Full Year Net Sales Increased 9% and Diluted
EPS Decreased to $6.55 from $7.79
Organic Net Sales1 Grew 8% and Adjusted
Diluted EPS Increased 12% in Constant Currency
Strong Organic Sales Growth Expected in
Fiscal 2023
The Estée Lauder Companies Inc. (NYSE: EL) today reported net
sales of $17.74 billion for its fiscal year ended June 30, 2022, an
increase of 9% from $16.22 billion in the prior-year period.
Organic net sales increased 8%, driven by double-digit growth in
The Americas and Europe, the Middle East & Africa (“EMEA”)
regions, largely reflecting a recovery in brick-and-mortar retail
stores, as well as double-digit growth in global online2 and growth
in travel retail.
The Company reported net earnings3 of $2.39 billion, compared
with net earnings of $2.87 billion in the prior-year period.
Diluted net earnings per common share was $6.55, compared with
$7.79 reported in the prior-year period. Excluding restructuring
and other charges and adjustments as detailed on page 3, adjusted
diluted net earnings per common share was $7.24, a 12% increase in
constant currency.
Fabrizio Freda, President and Chief Executive Officer said, “We
delivered excellent results in fiscal 2022, exceeding our
expectations in the fourth quarter and achieving record revenue and
profitability on an adjusted basis for the year. Our multiple
engines of growth strategy proved invaluable amid pandemic and
macro complexity, affording us the diversification to seize growth
of the moment. The Americas and EMEA prospered, Fragrance soared,
and Makeup realized the promise of its emerging renaissance.
“La Mer, M·A·C, and Jo Malone London led the contribution of
double-digit organic sales growth by nine brands, impressive on its
own and especially so given the significant pressure from COVID-19
in Asia/Pacific at the end of the year. Brick-and-mortar and Online
each grew globally, as we capitalized on reopening, extended our
consumer reach in high-growth channels, and amplified our
omni-channel capabilities.”
_________________________________
1 Organic net sales represents net sales
excluding returns associated with restructuring and other
activities; non-comparable impacts of acquisitions, divestitures
and brand closures; as well as the impact of currency
translation. We believe that the Non-GAAP measure of organic
net sales growth provides year-over-year sales comparisons on a
consistent basis. See page 2 for reconciliations to GAAP.
2 Online sales discussed throughout
includes sales of our products from our websites and third-party
platforms, as well as estimated sales of our products sold through
our retailers’ websites.
3 Net earnings attributable to The Estée
Lauder Companies Inc. which excludes net (earnings)/loss
attributable to noncontrolling interests and redeemable
noncontrolling interest.
Freda concluded, “We are very confident in the strength of our
Company and in the vibrant long-term growth opportunity of prestige
beauty, but recognize the environment remains complex and uncertain
at this point in time. For fiscal 2023, we expect to deliver strong
organic sales growth, fueled by our diversified growth engines and
enticing innovation, and to take the opportunity in this volatile
year to continue investing for our exciting future.”
COVID-19 Business Update
The COVID-19 pandemic continued to disrupt the Company’s
operating environment globally, primarily impacting supply chain,
inventory levels and other logistics during the year ended June 30,
2022. The resurgence of COVID-19 cases in many Chinese provinces
led to restrictions late in the fiscal 2022 third quarter that
remained in place through the end of fiscal 2022 to prevent further
spread of the virus. Consequently, retail traffic, travel and
distribution capabilities were temporarily curtailed. The Company’s
distribution facilities in Shanghai operated with limited capacity
to fulfill brick-and-mortar and online orders beginning in
mid-March 2022 and returned to normal capacity by early June
2022.
Fiscal 2022 Results
Organic net sales growth represents net sales growth excluding
returns associated with restructuring and other activities;
non-comparable impacts of acquisitions, divestitures and brand
closures (notably the acquisition of the majority interest in
Deciem Beauty Group Inc. (“DECIEM”) and the closure of BECCA); as
well as the impact of currency translation. Product category and
geographic region sales commentary reflect organic performance.
Reconciliation between GAAP
and Non-GAAP Net Sales Growth
(Unaudited)
Year Ended June 30,
2022
As Reported - GAAP(1)
9
%
Organic, Non-GAAP(2)
8
%
Impact of acquisitions, divestitures and
brand closures, net
2
Impact of foreign currency translation
(1
)
Returns associated with restructuring and
other activities
—
As Reported - GAAP(1)
9
%
(1)Includes returns associated with
restructuring and other activities
(2)Organic net sales growth represents net
sales growth excluding returns associated with restructuring and
other activities; non-comparable impacts of acquisitions,
divestitures and brand closures (notably DECIEM and BECCA); as well
as the impact of currency translation.
Adjusted diluted earnings per common share excludes
restructuring and other charges and adjustments as detailed in the
following table.
Reconciliation between GAAP
and Non-GAAP - Diluted Earnings Per Share (“EPS”)
(Unaudited)
Year Ended June 30
2022
2021
Growth
As Reported EPS - GAAP(1)
$
6.55
$
7.79
(16
)%
Non-GAAP
Restructuring and other charges
.31
.48
Changes in fair value of contingent
consideration
—
(.01
)
Change in fair value of
acquisition-related stock options (less the portion attributable
to
redeemable noncontrolling interest)
(.12
)
.09
Goodwill, other intangible and long-lived
asset impairments
.50
.40
Other income
—
(2.30
)
Adjusted EPS - Non-GAAP
$
7.24
$
6.45
12
%
Impact of foreign currency translation on
earnings per share
(.04
)
Adjusted Constant Currency EPS -
Non-GAAP
$
7.20
12
%
(1)Includes restructuring and other
charges and adjustments
Net sales in most of the Company’s product categories and in
EMEA were adversely impacted by a stronger U.S. dollar in relation
to most currencies. Operating income was favorably impacted by the
stronger U.S. dollar.
Total reported operating income was $3.17 billion, an increase
from $2.62 billion in the prior-year period. In constant currency,
adjusted operating income increased 13% to $3.48 billion, primarily
reflecting higher net sales and excluding the following items:
- Fiscal 2022: $241 million of other intangible asset impairments
related to Dr.Jart+ and GLAMGLOW and $144 million of restructuring
and other charges, partially offset by $55 million of income
related to the change in fair value of DECIEM acquisition-related
stock options.
- Fiscal 2021: $226 million of restructuring and other charges
and adjustments, $117 million of goodwill and other intangible
asset impairments related to GLAMGLOW and Smashbox, $71 million of
asset impairments related to some of the Company’s freestanding
stores and $40 million of DECIEM acquisition-related stock options
expense.
- The favorable impact of currency translation of $21
million.
