Core Insights - Estée Lauder reported a 9.8% year-over-year decline in sales for Q3 FY2025, totaling $3.55 billion, with organic net sales down 3% excluding travel retail, an improvement from a 4% decline in Q2 [1] Group 1: Sales Performance - The company's global retail sales, excluding travel retail, showed sequential growth, driven by online channels achieving mid-single-digit organic sales growth [2] - In the Asia-Pacific region, organic net sales decreased by 1%, with mainland China achieving mid-single-digit growth, partially offsetting declines in South Korea and other areas [2] - The high-end fragrance brand Le Labo experienced strong double-digit growth, contributing to low single-digit growth for the overall high-end fragrance segment [3] Group 2: Market Share and Strategy - The company gained market share in key markets like China, with three out of the last four quarters showing increases in market share [3] - The CEO highlighted that all four major categories—skincare, makeup, fragrance, and hair care—saw market share increases in China, with at least eight brands, including La Mer and Tom Ford, experiencing growth [3] - The company is actively optimizing consumer coverage and entering new retail partnerships to enhance brand presence, as seen with The Ordinary's strong performance on platforms like Douyin and Tmall [3][4] Group 3: Innovation and Product Launches - New product launches, such as La Mer's Concentrated Repair Cream and Tom Ford's Lip Color, are aimed at transformative innovation and reaching a broader audience [4] - The company plans to maintain its innovation momentum in Q4 FY2025, building on successful product launches in China [4] Group 4: Operational Efficiency - The company is making significant progress in its Profit Recovery and Growth Plan (PRGP), streamlining 20% of middle management positions and achieving a 30% reduction in costs [5] - A new executive team structure has been implemented to enhance accountability and efficiency, with a focus on global strategy and execution [5] - The company is confident in restoring sales growth by FY2026, contingent on resolving certain environmental issues and continuing strategic adjustments in travel retail [5]

Core Insights - The Estee Lauder Companies Inc. reported third-quarter fiscal 2025 results with both net sales and earnings declining year over year, primarily due to weak consumer sentiment and reduced conversion rates in China [1][2] Financial Performance - Adjusted earnings were 65 cents per share, surpassing the Zacks Consensus Estimate of 29 cents, but down 33% from 97 cents in the prior year [2] - Quarterly net sales reached $3,550 million, exceeding the Zacks Consensus Estimate of $3,507.2 million, but reflecting a 10% decline year over year [2] - Organic net sales decreased by 9% to $3,605 million [2] Category-Wise Revenue Results - Skin Care sales fell 12% year over year to $1,807 million, impacted by weak consumer sentiment and lower conversion rates among Chinese shoppers [3] - Makeup revenues declined 9% to $1,035 million, primarily due to weaker sales from key brands like M·A·C and Estée Lauder [4] - Fragrance revenues decreased 3% to $557 million, largely due to lower performance from Clinique and Estee Lauder [4] - Hair Care sales totaled $126 million, down 12% year over year, mainly due to Aveda's weaker performance [5] Regional Revenue Results - Sales in the Americas fell 6% year over year to $1,052 million [6] - Revenues in the EMEA region declined 18% to $1,358 million [6] - Asia-Pacific region sales tumbled 3% to $1,140 million [6] Margin Analysis - Adjusted gross margin improved by 310 basis points to 75%, driven by the Profit Recovery and Growth Plan (PRGP) [7] - Adjusted operating margin contracted by 270 basis points to 11.4%, due to increased investments and sales volume deleverage [8] Financial Health - The company exited the quarter with cash and cash equivalents of $2,631 million, long-term debt of $7,298 million, and total equity of $4,345 million [9] - Net cash flow from operating activities for the nine months ended March 31, 2025, was $671 million, with capital expenditures of $395 million [10] Restructuring and Future Outlook - The PRGP aims to transform the operating model, with expected restructuring charges between $1.2 billion and $1.6 billion before taxes [12][13] - The company anticipates a decline in reported net sales of 8-9% for fiscal 2025, with adjusted organic net sales expected to fall by the same percentage [14] - Adjusted EPS is projected to slump by 40-50%, ranging from $1.30 to $1.55 for fiscal 2025 [15]

