The Estée Lauder Companies Reports Fiscal 2023 Second Quarter Results
The Estée Lauder Companies reported a 17% decline in net sales for Q2 FY2023, totaling $4.62 billion, driven by adverse COVID-related impacts and currency fluctuations. Organic net sales decreased 11%, with diluted EPS falling 63% to $1.09.
Despite challenges, the company exceeded EPS expectations. Strong performance was noted in the Fragrance category, with double-digit growth. However, the outlook for the second half has been adjusted downwards due to ongoing volatility in travel retail and inflationary pressures, forecasting a further 10-8% decline in organic sales.
- Exceeded adjusted diluted EPS outlook despite tough conditions.
- Double-digit growth in Fragrance category due to successful holiday offerings.
- Net sales decreased by 17%, notably impacted by COVID-related restrictions.
- Adjusted diluted EPS fell by 49%, reflecting significant impairment charges.
Net Sales Decreased
Organic
Exceeded Adjusted Diluted EPS Outlook Despite Incremental External Headwinds
Lowering Second Half Outlook Amid Volatility in Travel Retail
The Company reported net earnings of
| __________________________________ |
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. |
2 Net earnings attributable to |
For fiscal 2023, we are lowering our outlook given the November and December disruption to travel and staffing levels in
Freda concluded, “We are encouraged by both our strong momentum in numerous markets globally and improving macro trends. Moreover, so far this fiscal year, we have made exciting progress on several strategic initiatives to drive growth and resiliency in our business, with the opening of our
Business Update
The COVID-19 pandemic continued to disrupt the Company’s operating environment through the first half of fiscal 2023, including the COVID-related impacts, affecting
During the first half of fiscal 2023, the Company’s business was also negatively impacted by the strong
Fiscal 2023 Second Quarter Results
Product category and geographic region net sales commentary reflect organic performance.
Reconciliation between GAAP and Non-GAAP Net Sales Growth
|
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|
|
||
|
Three Months Ended
|
||
As Reported - GAAP(1) |
(17 |
)% |
|
|
|
||
Organic, Non-GAAP(2) |
(11 |
)% |
|
Impact of the license terminations related to certain of the Company’s designer fragrances |
(1 |
) |
|
Impact of foreign currency translation |
(5 |
) |
|
Returns associated with restructuring and other activities |
— |
|
|
As Reported - GAAP(1) |
(17 |
)% |
|
(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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(3)Percentages are calculated on an individual basis |
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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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|
|
|
|
|||||
|
Three Months Ended |
|||||||
|
|
|
||||||
|
2022 |
2021 |
Growth |
|||||
As Reported EPS - GAAP(1) |
$ |
1.09 |
|
$ |
2.97 |
(63 |
)% |
|
|
|
|
|
|||||
Non-GAAP |
|
|
|
|||||
Restructuring and other charges |
|
.02 |
|
|
.03 |
|
||
Change in fair value of acquisition-related stock options (less the portion attributable to |
||||||||
redeemable noncontrolling interest) |
|
(.01 |
) |
|
.01 |
|
||
Other intangible asset impairments |
|
.44 |
|
|
— |
|
||
Adjusted EPS - Non-GAAP |
$ |
1.54 |
|
$ |
3.01 |
(49 |
)% |
|
Impact of foreign currency translation on earnings per share |
|
.15 |
|
|
|
|||
Adjusted Constant Currency EPS - Non-GAAP |
$ |
1.69 |
|
$ |
3.01 |
(44 |
)% |
|
(1)Includes restructuring and other charges and adjustments |
|
|
||||||
Net sales and operating income in the Company’s product categories and regions were unfavorably impacted by a stronger
Total reported operating income was
-
Fiscal 2023 second quarter:
$207 million $5 million -
Fiscal 2022 second quarter:
$17 million -
The unfavorable impact of foreign currency translation of
$68 million
Results by Product Category
|
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|
|
|
|
|
|
|
|
||||||||||||
|
Three Months Ended |
||||||||||||||||||
|
|
Percentage Change |
Operating
|
Percentage
|
|||||||||||||||
($ in millions) |
2022 |
2021 |
Reported
|
Constant
|
2022 |
2021 |
Reported
|
||||||||||||
|
$ |
2,382 |
|
$ |
3,159 |
|
(25 |
)% |
(20 |
)% |
$ |
421 |
|
$ |
1,082 |
|
(61 |
)% |
|
Makeup |
|
1,268 |
|
|
1,386 |
|
(9 |
) |
(3 |
) |
|
(37 |
) |
|
130 |
|
(100 |
+) |
|
Fragrance |
|
775 |
|
|
799 |
|
(3 |
) |
3 |
|
|
177 |
|
|
210 |
|
(16 |
) |
|
Hair Care |
|
182 |
|
|
180 |
|
1 |
|
4 |
|
|
5 |
|
|
8 |
|
(38 |
) |
|
Other |
|
14 |
|
|
16 |
|
(13 |
) |
— |
|
|
(1 |
) |
|
3 |
|
(100 |
+) |
|
Subtotal |
$ |
4,621 |
|
$ |
5,540 |
|
(17 |
)% |
(11 |
)% |
$ |
565 |
|
$ |
1,433 |
|
(61 |
)% |
|
Returns/charges associated with |
|||||||||||||||||||
restructuring and other activities |
|
(1 |
) |
|
(1 |
) |
|
|
|
(9 |
) |
|
(15 |
) |
|
||||
Total |
$ |
4,620 |
|
$ |
5,539 |
|
(17 |
)% |
(12 |
)% |
$ |
556 |
|
$ |
1,418 |
|
(61 |
)% |
|
Organic Net Sales Growth - Reconciliation to GAAP
|
|||||||||
|
Three Months Ended |
||||||||
|
Organic
|
Impact of
|
Impact of
|
|
|||||
|
(20 |
)% |
— |
% |
(5 |
)% |
(25 |
)% |
|
Makeup |
(3 |
) |
— |
|
(5 |
) |
(9 |
) |
|
Fragrance |
12 |
|
(9 |
) |
(6 |
) |
(3 |
) |
|
Hair Care |
4 |
|
— |
|
(3 |
) |
1 |
|
|
Other |
(6 |
) |
6 |
|
(13 |
) |
(13 |
) |
|
Subtotal |
(11 |
)% |
(1 |
)% |
(5 |
)% |
(17 |
)% |
|
Returns associated with restructuring and other activities |
|
|
|
— |
|
||||
Total |
(11 |
)% |
(1 |
)% |
(5 |
)% |
(17 |
)% |
|
(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. |
|||||||||
(2)Percentages are calculated on an individual basis |
|||||||||
-
Skin Care net sales declined20% , primarily reflecting the challenges of the prolonged COVID-related impacts, including both the anticipated tightening of inventory by certain retailers inAsia travel retail and limited retail traffic in mainlandChina . Lower replenishment orders inthe United States also negatively impacted the category’s growth. Net sales growth from The Ordinary andBobbi Brown was offset by declines fromEstée Lauder , La Mer, Dr.Jart+ and Clinique. -
Net sales from
Estée Lauder , La Mer, Dr.Jart+ and Clinique declined, reflecting the aforementionedSkin Care challenges. - Net sales from The Ordinary grew double digits across every region, reflecting growth in hero products, successful innovation, such as New! Multi-Peptide Lash & Brow Serum and increased productive distribution.