Results by Product Category
(Unaudited)
Year Ended June 30
Net Sales
Percentage Change
Operating Income
(Loss)
Percentage Change
($ in millions)
2022
2021
Reported Basis
Constant Currency
2022
2021
Reported Basis
Skin Care
$
9,886
$
9,484
4
%
4
%
$
2,753
$
3,036
(9
)%
Makeup
4,667
4,203
11
12
133
(384
)
100
+
Fragrance
2,508
1,926
30
32
456
215
100
+
Hair Care
631
571
11
12
(28
)
(19
)
(47
)
Other
49
45
9
9
—
(2
)
100
Subtotal
$
17,741
$
16,229
9
%
10
%
$
3,314
$
2,846
16
%
Returns/charges associated with
restructuring and other activities
(4
)
(14
)
(144
)
(228
)
Total
$
17,737
$
16,215
9
%
10
%
$
3,170
$
2,618
21
%
Organic Net Sales Growth -
Reconciliation to GAAP (Unaudited)
Year Ended June 30 2022
vs. 2021
Organic Net Sales
Growth (Non-GAAP)(1)
Impact of Acquisitions,
Divestitures and Brand Closures, Net
Impact of Foreign Currency
Translation
Net Sales Growth
(GAAP)
Skin Care
—
%
4
%
—
%
4
%
Makeup
12
—
(1
)
11
Fragrance
32
—
(2
)
30
Hair Care
12
—
(1
)
11
Other
4
5
—
9
Subtotal
8
%
2
%
(1
)%
9
%
Returns associated with restructuring and
other activities
—
Total
8
%
2
%
(1
)%
9
%
(1)Organic net sales growth represents net
sales growth excluding returns associated with restructuring and
other activities; non-comparable impacts of acquisitions,
divestitures and brand closures (notably DECIEM and BECCA); as well
as the impact of currency translation.
Skin Care
- Skin care net sales grew in The Americas, which was offset by a
decline in the EMEA region. Net sales growth from La Mer, Clinique
and Bobbi Brown was offset by a decline from Estée Lauder. High
single-digit growth in the first nine months of the fiscal year was
offset by the negative impacts from the increased COVID-related
restrictions in China in the fourth quarter, including the
temporarily reduced capacity at the Company’s distribution
facilities in Shanghai, resulting in flat skin care growth for the
fiscal year.
- The non-comparable impacts of net sales related to
acquisitions, divestitures and brand closures contributed
approximately 4 percentage points to net sales growth.
- Double-digit growth from La Mer was driven by strength among
Chinese consumers in both mainland China and travel retail. Net
sales growth reflected increases in hero products, including Crème
de la Mer and the upgrade to The Treatment Lotion. The launch of
The Hydrating Infused Emulsion and targeted expanded consumer
reach, including the launch on a new online platform in mainland
China, also contributed to growth.
- Clinique net sales growth was driven by strong demand for its
hero products, including the Take The Day Off line of products and
Even Better Clinical Radical Dark Spot Corrector + Interrupter, as
well as the launch of Smart Clinical Repair Wrinkle Correcting
Serum.
- Bobbi Brown delivered strong double-digit skin care net sales
growth in every region, led by robust demand from Chinese
consumers. Net sales growth reflected increases in hero products,
including Soothing Cleansing Oil and Vitamin Enriched Face Base.
Successful performance during holiday and key shopping moments, as
well as targeted consumer reach also contributed to growth.
- Estée Lauder skin care net sales declined, reflecting
challenges in the second half of fiscal 2022 due to the resurgence
of COVID-19 cases in Asia that led to increased restrictions. Estée
Lauder was disproportionately impacted by the temporarily reduced
capacity at the Company’s distribution facilities in Shanghai in
the fourth quarter. Difficult comparisons to the prior-year launch
of the upgraded Advanced Night Repair Synchronized Multi-Recovery
Complex also impacted growth.
- Skin care operating income decreased, primarily from lower net
sales related to the resurgence of COVID-19 cases in Asia in the
second half of fiscal 2022, as well as the year-over-year increase
of goodwill and other intangible asset impairments of approximately
$135 million.
Makeup
- Makeup net sales increased among most brands, reflecting
continued recovery in western markets, increased usage occasions
and easier comparisons to the prior year. The growth was led by
increases from both M·A·C and Estée Lauder.
- M·A·C’s double-digit net sales growth was driven by hero
products, such as Studio Fix, the launch of MACStack mascara, and
successful social media campaigns to drive the makeup
renaissance.
- Double-digit net sales growth from Estée Lauder was fueled by
the Double Wear and Futurist foundation product lines, as well as
the successful launch of Double Wear Sheer Long-Wear Makeup.
- Makeup operating income improved, primarily reflecting higher
net sales and the year-over-year reduction of other intangible and
long-lived asset impairments of approximately $63 million.
Fragrance
- Net sales grew across every region and every fragrance brand,
led by Jo Malone London, Tom Ford Beauty and Le Labo.
- Jo Malone London’s net sales grew strong double digits,
primarily driven by strength in colognes, particularly in hero
franchises like English Pear & Freesia as well as the launches
of House of Roses and the Blossoms Collection. Bath & Body and
Home also delivered strong growth reflecting consumer habits
developed during the pandemic. Successful performance during
holiday and key shopping moments also contributed to growth.
- Tom Ford Beauty grew strong double digits, reflecting strength
in its Signature and Private Blend fragrances, including Black
Orchid and Oud Wood. The launch of Ombre Leather Parfum also
contributed to growth and helped drive the Ombre Leather
franchise.
- Net sales from Le Labo also rose strong double digits with
growth in all regions, reflecting the recovery of brick-and-mortar,
improved retail traffic, and targeted expanded consumer reach.
Growth was driven by hero fragrances, such as Santal 33, as well as
the successful launch of Thé Matcha 26.
- Fragrance operating income increased, driven primarily by
higher net sales, partially offset by strategic investments to
support brick-and-mortar reopening.
Hair Care
- Hair care net sales rose across every region, reflecting
increases from both Aveda and Bumble and bumble as brick-and-mortar
recovered from prior-year closures related to COVID-19 through much
of the world.
- Aveda’s growth reflected the continued success of its hero
franchises, including Botanical Repair and Nutriplenish, as well as
the relaunch of Full Spectrum Semi-Permanent Treatment Hair Color
and the launch of Botanical Repair Strengthening Overnight
Serum.
- Double-digit net sales growth at Bumble and bumble primarily
reflected growth in hero franchises and the launches of Thickening
Plumping Mask and Thickening Go Big Plumping Treatment. Targeted
expanded consumer reach also contributed to growth.
- Hair care operating results declined reflecting strategic
investments to support the brick-and-mortar recovery and targeted
expanded consumer reach, partially offset by higher net sales.
Results by Geographic
Region
(Unaudited)
Year Ended June 30
Net Sales
Percentage Change
Operating Income
Percentage Change
($ in millions)
2022
2021
Reported Basis
Constant Currency
2022
2021
Reported Basis
The Americas
$
4,623
$
3,797
22
%
21
%
$
1,159
$
518
100
+%
Europe, the Middle East & Africa
7,681
6,946
11
12
1,360
1,335
2
Asia/Pacific
5,437
5,486
(1
)
(1
)
795
993
(20
)
Subtotal
$
17,741
$
16,229
9
%
10
%
$
3,314
$
2,846
16
%
Returns/charges associated with
restructuring
and other activities
(4
)
(14
)
(144
)
(228
)
37
Total
$
17,737
$
16,215
9
%
10
%
$
3,170
$
2,618
21
%
Organic Net Sales Growth -
Reconciliation to GAAP
(Unaudited)
Year Ended June 30
2022 vs. 2021
Organic Net Sales
Growth (Non-GAAP)(1)
Impact of Acquisitions,
Divestitures and Brand Closures, Net
Impact of Foreign Currency
Translation
Net Sales Growth
(GAAP)
The Americas
16
%
5
%
1
%
22
%
Europe, the Middle East & Africa
10
2
(1
)
11
Asia/Pacific
(2
)
1
—
(1
)
Subtotal
8
%
2
%
(1
)%
9
%
Returns associated with restructuring and
other activities
—
Total
8
%
2
%
(1
)%
9
%
(1)Organic net sales growth represents net
sales growth excluding returns associated with restructuring and
other activities; non-comparable impacts of acquisitions,
divestitures and brand closures (notably DECIEM and BECCA); as well
as the impact of currency translation.
