Net Sales Decreased 17% and Diluted EPS
Decreased 63% to $1.09
Organic Net Sales1 Decreased 11% and
Adjusted Diluted EPS Fell 44% in Constant Currency
Exceeded Adjusted Diluted EPS Outlook
Despite Incremental External Headwinds
Lowering Second Half Outlook Amid Volatility
in Travel Retail
The Estée Lauder Companies Inc. (NYSE: EL) today reported net
sales of $4.62 billion for its second quarter ended December 31,
2022, a decline of 17% from $5.54 billion in the prior-year period,
including negative impacts from foreign currency. Organic net sales
fell 11%. In the fiscal 2023 second quarter, the evolution of the
COVID-19 environment, including restrictions in mainland China and
the rising number of COVID cases (collectively “COVID-related
impacts”), led to stronger headwinds as the quarter progressed. As
a result, tourism and product shipments to Hainan remained largely
curtailed and traffic in brick-and-mortar in the rest of China was
limited. These challenges were partially offset by broad-based
strong organic net sales growth across developed and emerging
markets globally. Organic net sales benefited from continued
double-digit growth in Fragrance as well as strong holiday
offerings and performance during the 11.11 Global Shopping
Festival.
The Company reported net earnings of $0.39 billion, compared
with net earnings of $1.09 billion in the prior-year period2.
Diluted net earnings per common share was $1.09, compared with
$2.97 reported in the prior-year period, including the impacts of
other intangible asset impairments. Excluding restructuring and
other charges and adjustments as detailed on page 3, adjusted
diluted net earnings per common share declined 49% to $1.54,
decreasing 44% in constant currency, better than the Company’s
expectations. These declines include a negative impact of 4% from
certain foreign currency transactions in key international travel
retail locations.
Fabrizio Freda, President and Chief Executive Officer said, “We
delivered on our expectations for the second quarter of fiscal
2023, despite the incremental pressure of COVID-19 in China in
December. Many developed and emerging markets around the world
outperformed to realize our organic sales growth outlook and, given
disciplined expense management and moderation of the stronger U.S.
dollar, we exceeded our adjusted diluted EPS outlook. Fragrance
excelled globally, while Makeup prospered in a great number of
markets, as our brands are realizing the promise of the category’s
renaissance as usage occasions resume.
__________________________________
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 from foreign currency
translation. The Company believes 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 Net earnings attributable to The Estée
Lauder Companies Inc. which excludes net loss (earnings)
attributable to redeemable noncontrolling interests for the second
fiscal quarter of fiscal 2023 and fiscal 2022 and noncontrolling
interests for the second quarter of fiscal 2022.
For fiscal 2023, we are lowering our outlook given the November
and December disruption to travel and staffing levels in Hainan
that slowed the expected normalization of inventory and the
recently-announced potential roll-back of COVID-related supportive
measures in Korea duty free. Together, these are creating a
near-term, transitory pressure to our travel retail business. In
the third quarter, this is more than offsetting the initial
positive impact from the resumption of international travel by
Chinese consumers, as well as favorable trends from our second
quarter results, including outstanding performance across many
developed markets in Western Europe and Asia/Pacific, as well as
many emerging markets globally, and a less onerous currency
environment. All told, our return to growth has shifted to the
fourth quarter. We remain focused on investing in our brands,
including for innovation, advertising, and entry into new
countries, among others, to fuel our multiple engines of growth
strategy.”
Freda concluded, “We are encouraged by both our strong momentum
in numerous markets globally and improving macro trends. Moreover,
so far this fiscal year, we have made exciting progress on several
strategic initiatives to drive growth and resiliency in our
business, with the opening of our China Innovation Labs as well as
our first-ever manufacturing facility in Asia/Pacific, and with our
deal to acquire Tom Ford, to name just a few. We have great
confidence that we will emerge from this year even better
positioned to realize the long-term growth opportunities of global
prestige beauty.”
Business Update The COVID-19
pandemic continued to disrupt the Company’s operating environment
through the first half of fiscal 2023, including the COVID-related
impacts, affecting Asia travel retail, particularly Hainan, and
retail traffic in mainland China. In Asia travel retail, these
challenges led to prolonged store closures as well as the
curtailment of travel and caused the tightening of inventory by
certain retailers who had previously placed orders in anticipation
of the return of travel that was since delayed.
During the first half of fiscal 2023, the Company’s business was
also negatively impacted by the strong U.S. dollar, along with
inflationary pressures and recession concerns, which caused certain
retailers in the United States to tighten inventory. While the
Company’s monthly retail trends improved sequentially during the
fiscal 2023 second quarter in the United States, the pace was
slower than anticipated resulting in lower replenishment orders
compared to the prior-year period.
Fiscal 2023 Second Quarter
Results Product category and geographic region net sales
commentary reflect organic performance.
