||||||
|
Sales
|
Cost of
|
Operating Expenses |
Total |
After
|
Diluted
|
|||||||||||||||
(In millions, except per share data) |
Restructuring
|
Other Charges/
|
|||||||||||||||||||
Leading Beauty Forward |
$ |
— |
$ |
— |
$ |
— |
$ |
3 |
$ |
3 |
$ |
1 |
$ |
— |
|||||||
PCBA Program |
|
17 |
|
4 |
|
23 |
|
5 |
|
49 |
|
40 |
|
.11 |
|||||||
Change in fair value of acquisition-related stock
|
|
— |
|
— |
|
— |
|
24 |
|
24 |
|
19 |
|
.05 |
|||||||
Total |
$ |
17 |
$ |
4 |
$ |
23 |
$ |
32 |
$ |
76 |
$ |
60 |
$ |
.16 |
|||||||
|
|
|
|
|
|
|
|
||||||||||||||
|
Year Ended June 30, 2023 |
||||||||||||||||||||
|
Sales
|
Cost of
|
Operating Expenses |
Total |
After
|
Diluted
|
|||||||||||||||
(In millions, except per share data) |
Restructuring
|
Other Charges/
|
|||||||||||||||||||
Leading Beauty Forward |
$ |
— |
$ |
— |
$ |
1 |
$ |
7 |
$ |
8 |
$ |
6 |
$ |
.02 |
|||||||
PCBA Program |
|
27 |
|
3 |
|
35 |
|
12 |
|
77 |
|
60 |
|
.16 |
|||||||
Change in fair value of acquisition-related stock
|
|
— |
|
— |
|
— |
|
22 |
|
22 |
|
17 |
|
.05 |
|||||||
Other intangible asset impairments |
|
— |
|
— |
|
— |
|
207 |
|
207 |
|
159 |
|
.44 |
|||||||
Total |
$ |
27 |
$ |
3 |
$ |
36 |
$ |
248 |
$ |
314 |
$ |
242 |
$ |
.67 |
|||||||
|
|
|
|
|
|
|
|
|
Three Months Ended June 30, 2022 |
||||||||||||||||||||
|
Sales
|
Cost of
|
Operating Expenses |
Total |
After
|
Diluted
|
|||||||||||||||
(In millions, except per share data) |
Restructuring
|
Other Charges/
|
|||||||||||||||||||
Leading Beauty Forward |
$ |
— |
$ |
— |
$ |
1 |
|
$ |
3 |
|
$ |
4 |
|
$ |
3 |
|
$ |
.01 |
|
||
PCBA Program |
|
1 |
|
7 |
|
85 |
|
|
3 |
|
|
96 |
|
|
76 |
|
|
.21 |
|
||
Change in fair value of acquisition-related stock
|
|
— |
|
— |
|
— |
|
|
3 |
|
|
3 |
|
|
3 |
|
|
.01 |
|
||
Other intangible asset impairments |
|
— |
|
— |
|
— |
|
|
25 |
|
|
25 |
|
|
19 |
|
|
.05 |
|
||
Total |
$ |
1 |
$ |
7 |
$ |
86 |
|
$ |
34 |
|
$ |
128 |
|
$ |
101 |
|
$ |
.28 |
|
||
|
|
|
|
|
|
|
|
||||||||||||||
|
Year Ended June 30, 2022 |
||||||||||||||||||||
|
Sales
|
Cost of
|
Operating Expenses |
Total |
After
|
Diluted
|
|||||||||||||||
(In millions, except per share data) |
Restructuring
|
Other Charges/
|
|||||||||||||||||||
Leading Beauty Forward |
$ |
— |
$ |
2 |
$ |
(1 |
) |
$ |
16 |
|
$ |
17 |
|
$ |
13 |
|
$ |
.04 |
|
||
PCBA Program |
|
4 |
|
5 |
|
109 |
|
|
9 |
|
|
127 |
|
|
100 |
|
|
.27 |
|
||
Change in fair value of acquisition-related stock
|
|
— |
|
— |
|
— |
|
|
(55 |
) |
|
(55 |
) |
|
(43 |
) |
|
(.12 |
) |
||
Other intangible asset impairments |
|
— |
|
— |
|
— |
|
|
241 |
|
|
241 |
|
|
183 |
|
|
.50 |
|
||
Other income |
|
— |
|
— |
|
— |
|
|
(1 |
) |
|
(1 |
) |
|
(1 |
) |
|
— |
|
||
Total |
$ |
4 |
$ |
7 |
$ |
108 |
|
$ |
210 |
|
$ |
329 |
|
$ |
252 |
|
$ |
.69 |
|
Results by Product Category (Unaudited) |
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Three Months Ended June 30 |
|||||||||||||||||||||
|
Net Sales |
Percentage Change(1) |
Operating
|
Percentage
|
||||||||||||||||||
($ in millions) |
2023 |
2022 |
Reported
|
Impact of
|
Impact of
|
Organic
|
2023 |
2022 |
Reported
|
|||||||||||||
Skin Care |
$ |
1,794 |
|
$ |
1,883 |
|
(5 |
)% |
— |
% |
2 |
% |
(3 |
)% |
$ |
(3 |
) |
$ |
287 |
|
(100 |
+%) |
Makeup |
|
1,108 |