The Americas
- Net sales grew strong double digits in the United States,
Canada and Latin America as brick-and-mortar retail traffic
recovered during the year. Net sales increased in every product
category and in nearly every distribution channel.
- The non-comparable impacts of net sales related to
acquisitions, divestitures and brand closures contributed
approximately 5 percentage points to net sales growth.
- Brick-and-mortar net sales increased strong double digits,
benefiting from the year-over-year increase in open retail
locations, as well as improved traffic.
- In North America, net sales growth was led by makeup, which was
disproportionately impacted by the greater challenges stemming from
the COVID-19 pandemic in the prior-year period, as well as
continued growth in fragrance.
- In Latin America, net sales grew in nearly every market and
product category.
- Operating income in The Americas increased, primarily
reflecting higher net sales, the year-over-year reduction of
goodwill, other intangible and long-lived asset impairments of $129
million, partially offset by strategic investments to support the
reopening of brick-and-mortar retail and the makeup recovery.
Europe, the Middle East &
Africa
- Net sales grew in nearly every market, led by the United
Kingdom. The growth reflects strong double-digit recovery in
brick-and-mortar compared to the prior year when retail traffic was
more negatively impacted by COVID-19.
- The non-comparable impacts of net sales related to
acquisitions, divestitures and brand closures contributed
approximately 2 percentage points to net sales growth.
- Net sales from most emerging markets in the region increased
double digits, driven by the brick-and-mortar recovery.
- Net sales grew double digits in makeup, fragrance and haircare,
partly reflecting the return of more social activities and in-store
services.
- Global travel retail net sales increased year-over-year
reflecting continued growth from Asia/Pacific despite increased
travel restrictions beginning in March 2022 that particularly
impacted Hainan. Travel retail net sales also grew from EMEA and
The Americas driven by increased traffic as COVID-19 restrictions
were lifted.
- Operating income increased, reflecting brick-and-mortar
recovery, partially offset by an increase in the intercompany
royalty expense related to the growth in our travel retail
business.
Asia/Pacific
- Net sales declined slightly, reflecting variability in recovery
and COVID restrictions across the region. Net sales growth in more
than half of the markets in the region was offset by increased
COVID-19 restrictions during the second half of fiscal 2022.
Mid-single-digit growth in the first nine months of the fiscal year
was offset by the negative impacts from the increased COVID-related
restrictions in China in the fourth quarter, including the
temporarily reduced capacity at the Company’s distribution
facilities in Shanghai, resulting in a modest decline in
Asia/Pacific growth for the fiscal year.
- The non-comparable impacts of net sales related to
acquisitions, divestitures and brand closures contributed
approximately 1 percentage point to net sales growth.
- Net sales declines in makeup and skin care were only partly
offset by net sales growth from fragrance and hair care in the
region.
- Net sales declined in brick-and-mortar due to soft traffic in
areas most impacted by rising cases of COVID-19. Strong
double-digit online growth partly offset the decline in
brick-and-mortar as the Company and many retailers continued to
capture consumer demand online.
- In mainland China, net sales was close to flat year-over-year
as the impact from the rise in COVID-19 restrictions was mostly
offset by very strong growth in the first half of fiscal 2022. Net
sales benefited from successful programs during key shopping
events, including the 11.11 Global Shopping Festival and the 6.18
Mid-Year Shopping Festival, where the Estée Lauder brand was ranked
the #1 prestige beauty flagship store on both Tmall and JD.
- Operating income decreased, due entirely to the fiscal 2022
other intangible asset impairment of $230 million relating to
Dr.Jart+.
Cash Flows
- For the twelve months ended June 30, 2022, net cash flows
provided by operating activities were $3.04 billion, compared with
$3.63 billion in the prior year, reflecting higher working capital
needs to support growth and to mitigate the global supply chain
challenges, as well as higher cash paid for taxes, partially offset
by higher earnings before taxes, excluding non-cash items.
- Capital Expenditures increased to $1.04 billion compared to
$0.64 billion in the prior-year period, primarily driven by
increased investments for a new manufacturing facility in Japan,
online capabilities, the Company’s freestanding stores and counters
at retailers to support new and existing distribution and
information technology enhancements as well as investments to
support the reopening of the Company’s offices located around the
world, which were previously closed due to COVID-19.
- The Company ended the year with $3.96 billion in cash and cash
equivalents after returning $3.15 billion cash to stockholders
through dividends and share repurchases during the twelve month
period.
Fourth Quarter Results
- For the three months ended June 30, 2022, the Company reported
net sales of $3.56 billion, a 10% decrease compared with $3.94
billion in the prior-year period. Organic net sales decreased
8%.
- Strong growth in The Americas where improved foot traffic in
brick-and-mortar drove net sales growth in every category was more
than offset by the negative impacts from the increased
COVID-related restrictions in China that affected travel and retail
traffic as well as temporarily reducing capacity at the Company’s
Shanghai distribution facilities. In addition, the Company
suspended commercial activities in Russia and Ukraine after the
invasion of Ukraine. As a result, net sales declined in both
Asia/Pacific and EMEA.
- Net earnings4 were $52 million, and diluted earnings per share
was $.14. In the prior-year quarter, the Company reported net
earnings4 of $1.02 billion and diluted earnings per share of
$2.76.
- During the three-months ended June 30, 2022, the Company
recorded restructuring and other charges, other intangible asset
impairments, and expense relating to the change in fair value of
acquisition-related stock options that, combined, resulted in an
unfavorable impact of $128 million ($101 million less the portion
attributable to redeemable noncontrolling interest and net of tax),
equal to $.28 per diluted share, as detailed on page 18. The
prior-year period results include restructuring and other charges,
changes in contingent consideration, goodwill, other intangible and
long-lived asset impairments, acquisition-related stock option
expense (less the portion attributable to redeemable noncontrolling
interest), and other income primarily related to a gain on a
previously held equity investment in DECIEM that, combined,
resulted in a favorable impact of $696 million ($731 million after
tax), equal to $1.98 per diluted share, as detailed on page
18.
- Excluding restructuring and other charges and adjustments
referred to in the previous bullet, adjusted diluted net earnings
per common share for the three months ended June 30, 2022 was $.42,
a decrease from adjusted diluted net earnings per common share of
$.78 in the three months ended June 30, 2021. Adjusted diluted net
earnings per common share was $.43 in constant currency.
_________________________________
4 Net earnings attributable to The Estée
Lauder Companies Inc. which excludes net (earnings)/loss
attributable to noncontrolling interests and redeemable
noncontrolling interest.
Outlook for Fiscal 2023 First Quarter
and Full Year
The Company enters the fiscal year during a volatile period of
record inflation, supply chain disruptions, strengthening U.S.
dollar, risk of a slowdown in many markets globally, and with a
strong headwind from the August 2022 COVID-19 restrictions in
Hainan. The Company remains excited about the prospects and future
growth in global prestige beauty and plans to invest in its
business during this difficult environment to support share gains
and long-term growth. With multiple engines of growth across
regions, brands, product categories and channels, the Company is
well-positioned to drive diversified growth across its portfolio as
it manages through this period.
The full year outlook reflects the following assumptions and
expectations:
- More balanced growth across categories, regions and channels as
the impacts of COVID-19 restrictions begin to abate.
- Targeted expanded distribution throughout the year to retailers
that provide broader consumer reach.
- A continued gradual resumption of global international travel,
including to Hainan.