Sales Performance - Skin care net sales decreased by 12% to $1,807 million for the three months ended March 31, 2025, compared to $2,060 million in the same period of 2024[185]. - Makeup net sales decreased by 9% to $1,035 million for the three months ended March 31, 2025, compared to $1,136 million in the same period of 2024[185]. - Fragrance net sales decreased by 3% to $557 million for the three months ended March 31, 2025, compared to $575 million in the same period of 2024[185]. - Hair care net sales decreased by 12% to $126 million for the three months ended March 31, 2025, compared to $143 million in the same period of 2024[185]. - Net sales decreased by 10% to $3,550 million for the three months ended March 31, 2025, compared to $3,940 million in the prior year[223]. - The Americas region net sales were $1,052 million for the three months ended March 31, 2025, down from $1,117 million in the same period of 2024[185]. - Europe, the Middle East & Africa region net sales decreased to $1,358 million for the three months ended March 31, 2025, compared to $1,647 million in the same period of 2024[185]. - Asia/Pacific region net sales decreased to $1,140 million for the three months ended March 31, 2025, compared to $1,176 million in the same period of 2024[185]. - Net sales in The Americas decreased by 6%, primarily due to lower sales in North America and ongoing retail softness[197]. - Net sales in Europe, the Middle East & Africa decreased by 18%, driven by lower sales in the Asia travel retail business and strategic decisions to reduce exposure to reseller activity[197]. - Net sales in Asia/Pacific decreased by 3%, with declines in Korea, Hong Kong SAR, Singapore, Taiwan, and Australia, partially offset by growth in mainland China and Japan[197]. Operating Income and Expenses - Operating income decreased to $306 million for the three months ended March 31, 2025, compared to $531 million in the same period of 2024[185]. - Total operating expenses increased to 66.3% of net sales for the three months ended March 31, 2025, compared to 58.4% in the same period of 2024[187]. - Operating income decreased by 42% for the three months ended March 31, 2025, with an operating margin of 8.6%, down from 13.5% in the prior-year period[276]. - The unfavorable change in operating expense margin for the three months ended March 31, 2025 was influenced by higher advertising and merchandising expenses to support sales[274]. - Charges associated with restructuring and other activities for the three months ended March 31, 2025 amounted to $97 million, impacting overall operating income[277]. Earnings and Profitability - Net earnings attributable to The Estée Lauder Companies Inc. were 4.5% of net sales for the three months ended March 31, 2025, down from 8.4% in the same period of 2024[187]. - Net earnings attributable to The Estée Lauder Companies Inc. for the three months ended March 31, 2025, were $159 million, a decrease of 52% from $330 million in the prior year[301]. - Operating income as reported for the nine months ended March 31, 2025, was a loss of $395 million, compared to a profit of $1,203 million in the prior year, representing a decline of over 100%[309]. - Diluted net earnings per common share for the nine months ended March 31, 2025, were $(1.63), a decrease of over 100% from $1.87 in the prior year[309]. - The company reported a decrease in operating income as adjusted to $1,009 million for the nine months ended March 31, 2025, down 19% from $1,239 million in the prior year[309]. Restructuring and Future Plans - The company expects restructuring charges from the Profit Recovery and Growth Plan (PRGP) to total between $1,200 million and $1,600 million, before taxes[213]. - The PRGP aims to yield annual gross benefits of between $800 million and $1,000 million, before taxes, to support sales growth and improve profitability[214]. - The restructuring program is expected to result in a net reduction of approximately 5,800 to 7,000 positions globally, representing about 9-11% of total positions[212]. - The company is focusing on disciplined advertising and promotional expense management to mitigate declines in operating income across various segments[282][285]. - Future strategies may include targeted expansions and new product launches to enhance market presence and drive sales growth[285]. Cash Flow and Debt - As of March 31, 2025, the company had cash and cash equivalents of $2,631 million, down from $3,395 million at June 30, 2024[320]. - Total debt as a percentage of total capitalization increased to 63% at March 31, 2025, compared to 59% at June 30, 2024[329]. - Net cash flows provided by operating activities for the nine months ended March 31, 2025, were $671 million, a decrease from $1,471 million in the same period of 2024[331]. - The company’s outstanding borrowings totaled $7,301 million as of March 31, 2025, with long-term debt accounting for $7,298 million and current debt at $3 million[327]. Market Risks and Challenges - The company acknowledges potential risks affecting future performance, including increased competition in the skin care, makeup, fragrance, and hair care sectors[349]. - Future operating results may depend on the successful development, production, and marketing of new products[349]. - The company faces challenges from retail industry consolidations and potential bankruptcies, which could decrease the number of stores selling its products[349]. - Changes in consumer preferences regarding value perception and shopping habits may impact sales[349]. - The company is exposed to foreign currency fluctuations that could affect operational results and asset values[349]. - Global or local conditions, including economic policies and supply chain challenges, may influence consumer purchasing behavior[349]. - Shipment delays and increased production costs could arise from operational disruptions at manufacturing or distribution facilities[349].

