Estée Lauder(US:EL)2025-05-01 12:01Financial 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].