- Inflationary pressures, including higher transportation and
logistics costs, are negatively impacting both cost of sales and
operating expenses in fiscal 2023. The Company expects to mitigate
most of the impact to its business and costs through strategic
price increases, mix optimization and cost savings in other
areas.
- Incremental savings from the Post-COVID Business Acceleration
Program and reinvestment in advertising and capabilities.
- Full-year effective tax rate of approximately 23%.
- Net cash flows provided by operating activities are forecast to
be between $3.1 billion and $3.2 billion, assuming the Company
achieves the results described below, and capital expenditures are
expected to be approximately 6.5% of projected sales to support the
continued build out of the manufacturing facility in Japan and
continued investment in customer facing capital including counters
and online technologies.
The Company is mindful of ongoing risks related to the COVID-19
pandemic as well as risks related to the effects of the global
macro environment, including the risk of recession; currency
volatility; increasing inflationary pressures; supply chain
disruptions; social and political issues; regulatory matters,
including the imposition of tariffs and sanctions; geopolitical
tensions; and global security issues. The Company is also mindful
of inflationary pressures on our cost base and is monitoring the
impact on consumer preferences.
Full Year Fiscal 2023
Sales Outlook
- Reported net sales are forecasted to increase between 3% and 5%
versus the prior-year period. This range includes:
- The negative impact of 1% from the termination of the Company’s
license agreements for the Donna Karan New York, DKNY, Michael
Kors, Tommy Hilfiger and Ermenegildo Zegna product lines effective
June 30, 2022.
- A negative impact of 1% related to Russia and Ukraine.
- A negative 3% due to foreign currency translation, as well as
an additional 1% due to certain impacts of foreign currency
transactions in key international travel retail markets.
- Organic net sales, which excludes returns associated with
restructuring and other activities; non-comparable impacts from
acquisitions, divestitures and brand closures; as well as the
impact of currency translation, are forecasted to increase between
7% and 9%. This includes the negative impacts related to Russia and
Ukraine, as well as foreign currency transactions, noted
above.
Earnings per Share Outlook
- Reported diluted net earnings per common share are projected to
be between $7.11 and $7.33. Excluding restructuring and other
charges, diluted net earnings per common share are projected to be
between $7.39 and $7.54.
- Adjusted diluted earnings per common share are expected to
increase between 5% and 7% on a constant currency basis. Currency
exchange rates are volatile and difficult to predict. Using July
31, 2022 spot rates for fiscal 2023:
- The negative currency impact equates to about $.20 of diluted
earnings per share.
- The impact from certain foreign currency transactions in key
international travel retail markets is expected to negatively
impact adjusted diluted earnings per common share growth by
6%.
First Quarter Fiscal 2023
Sales Outlook
- Reported net sales are forecasted to decrease between 10% and
8% versus the prior-year period. This range includes the negative
impacts from the termination of the Company’s license agreements
for the Donna Karan New York, DKNY, Michael Kors, Tommy Hilfiger
and Ermenegildo Zegna product lines effective June 30, 2022, the
negative impact related to Russia and Ukraine, and the negative
impact from foreign currency translation, as well as certain
impacts of foreign currency transactions in key international
travel retail markets.
- Organic net sales, which excludes returns associated with
restructuring and other activities; non-comparable impacts from
acquisitions, divestitures and brand closures; as well as the
impact of currency translation, are forecasted to decrease between
6% and 4%. This includes the negative impacts related to Russia and
Ukraine, as well as foreign currency transactions, noted
above.
Earnings per Share Outlook
- Reported diluted net earnings per common share are projected to
be between $1.16 and $1.28. Excluding restructuring and other
charges, diluted net earnings per common share are projected to be
between $1.22 and $1.32.
- Adjusted diluted earnings per common share are expected to
decrease between 34% and 28% on a constant currency basis. Currency
exchange rates are volatile and difficult to predict. Using July
31, 2022 spot rates for the first quarter of fiscal 2023:
- The negative currency impact equates to about $.04 of diluted
earnings per share.
- The impact from certain foreign currency transactions in key
international travel retail markets is expected to negatively
impact adjusted diluted earnings per common share growth by
5%.
Reconciliation between GAAP
and Non-GAAP - Net Sales Growth (Unaudited)
Three Months Ending
Twelve Months Ending
September 30, 2022(F)
June 30, 2023(F)
As Reported - GAAP(1)
(10%) - (8
%)
3% - 5
%
Organic, Non-GAAP(2)
(6%) - (4
%)
7% - 9
%
Impact of acquisitions, divestitures and
brand closures
(1
)
(1
)
Impact of foreign currency translation
(3
)
(3
)
Returns associated with restructuring and
other activities
—
—
As Reported - GAAP(1)
(10%) - (8
%)
3% - 5
%
(1)Includes returns associated with
restructuring and other activities
(2)Organic net sales growth represents net
sales growth excluding returns associated with restructuring and
other activities; non-comparable impacts of already announced
acquisitions, divestitures and brand closures (i.e., certain of
your designer fragrances); as well as the impact of currency
translation.
(F)Represents forecast
Reconciliation between GAAP
and Non-GAAP - Diluted Earnings Per Share (“EPS”)
(Unaudited)
Three Months Ending
Twelve Months Ending
September 30
June 30
2022(F)
2021
Growth
2023(F)
2022
Variance
Forecasted/As Reported EPS -
GAAP(1)
$1.16 - $1.28
$
1.88
(38%) - (32%)
$7.11 - $7.33
$
6.55
9% - 12%
Non-GAAP
Restructuring and other charges
.04 - .06
.01
.21 - .28
.31
Change in fair value of
acquisition-related
stock options (less the portion
attributable to
redeemable noncontrolling interest)
—
—
—
(.12
)
Other intangible and long-lived asset
impairments
—
—
—
.50
Forecasted/Adjusted EPS -
Non-GAAP
$1.22- $1.32
$
1.89
(36%) - (30%)
$7.39 - $7.54
$
7.24
2% - 4%
Impact of foreign currency translation
.04
.20
Forecasted Adjusted Constant Currency
EPS -
Non-GAAP
$1.26 - $1.36
(34%) - (28%)
$7.59 - $7.74
5% - 7%
(1)Includes restructuring and other
charges and adjustments
(F)Represents forecast
Conference Call The Estée
Lauder Companies will host a conference call at 9:30 a.m. (ET)
today, August 18, 2022 to discuss its results. The dial-in
number for the call is 877-883-0383 in the U.S. or 412-902-6506
internationally (conference ID number: 8308619). The call will also
be webcast live at
http://www.elcompanies.com/investors/events-and-presentations.
Cautionary Note Regarding
Forward-Looking Statements
Statements in this press release, in particular those in
“Outlook,” as well as remarks by the CEO and other members of
management, may constitute forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
Such statements may address our expectations regarding sales,
earnings or other future financial performance and liquidity, other
performance measures, product introductions, entry into new
geographic regions, information technology initiatives, new methods
of sale, our long-term strategy, restructuring and other charges
and resulting cost savings, and future operations or operating
results. These statements may contain words like “expect,” “will,”
“will likely result,” “would,” “believe,” “estimate,” “planned,”
“plans,” “intends,” “may,” “should,” “could,” “anticipate,”
“estimate,” “project,” “projected,” “forecast,” and “forecasted” or
similar expressions.