Core Insights - Estee Lauder reported $3.55 billion in revenue for the quarter ended March 2025, a year-over-year decline of 9.9% with an EPS of $0.65 compared to $0.97 a year ago, exceeding the Zacks Consensus Estimate of $3.51 billion by 1.22% and delivering an EPS surprise of 124.14% against a consensus estimate of $0.29 [1] Revenue Performance - Net sales in the Americas were $1.05 billion, below the average estimate of $1.08 billion, reflecting a year-over-year decline of 5.8% [4] - Net sales in Asia/Pacific reached $1.14 billion, surpassing the average estimate of $1.02 billion, but still showing a year-over-year decrease of 3.1% [4] - Net sales in Europe, the Middle East & Africa totaled $1.36 billion, slightly below the average estimate of $1.40 billion, with a significant year-over-year decline of 17.6% [4] - Skin Care net sales were $1.81 billion, compared to the average estimate of $1.87 billion, marking a year-over-year decline of 12.3% [4] - Makeup net sales were $1.04 billion, below the average estimate of $1.07 billion, reflecting an 8.9% year-over-year decline [4] - Other net sales were $25 million, exceeding the average estimate of -$38.46 million, with a year-over-year change of -3.9% [4] - Hair Care net sales were $126 million, below the average estimate of $134.79 million, representing an 11.9% year-over-year decline [4] - Fragrance net sales were $557 million, slightly below the average estimate of $574.19 million, with a year-over-year decline of 3.1% [4] Operating Income Analysis - Hair Care reported an operating loss of $13 million, worse than the average estimate of -$7.17 million [4] - Skin Care achieved an operating income of $361 million, slightly above the average estimate of $354.08 million [4] - Other segments reported an operating income of $9 million, significantly better than the average estimate of -$220.82 million [4] - Makeup reported an operating income of $14 million, below the average estimate of $53.44 million [4] Stock Performance - Estee Lauder shares have returned -12.8% over the past month, compared to a -0.7% change in the Zacks S&P 500 composite, with a current Zacks Rank of 3 (Hold) indicating potential performance in line with the broader market [3]

Financial Data and Key Metrics Changes - Organic sales declined by 9%, with a sequential improvement from a 4% decline in the second quarter to a 3% decline excluding Travel Retail [6][30] - Diluted earnings per share decreased by 33% to $0.65, which was better than anticipated [6][30] - Gross margin expanded by over 300 basis points for the fourth consecutive quarter, driven by the Profit Recovery and Growth Plan (PRGP) [6][30] - Operating margin contracted by 270 basis points to 11.4%, influenced by increased consumer-facing spending [6][30] Business Line Data and Key Metrics Changes - Travel Retail experienced a significant decline of 28% organically, continuing to shrink as a percentage of the overall business [6][30] - The U.S., China, and Japan saw share gains, with Clinique, The Ordinary, and Bumble and Bumble driving gains in the U.S. market [8][9] - Clinique gained share for eleven consecutive months through March, while La Mer and Estee Lauder fueled growth in China [9][10] Market Data and Key Metrics Changes - The company outperformed in the U.S., China, and Japan, marking the first share gains in the U.S. in many years [8][9] - In China, share gains were achieved in three of the last four quarters, indicating a strong brand presence [9][10] - The company is focused on expanding gains in key markets while reigniting share gains in the UK, Korea, and Mexico [10] Company Strategy and Development Direction - The company is committed to transforming its operating model to be leaner and more agile through the Beauty Reimagine strategic vision [5][30] - The PRGP aims to restore sustainable sales growth and achieve a solid double-digit adjusted operating margin over the next few years [5][30] - The company is exploring expansion with various retailers and focusing on innovative product launches to attract new consumers [10][17] Management's Comments on Operating Environment and Future Outlook - Management acknowledged elevated macroeconomic challenges but expressed confidence in returning to sales growth in fiscal 2026 [25][30] - The company expects continued softness in the Travel Retail business and tighter inventory management due to weakened consumer sentiment [25][30] - Management is closely monitoring external conditions, including tariffs and consumer sentiment, to navigate potential risks [39][40] Other Important