Workflow
Estée Lauder(EL) - 2025 FY - Earnings Call Transcript
Estée LauderEstée Lauder(US:EL)2025-09-03 21:30

Financial Data and Key Metrics Changes - The company is entering fiscal 2026 with momentum and has made progress in transforming its operations, particularly in regaining market share in the Americas and China after years of decline [4][6] - The company aims for a significant improvement in adjusted operating margin, targeting a swing of 8% to 11% within one fiscal year, with a midpoint improvement of 165 basis points [65][66] Business Line Data and Key Metrics Changes - The Americas region has seen a positive shift, with the company gaining market share for the first time in a long while, attributed to increased consumer-facing spend and investment [11][12] - The company plans for over 25% of its total business to come from innovation, indicating a strong focus on new product development [7][21] Market Data and Key Metrics Changes - The Chinese market is stabilizing, with expectations of mid-single-digit growth, while the company is gaining market share across various brands, including La Mer and Tom Ford [28][29] - Emerging markets, particularly India and Southeast Asia, are critical to the company's strategy, with a goal to increase their contribution to total business from 10% to mid-double digits [33][34] Company Strategy and Development Direction - The company is focused on a strategy called "Beauty Reimagined," which emphasizes consumer coverage and innovation, aiming to reposition products at more acceptable price points to attract new consumers and reengage lapsed ones [5][22][25] - The operational transformation is described as the largest in the company's history, aimed at simplifying processes and enhancing decision-making speed [9][60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the U.S. market's robustness and the luxury beauty segment's resilience amid economic challenges, while cautioning about risks in Continental Europe due to subdued consumer confidence [39][41] - The company is committed to navigating external volatility and maintaining focus on its strategic goals, despite challenges such as tariffs and market fluctuations [70][71] Other Important Information - The company is leveraging AI to enhance efficiency in product development, significantly reducing the time required for stability testing and packaging risk [19][21] - There is an ongoing review of the product portfolio to ensure alignment with the new strategy, which may involve culling underperforming products or brands [61][62] Q&A Session Summary Question: What is the outlook for growth in China? - The company expects mid-single-digit growth in China, with a focus on gaining market share across various brands, despite the market's maturation [28][29] Question: How is the company addressing the competitive environment in China? - Management noted that international brands are currently growing faster than local brands, with a focus on luxury segments [31][32] Question: What is the strategy for emerging markets? - The company aims to increase the contribution of emerging markets to total business, with significant investments planned for India and Southeast Asia [33][34] Question: How does the company balance investment and margin restoration? - The company is focused on reinvesting to fuel growth while also aiming to restore margins, with a clear strategy to improve efficiency and leverage in the P&L [66][68] Question: What does success look like for the company in the next year? - Success is defined by consistent market share gains beyond the U.S. and China, with a focus on agility and operational efficiency [70][71]