Factors that could cause actual results to differ materially
from our forward-looking statements include the following:
(1)
increased competitive activity
from companies in the skin care, makeup, fragrance and hair care
businesses;
(2)
the Company’s ability to develop,
produce and market new products on which future operating results
may depend and to successfully address challenges in the Company’s
business;
(3)
consolidations, restructurings,
bankruptcies and reorganizations in the retail industry causing a
decrease in the number of stores that sell the Company’s products,
an increase in the ownership concentration within the retail
industry, ownership of retailers by the Company’s competitors or
ownership of competitors by the Company’s customers that are
retailers and our inability to collect receivables;
(4)
destocking and tighter working
capital management by retailers;
(5)
the success, or changes in timing
or scope, of new product launches and the success, or changes in
timing or scope, of advertising, sampling and merchandising
programs;
(6)
shifts in the preferences of
consumers as to where and how they shop;
(7)
social, political and economic
risks to the Company’s foreign or domestic manufacturing,
distribution and retail operations, including changes in foreign
investment and trade policies and regulations of the host countries
and of the United States;
(8)
changes in the laws, regulations
and policies (including the interpretations and enforcement
thereof) that affect, or will affect, the Company’s business,
including those relating to its products or distribution networks,
changes in accounting standards, tax laws and regulations,
environmental or climate change laws, regulations or accords, trade
rules and customs regulations, and the outcome and expense of legal
or regulatory proceedings, and any action the Company may take as a
result;
(9)
foreign currency fluctuations
affecting the Company’s results of operations and the value of its
foreign assets, the relative prices at which the Company and its
foreign competitors sell products in the same markets and the
Company’s operating and manufacturing costs outside of the United
States;
(10)
changes in global or local
conditions, including those due to volatility in the global credit
and equity markets, natural or man-made disasters, real or
perceived epidemics, supply chain challenges, inflation, or
increased energy costs, that could affect consumer purchasing, the
willingness or ability of consumers to travel and/or purchase the
Company’s products while traveling, the financial strength of the
Company’s customers, suppliers or other contract counterparties,
the Company’s operations, the cost and availability of capital
which the Company may need for new equipment, facilities or
acquisitions, the returns that the Company is able to generate on
its pension assets and the resulting impact on funding obligations,
the cost and availability of raw materials and the assumptions
underlying the Company’s critical accounting estimates;
(11)
impacts attributable to the
COVID-19 pandemic, including disruptions to our global
business;
(12)
shipment delays, commodity
pricing, depletion of inventory and increased production costs
resulting from disruptions of operations at any of the facilities
that manufacture the Company’s products or at the Company’s
distribution or inventory centers, including disruptions that may
be caused by the implementation of information technology
initiatives, or by restructurings;
(13)
real estate rates and
availability, which may affect the Company’s ability to increase or
maintain the number of retail locations at which the Company sells
its products and the costs associated with the Company’s other
facilities;
(14)
changes in product mix to
products which are less profitable;
(15)
the Company’s ability to acquire,
develop or implement new information and distribution technologies
and initiatives on a timely basis and within the Company’s cost
estimates and the Company’s ability to maintain continuous
operations of such systems and the security of data and other
information that may be stored in such systems or other systems or
media;
(16)
the Company’s ability to
capitalize on opportunities for improved efficiency, such as
publicly-announced strategies and restructuring and cost-savings
initiatives, and to integrate acquired businesses and realize value
therefrom;
(17)
consequences attributable to
local or international conflicts around the world, as well as from
any terrorist action, retaliation and the threat of further action
or retaliation;
(18)
the timing and impact of
acquisitions, investments and divestitures; and
(19)
additional factors as described
in the Company’s filings with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for the fiscal
year ended June 30, 2021.
The Company assumes no responsibility to update forward-looking
statements made herein or otherwise.
The Estée Lauder Companies Inc. is one of the world’s leading
manufacturers, marketers and sellers of quality skin care, makeup,
fragrance and hair care products. The Company’s products are sold
in approximately 150 countries and territories under brand names
including: Estée Lauder, Aramis, Clinique, Lab Series, Origins,
M·A·C, La Mer, Bobbi Brown, Aveda, Jo Malone London, Bumble and
bumble, Darphin Paris, TOM FORD BEAUTY, Smashbox, AERIN Beauty, Le
Labo, Editions de Parfums Frédéric Malle, GLAMGLOW, KILIAN PARIS,
Too Faced, Dr.Jart+, and the DECIEM family of brands, including The
Ordinary and NIOD.
ELC-F ELC-E
CONSOLIDATED STATEMENT OF
EARNINGS (Unaudited)
Three Months Ended June
30
Percentage Change
Year Ended June
30
Percentage Change
($ in millions, except per share data)
2022
2021
2022
2021
Net sales(A)
$
3,561
$
3,936
(10
)%
$
17,737
$
16,215
9
%
Cost of sales(A)
1,031
986
5
4,305
3,834
12
Gross profit
2,530
2,950
(14
)
13,432
12,381
8
Gross margin
71.0
%
74.9
%
75.7
%
76.4
%
Operating expenses
Selling, general and administrative(B)
2,334
2,610
(11
)
9,888
9,371
6
Restructuring and other charges(A)
92
32
100
+
133
204
(35
)
Goodwill impairment(C)
—
—
—
—
54
(100
)
Impairment of other intangible and
long-lived assets(C)
25
74
(66
)
241
134
80
Total operating expenses
2,451
2,716
(10
)
10,262
9,763
5
Operating expense margin
68.8
%
69.0
%
57.9
%
60.2
%
Operating income
79
234
(66
)
3,170
2,618
21
Operating income margin
2.2
%
5.9
%
17.9
%
16.1
%
Interest expense
42
42
—
167
173
(3
)
Interest income and investment income,
net
11
11
—
30
51
(41
)
Other components of net periodic benefit
cost
—
—
—
(2
)
12
(100
+)
Other income(D)
—
847
(100
)
1
847
(100
)
Earnings before income taxes
48
1,050
(95
)
3,036
3,331
(9
)
Provision for income taxes
(2
)
35
(100
+)
628
456
38
Net earnings
50
1,015
(95
)
2,408
2,875
(16
)
Net earnings(loss) attributable to
noncontrolling interests
1
(4
)
100
+
(7
)
(12
)
42
Net earnings(loss) attributable to
redeemable
noncontrolling interest
1
7
(86
)
(11
)
7
(100
+)
Net earnings attributable to The Estée
Lauder
Companies Inc.
$
52
$
1,018
(95
)%
$
2,390
$
2,870
(17
)%
Net earnings attributable to The Estée
Lauder
Companies Inc. per common share
Basic
$
.15
$
2.81
(95
)%
$
6.64
$
7.91
(16
)%
Diluted
$
.14
$
2.76
(95
)%
$
6.55
$
7.79
(16
)%
Weighted-average common shares
outstanding
Basic
358.0
362.9
360.0
362.9
Diluted
361.6
368.5
364.9
368.2
(A)In August 2020, the Company announced a
two-year restructuring program, Post-COVID Business Acceleration
Program (the “PCBA Program”), designed to realign its business to
address the dramatic shifts to its distribution landscape and
consumer behaviors in the wake of the COVID-19 pandemic. The PCBA
Program will help improve efficiency and effectiveness by
rebalancing resources to growth areas of prestige beauty. It will
further strengthen the Company by building upon the foundational
capabilities in which the Company has invested. The PCBA Program’s
main areas of focus include accelerating the shift to online with
the realignment of the Company’s distribution network reflecting
freestanding store and certain department store closures, with a
focus on North America and Europe, the Middle East & Africa;
the reduction in brick-and-mortar point of sale employees and
related support staff; and the redesign of the Company’s regional
branded marketing organizations, plus select opportunities in
global brands and functions. This program is expected to position
the Company to better execute its long-term strategy while
strengthening its financial flexibility. The Company plans to
approve specific initiatives under the PCBA Program through fiscal
2022 and expects to substantially complete those initiatives
through fiscal 2023. The Company expects that the PCBA Program will
result in related restructuring and other charges totaling between
$500 million and $515 million, before taxes.