|
|
993 |
|
12 |
|
— |
|
2 |
|
13 |
|
|
14 |
|
|
(95 |
) |
100 |
+ |
Fragrance |
|
545 |
|
|
521 |
|
5 |
|
6 |
|
2 |
|
12 |
|
|
41 |
|
|
10 |
|
100 |
+ |
Hair Care |
|
164 |
|
|
156 |
|
5 |
|
— |
|
1 |
|
6 |
|
|
(3 |
) |
|
(20 |
) |
85 |
|
Other |
|
15 |
|
|
9 |
|
67 |
|
(100 |
+) |
— |
|
(60 |
) |
|
(2 |
) |
|
(3 |
) |
33 |
|
Subtotal |
$ |
3,626 |
|
$ |
3,562 |
|
2 |
% |
— |
% |
2 |
% |
4 |
% |
$ |
47 |
|
$ |
179 |
|
(74 |
)% |
Returns/charges
|
|
(17 |
) |
|
(1 |
) |
|
|
|
|
|
(52 |
) |
|
(100 |
) |
|
|||||
Total |
$ |
3,609 |
|
$ |
3,561 |
|
1 |
% |
— |
% |
2 |
% |
4 |
% |
$ |
(5 |
) |
$ |
79 |
|
(100 |
+%) |
(1)Percentages are calculated on an individual basis |
|
Results by Geographic Region
|
||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Three Months Ended June 30 |
|||||||||||||||||||||
|
Net Sales |
Percentage Change(1) |
Operating
|
Percentage
|
||||||||||||||||||
($ in millions) |
2023 |
2022 |
Reported
|
Impact of
|
Impact of
|
Organic
|
2023 |
2022 |
Reported
|
|||||||||||||
The |
$ |
1,071 |
|
$ |
1,076 |
|
— |
% |
— |
% |
— |
% |
— |
% |
$ |
(20 |
) |
$ |
115 |
|
(100 |
+%) |
|
|
1,253 |
|
|
1,480 |
|
(15 |
) |
1 |
|
— |
|
(15 |
) |
|
(76 |
) |
|
(6 |
) |
(100 |
+) |
|
|
1,302 |
|
|
1,006 |
|
29 |
|
— |
|
6 |
|
36 |
|
|
143 |
|
|
70 |
|
100 |
+ |
Subtotal |
$ |
3,626 |
|
$ |
3,562 |
|
2 |
% |
— |
% |
2 |
% |
4 |
% |
$ |
47 |
|
$ |
179 |
|
(74 |
)% |
Returns/charges
|
|
(17 |
) |
|
(1 |
) |
|
|
|
|
|
(52 |
) |
|
(100 |
) |
|
|||||
Total |
$ |
3,609 |
|
$ |
3,561 |
|
1 |
% |
— |
% |
2 |
% |
4 |
% |
$ |
(5 |
) |
$ |
79 |
|
(100 |
+%) |
(1)Percentages are calculated on an individual basis |
|
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 manner in which 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. The Company’s 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
|
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
Three Months Ended June 30 |
|
||||||||||||||||||||||||||
|
2023 |
2022 |
% Change |
|||||||||||||||||||||||||
($ in millions, except per share data) |
As
|
Returns/
|
Non-
|
Impact of
|
Non-
|
As
|
Returns/
|
Non-
|
Non-
|
Non-
|
||||||||||||||||||
Net sales |
$ |
3,609 |
|
$ |
17 |
$ |
3,626 |
$ |
64 |
$ |
3,690 |
$ |
3,561 |
$ |
1 |
$ |
3,562 |
2 |
% |
4 |
% |
|||||||
Gross profit |
|
2,446 |
|
|
21 |
|
2,467 |
|
50 |
|
2,517 |
|
2,530 |
|
8 |
|
2,538 |
(3 |
)% |
(1 |
)% |
|||||||
Operating (loss)
|
|
(5 |
) |
|
76 |
|
71 |
|
18 |
|
89 |
|
79 |
|
128 |
|
207 |
(66 |
)% |
(57 |
)% |
|||||||
Diluted EPS |
$ |
(.09 |
) |
$ |
.16 |
$ |
.07 |
$ |
.04 |
$ |
.11 |
$ |
.14 |
$ |
.28 |
$ |
.42 |
(82 |
)% |
(75 |
)% |
|||||||
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Certain Consolidated Statements of Earnings Accounts
|
||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
Year Ended June 30 |
|
||||||||||||||||||||||||||
|
2023 |
2022 |
% Change |
|||||||||||||||||||||||||
($ in millions, except per
|
As
|
Returns/
|
Non-
|
Impact of
|
Non-
|
As
|
Returns/
|
Non-
|
Non-
|
Non-
|
||||||||||||||||||
Net sales |
$ |
15,910 |
$ |
27 |
$ |
15,937 |
$ |
629 |
$ |
16,566 |
$ |
17,737 |
$ |
4 |
$ |
17,741 |
(10 |
)% |
(7 |
)% |
||||||||
Gross profit |
|
11,346 |
|
30 |
|
11,376 |
|
492 |
|
11,868 |
|
13,432 |
|
11 |
|
13,443 |
