Financial Data and Key Metrics Changes - The company reported organic sales growth of 3% in the first quarter, a significant improvement from a 13% decline in the previous quarter [4][16]. - Gross margin expanded by 60 basis points to 73.3%, while operating margin increased by 300 basis points to 7.3% compared to the previous year [17][19]. - Diluted EPS more than doubled to $0.32, up from $0.14 last year [19]. Business Line Data and Key Metrics Changes - Fragrance category saw double-digit growth, while skincare experienced low single-digit growth [16]. - Makeup and hair care categories declined, contributing to a low single-digit decrease in the Americas [17]. - The Ordinary brand drove share gains in skincare, while Aveda contributed to share gains in hair care [7][11]. Market Data and Key Metrics Changes - Mainland China contributed positively to growth, with the company outperforming the prestige beauty market, achieving double-digit growth [5][42]. - High single-digit growth was reported in priority emerging markets, including Mexico, Turkey, and India [4]. - The UK market showed resilience with nearly 10% industry sales growth, while France and Spain also saw share gains [8][10]. Company Strategy and Development Direction - The company is focused on its "Beauty Reimagined" action plan, which includes enhancing consumer coverage, driving innovation, and increasing consumer-facing investments [5][12]. - A new partnership with Shopify aims to modernize and scale the direct-to-consumer business [14]. - The company plans to expand its presence in various channels, including Amazon and TikTok Shop, to better connect with younger consumers [9][78]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the fiscal 2024 outlook, emphasizing the importance of sustainable sales growth and rebuilding operating margins [5][24]. - The macroeconomic environment remains dynamic, with ongoing challenges in certain markets, particularly in the East [22][44]. - The company anticipates a non-linear growth path, with potential headwinds from tariffs impacting profitability by approximately $100 million [23]. Other Important Information - The company opened 14 net new freestanding stores and launched several new campaigns to enhance consumer engagement [12][15]. - The fiscal 2025 Social Impact and Sustainability Report highlighted achievements in climate, water, waste, and social investment [15]. Q&A Session Summary Question: Volume trends versus price mix - Management noted significant share gains driven by volume, with strategic price adjustments contributing to new consumer acquisition [26][30]. Question: Clarity on full-year guidance - Management explained that while Q1 results were strong, macro volatility and challenging comparisons in the second half influenced the decision to maintain guidance [40][46]. Question: Margin outlook for the year - Management reaffirmed guidance for gross and operating margins, indicating confidence in sequential improvement despite potential tariff impacts [52][54]. Question: Asia travel retail inventory levels - Management confirmed that travel retail inventory is appropriately sized relative to demand, with positive momentum observed in certain markets [60][66]. Question: Opportunities in new channels - Management emphasized the importance of moving quickly into new channels and enhancing existing ones, with ongoing efforts to expand distribution and consumer engagement [74][78].

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 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]