The Company substantially completed
initiatives approved under the Leading Beauty Program (the “LBF
Program”) through fiscal 2021. Additional information about the LBF
Program is included in the notes to consolidated financial
statements in the Company’s Annual Report on Form 10-K for the
fiscal year ended June 30, 2021.
(B)For the three and twelve months ended
June 30, 2022, the Company recorded $3 million ($3 million, less
the portion attributable to redeemable noncontrolling interest and
net of tax, or $.01 per common share) and $(55) million ($(43)
million, less the portion attributable to redeemable noncontrolling
interest and net of tax, or ($.12) per common share), respectively,
of expense(income) related to the change in fair value of
acquisition-related stock options related to DECIEM. For the twelve
months ended June 30, 2021, the Company recorded $40 million ($31
million, less portion attributable to redeemable noncontrolling
interest and net of tax, or $.09 per common share) of
acquisition-related stock option expense related to DECIEM stock
options.
The Company recorded $2 million ($2
million, net of tax) of income within selling, general and
administrative expenses for the three and twelve months ended June
30, 2021 to reflect changes in the fair value of its contingent
consideration related to its fiscal 2016 acquisition.
(C)During the fiscal 2022 third quarter,
given the lower-than-expected results from international expansion
to areas that continue to be impacted by COVID-19, the Company made
revisions to the internal forecasts relating to its GLAMGLOW
reporting unit. The Company concluded that the changes in
circumstances in the reporting unit triggered the need for an
interim impairment review of its trademark intangible asset.
During the fiscal 2022 third quarter,
given the lower-than-expected growth within key geographic regions
and channels for Dr.Jart+ that continue to be impacted by the
spread of COVID-19 variants and resurgence in cases and the
potential future impacts relating to the uncertainty of the
duration and severity of COVID-19 impacting the financial
performance of the brand, the lower than expected growth in key
retail channels for DECIEM, and the lower than expected results
from international expansion to areas that continue to be impacted
by COVID-19 for Too Faced, the Company made revisions to the
internal forecasts relating to its Dr.Jart+, DECIEM and Too Faced
reporting units.
The Company concluded that the changes in
circumstances in the reporting units triggered the need for interim
impairment reviews of their trademarks and goodwill. These changes
in circumstances were also an indicator that the carrying amounts
of Dr.Jart+’s, DECIEM’s and Too Faced’s long-lived assets,
including customer lists, may not be recoverable. Accordingly, the
Company performed interim impairment tests for the trademarks and a
recoverability test for the long-lived assets as of February 28,
2022. The Company concluded that the carrying amounts of the
long-lived assets were recoverable. For the Dr.Jart+ reporting
unit, the Company also concluded that the carrying value of the
trademark intangible asset exceeded its estimated fair value and
recorded an impairment charge. For the Too Faced and DECIEM
reporting units, as the carrying values of the trademarks did not
exceed their estimated fair values the Company did not record
impairment charges. After adjusting the carrying values of the
trademarks, the Company completed interim quantitative impairment
tests for goodwill. As the estimated fair value of the Dr.Jart+,
DECIEM and Too Faced reporting units were in excess of their
carrying values, the Company concluded that the carrying amounts of
the goodwill were recoverable and did not record a goodwill
impairment charge related to these reporting units.
During the fiscal 2022 fourth quarter,
based on the Company’s annual goodwill and other indefinite-lived
intangible asset impairment testing as of April 1, 2022, the
Company determined that the carrying value of the Dr.Jart+
trademark exceeded its fair value. This determination was made
based on updated internal forecasts. Given the lower-than-expected
growth within key geographic regions and channels that continued to
be impacted by the spread of COVID-19 variants, the resurgence in
cases, regional lockdowns and the potential future impacts relating
to the uncertainty of the duration and severity of COVID-19
impacting the financial performance of the brand, we made revisions
to the internal forecasts relating to the Dr.Jart+ reporting unit.
These changes in circumstances were also indicators that the
carrying amounts of their respective long-lived assets may not be
recoverable. The Company concluded that the carrying value of the
trademark intangible asset exceeded its estimated fair value. The
Company concluded that the carrying amount of the long-lived assets
were recoverable. For the three months ended June 30, 2022, the
Company recognized other intangible asset impairment charges of $25
million ($19 million, net of tax, or $.05 per common share)
relating to the Dr.Jart+ reporting unit.
The total other intangible asset
impairment charges recorded for the twelve months ended June 30,
2022 were $241 million ($183 million, net of tax), with an impact
of $.50 per common share.
During November 2020, given the actual and
the estimate of the potential future impacts relating to the
uncertainty of the duration and severity of COVID-19 impacting the
Company and lower than expected results from geographic expansion,
the Company made further revisions to the internal forecasts
relating to its GLAMGLOW reporting unit, triggering a need for an
interim impairment review.
During the fiscal 2021 fourth quarter,
based on the Company’s annual goodwill and other indefinite-lived
intangible asset impairment testing as of April 1, 2021, the
Company determined that the carrying value of the GLAMGLOW and
Smashbox trademarks exceeded their fair values. This determination
was made based on updated internal forecasts, finalized and
approved in June 2021, that reflected lower net sales growth
projections due to a softer than expected retail environment for
these brands, as well as the continued impacts relating to the
uncertainty of the duration and severity of the COVID-19 pandemic.
These changes in circumstances were also indicators that the
carrying amounts of their respective long-lived assets may not be
recoverable. The Company concluded that the carrying values of the
trademarks exceeded their estimated fair values. The Company
concluded that the carrying amounts of the long-lived assets were
recoverable. For the three months ended June 30, 2021, the Company
recognized other intangible asset impairment charges of $36 million
($27 million, net of tax, or $.08 per common share) relating to
these reporting units.
The total goodwill and other intangible
asset impairment charges recorded for the twelve months ended June
30, 2021 were $117 million ($91 million, net of tax, or $.25 per
common share).
During March 2021, the Company recognized
long-lived asset impairments related to other assets (i.e. rights
associated with commercial operating leases), operating lease ROU
assets and the related property, plant and equipment in certain
freestanding stores primarily in Europe due to the impact of the
COVID-19 pandemic.
During the fiscal 2021 fourth quarter, the
Company also recognized $38 million ($31 million, net of tax, or
$.08 per common share) of long-lived asset impairments, included in
Impairments of other intangible and long-lived assets, in the
accompanying consolidated statements of earnings (loss) for the
three months ended June 30, 2021, related to operating lease ROU
assets of $21 million, as well as the related property, plant and
equipment and other long-lived assets in certain freestanding
stores of $16 million, combined.
The total long-lived asset impairment
charges recognized for the twelve months ended June 30, 2021 were
$71 million ($57 million, net of tax, or $.15 per common share),
related to other assets (i.e. rights associated with commercial
operating leases) of $27 million, operating lease ROU assets of $25
million, as well as the related property, plant and equipment in
certain freestanding stores of $19 million.
For the three and twelve months ended June
30, 2021, total goodwill, other intangible and long-lived asset
impairment charges were $74 million ($58 million, net of tax, or
$.16 per common share) and $188 million ($148 million, net of tax,
or $.40 per common share), respectively.