Reconciliation between GAAP
and Non-GAAP Net Sales Growth (Unaudited)
Three Months Ended December
31, 2022(3)
As Reported - GAAP(1)
(17
)%
Organic, Non-GAAP(2)
(11
)%
Impact of the license terminations related
to certain of the Company’s designer fragrances
(1
)
Impact of foreign currency translation
(5
)
Returns associated with restructuring and
other activities
—
As Reported - GAAP(1)
(17
)%
(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 (the license terminations related
to certain of the Company’s designer fragrances); as well as the
impact of foreign currency translation.
(3)Percentages are calculated on an
individual basis
Adjusted diluted net earnings per common share excludes
restructuring and other charges and adjustments as detailed in the
following table.
Reconciliation between GAAP
and Non-GAAP - Diluted Net Earnings Per Share (“EPS”)
(Unaudited)
Three Months Ended
December 31
2022
2021
Growth
As Reported EPS - GAAP(1)
$
1.09
$
2.97
(63
)%
Non-GAAP
Restructuring and other charges
.02
.03
Change in fair value of
acquisition-related stock options (less the portion attributable
to
redeemable noncontrolling interest)
(.01
)
.01
Other intangible asset impairments
.44
—
Adjusted EPS - Non-GAAP
$
1.54
$
3.01
(49
)%
Impact of foreign currency translation on
earnings per share
.15
Adjusted Constant Currency EPS -
Non-GAAP
$
1.69
$
3.01
(44
)%
(1)Includes restructuring and other
charges and adjustments
Net sales and operating income in the Company’s product
categories and regions were unfavorably impacted by a stronger U.S.
dollar in relation to most currencies. Reported net sales was
negatively impacted by 5% of foreign currency translation, with
negative impacts in Asia/Pacific and Europe, the Middle East &
Africa of 10% and 4%, respectively. In addition, reported and
organic net sales was negatively impacted by 1% from foreign
currency transactions in key international travel retail locations,
with a negative impact in Europe, the Middle East & Africa of
3%.
Total reported operating income was $0.56 billion, a 61%
decrease from $1.42 billion in the prior-year period. In constant
currency, adjusted operating income decreased 42%, primarily
reflecting lower net sales, and excludes the following items:
- Fiscal 2023 second quarter: $207 million of other intangible
asset impairments related to Dr.Jart+, Too Faced and Smashbox,
combined, as well as $5 million restructuring and other charges and
adjustments
- Fiscal 2022 second quarter: $17 million of restructuring and
other charges and adjustments
- The unfavorable impact of foreign currency translation of $68
million
Results by Product Category
(Unaudited)
Three Months Ended December
31
Net Sales
Percentage Change
Operating Income
(Loss)
Percentage Change
($ in millions)
2022
2021
Reported Basis
Constant
Currency
2022
2021
Reported Basis
Skin Care
$
2,382
$
3,159
(25
)%
(20
)%
$
421
$
1,082
(61
)%
Makeup
1,268
1,386
(9
)
(3
)
(37
)
130
(100
+)
Fragrance
775
799
(3
)
3
177
210
(16
)
Hair Care
182
180
1
4
5
8
(38
)
Other
14
16
(13
)
—
(1
)
3
(100
+)
Subtotal
$
4,621
$
5,540
(17
)%
(11
)%
$
565
$
1,433
(61
)%
Returns/charges associated with
restructuring and other activities
(1
)
(1
)
(9
)
(15
)
Total
$
4,620
$
5,539
(17
)%
(12
)%
$
556
$
1,418
(61
)%
Organic Net Sales Growth -
Reconciliation to GAAP (Unaudited)
Three Months Ended December
31 2022 vs. 2021(2)
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
(20
)%
—
%
(5
)%
(25
)%
Makeup
(3
)
—
(5
)
(9
)
Fragrance
12
(9
)
(6
)
(3
)
Hair Care
4
—
(3
)
1
Other
(6
)
6
(13
)
(13
)
Subtotal
(11
)%
(1
)%
(5
)%
(17
)%
Returns associated with restructuring and
other activities
—
Total
(11
)%
(1
)%
(5
)%
(17
)%
(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 (the license terminations related
to certain of the Company’s designer fragrances); as well as the
impact of foreign currency translation.
(2)Percentages are calculated on an
individual basis
Skin Care
- Skin Care net sales declined 20%, primarily reflecting the
challenges of the prolonged COVID-related impacts, including both
the anticipated tightening of inventory by certain retailers in
Asia travel retail and limited retail traffic in mainland China.
Lower replenishment orders in the United States also negatively
impacted the category’s growth. Net sales growth from The Ordinary
and Bobbi Brown was offset by declines from Estée Lauder, La Mer,
Dr.Jart+ and Clinique.
- Net sales from Estée Lauder, La Mer, Dr.Jart+ and Clinique
declined, reflecting the aforementioned Skin Care challenges.