-
Hero products, including Soothing Cleansing Oil and Vitamin Enriched Face Base, drove net sales growth from
Bobbi Brown . -
Skin Care operating income decreased, reflecting the decline in net sales and an other intangible asset impairment of$100 million
Makeup
-
Makeup net sales decreased
3% , primarily reflecting the ongoing COVID-related impacts affectingAsia travel retail and mainlandChina , partially offset by the progression of the makeup renaissance as usage occasions increased in many other markets. Net sales growth from M·A·C and Clinique was offset by declines fromEstée Lauder andTom Ford Beauty . -
Net sales from
Estée Lauder andTom Ford Beauty were negatively impacted by the decline in retail traffic and travel due to the ongoing COVID-related impacts. - M·A·C double-digit net sales growth reflected continued success from hero products, such as Studio Fix foundation, and recent launches, including Powder Kiss Velvet Blur Slim Stick lipstick, as well as strong 11.11 Global Shopping Festival performance and holiday demand. The increase in net sales also reflected the expected benefit from changes to the brand’s take back loyalty program made in the fiscal 2023 second quarter.
- The continued success of Almost Lipstick in Black Honey continues to drive net sales growth from Clinique. Strength from the concealer and eye subcategories also contributed to growth.
-
Net sales grew double digits in most countries in
Europe , theMiddle East &Africa ,Asia/Pacific andLatin America as they continued to reopen and evolve in recovery. -
Makeup operating income decreased, primarily reflecting
$107 million
Fragrance
-
Net sales grew in every region, driven primarily by growth from
Estée Lauder ,Le Labo andTom Ford Beauty . - The license terminations related to certain of the Company’s designer fragrances was dilutive to reported net sales growth by approximately 9 percentage points.
-
Estée Lauder net sales grew double digits, driven primarily by strong holiday demand for the Beautiful franchise line of products, such as Beautiful Magnolia Intense. -
Net sales from
Le Labo rose strong double digits, reflecting growth in every region due to the continued consumer demand for the brand’s artisanal offerings, robust holiday performance and targeted expanded consumer reach. -
Tom Ford Beauty net sales grew double digits, fueled by growth in existing hero franchises likeOud Wood and Ombre Leather and recent launches, such as Noir Extreme Parfum. - Fragrance operating income decreased, driven primarily by strategic investments to support brick-and-mortar recovery and the expansion of freestanding stores, as well as investments in advertising and promotional activity to support holiday.
Hair Care
-
Hair Care net sales rose
4% , reflecting growth from both The Ordinary, due to the recent launch of the brand’s hair care products, and Aveda. -
Aveda’s net sales growth reflected strength in
Europe , theMiddle East &Africa , the launch of the brand in mainlandChina and strong performance during holiday and key shopping moments. -
Hair Care operating results decreased, reflecting strategic investments to support innovation and Aveda’s launch in mainland
China , partially offset by higher net sales.
Results by |
|||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
|
Three Months Ended |
||||||||||||||||||
|
|
Percentage Change |
Operating
|
Percentage
|
|||||||||||||||
($ in millions) |
2022 |
2021 |
Reported
|
Constant
|
2022 |
2021 |
Reported
|
||||||||||||
The |
$ |
1,235 |
|
$ |
1,300 |
|
(5 |
)% |
(6 |
)% |
$ |
(85 |
) |
$ |
382 |
|
(100 |
+)% |
|
|
|
1,816 |
|
|
2,338 |
|
(22 |
) |
(18 |
) |
|
409 |
|
|
620 |
|
(34 |
) |
|
|
|
1,570 |
|
|
1,902 |
|
(17 |
) |
(8 |
) |
|
241 |
|
|
431 |
|
(44 |
) |
|
Subtotal |
$ |
4,621 |
|
$ |
5,540 |
|
(17 |
)% |
(11 |
)% |
$ |
565 |
|
$ |
1,433 |
|
(61 |
)% |
|
Returns/charges associated with restructuring and |
|||||||||||||||||||
other activities |
|
(1 |
) |
|
(1 |
) |
|
|
|
(9 |
) |
|
(15 |
) |
|
||||
Total |
$ |
4,620 |
|
$ |
5,539 |
|
(17 |
)% |
(12 |
)% |
$ |
556 |
|
$ |
1,418 |
|
(61 |
)% |
|
Organic Net Sales Growth - Reconciliation to GAAP
|
|||||||||
|
Three Months Ended |
||||||||
|
Organic
|
Impact of
|
Impact of
|
|
|||||
The |
(3 |
)% |
(2 |
)% |
1 |
% |
(5 |
)% |
|
|
(17 |
) |
(1 |
) |
(4 |
) |
(22 |
) |
|
|
(7 |
) |
— |
|
(10 |
) |
(17 |
) |
|
Subtotal |
(11 |
)% |
(1 |
)% |
(5 |
)% |
(17 |
)% |
|
Returns associated with restructuring and other activities |
|
|
|
— |
|
||||
Total |
(11 |
)% |
(1 |
)% |
(5 |
)% |
(17 |
)% |
|
(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. |
|||||||||
(2)Percentages are calculated on an individual basis |
|||||||||
The
-
Net sales declined
3% , driven by the negative impact from lower replenishment orders inthe United States primarily impacting the Skin Care category. Conversely, net sales grew in both the Fragrance and Makeup categories. - The license terminations related to certain of the Company’s designer fragrances contributed approximately 2 percentage points to the decline in reported net sales.