(D)In conjunction with the increased
investment in DECIEM in May 2021, the Company recorded a gain on
its previously held equity method investment of $847 million ($847
million, net of tax) which had an impact of $2.30 per common share
for the three and twelve months ended June 30, 2021.
Returns and Charges Associated
With Restructuring and Other Activities and Other Adjustments
(Unaudited)
Three Months Ended June 30,
2022
Sales Returns
Cost of Sales
Operating Expenses
Total
After Redeemable
Noncontrolling Interest and Tax
Diluted EPS
(In millions, except per share data)
Restructuring
Charges
Other Charges/
Adjustments
Leading Beauty Forward
$
—
$
—
$
1
$
3
$
4
$
3
$
.01
PCBA Program
1
7
85
3
96
76
.21
Change in fair value of
acquisition-related stock
options
3
3
3
.01
Other intangible asset impairments
25
25
19
.05
Total
$
1
$
7
$
86
$
34
$
128
$
101
$
.28
Year Ended June 30,
2022
Sales Returns
Cost of Sales
Operating Expenses
Total
After Redeemable
Noncontrolling Interest and Tax
Diluted EPS
(In millions, except per share data)
Restructuring
Charges
Other Charges/
Adjustments
Leading Beauty Forward
$
—
$
2
$
(1
)
$
16
$
17
$
13
$
.04
PCBA Program
4
5
109
9
127
100
.27
Change in fair value of
acquisition-related stock
options
(55
)
(55
)
(43
)
(.12
)
Other intangible asset impairments
241
241
183
.50
Other income
(1
)
(1
)
(1
)
—
Total
$
4
$
7
$
108
$
210
$
329
$
252
$
.69
Three Months Ended June 30,
2021
Sales Returns
Cost of Sales
Operating Expenses
Total
After Redeemable
Noncontrolling Interest and Tax
Diluted EPS
(In millions, except per share data)
Restructuring
Charges
Other Charges/
Adjustments
Leading Beauty Forward
$
—
$
4
$
(8
)
$
5
$
1
$
1
$
—
PCBA Program
4
(3
)
34
1
36
26
.07
Changes in fair value of contingent
consideration
—
—
—
—
Acquisition-related stock option
expense
40
40
31
.09
Goodwill, other intangible and long-lived
asset
impairments
74
74
58
.16
Other income
(847
)
(847
)
(847
)
(2.30
)
Total
$
4
$
1
$
26
$
(727
)
$
(696
)
$
(731
)
$
(1.98
)
Year Ended June 30,
2021
Sales Returns
Cost of Sales
Operating Expenses
Total
After Redeemable
Noncontrolling Interest and Tax
Diluted EPS
(In millions, except per share data)
Restructuring
Charges
Other Charges/
Adjustments
Leading Beauty Forward
$
—
$
8
$
(15
)
$
14
$
7
$
6
$
.02
PCBA Program
14
2
201
4
221
170
.46
Changes in fair value of contingent
consideration
(2
)
(2
)
(2
)
(.01
)
Acquisition-related stock option
expense
40
40
31
.09
Goodwill, other intangible and long-lived
asset
impairments
188
188
148
.40
Other income
(847
)
(847
)
(847
)
(2.30
)
Total
$
14
$
10
$
186
$
(603
)
$
(393
)
$
(494
)
$
(1.34
)
Results by Product
Category (Unaudited)
Three Months Ended June
30
Net Sales
Percentage Change
Operating Income
(Loss)
Percentage Change
($ in millions)
2022
2021
Reported Basis
Constant Currency
2022
2021
Reported Basis
Skin Care
$
1,883
$
2,371
(21
)%
(18
)%
$
287
$
583
(51
)%
Makeup
993
960
3
7
(95
)
(269
)
65
Fragrance
521
448
16
22
10
(33
)
100
+
Hair Care
156
153
2
5
(20
)
(9
)
(100
+)
Other
9
8
13
13
(3
)
(1
)
(100
+)
Subtotal
$
3,562
$
3,940
(10
)%
(7
)%
$
179
$
271
(34
)%
Returns/charges associated with
restructuring and other activities
(1
)
(4
)
(100
)
(37
)
Total
$
3,561
$
3,936
(10
)%
(7
)%
$
79
$
234
(66
)%
Organic Net Sales Growth -
Reconciliation to GAAP (Unaudited)
Three Months Ended June
2022 vs. 2021
Organic Net Sales
Growth (Non-GAAP)(1)
Impact of Acquisitions,
Divestitures and Brand Closures, Net
Impact of Foreign Currency
Translation
Net Sales Growth
(GAAP)
Skin Care
(21
)%
3
%
(3
)%
(21
)%
Makeup
8
(1
)
(4
)
3
Fragrance
22
—
(6
)
16
Hair Care
5
—
(3
)
2
Other
13
—
—
13
Subtotal
(8
)%
1
%
(3
)%
(10
)%
Returns associated with restructuring and
other activities
—
Total
(8
)%
1
%
(3
)%
(10
)%
(1)Organic net sales growth represents net
sales growth excluding returns associated with restructuring and
other activities; non-comparable impacts of acquisitions,
divestitures and brand closures (notably DECIEM and BECCA); as well
as the impact of currency translation.
Results by Geographic
Region (Unaudited)
Three Months Ended June
30
Net Sales
Percentage Change
Operating Income
(Loss)
Percentage Change
($ in millions)
2022
2021
Reported Basis
Constant Currency
2022
2021
Reported Basis
The Americas
$
1,076
$
960
12
%
11
%
$
115
$
262
(56
)%
Europe, the Middle East & Africa
1,480
1,670
(11
)
(7
)
(6
)
(94
)
94
Asia/Pacific
1,006
1,310
(23
)
(19
)
70
103
(32
)
Subtotal
$
3,562
$
3,940
(10
)%
(7
)%
$
179
$
271
(34
)%
Returns/charges associated with
restructuring and other activities
(1
)
(4
)
(100
)
(37
)
Total
$
3,561
$
3,936
(10
)%
(7
)%
$
79
$
234
(66
)%
Organic Net Sales Growth -
Reconciliation to GAAP (Unaudited)
Three Months Ended June 30
2022 vs. 2021
Organic Net Sales
Growth (Non-GAAP)(1)
Impact of Acquisitions,
Divestitures and Brand Closures, Net
Impact of Foreign Currency
Translation
Net Sales Growth
(GAAP)
The Americas
9
%
2
%
1
%
12
%
Europe, the Middle East & Africa
(9
)
2
(4
)
(11
)
Asia/Pacific
(19
)
—
(4
)
(23
)
Subtotal
(8
)%
1
%
(3
)%
(10
)%
Returns associated with restructuring and
other activities
—
Total
(8
)%
1
%
(3
)%
(10
)%
(1)Organic net sales growth represents net
sales growth excluding returns associated with restructuring and
other activities; non-comparable impacts of acquisitions,
divestitures and brand closures (notably DECIEM and BECCA); as well
as the impact of currency translation.
This earnings release includes some non-GAAP financial measures
relating to charges associated with restructuring and other
activities and adjustments, as well as organic net sales. Included
herein are reconciliations between the non-GAAP financial measures
and the most directly comparable GAAP measures for certain
consolidated statements of earnings accounts before and after these
items. The Company uses certain non-GAAP financial measures, among
other financial measures, to evaluate its operating performance,
which represent the way the Company conducts and views its
business. Management believes that excluding certain items that are
not comparable from period-to-period, or do not reflect the
Company’s underlying ongoing business, provides transparency for
such items and helps investors and others compare and analyze
operating performance from period to period. In the future, the
Company expects to incur charges or make adjustments similar in
nature to those presented herein; however, the impact to the
Company’s results in a given period may be highly variable and
difficult to predict. Our non-GAAP financial measures may not be
comparable to similarly titled measures used by, or determined in a
manner consistent with, other companies. While the Company
considers the non-GAAP measures useful in analyzing its results,
they are not intended to replace, or act as a substitute for, any
presentation included in the consolidated financial statements
prepared in conformity with GAAP.
