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Estée Lauder(EL) - 2024 Q4 - Annual Results
ELEstée Lauder(EL)2024-08-19 12:00

Net Sales Performance - Net sales decreased by 2% to 15.61billioninfiscal2024,withorganicnetsalesalsodecliningby215.61 billion in fiscal 2024, with organic net sales also declining by 2%[1] - Skin Care net sales decreased by 3%, primarily due to softness in mainland China and Asia travel retail[11] - Makeup net sales decreased by 1%, driven by global travel retail business and prior-year benefits from M·A·C's loyalty program changes[13] - Fragrance net sales increased by 2%, led by mid-single-digit growth from Luxury Brands[14] - Hair Care net sales declined by 4%, primarily due to Aveda's performance in North America[16] - Net sales in The Americas increased by 1% to 4,581 million, driven by double-digit growth in Latin America, particularly in Mexico and Brazil, offset by flat performance in North America[17][19] - Europe, the Middle East & Africa net sales decreased by 2% to 6,140million,primarilyduetochallengesinAsiatravelretail,partiallyoffsetbygrowthinSkinCare,Makeup,andluxuryfragrancebrands[17][20]−Asia/Pacificnetsalesdecreasedby36,140 million, primarily due to challenges in Asia travel retail, partially offset by growth in Skin Care, Makeup, and luxury fragrance brands[17][20] - Asia/Pacific net sales decreased by 3% to 4,888 million, with mainland China experiencing a decline, while Hong Kong SAR and Japan saw double-digit growth[17][21] - Total net sales for the company decreased by 2% to 15,608million,withorganicnetsalesdecliningby215,608 million, with organic net sales declining by 2%[17] - Net sales for the three months ended June 30, 2024, increased by 7% to 3,871 million compared to 3,609millioninthesameperiodin2023[47]−NetsalesfortheyearendedJune30,2024,decreasedby23,609 million in the same period in 2023[47] - Net sales for the year ended June 30, 2024, decreased by 2% to 15,608 million compared to 15,910millioninthepreviousyear[47]−NetsalesforthethreemonthsendedJune30,2024,were15,910 million in the previous year[47] - Net sales for the three months ended June 30, 2024, were 3.871 billion, with a 7% increase on a non-GAAP basis and 8% on a constant currency basis[59] - Net sales for the year ended June 30, 2024, were 15.608billion,witha215.608 billion, with a 2% decrease on a non-GAAP basis and 1% decrease on a constant currency basis[61] Earnings and Profitability - Diluted EPS declined by 61% to 1.08, while adjusted diluted EPS decreased by 25% to 2.59[1]−Netearningsdroppedto2.59[1] - Net earnings dropped to 0.39 billion from 1.01billionintheprioryear,withaneffectivetaxrateof47.01.01 billion in the prior year, with an effective tax rate of 47.0%[2] - Total reported operating income decreased by 36% to 0.97 billion, with adjusted operating income down 10% to 1.64billion[7]−OperatingincomeinTheAmericasincreasedby1.64 billion[7] - Operating income in The Americas increased by 174 million, driven by a full-year true-up of charges and a decrease in intangible asset impairments, partially offset by lower intercompany royalty income[19] - Operating income in Europe, the Middle East & Africa was virtually flat, with a decrease of 131millionoffsetbylowercostsofsalesandreducedroyaltyexpenses[20]−OperatingincomeinAsia/Pacificdecreasedduetoa131 million offset by lower costs of sales and reduced royalty expenses[20] - Operating income in Asia/Pacific decreased due to a 371 million increase in goodwill and intangible asset impairments related to Dr.Jart+[21] - Net loss for the fiscal 2023 fourth quarter was 284million,withadilutednetlosspercommonshareof284 million, with a diluted net loss per common share of .79, compared to a net loss of 33millionanddilutednetlosspercommonshareof33 million and diluted net loss per common share of .09 in the prior-year period[28] - Adjusted diluted net earnings per common share for the three months ended June 30, 2024 was .64,upfrom.64, up from .07 in the same period in 2023, and .67inconstantcurrency[28]−Reporteddilutednetearningspercommonshareforfiscal2025areprojectedtobebetween.67 in constant currency[28] - Reported diluted net earnings per common share for fiscal 2025 are projected to be between 2.52 and 2.76,withadjusteddilutednetearningspercommonshareexpectedtoincreasebetween72.76, with adjusted diluted net earnings per common share expected to increase between 7% and 15% on a constant currency basis[36] - Reported diluted net earnings per common share for the first quarter of fiscal 2025 are projected to be (.09) to flat, with adjusted diluted net earnings per common share expected to decrease between 89% and 17% on a constant currency basis[38] - Gross profit for the three months ended June 30, 2024, increased by 14% to 2,778million,withagrossmarginof71.82,778 million, with a gross margin of 71.8%, up from 67.8% in the same period in 2023[47] - Gross profit for the three months ended June 30, 2024, was 2.778 billion, showing a 13% increase on a non-GAAP basis and 14% on a constant currency basis[59] - Gross profit for the year ended June 30, 2024, was 11.184billion,showinga211.184 billion, showing a 2% decrease on a non-GAAP basis and 1% decrease on a constant currency basis[61] - Operating income for the three months ended June 30, 2024, improved to 349 million on a non-GAAP basis, compared to an operating loss of 233millionasreported[59]−OperatingincomefortheyearendedJune30,2024,was233 million as