-
In
Latin America , net sales rose double digits, fueled by growth in the Makeup and Fragrance categories. -
Operating income in The
Americas decreased, primarily reflecting lower intercompany royalty income due to the decline in income from the Company’s travel retail business, other intangible asset impairments of$107 million
-
Net sales declined
17% , primarily due to the ongoing COVID-related impacts, affectingAsia travel retail. - The license terminations related to certain of the Company’s designer fragrances contributed approximately 1 percentage point to the decline in reported net sales.
-
Global travel retail net sales decreased double digits, reflecting the ongoing COVID-related impacts that led to reduced travel in
Asia , particularly toHainan . Travel retail net sales grew inEurope , theMiddle East &Africa and TheAmericas , benefiting from an increase in professional and personal travel compared to the prior-year period. -
Net sales in the
United Kingdom grew mid-single-digits, powered by the progression of the makeup renaissance as usage occasions returned, as well as strong growth in Fragrance andSkin Care . -
Net sales from most emerging markets in the region increased double digits, led by
India andTurkey , driven by growth in the Makeup category. Developed markets also grew, led byFrance ,Spain andItaly . - Operating income decreased, driven by the decline in net sales, partially offset by a lower intercompany royalty expense due to the decline in income from the Company’s travel retail business and disciplined expense management.
-
Net sales declined
7% , due to the ongoing COVID-related impacts affecting brick-and-mortar inGreater China and Dr.Jart+ travel retail inKorea . -
In other markets in
Asia/Pacific , COVID recovery drove strong net sales growth in most countries, led byJapan ,Australia ,Malaysia andthe Philippines . InKorea , double-digit growth from most brands was more than offset by the decline from Dr.Jart+’s travel retail business. - Fragrance and Hair Care net sales grew double digits in the region.
-
Operating income decreased, driven by the decline in net sales and an other intangible asset impairment of
$100 million
Six-Months Results
-
For the six months ended
December 31, 2022 , the Company reported net sales of$8.55 billion 14% decrease compared with$9.93 billion 8% . -
Net earnings3 were
$0.88 billion $2.45 $1.78 billion $4.85
| __________________________________ |
3 Net earnings attributable to |
-
During the six-months ended
December 31, 2022 , the Company recorded restructuring and other charges, other intangible asset impairments, and change in fair value of acquisition-related stock options, that, combined, resulted in an unfavorable impact of$219 million $167 million $.46 per diluted share, as detailed on page 16. The prior-year period results include restructuring and other charges, change in fair value of acquisition-related stock options, and other income related to a gain on previously held equity investment inDeciem Beauty Group Inc. that, combined, resulted in a favorable impact of$22 million $18 million $.05 per diluted share. -
Excluding restructuring and other charges and adjustments referred to in the previous bullet, adjusted diluted net earnings per common share for the six months ended
December 31, 2022 was$2.91 36% in constant currency. For the six months endedDecember 31, 2022 , the unfavorable impact of foreign currency translation on diluted net earnings per common share was$.22 .
Cash Flows
-
For the six months ended
December 31, 2022 , net cash flows provided by operating activities were$0.75 billion $1.85 billion -
Capital Expenditures decreased to
$419 million $459 million -
The Company ended the quarter with
$3.73 billion $0.71 billion -
In
November 2022 , the Company announced it signed an agreement to acquire the TOM FORD brand. The transaction is expected to be completed in the fiscal 2023 fourth quarter and to be funded through a combination of cash, debt and deferred payments to the sellers.
Outlook for Fiscal 2023 Third Quarter and Full Year
The Company expects the remainder of the fiscal year to be volatile, including risks associated with the uncertain pace of recovery of consumers in travel retail, and pressured by the ongoing disruptions due to the evolving COVID-19 environment, inflation, supply chain disruptions, and the risk of a slowdown in certain markets globally.
The Company remains optimistic about the prospects and future growth in global prestige beauty and plans to invest in its business during this difficult environment to support share gains and long-term growth, including investments in advertising, innovation, its innovation center in
The second half outlook reflects the following assumptions and expectations:
-
A shift in the return to growth in Asia Travel Retail and mainland
China from the fiscal 2023 third quarter to the fourth quarter, reflecting:-
The normalization of inventory levels in
Hainan , given the disruptions from the COVID-related impacts in November and December. -
The transitory pressure to the Company’s travel retail business with its Korean duty free retailers due to the potential roll-back of temporary COVID-related government supportive measures in
Korea duty free. - An acceleration of retail sales in the fourth quarter of fiscal 2023 in travel retail, primarily due to the resumption of outbound Chinese traveling consumers.
-
A moderate return to net sales growth in mainland
China , given the disruption from the COVID-related impacts in November and December that slowed expected brick-and-mortar retail traffic in the second quarter and is continuing to dampen traffic in the third quarter.
-
The normalization of inventory levels in
- Increased productive distribution throughout the year to retailers that provide new consumer reach and continued strategic entry into new countries for some of the Company’s 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
25.5% .
The full year outlook does not reflect the net sales and the slight dilution to earnings per share from the acquisition of the TOM FORD brand that is expected to be completed in the fiscal 2023 fourth quarter.
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 its cost base and consumer behaviors.
Third Quarter Fiscal 2023
Sales Outlook
-
Reported net sales are forecasted to decrease between
14% and12% versus the prior-year period. This range includes:-
A shift in the return to growth in Asia Travel Retail and mainland
China , as detailed above. -
A negative
3% due to foreign currency translation. -
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 shift in the return to growth in Asia Travel Retail and mainland
-
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
10% and8% .