Information - The company has approved initiatives to reduce over 2,600 net positions as part of the PRGP restructuring plan [23][30] - Capital expenditures were reduced by 44% compared to last year, reflecting a strong focus on optimizing capital expenditures [36][30] - The company is actively working on regionalizing its supply chain to mitigate tariff impacts and enhance supply chain agility [37][39] Q&A Session Summary Question: Inventory alignment across categories and geographies - Management noted significant progress in reducing inventory levels, particularly in Travel Retail, and emphasized ongoing monitoring of retail inventory [45][47] Question: FY26 planning assumptions and market trends - Management expressed confidence in returning to positive growth in FY26, citing market share gains in key regions and ongoing strategic initiatives [56][58] Question: Tariff regime and sourcing strategies - Management indicated plans to reduce product sourced from China to below 10% by the end of the fiscal year, leveraging manufacturing capabilities in Japan and Europe [72][74] Question: PRGP savings expectations and reinvestment - Management highlighted ongoing progress in the PRGP, with a focus on operational efficiencies and potential savings in fiscal 2025 and beyond [82][84]

Financial Data and Key Metrics Changes - Organic sales declined by 9%, with business excluding Travel Retail decreasing by 3% organically, showing sequential improvement from a 4% decline in the second quarter [6][30] - Diluted earnings per share decreased by 33% to $0.65, which was better than anticipated, indicating disciplined expense management [6][30] - Gross margin expanded over 300 basis points for the fourth consecutive quarter, driven by the Profit Recovery and Growth Plan (PRGP) [6][30] - Operating margin contracted by 270 basis points to 11.4%, influenced by increased consumer-facing spending [6][30] Business Line Data and Key Metrics Changes - Travel Retail experienced a significant decline of 28% organically, continuing to shrink as a percentage of the overall business [6][30] - Retail sales trends improved sequentially, with notable share gains in the U.S., China, and Japan, marking the first share gains in the U.S. in many years [7][9][31] - Clinique, The Ordinary, and Bumble and Bumble contributed to gains in the U.S., while La Mer and Estee Lauder drove growth in China [9][10] Market Data and Key Metrics Changes - The company gained market share in three of the last four quarters in China, with Clinique achieving eleven consecutive months of share gains in the U.S. [8][9] - Japan saw its fourth consecutive quarter of share gains, indicating strong brand performance in key markets [9][10] - Emerging markets in Southeast Asia also showed growth, with online organic sales growing in the mid-single digits [12][21] Company Strategy and Development Direction - The company is focused on its Beauty Reimagine strategic vision, aiming to transform its operating model to be leaner and more agile [5][30] - The PRGP is a key initiative, with plans to reduce over 2,600 net positions and streamline middle management by 20% [23][30] - The company is exploring expansion with new retailers and enhancing its online presence through platforms like Amazon and TikTok [10][12] Management's Comments on Operating Environment and Future Outlook - Management acknowledged elevated macroeconomic challenges but expressed confidence in returning to sustainable sales growth and achieving a solid double-digit adjusted operating margin in the coming years [5][30] - The outlook for fiscal 2025 anticipates continued headwinds in Travel Retail, with organic sales expected to decline between 9% to 8% [41][42] - Management is closely monitoring consumer sentiment, particularly in the U.S. and China, and is adjusting inventory levels accordingly [25][41] Other Important Information - The company generated $671 million in net cash flow from operating activities for the nine months, a decrease from $1.471 billion the previous year [35][36] - Capital expenditures were reduced by 44% to $395 million, reflecting a focus on optimizing capital expenditures [36][30] - The company is actively working on tariff mitigation strategies and regionalizing its supply chain to reduce exposure [37][39] Q&A Session Summary Question: Inventory alignment across categories and geographies - Management noted significant progress in reducing inventory levels, particularly in Travel Retail, and emphasized ongoing monitoring of retail inventory [46][48] Question: FY 2026 planning assumptions