(15 |
)% |
(12 |
)% |
||||||||
Operating income |
|
1,509 |
|
314 |
|
1,823 |
|
126 |
|
1,949 |
|
3,170 |
|
330 |
|
3,500 |
(48 |
)% |
(44 |
)% |
||||||||
Diluted EPS |
$ |
2.79 |
$ |
.67 |
$ |
3.46 |
$ |
.26 |
$ |
3.72 |
$ |
6.55 |
$ |
.69 |
$ |
7.24 |
(52 |
)% |
(49 |
)% |
CONDENSED CONSOLIDATED BALANCE SHEETS
|
||||||
|
|
|
||||
|
June 30,
|
June 30,
|
||||
($ in millions) |
(Audited) |
|||||
ASSETS |
|
|
||||
|
|
|
||||
Cash and cash equivalents |
$ |
4,029 |
$ |
3,957 |
||
Accounts receivable, net |
|
1,452 |
|
1,629 |
||
Inventory and promotional merchandise |
|
2,979 |
|
2,920 |
||
Prepaid expenses and other current assets |
|
679 |
|
792 |
||
Total current assets |
|
9,139 |
|
9,298 |
||
Property, plant and equipment, net |
|
3,179 |
|
2,650 |
||
Operating lease right-of-use assets |
|
1,797 |
|
1,949 |
||
Other assets |
|
9,300 |
|
7,013 |
||
Total assets |
$ |
23,415 |
$ |
20,910 |
||
|
|
|
||||
LIABILITIES AND EQUITY |
|
|
||||
|
|
|
||||
Current debt |
$ |
997 |
$ |
268 |
||
Accounts payable |
|
1,670 |
|
1,822 |
||
Operating lease liabilities |
|
357 |
|
365 |
||
Other accrued liabilities |
|
3,216 |
|
3,360 |
||
Total current liabilities |
|
6,240 |
|
5,815 |
||
Long-term debt |
|
7,117 |
|
5,144 |
||
Long-term operating lease liabilities |
|
1,698 |
|
1,868 |
||
Other noncurrent liabilities |
|
1,943 |
|
1,651 |
||
Total noncurrent liabilities |
|
10,758 |
|
8,663 |
||
Redeemable noncontrolling interest |
|
832 |
|
842 |
||
Total equity |
|
5,585 |
|
5,590 |
||
Total liabilities and equity |
$ |
23,415 |
$ |
20,910 |
||
|
|
|
SELECT CASH FLOW DATA
|
||||||
|
|
|
||||
|
Twelve Months Ended
|
|||||
($ in millions) |
2023 |
2022
|
||||
Net earnings |
$ |
1,010 |
|
$ |
2,408 |
|
Adjustments to reconcile net earnings to net cash flows from operating
|
|
|
||||
Depreciation and amortization |
|
744 |
|
|
727 |
|
Deferred income taxes |
|
(186 |
) |
|
(149 |
) |
Other intangible asset impairments |
|
207 |
|
|
241 |
|
Other items |
|
312 |
|
|
367 |
|
Changes in operating assets and liabilities: |
|
|
||||
Decrease (increase) in accounts receivable, net |
|
185 |
|
|
(10 |
) |
Increase in inventory and promotional merchandise |
|
(64 |
) |
|
(602 |
) |
Decrease (increase) in other assets, net |
|
26 |
|
|
(101 |
) |
Increase (decrease) in accounts payable and other liabilities |
|
(503 |
) |
|
159 |
|
Net cash flows provided by operating activities |
$ |
1,731 |
|
$ |
3,040 |
|
|
|
|
||||
Other Investing and Financing Sources (Uses): |
|
|
||||
Capital expenditures |
$ |
(1,003 |
) |
$ |
(1,040 |
) |
Settlement of net investment hedges |
|
80 |
|
|
108 |
|
Purchases of other intangible assets |
|
(2,286 |
) |
|
— |
|
Payments for acquired businesses, net of cash acquired |
|
— |
|
|
(3 |
) |
Purchases of investments |
|
(8 |
) |
|
(10 |
) |
Payments to acquire treasury stock |
|
(271 |
) |
|
(2,309 |
) |
Dividends paid |
|
(925 |
) |
|
(840 |
) |
Proceeds (repayments) of current debt, net |
|
983 |
|
|
(4 |
) |
Proceeds (repayments) of long-term debt, net |
|
1,730 |
|
|
(18 |
) |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230818019446/en/
Investors: Rainey Mancini
rmancini@estee.com
Media: Jill Marvin
jimarvin@estee.com
Source: The Estée Lauder Companies Inc.