Earnings per Share Outlook
-
Reported diluted net earnings per common share are projected to be between
$.32 and$.43 . Excluding restructuring and other charges, diluted net earnings per common share are projected to be between$.37 and$.47 . -
Adjusted diluted earnings per common share are expected to decrease between
79% and73% on a constant currency basis. Currency exchange rates are volatile and difficult to predict. UsingDecember 30, 2022 spot rates for the third quarter of fiscal 2023:-
The negative foreign currency translation impact equates to about
$.04 of diluted earnings per share. -
As reported and adjusted diluted earnings per share in constant currency are expected to be negatively impacted
1% from certain foreign currency transactions in key international travel retail locations.
-
The negative foreign currency translation impact equates to about
Full Year Fiscal 2023
Sales Outlook
-
Reported net sales are forecasted to decrease between
7% and5% versus the prior-year period. This range includes:-
A shift in the return to growth in Asia Travel Retail and mainland
China , as detailed above. -
A negative
4% due to foreign currency translation, as well as an additional1% 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 shift in the return to growth in Asia Travel Retail and mainland
-
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 down
2% to flat. This includes the negative impact related to foreign currency transactions, noted above.
Earnings per Share Outlook
-
Reported diluted net earnings per common share are projected to be between
$4.25 $4.44 $4.87 $5.02 -
Adjusted diluted earnings per common share are expected to decrease between
29% and27% on a constant currency basis. Currency exchange rates are volatile and difficult to predict. UsingDecember 30, 2022 spot rates for fiscal 2023:-
The negative foreign currency translation impact equates to about
$.29 of diluted earnings per share. -
As reported and adjusted diluted earnings per share in constant currency are expected to be negatively impacted by
4% from certain foreign currency transactions in key international travel retail locations.
-
The negative foreign currency translation impact equates to about
Reconciliation between GAAP and Non-GAAP - Net Sales Growth
|
|||||
|
|
|
|||
|
Three Months Ending |
Twelve Months Ending |
|||
|
|
|
|||
As Reported - GAAP(1) |
( |
%) |
( |
%) |
|
|
|
||||
Organic, Non-GAAP(2) |
( |
%) |
( |
% | |
Impact of the license terminations related to certain of the Company’s |
|||||
designer fragrances |
(1 |
) |
(1 |
) |
|
Impact of foreign currency translation |
(3 |
) |
(4 |
) |
|
Returns associated with restructuring and other activities |
— |
|
— |
|
|
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 the Company’s designer fragrances); as well as the impact of foreign currency translation. |
|||||
(F)Represents forecast |
|||||
Reconciliation between GAAP and Non-GAAP - Diluted Net Earnings Per Share (“EPS”)
|
|||||||||||||
|
|
|
|
|
|
|
|||||||
|
Three Months Ending |
Twelve Months Ending |
|||||||||||
|
|
|
|
|
|||||||||
|
2023(F) |
2022 |
Growth |
2023(F) |
2022 |
Variance |
|||||||
Forecasted/As Reported EPS - GAAP(1) |
|
$ |
1.53 |
|
( |
|
$ |
6.55 |
|
( |
|||
|
|
|
|
|
|
|
|||||||
Non-GAAP |
|
|
|
|
|
|
|||||||
Restructuring and other charges |
.04 - .05 |
|
.05 |
|
|
.15 - .19 |
|
.31 |
|
|
|||
Change in fair value of acquisition-related stock |
|
|
|||||||||||
options (less the portion attributable to |
|
|
|||||||||||
redeemable noncontrolling interest) |
— |
|
(.13 |
) |
|
(.01 |
) |
|
(.12 |
) |
|
||
Other intangible asset impairments |
— |
|
.45 |
|
|
.44 |
|
|
.50 |
|
|||
Forecasted/Adjusted EPS - Non-GAAP |
|
$ |
1.90 |
|
( |
|
$ |
7.24 |
|
( |
|||
Impact of foreign currency translation |
.04 |
|
|
.29 |
|
|
|
||||||
Forecasted/Adjusted Constant Currency EPS - |
|
|
|||||||||||
Non-GAAP |
|
$ |
1.90 |
|
( |
|
$ |
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 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 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
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
|
Three Months Ended
|
Percentage
|
|
Six Months Ended