and market trends - Management expressed confidence in returning to positive growth in FY 2026, citing market share gains in key regions and ongoing improvements in retail sales [56][58] Question: Tariff sourcing and mitigation strategies - Management indicated plans to reduce the percentage of products sourced from China to below 10% by the end of the fiscal year, leveraging manufacturing capabilities in Japan and Europe [72][75] Question: Expectations for PRGP savings and reinvestment - Management confirmed they are on target for PRGP savings and are exploring further efficiencies, with a focus on outsourcing and procurement [84][87] Question: Sales growth and tariff impact on FY 2026 - Management clarified that the expectation for returning to growth in FY 2026 is a full-year comment, with ongoing monitoring of external risks related to tariffs and consumer sentiment [94][96]

Financial Data and Key Metrics Changes - Organic sales declined by 9%, with a sequential improvement from a 4% decline in the second quarter to a 3% decline excluding Travel Retail [7][32] - Diluted earnings per share decreased by 33% to $0.65, which was better than anticipated [7][32] - Gross margin expanded by over 300 basis points, marking the fourth consecutive quarter of improvement [7][34] - Operating margin contracted by 270 basis points to 11.4%, influenced by increased consumer-facing spending [8][34] Business Line Data and Key Metrics Changes - Travel Retail experienced a significant decline of 28% organically, continuing to shrink as a percentage of the overall business [7][32] - The U.S., China, and Japan saw share gains, with Clinique, The Ordinary, and Bumble and Bumble driving gains in the U.S. [9][10] - Clinique gained share for eleven consecutive months through March, while La Mer and Estee Lauder fueled growth in China [10][11] Market Data and Key Metrics Changes - The company outperformed in key markets, gaining share in the U.S., China, and Japan, marking the first share gains in the U.S. in many years [9][10] - In China, share gains were achieved in three of the last four quarters, while Japan saw its fourth consecutive quarter of share gains [10][11] - Online organic sales grew in the fourth quarter, driven by strong performance on platforms like Amazon and TikTok [13][14] Company Strategy and Development Direction - The company is focused on its "Beauty Reimagine" strategic vision, aiming to transform its operating model to be leaner and more agile [6][32] - The five action plan priorities include accelerating consumer coverage, creating transformative innovation, boosting consumer-facing investment, fueling sustainable growth through efficiencies, and reimagining the way the company works [11][25] - The company is committed to restoring sustainable sales growth and achieving a solid double-digit adjusted operating margin over the next few years [6][32] Management's Comments on Operating Environment and Future Outlook - Management acknowledged elevated macroeconomic challenges but expressed confidence in returning to sales growth in fiscal 2026 [27][32] - The company expects continued pressure in the Travel Retail business but anticipates a moderation in organic sales decline outside of Travel Retail [27][44] - Management highlighted the importance of monitoring consumer sentiment, particularly in the U.S. and China, as it impacts inventory management and sales [27][44] Other Important Information - The company has approved initiatives to reduce over 2,600 net positions as part of its restructuring plan [25][36] - Capital expenditures were reduced by 44% compared to the previous year, reflecting a focus on optimizing capital expenditures [38] - The company is exploring additional PRGP savings and strategic pricing to mitigate potential impacts from tariffs [42][43] Q&A Session Summary Question: Inventory alignment across categories and geographies - Management noted significant progress in reducing inventory levels, particularly in Travel Retail, and emphasized ongoing monitoring of retail inventory [48][50] Question: FY 2026 planning assumptions and market trends - Management expressed confidence in returning to positive growth in FY 2026, citing market share gains in key markets and improvements in retail sales [58][60] Question: Tariff sourcing and mitigation strategies - Management indicated plans to reduce product sourced from China to below 10% by the end of the fiscal year, leveraging manufacturing capabilities in Japan and Europe [74][76] Question: PRGP savings expectations and reinvestment - Management confirmed they are on target for PRGP savings and are focused on creating efficiencies through outsourcing and procurement projects [86][90] Question: Sales growth outlook and tariff impacts - Management stated that while tariffs pose risks, they are confident in their ability to navigate these challenges and return to growth in FY 2026 [98][100]