reported[59] - Operating income for the year ended June 30, 2024, was 970 million, with a 13% decrease on a non-GAAP basis and 10% decrease on a constant currency basis[61] - Net earnings for the twelve months ended June 2024 were 409million,downfrom409 million, down from 1,010 million in the previous year[63] Impairments and Restructuring - The company recorded a goodwill impairment charge of 291millionandanintangibleassetimpairmentchargeof291 million and an intangible asset impairment charge of 180 million for the Dr.Jart+ reporting unit in fiscal 2024[51] - The company announced a two-year restructuring program expected to result in charges between 500millionand500 million and 700 million, focusing on reorganization and process simplification[48] - The company expects to take restructuring charges between 99millionand99 million and 119 million for the full year fiscal 2025, and between 54millionand54 million and 59 million for the first quarter fiscal 2025[36][38] - Total restructuring and other charges for the year ended June 30, 2024, amounted to 618million,withadilutedEPSimpactof618 million, with a diluted EPS impact of 1.51[55] - For the year ended June 30, 2023, total restructuring and other charges were 314million,withadilutedEPSimpactof314 million, with a diluted EPS impact of 0.67[56] - The company recorded an impairment charge of 100millionforDr.Jart+and100 million for Dr.Jart+ and 86 million for Too Faced trademarks due to changes in circumstances and increased weighted average cost of capital[53] - Other intangible asset impairment charges for the twelve months ended June 30, 2023, were 207million(207 million (159 million, net of tax), impacting 0.44percommonshare[54]CashFlowandFinancialPosition−Netcashflowsfromoperatingactivitiesincreasedto0.44 per common share[54] Cash Flow and Financial Position - Net cash flows from operating activities increased to 2.36 billion, up from 1.73billionintheprioryear,drivenbylowerworkingcapitalandimprovedinventorymanagement[22]−Thecompanyendedtheyearwith1.73 billion in the prior year, driven by lower working capital and improved inventory management[22] - The company ended the year with 3.40 billion in cash and cash equivalents and paid dividends of 0.95billion[23]−Cashandcashequivalentsdecreasedto0.95 billion[23] - Cash and cash equivalents decreased to 3,395 million from 4,029millionyear−over−year[62]−Accountsreceivableincreasedto4,029 million year-over-year[62] - Accounts receivable increased to 1,727 million from 1,452millionyear−over−year[62]−Inventoryandpromotionalmerchandisedecreasedto1,452 million year-over-year[62] - Inventory and promotional merchandise decreased to 2,175 million from 2,979millionyear−over−year[62]−Totalcurrentassetsdecreasedto2,979 million year-over-year[62] - Total current assets decreased to 7,922 million from 9,139millionyear−over−year[62]−Netcashflowsfromoperatingactivitiesincreasedto9,139 million year-over-year[62] - Net cash flows from operating activities increased to 2,360 million from 1,731millionyear−over−year[63]−Capitalexpenditureswere1,731 million year-over-year[63] - Capital expenditures were 919 million, down from 1,003millioninthepreviousyear[63]−Dividendspaidincreasedto1,003 million in the previous year[63] - Dividends paid increased to 947 million from 925millionyear−over−year[63]−Proceedsfromissuanceoflong−termdebt,netwere925 million year-over-year[63] - Proceeds from issuance of long-term debt, net were 648 million, down from 1,995millioninthepreviousyear[63]−Paymentsforacquisitionofredeemablenoncontrollinginterestwere1,995 million in the previous year[63] - Payments for acquisition of redeemable noncontrolling interest were 745 million[63] Strategic Initiatives and Outlook - The company anticipates continued declines in the prestige beauty segment in China for fiscal 2025, with plans to drive share gains[3] - The Profit Recovery and Growth Plan aims to offset profitability pressures in China, with a focus on cost structure and organizational agility[4] - The company expects global prestige beauty to grow 2%-3% in fiscal 2025, with a re-acceleration to mid-single-digit growth in fiscal 2026, assuming stabilization and growth in China[29] - The company anticipates more tempered performance in fiscal 2025 due to significant business in mainland China and Asia travel retail, but expects accelerated net sales growth elsewhere driven by strategic priorities[30] - The Profit Recovery and Growth Plan (PRGP) is expected to drive operating profit net savings of 1.1billionto1.1 billion to 1.4 billion in fiscal years 2025 and 2026, with slightly more than half realized in fiscal 2025[31] - Full-year fiscal 2025 net sales are forecasted to range between a decrease of 1% and an increase of 2% versus the prior year[35] - First quarter fiscal 2025 net sales are forecasted to decrease between 5% and 3% versus the prior-year period[37] - The company revised its internal forecasts for the Dr.Jart+ and Too Faced reporting units due to lower-than-expected growth in key geographic regions and channels impacted by COVID-19[52] Acquisitions and Investments - The company completed the acquisition of DECIEM Beauty Group Inc. for 859million,with859 million, with 829 million paid as of June 30, 2024[23] - The company recorded 15millionand15 million and 23 million in expenses related to the change in fair value of DECIEM acquisition-related stock options for the three and twelve months ended June 30, 2024, respectively[50]