|
Percentage
|
|||||||||||||
($ in millions, except per share data) |
2022 |
2021 |
|
2022 |
2021 |
|||||||||||||
Net sales(A) |
$ |
4,620 |
|
$ |
5,539 |
|
(17 |
)% |
|
$ |
8,550 |
|
$ |
9,931 |
|
(14 |
)% |
|
Cost of sales(A) |
|
1,219 |
|
|
1,223 |
|
— |
|
|
|
2,242 |
|
|
2,280 |
|
(2 |
) |
|
Gross profit |
|
3,401 |
|
|
4,316 |
|
(21 |
) |
|
|
6,308 |
|
|
7,651 |
|
(18 |
) |
|
Gross margin |
|
73.6 |
% |
|
77.9 |
% |
|
|
|
73.8 |
% |
|
77.0 |
% |
|
|||
|
|
|
|
|
|
|
|
|||||||||||
Operating expenses |
|
|
|
|
|
|
|
|||||||||||
Selling, general and administrative(B) |
|
2,630 |
|
|
2,885 |
|
(9 |
) |
|
|
4,874 |
|
|
5,279 |
|
(8 |
) |
|
Restructuring and other charges(A) |
|
8 |
|
|
13 |
|
(38 |
) |
|
|
10 |
|
|
19 |
|
(47 |
) |
|
Impairment of other intangible assets(C) |
|
207 |
|
|
— |
|
100 |
|
|
|
207 |
|
|
— |
|
100 |
|
|
Total operating expenses |
|
2,845 |
|
|
2,898 |
|
(2 |
) |
|
|
5,091 |
|
|
5,298 |
|
(4 |
) |
|
Operating expense margin |
|
61.6 |
% |
|
52.3 |
% |
|
|
|
59.5 |
% |
|
53.3 |
% |
|
|||
|
|
|
|
|
|
|
|
|||||||||||
Operating income |
|
556 |
|
|
1,418 |
|
(61 |
) |
|
|
1,217 |
|
|
2,353 |
|
(48 |
) |
|
Operating income margin |
|
12.0 |
% |
|
25.6 |
% |
|
|
|
14.2 |
% |
|
23.7 |
% |
|
|||
|
|
|
|
|
|
|
|
|||||||||||
Interest expense |
|
52 |
|
|
42 |
|
24 |
|
|
|
98 |
|
|
84 |
|
17 |
|
|
Interest income and investment income, net |
|
26 |
|
|
10 |
|
100 |
+ |
|
|
41 |
|
|
14 |
|
100 |
+ |
|
Other components of net periodic benefit cost |
|
(2 |
) |
|
(2 |
) |
— |
|
|
|
(5 |
) |
|
(1 |
) |
(100 |
+) |
|
Other income |
|
— |
|
|
— |
|
— |
|
|
|
— |
|
|
1 |
|
(100 |
) |
|
Earnings before income taxes |
|
532 |
|
|
1,388 |
|
(62 |
) |
|
|
1,165 |
|
|
2,285 |
|
(49 |
) |
|
Provision for income taxes |
|
135 |
|
|
298 |
|
(55 |
) |
|
|
278 |
|
|
500 |
|
(44 |
) |
|
Net earnings |
|
397 |
|
|
1,090 |
|
(64 |
) |
|
|
887 |
|
|
1,785 |
|
(50 |
) |
|
Net earnings attributable to noncontrolling interests |
|
— |
|
|
(4 |
) |
100 |
|
|
|
— |
|
|
(5 |
) |
100 |
|
|
Net loss (earnings) attributable to redeemable |
||||||||||||||||||
noncontrolling interest |
|
(3 |
) |
|
2 |
|
(100 |
+) |
|
|
(4 |
) |
|
— |
|
(100 |
) |
|
Net earnings attributable to The |
||||||||||||||||||
|
$ |
394 |
|
$ |
1,088 |
|
(64 |
)% |
|
$ |
883 |
|
$ |
1,780 |
|
(50 |
)% |
|
|
|
|
|
|
|
|
|
|||||||||||
Net earnings attributable to The |
||||||||||||||||||
|
|
|
|
|
|
|
|
|||||||||||
Basic |
$ |
1.10 |
|
$ |
3.02 |
|
(64 |
)% |
|
$ |
2.47 |
|
$ |
4.93 |
|
(50 |
)% |
|
Diluted |
$ |
1.09 |
|
$ |
2.97 |
|
(63 |
)% |
|
$ |
2.45 |
|
$ |
4.85 |
|
(50 |
)% |
|
|
|
|
|
|
|
|
|
|||||||||||
Weighted-average common shares outstanding |
|
|
|
|
|
|
|
|||||||||||
Basic |
|
357.7 |
|
|
360.6 |
|
|
|
|
357.8 |
|
|
361.4 |
|
|
|||
Diluted |
|
360.4 |
|
|
366.0 |
|
|
|
|
360.9 |
|
|
367.0 |
|
|
|||
|
|
|
|
|
|
|
|
|||||||||||
(A)In |
||||||||||||||||||
(B)For the three and six months ended |
||||||||||||||||||
(C)During the fiscal 2023 second quarter, given the lower-than-expected results in the overall business, the Company made revisions to 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 made revisions to 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 |
||||||||||||||||||
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 |
||||||||||||||||||
For the three and six months ended |
||||||||||||||||||
Returns and Charges Associated With Restructuring and Other Activities and Other Adjustments
|
|||||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||
|
Three Months Ended |
||||||||||||||||||||
|
Sales Returns |
Cost of Sales |
Operating Expenses |
Total |
After
|
Diluted EPS |
|||||||||||||||
(In millions, except per share data) |
Restructuring
|
Other
|
|||||||||||||||||||
Leading |
$ |
— |
$ |
— |
|
$ |
— |
$ |
1 |
|
$ |
1 |
|
$ |
1 |
|
$ |
— |
|
||
PCBA Program |
|
1 |
|
— |
|
|
4 |
|
|
3 |
|
|
8 |
|
|
6 |
|
|
.02 |
|
|
Change in fair value of acquisition-related |
|||||||||||||||||||||
stock options |
|
— |
|
— |
|
|
— |
|
|
(4 |
) |
|
(4 |
) |
|
(4 |
) |
|
(.01 |
) |
|
Other intangible asset impairments |
|
— |
|
— |
|
|
— |
|
|
207 |
|
|
207 |
|
|
159 |
|
|
.44 |
|
|
Total |
$ |
1 |
$ |
— |
|
$ |
4 |
|
$ |
207 |
|