Financial Data and Key Metrics Changes - Organic sales declined by 9%, with a sequential improvement from a 4% decline in the second quarter to a 3% decline excluding Travel Retail [6][31] - Diluted earnings per share decreased by 33% to $0.65, which was better than anticipated [6][31] - Gross margin expanded by over 300 basis points, marking the fourth consecutive quarter of improvement [6][33] - Operating margin contracted by 270 basis points to 11.4%, influenced by increased consumer-facing spending [6][33] Business Line Data and Key Metrics Changes - Travel Retail experienced a significant decline of 28% organically, continuing to shrink as a percentage of the overall business [6][31] - The U.S., China, and Japan saw share gains, with Clinique, The Ordinary, and Bumble and Bumble driving gains in the U.S. [8][9] - Clinique gained share for eleven consecutive months through March, while La Mer and Estee Lauder fueled growth in China [9][10] Market Data and Key Metrics Changes - The company outperformed in the U.S., China, and Japan, marking the first share gains in the U.S. in many years [8][9] - In China, share gains were achieved in three of the last four quarters, indicating a strong brand presence [9][10] - The company is focused on expanding gains in key markets while reigniting share gains in the UK, Korea, and Mexico [10] Company Strategy and Development Direction - The company is committed to transforming its operating model to be leaner and more agile through the "Beauty Reimagine" strategic vision [5][30] - The PRGP (Profit Recovery and Growth Plan) aims to restore sustainable sales growth and achieve a solid double-digit adjusted operating margin over the next few years [5][31] - The company is exploring expansion with various retailers and focusing on innovative product launches to reach a wider audience [10][14] Management's Comments on Operating Environment and Future Outlook - Management expects headwinds in the Travel Retail business to be greater in the fourth quarter, but organic sales decline is anticipated to moderate [26][43] - There is a focus on tighter inventory management as retailers manage working capital, particularly in North America [26][50] - The company remains confident in returning to sales growth in fiscal 2026, contingent on resolving recent tariff issues [27][44] Other Important Information - The company has approved initiatives to reduce over 2,600 net positions as part of the PRGP restructuring plan [24][35] - Capital expenditures were reduced by 44% compared to last year, reflecting a strong focus on optimizing capital expenditures [37][38] - The company is actively monitoring trade policies and tariffs, with strategies in place to mitigate potential impacts [38][41] Q&A Session Summary Question: Inventory Alignment Across Categories and Geographies - Management noted significant progress in reducing inventory levels, particularly in Travel Retail, and is closely monitoring retail inventory adjustments [46][49] Question: FY 2026 Planning Assumptions - Management expressed confidence in returning to positive growth in fiscal 2026, citing market share gains in key markets and improvements in retail sales [54][60] Question: Tariff Sourcing and Mitigation Plans - The company aims to reduce the percentage of products sourced from China to below 10% by the end of the fiscal year, leveraging manufacturing capabilities in Japan and Europe [72][75] Question: PRGP Savings Expectations - Management is on target for PRGP savings and is exploring additional efficiencies, including outsourcing and procurement projects [86][90] Question: Sales Growth and Tariff Impact - Management indicated that the return to growth in fiscal 2026 is contingent on resolving tariff issues, with ongoing monitoring of consumer sentiment [97][104]

Estee Lauder (EL) came out with quarterly earnings of $0.65 per share, beating the Zacks Consensus Estimate of $0.29 per share. This compares to earnings of $0.97 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 124.14%. A quarter ago, it was expected that this beauty products company would post earnings of $0.32 per share when it actually produced earnings of $0.62, delivering a surprise of 93.75%.Over the last four quarters, ...