The Company operates on a global basis, with the majority of its
net sales generated outside the United States. Accordingly,
fluctuations in foreign currency exchange rates can affect the
Company’s results of operations. Therefore, the Company presents
certain net sales, operating results and diluted earnings per share
information excluding the effect of foreign currency rate
fluctuations to provide a framework for assessing the performance
of its underlying business outside the United States. Constant
currency information compares results between periods as if
exchange rates had remained constant period-over-period. The
Company calculates constant currency information by translating
current-period results using prior-year period monthly average
foreign currency exchange rates and adjusting for the
period-over-period impact of foreign currency cash flow hedging
activities.
Reconciliation of Certain
Consolidated Statements of Earnings Accounts
Before and After Returns,
Charges and Other Adjustments
(Unaudited)
Three Months Ended June
30
2022
2021
% Change
($ in millions, except per share data)
As Reported
Returns/ Charges/
Adjustments
Non- GAAP
Impact of Foreign Currency
Translation
Non- GAAP, Constant
Currency
As Reported
Returns/ Charges/
Adjustments
Non- GAAP
Non- GAAP
Non- GAAP, Constant
Currency
Net sales
$
3,561
$
1
$
3,562
$
120
$
3,682
$
3,936
$
4
$
3,940
(10
)%
(7
)%
Cost of sales
1,031
(7
)
1,024
33
1,057
986
(1
)
985
Gross profit
2,530
8
2,538
87
2,625
2,950
5
2,955
(14
)%
(11
)%
Gross margin
71.0
%
71.3
%
71.3
%
74.9
%
75.0
%
Operating expenses
2,451
(120
)
2,331
85
2,416
2,716
(146
)
2,570
(9
)%
(6
)%
Operating expense
margin
68.8
%
65.4
%
65.6
%
69.0
%
65.2
%
Operating income
79
128
207
2
209
234
151
385
(46
)%
(46
)%
Operating income
margin
2.2
%
5.8
%
5.7
%
5.9
%
9.8
%
Other income
—
—
—
—
—
847
(847
)
—
—
%
—
%
Provision(benefit) for
income taxes
(2
)
27
25
1
26
35
26
61
(59
)%
(57
)%
Net earnings
attributable to The
Estée Lauder
Companies Inc.
$
52
$
101
$
153
$
2
$
155
$
1,018
$
(731
)
$
287
(47
)%
(46
)%
Diluted EPS
$
.14
$
.28
$
.42
$
.01
$
.43
$
2.76
$
(1.98
)
$
.78
(46
)%
(45
)%
Reconciliation of Certain
Consolidated Statements of Earnings Accounts Before and
After Returns, Charges and Other Adjustments
(Unaudited)
Year Ended June 30
2022
2021
% Change
($ in millions, except per share data)
As Reported
Returns/ Charges/
Adjustments
Non- GAAP
Impact of Foreign Currency
Translation
Non- GAAP, Constant
Currency
As Reported
Returns/ Charges/
Adjustments
Non- GAAP
Non- GAAP
Non- GAAP, Constant
Currency
Net sales
$
17,737
$
4
$
17,741
$
88
$
17,829
$
16,215
$
14
$
16,229
9
%
10
%
Cost of sales
4,305
(7
)
4,298
29
4,327
3,834
(10
)
3,824
Gross profit
13,432
11
13,443
59
13,502
12,381
24
12,405
8
%
9
%
Gross margin
75.7
%
75.8
%
75.7
%
76.4
%
76.4
%
Operating expenses
10,262
(319
)
9,943
80
10,023
9,763
(430
)
9,333
7
%
7
%
Operating expense
margin
57.9
%
56.0
%
56.2
%
60.2
%
57.5
%
Operating income
3,170
330
3,500
(21
)
3,479
2,618
454
3,072
14
%
13
%
Operating income margin
17.9
%
19.7
%
19.5
%
16.1
%
18.9
%
Other income
1
(1
)
—
—
—
847
(847
)
—
—
%
—
%
Provision for income
taxes
628
89
717
(5
)
712
456
92
548
31
%
30
%
Net earnings attributable
to The Estée Lauder
Companies Inc.
$
2,390
$
252
$
2,642
$
(14
)
$
2,628
$
2,870
$
(494
)
$
2,376
11
%
11
%
Diluted EPS
$
6.55
$
.69
$
7.24
$
(.04
)
$
7.2
$
7.79
$
(1.34
)
$
6.45
12
%
12
%
CONDENSED CONSOLIDATED BALANCE
SHEETS (Unaudited, except where noted)
June 30, 2022
June 30, 2021
($ in millions)
(Audited)
ASSETS
Cash and cash equivalents
$
3,957
$
4,958
Accounts receivable, net
1,629
1,702
Inventory and promotional merchandise
2,920
2,505
Prepaid expenses and other current
assets
792
603
Total current assets
9,298
9,768
Property, plant and equipment, net
2,650
2,280
Operating lease right-of-use assets
1,949
2,190
Other assets
7,013
7,733
Total assets
$
20,910
$
21,971
LIABILITIES AND EQUITY
Current debt
$
268
$
32
Accounts payable
1,822
1,692
Operating lease liabilities
365
379
Other accrued liabilities
3,360
3,195
Total current liabilities
5,815
5,298
Long-term debt
5,144
5,537
Long-term operating lease liabilities
1,868
2,151
Other noncurrent liabilities
1,651
2,037
Total noncurrent liabilities
8,663
9,725
Redeemable noncontrolling
interest
842
857
Total equity
5,590
6,091
Total liabilities and equity
$
20,910
$
21,971
SELECT CASH FLOW DATA
(Unaudited, except where noted)
Twelve Months Ended
June 30
($ in millions)
2022
2021 (Audited)
Net earnings
$
2,408
$
2,875
Adjustments to reconcile net earnings to
net cash flows from operating
activities:
Depreciation and amortization
727
651
Deferred income taxes
(149
)
(230
)
Goodwill, other intangible and long-lived
asset impairments
241
188
Gain on previously held equity method
investment
(1
)
(847
)
Other items
368
440
Changes in operating assets and
liabilities:
Increase in accounts receivable, net
(10
)
(398
)
Increase in inventory and promotional
merchandise
(602
)
(140
)
Decrease (increase) in other assets,
net
(101
)
13
Increase in accounts payable and other
liabilities
159
1,079
Net cash flows provided by operating
activities
$
3,040
$
3,631
Other Investing and Financing Sources
(Uses):
Capital expenditures
$
(1,040
)
$
(637
)
Settlement of net investment hedges
108
(152
)
Payments for acquired businesses, net of
cash acquired
(3
)
(1,065
)
Purchases of investments
(10
)
(42
)
Payments to acquire treasury stock
(2,309
)
(733
)
Dividends paid
(840
)
(753
)
Proceeds (repayments) of current debt,
net
(4
)
(744
)
Proceeds of long-term debt, net
(18
)
137
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220818005035/en/
Investors: Rainey Mancini rmancini@estee.com
Media: Jill Marvin jimarvin@estee.com
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