$ |
212 |
|
$ |
162 |
|
$ |
.45 |
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Six Months Ended |
||||||||||||||||||||
|
Sales Returns |
Cost of Sales |
Operating Expenses |
Total |
After
|
Diluted EPS |
|||||||||||||||
(In millions, except per share data) |
Restructuring
|
Other
|
|||||||||||||||||||
Leading |
$ |
— |
$ |
— |
|
$ |
(2 |
) |
$ |
3 |
|
$ |
1 |
|
$ |
1 |
|
$ |
— |
|
|
PCBA Program |
|
6 |
|
(1 |
) |
|
6 |
|
|
3 |
|
|
14 |
|
|
10 |
|
|
.03 |
|
|
Change in fair value of acquisition-related |
|||||||||||||||||||||
stock options |
|
— |
|
— |
|
|
— |
|
|
(3 |
) |
|
(3 |
) |
|
(3 |
) |
|
(.01 |
) |
|
Other intangible asset impairments |
|
— |
|
— |
|
|
— |
|
|
207 |
|
|
207 |
|
|
159 |
|
|
.44 |
|
|
Total |
$ |
6 |
$ |
(1 |
) |
$ |
4 |
|
$ |
210 |
|
$ |
219 |
|
$ |
167 |
|
$ |
.46 |
|
|
|
|
|
|
|
|
|
|
||||||||||||||
|
Three Months Ended |
|||||||||||||||||||
|
Sales Returns |
Cost of Sales |
Operating Expenses |
Total |
After
|
Diluted EPS |
||||||||||||||
(In millions, except per share data) |
Restructuring
|
Other
|
||||||||||||||||||
Leading |
$ |
— |
$ |
2 |
|
$ |
(2 |
) |
$ |
5 |
|
$ |
5 |
|
$ |
4 |
|
$ |
.01 |
|
PCBA Program |
|
1 |
|
(1 |
) |
|
7 |
|
|
3 |
|
|
10 |
|
|
8 |
|
|
.02 |
|
Change in fair value of acquisition-related |
||||||||||||||||||||
stock options |
|
— |
|
— |
|
|
— |
|
|
2 |
|
|
2 |
|
|
2 |
|
|
.01 |
|
Total |
$ |
1 |
$ |
1 |
|
$ |
5 |
|
$ |
10 |
|
$ |
17 |
|
$ |
14 |
|
$ |
.04 |
|
|
|
|
|
|
|
|
|
|||||||||||||
|
Six Months Ended |
|||||||||||||||||||
|
Sales Returns |
Cost of Sales |
Operating Expenses |
Total |
After
|
Diluted EPS |
||||||||||||||
(In millions, except per share data) |
Restructuring
|
Other
|
||||||||||||||||||
Leading |
$ |
— |
$ |
2 |
|
$ |
(1 |
) |
$ |
8 |
|
$ |
9 |
|
$ |
7 |
|
$ |
.02 |
|
PCBA Program |
|
2 |
|
(2 |
) |
|
7 |
|
|
5 |
|
|
12 |
|
|
10 |
|
|
.03 |
|
Change in fair value of acquisition-related |
||||||||||||||||||||
stock options |
|
— |
|
— |
|
|
— |
|
|
2 |
|
|
2 |
|
|
2 |
|
|
— |
|
Other income |
|
— |
|
— |
|
|
— |
|
|
(1 |
) |
|
(1 |
) |
|
(1 |
) |
|
— |
|
Total |
$ |
2 |
$ |
— |
|
$ |
6 |
|
$ |
14 |
|
$ |
22 |
|
$ |
18 |
|
$ |
.05 |
|
Results by Product Category
|
|||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
|
Six Months Ended |
||||||||||||||||||
|
|
Percentage Change |
Operating
|
Percentage
|
|||||||||||||||
($ in millions) |
2022 |
2021 |
Reported
|
Constant
|
2022 |
2021 |
Reported
|
||||||||||||
|
$ |
4,486 |
|
$ |
5,608 |
|
(20 |
)% |
(16 |
)% |
$ |
951 |
|
$ |
1,799 |
|
(47 |
)% |
|
Makeup |
|
2,320 |
|
|
2,560 |
|
(9 |
) |
(5 |
) |
|
(21 |
) |
|
221 |
|
(100 |
+) |
|
Fragrance |
|
1,382 |
|
|
1,408 |
|
(2 |
) |
4 |
|
|
310 |
|
|
341 |
|
(9 |
) |
|
Hair Care |
|
340 |
|
|
328 |
|
4 |
|
7 |
|
|
(7 |
) |
|
10 |
|
(100 |
+) |
|
Other |
|
28 |
|
|
29 |
|
(3 |
) |
3 |
|
|
(1 |
) |
|
3 |
|
(100 |
+) |
|
Subtotal |
$ |
8,556 |
|
$ |
9,933 |
|
(14 |
)% |
(9 |
)% |
$ |
1,232 |
|
$ |
2,374 |
|
(48 |
)% |
|
Returns/charges associated with |
|
||||||||||||||||||
restructuring and other activities |
|
(6 |
) |
|
(2 |
) |
|
|
|
(15 |
) |
|
(21 |
) |
|
||||
Total |
$ |
8,550 |
|
$ |
9,931 |
|
(14 |
)% |
(9 |
)% |
$ |
1,217 |
|
$ |
2,353 |
|
(48 |
)% |
|
Organic Net Sales Growth - Reconciliation to GAAP
|
|||||||||
|
Six Months Ended |
||||||||
|
Organic
|
Impact of
|
Impact of
|
|
|||||
|
(16 |
)% |
— |
% |
(4 |
)% |
(20 |
)% |
|
Makeup |
(5 |
) |
— |
|
(5 |
) |
(9 |
) |
|
Fragrance |
14 |
|
(10 |
) |
(6 |
) |
(2 |
) |
|
Hair Care |
7 |
|
— |
|
(4 |
) |
4 |
|
|
Other |
(3 |
) |
7 |
|
(7 |
) |
(3 |
) |
|
Subtotal |
(8 |
)% |
(1 |
)% |
(5 |
)% |
(14 |
)% |
|
Returns associated with restructuring and other activities |
|
|
|
— |
|
||||
Total |
(8 |
)% |
(1 |
)% |
(5 |
)% |
(14 |
)% |
|
(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. |
|||||||||
(2)Percentages are calculated on an individual basis |
|||||||||
Results by |
|||||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||
|
Six Months Ended |
||||||||||||||||||
|
|
Percentage Change |
Operating
|
Percentage
|
|||||||||||||||
($ in millions) |
2022 |
2021 |
Reported
|
Constant
|
2022 |
2021 |
Reported
|
||||||||||||
The |
$ |
2,358 |
|
$ |
2,494 |
|
(5 |