Financial Performance - Net sales decreased 10% to $3.55 billion, while organic net sales decreased 9% compared to the prior year[4]. - Operating income fell 42% to $306 million, with an operating margin of 8.6%, down from 13.5% in the prior-year period[4]. - Diluted net earnings per share decreased 52% to $0.44, while adjusted diluted net earnings per share decreased 33% to $0.65[5]. - Net sales for the three months ended March 31, 2025, were $3,550 million, a decrease of 10% compared to $3,940 million in the same period of 2024[42]. - Net sales for the nine months ended March 31, 2025, were $10,915 million, a decrease of 7% compared to $11,737 million in the same period of 2024[60]. - Net earnings for the nine months ended March 31, 2025, were a loss of $587 million, compared to a profit of $695 million in 2024[67]. - Operating income (loss) for the nine months ended March 31, 2025, was $(395) million, a decline of over 100% from $1,203 million in 2024[63]. - The company's diluted net earnings per common share for the nine months ended March 31, 2025, were $(1.63), a significant decline from $1.87 in 2024[63]. Sales by Category - Skin Care net sales decreased 11%, primarily due to declines in the Asia travel retail business and lower consumer sentiment in China[11]. - Makeup net sales decreased 7%, impacted by lower shipments for new product launches and retailer destocking[15]. - Fragrance net sales decreased 1%, with strong performance from Luxury Brands like Le Labo offsetting declines in other areas[15]. - The Americas region saw a 6% decline in net sales, while Europe, the Middle East & Africa experienced an 18% decline[16]. - Net sales in North America decreased by 5%, primarily due to retail softness and elevated inventory levels, despite a low single-digit increase in retail sales[19]. Gross Margin and Operating Income - Gross margin expanded 310 basis points to 75.0%, driven by the Profit Recovery and Growth Plan, despite the decline in net sales[5]. - Operating income decreased due to net sales decline and increased consumer-facing investments, partially offset by lower cost of sales and net benefits from the PRGP[22]. - Adjusted operating income (Non-GAAP) for the nine months ended March 31, 2025, was $1,009 million, down 19% from $1,239 million in 2024[63]. - Gross profit for the nine months ended March 31, 2025, was $8,141 million, down 3% from $8,406 million in 2024, with a gross margin of 74.6%[42]. Restructuring and Future Outlook - The Profit Recovery and Growth Plan (PRGP) aims to restore a solid double-digit adjusted operating margin by fiscal 2027, with restructuring charges estimated between $1.2 billion and $1.6 billion[25][27]. - The Company expects a net sales decline of 9% to 8% for the fiscal year ending June 30, 2025, with a high-single-digit organic net sales decline in Asia/Pacific[31]. - Forecasted diluted net earnings per share (EPS) for fiscal 2025 is projected to be between -$1.89 and -$1.61, with adjusted EPS expected to decline by 50% to 40% compared to the previous year[32]. - The company plans to complete specific initiatives under the restructuring program by the end of fiscal 2026, with an expanded focus on outsourcing and evolving selling models[45]. Impairments and Charges - The company recorded an impairment charge of $773 million for the TOM FORD brand and $75 million for the Too Faced brand due to interim impairment reviews[49]. - The impairment of goodwill and other intangible assets amounted to $861 million, with no such impairment reported in 2024[67]. - The company recorded a charge of $159 million related to talcum litigation settlement agreements in the fiscal 2025 first quarter[51]. Cash Flow and Capital Expenditures - Net cash flows provided by operating activities decreased to $671 million from $1,471 million year-over-year[67]. - Capital expenditures were reduced to $395 million from $702 million in the previous year[67]. - Dividends paid decreased to $492 million from $710 million year-over-year[67]. - The company’s cash and cash equivalents decreased to $2,631 million as of March 31, 2025, from $3,701 million in 2024[65]. Macroeconomic Factors - The company continues to monitor global macroeconomic factors, including inflationary pressures and supply chain challenges, which may impact consumer purchasing behavior[33]. - The global travel retail business experienced a strong double-digit decline, influenced by subdued consumer sentiment and strategic shifts by retailers in Korea and mainland China[22].