)% |
(6 |
)% |
$ |
40 |
|
$ |
636 |
|
(94 |
)% |
|
|
|
3,498 |
|
|
4,211 |
|
(17 |
) |
(13 |
) |
|
743 |
|
|
1,085 |
|
(32 |
) |
|
|
|
2,700 |
|
|
3,228 |
|
(16 |
) |
(7 |
) |
|
449 |
|
|
653 |
|
(31 |
) |
|
Subtotal |
$ |
8,556 |
|
$ |
9,933 |
|
(14 |
)% |
(9 |
)% |
$ |
1,232 |
|
$ |
2,374 |
|
(48 |
)% |
|
Returns/charges associated with restructuring |
|||||||||||||||||||
and other activities |
|
(6 |
) |
|
(2 |
) |
|
|
|
(15 |
) |
|
(21 |
) |
|
||||
Total |
$ |
8,550 |
|
$ |
9,931 |
|
(14 |
)% |
(9 |
)% |
$ |
1,217 |
|
$ |
2,353 |
|
(48 |
)% |
|
Organic Net Sales Growth - Reconciliation to GAAP (Unaudited) |
|||||||||
|
Six Months Ended 2022 vs. 2021(2) |
||||||||
|
Organic
|
Impact of
|
Impact of
|
|
|||||
The |
(3 |
)% |
(3 |
)% |
1 |
% |
(5 |
)% |
|
|
(12 |
) |
(1 |
) |
(4 |
) |
(17 |
) |
|
|
(7 |
) |
— |
|
(9 |
) |
(16 |
) |
|
Subtotal |
(8 |
)% |
(1 |
)% |
(5 |
)% |
(14 |
)% |
|
Returns associated with restructuring and other activities |
|
|
|
— |
|
||||
Total |
(8 |
)% |
(1 |
)% |
(5 |
)% |
(14 |
)% |
|
(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. |
|||||||||
(2)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 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 |
|
||||||||||||||||||||||||||
|
2022 |
2021 |
% Change |
|||||||||||||||||||||||||
($ in millions, except per
|
As
|
Returns/
|
Non-
|
Impact of
|
Non-
|
As
|
Returns/
|
Non-
|
Non-
|
Non-
|
||||||||||||||||||
Net sales |
$ |
4,620 |
|
$ |
1 |
|
$ |
4,621 |
|
$ |
282 |
$ |
4,903 |
|
$ |
5,539 |
|
$ |
1 |
|
$ |
5,540 |
|
(17 |
)% |
(11 |
)% |
|
Cost of sales |
|
1,219 |
|
|
— |
|
|
1,219 |
|
|
64 |
|
1,283 |
|
|
1,223 |
|
|
(1 |
) |
|
1,222 |
|
|
|
|||
Gross profit |
|
3,401 |
|
|
1 |
|
|
3,402 |
|
|
218 |
|
3,620 |
|
|
4,316 |
|
|
2 |
|
|
4,318 |
|
(21 |
)% |
(16 |
)% |
|
Gross margin |
|
73.6 |
% |
|
|
73.6 |
% |
|
|
73.8 |
% |
|
77.9 |
% |
|
|
77.9 |
% |
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Operating expenses |
|
2,845 |
|
|
(211 |
) |
|
2,634 |
|
|
150 |
|
2,784 |
|
|
2,898 |
|
|
(15 |
) |
|
2,883 |
|
(9 |
)% |
(3 |
)% |
|
Operating expense |
||||||||||||||||||||||||||||
margin |
|
61.6 |
% |
|
|
57.0 |
% |
|
|
56.8 |
% |
|
52.3 |
% |
|
|
52.0 |
% |
|
|
||||||||
Operating income |
|
556 |
|
|
212 |
|
|
768 |
|
|
68 |
|
836 |
|
|
1,418 |
|
|
17 |
|
|
1,435 |
|
(46 |
)% |
(42 |
)% |
|
Operating income |
||||||||||||||||||||||||||||
margin |
|
12.0 |
% |
|
|
16.6 |
% |
|
|
17.1 |
% |
|
25.6 |
% |
|
|
25.9 |
% |
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Provision for income |
||||||||||||||||||||||||||||
taxes |
|
135 |
|
|
50 |
|
|
185 |
|
|
17 |
|
202 |
|
|
298 |
|
|
3 |
|
|
301 |
|
(39 |
)% |
(33 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Net earnings |
||||||||||||||||||||||||||||
attributable to The |
||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
|
$ |
394 |
|
$ |
162 |
|
$ |
556 |
|
$ |
54 |
$ |
610 |
|
$ |
1,088 |
|
$ |
14 |
|
$ |
1,102 |
|
(50 |
)% |
(45 |
)% |
|
Diluted EPS |
$ |
1.09 |
|
$ |
.45 |
|
$ |
1.54 |
|
$ |
.15 |
$ |
1.69 |
|
$ |
2.97 |
|
$ |
.04 |
|
$ |
3.01 |
|
(49 |
)% |
(44 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
|
Six Months Ended |
|
||||||||||||||||||||||||||
|
2022 |
2021 |
% Change |
|||||||||||||||||||||||||
($ in millions, except per
|
As
|
Returns/
|
Non-
|
Impact of
|
Non-
|
As
|
Returns/
|
Non-
|
Non-
|
Non-
|
||||||||||||||||||
Net sales |
$ |
8,550 |
|
$ |
6 |
|
$ |
8,556 |
|
$ |
458 |
$ |
9,014 |
|
$ |
9,931 |
|
$ |
2 |
|
$ |
9,933 |
|
(14 |
)% |
(9 |
)% |
|
Cost of sales |
|
2,242 |
|
|
1 |
|
|
2,243 |
|
|
94 |
|
2,337 |
|
|
2,280 |
|
|
— |
|
|
2,280 |
|
|
|
|||
Gross profit |
|
6,308 |
|
|
5 |
|
|
6,313 |
|
|
364 |
|
6,677 |
|
|
7,651 |
|
|
2 |
|
|
7,653 |
|
(18 |
)% |
(13 |
)% |
|
Gross margin |
|
73.8 |
% |
|
|
73.8 |
% |
|
|
74.1 |
% |
|
77.0 |
% |
|
|
77.0 |
% |
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Operating expenses |
|
5,091 |
|
|
(214 |
) |
|
4,877 |
|
|
265 |
|
5,142 |
|
|
5,298 |
|
|
(21 |
) |
|
5,277 |
|
(8 |
)% |
(3 |
)% |
|
Operating expense |
||||||||||||||||||||||||||||
margin |
|
59.5 |
% |
|
|
57.0 |
% |
|
|
57.0 |
% |
|
53.3 |
% |
|
|
53.1 |
% |
|
|
||||||||
Operating income |
|
1,217 |
|
|
219 |
|
|
1,436 |
|
|
99 |
|
1,535 |
|
|
2,353 |
|
|
23 |
|
|
2,376 |
|
(40 |
)% |
(35 |
)% |
|
Operating income |
||||||||||||||||||||||||||||
margin |
|
14.2 |
% |
|
|
16.8 |
% |
|
|
17.0 |
% |
|
23.7 |
% |
|
|
23.9 |
% |
|
|
||||||||
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Other income |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
— |
|
|
1 |
|
|
(1 |
) |
|
— |
|
|
|
|||
Provision for income |
||||||||||||||||||||||||||||
taxes |
|
278 |
|
|
52 |
|
|
330 |
|
|
24 |
|
354 |
|
|
500 |
|
|
4 |
|
|
504 |
|
(35 |
)% |
(30 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||
Net earnings |
||||||||||||||||||||||||||||
attributable to The |
||||||||||||||||||||||||||||
|
||||||||||||||||||||||||||||
|
$ |
883 |
|
$ |
167 |
|
$ |
1,050 |
|
$ |
78 |
$ |
1,128 |
|
$ |
1,780 |
|
$ |
18 |
|
$ |
1,798 |
|
(42 |
)% |
(37 |
)% |
|
Diluted EPS |
$ |
2.45 |
|
$ |
.46 |
|
$ |
2.91 |
|
$ |
.22 |
$ |
3.13 |
|
$ |
4.85 |
|
$ |
.05 |
|
$ |
4.90 |
|
(41 |
)% |
(36 |
)% |
|
|
|
|||||||||||||||||||||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited, except where noted) |
||||||
|
|
|
|
|||
|
|
|
|
|||
($ in millions) |
(Audited) |
|||||
ASSETS |
|
|
|
|||
|
|
|
|
|||
Cash and cash equivalents |
$ |
3,725 |
$ |
3,957 |
$ |
4,603 |
Accounts receivable, net |
|
1,932 |
|
1,629 |
|
2,079 |
Inventory and promotional merchandise |
|
3,069 |
|
2,920 |
|
2,612 |
Prepaid expenses and other current assets |
|
641 |
|
792 |
|
661 |
Total current assets |
|
9,367 |
|
9,298 |
|
9,955 |
Property, plant and equipment, net |
|
2,908 |
|
2,650 |
|
2,451 |
Operating lease right-of-use assets |
|
1,847 |
|
1,949 |
|
2,102 |
Other assets |
|
6,609 |
|
7,013 |
|
7,570 |
Total assets |
$ |
20,731 |
$ |
20,910 |
$ |
22,078 |
|
|
|
|
|||
LIABILITIES AND EQUITY |
|
|
|
|||
|
|
|
|
|||
Current debt |
$ |
260 |
$ |
268 |
$ |
272 |
Accounts payable |
|
1,507 |
|
1,822 |
|
1,639 |
Operating lease liabilities |
|
349 |
|
365 |
|
397 |
Other accrued liabilities |
|
3,539 |
|
3,360 |
|
3,454 |
Total current liabilities |
|
5,655 |
|
5,815 |
|
5,762 |
Long-term debt |
|
5,111 |
|
5,144 |
|
5,259 |
Long-term operating lease liabilities |
|
1,757 |
|
1,868 |
|
2,028 |
Other noncurrent liabilities |
|
1,487 |
|
1,651 |
|
1,937 |
Total noncurrent liabilities |
|
8,355 |
|
8,663 |
|
9,224 |
Redeemable noncontrolling interest |
|
819 |
|
842 |
|
840 |
Total equity |
|
5,902 |
|
5,590 |
|
6,252 |
Total liabilities and equity |
$ |
20,731 |
$ |
20,910 |
$ |
22,078 |
|
|
|
|
|||
SELECT CASH FLOW DATA (Unaudited) |
||||||
|
|
|
||||
|
Six Months Ended
|
|||||
($ in millions) |
2022 |
2021 |
||||
Net earnings |
$ |
887 |
|
$ |
1,785 |
|
Adjustments to reconcile net earnings to net cash flows from operating |
||||||
activities: |
|
|
||||
Depreciation and amortization |
|
359 |
|
|
364 |
|
Deferred income taxes |
|
(31 |
) |
|
(43 |
) |
Impairment of other intangible assets |
|
207 |
|
|
— |
|
Other items |
|
192 |
|
|
212 |
|
Changes in operating assets and liabilities: |
|
|
||||
Increase in accounts receivable, net |
|
(295 |
) |
|
(407 |
) |
Increase in inventory and promotional merchandise |
|
(156 |
) |
|
(164 |
) |
Decrease (increase) in other assets, net |
|
33 |
|
|
(57 |
) |
Increase (decrease) in accounts payable and other liabilities, net |
|
(445 |
) |
|
156 |
|
Net cash flows provided by operating activities |
$ |
751 |
|
$ |
1,846 |
|
|
|
|
||||
Other Investing and Financing Sources (Uses): |
|
|
||||
Capital expenditures |
$ |
(419 |
) |
$ |
(459 |
) |
Settlement of net investment hedges |
|
138 |
|
|
58 |
|
Payments to acquire treasury stock |
|
(257 |
) |
|
(1,428 |
) |
Dividends paid |
|
(451 |
) |
|
(409 |
) |
Proceeds (repayments) of current debt, net |
|
244 |
|
|
(4 |
) |
Repayments and redemptions of long-term debt, net |
|
(258 |
) |
|
(10 |
) |
View source version on businesswire.com: https://www.businesswire.com/news/home/20230202005036/en/
Investors:
rmancini@estee.com
Media:
jimarvin@estee.com
Source:
FAQ
What were Estée Lauder's Q2 2023 earnings results?
How has COVID-19 affected Estée Lauder's business?
What is the future outlook for Estée Lauder's sales?
What is the forecasted EPS for Estée Lauder for the next quarter?