- Net sales from The Ordinary grew double digits across every
region, reflecting growth in hero products, successful innovation,
such as New! Multi-Peptide Lash & Brow Serum and increased
productive distribution.
- Hero products, including Soothing Cleansing Oil and Vitamin
Enriched Face Base, drove net sales growth from Bobbi Brown.
- Skin Care operating income decreased, reflecting the decline in
net sales and an other intangible asset impairment of $100 million
related to Dr.Jart+, partially offset by disciplined expense
management.
Makeup
- Makeup net sales decreased 3%, primarily reflecting the ongoing
COVID-related impacts affecting Asia travel retail and mainland
China, partially offset by the progression of the makeup
renaissance as usage occasions increased in many other markets. Net
sales growth from M·A·C and Clinique was offset by declines from
Estée Lauder and Tom Ford Beauty.
- Net sales from Estée Lauder and Tom Ford Beauty were negatively
impacted by the decline in retail traffic and travel due to the
ongoing COVID-related impacts.
- M·A·C double-digit net sales growth reflected continued success
from hero products, such as Studio Fix foundation, and recent
launches, including Powder Kiss Velvet Blur Slim Stick lipstick, as
well as strong 11.11 Global Shopping Festival performance and
holiday demand. The increase in net sales also reflected the
expected benefit from changes to the brand’s take back loyalty
program made in the fiscal 2023 second quarter.
- The continued success of Almost Lipstick in Black Honey
continues to drive net sales growth from Clinique. Strength from
the concealer and eye subcategories also contributed to
growth.
- Net sales grew double digits in most countries in Europe, the
Middle East & Africa, Asia/Pacific and Latin America as they
continued to reopen and evolve in recovery.
- Makeup operating income decreased, primarily reflecting $107
million of other intangible asset impairments relating to Too Faced
and Smashbox, combined, and lower net sales, partially offset by
disciplined expense management.
Fragrance
- Net sales grew in every region, driven primarily by growth from
Estée Lauder, Le Labo and Tom Ford Beauty.
- The license terminations related to certain of the Company’s
designer fragrances was dilutive to reported net sales growth by
approximately 9 percentage points.
- Estée Lauder net sales grew double digits, driven primarily by
strong holiday demand for the Beautiful franchise line of products,
such as Beautiful Magnolia Intense.
- Net sales from Le Labo rose strong double digits, reflecting
growth in every region due to the continued consumer demand for the
brand’s artisanal offerings, robust holiday performance and
targeted expanded consumer reach.
- Tom Ford Beauty net sales grew double digits, fueled by growth
in existing hero franchises like Oud Wood and Ombre Leather and
recent launches, such as Noir Extreme Parfum.
- Fragrance operating income decreased, driven primarily by
strategic investments to support brick-and-mortar recovery and the
expansion of freestanding stores, as well as investments in
advertising and promotional activity to support holiday.
Hair Care
- Hair Care net sales rose 4%, reflecting growth from both The
Ordinary, due to the recent launch of the brand’s hair care
products, and Aveda.
- Aveda’s net sales growth reflected strength in Europe, the
Middle East & Africa, the launch of the brand in mainland China
and strong performance during holiday and key shopping
moments.
- Hair Care operating results decreased, reflecting strategic
investments to support innovation and Aveda’s launch in mainland
China, partially offset by higher net sales.
Results by Geographic Region
(Unaudited)
Three Months Ended December
31
Net Sales
Percentage Change
Operating Income
(Loss)
Percentage Change
($ in millions)
2022
2021
Reported Basis
Constant
Currency
2022
2021
Reported Basis
The Americas
$
1,235
$
1,300
(5
)%
(6
)%
$
(85
)
$
382
(100
+)%
Europe, the Middle East & Africa
1,816
2,338
(22
)
(18
)
409
620
(34
)
Asia/Pacific
1,570
1,902
(17
)
(8
)
241
431
(44
)
Subtotal
$
4,621
$
5,540
(17
)%
(11
)%
$
565
$
1,433
(61
)%
Returns/charges associated with
restructuring and
other activities
(1
)
(1
)
(9
)
(15
)
Total
$
4,620
$
5,539
(17
)%
(12
)%
$
556
$
1,418
(61
)%
Organic Net Sales Growth -
Reconciliation to GAAP (Unaudited)
Three Months Ended December
31 2022 vs. 2021(2)
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
(3
)%
(2
)%
1
%
(5
)%
Europe, the Middle East & Africa
(17
)
(1
)
(4
)
(22
)
Asia/Pacific
(7
)
—
(10
)
(17
)
Subtotal
(11
)%
(1
)%
(5
)%
(17
)%
Returns associated with restructuring and
other activities
—
Total
(11
)%
(1
)%
(5
)%
(17
)%
(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 (the license terminations related
to certain of the Company’s designer fragrances); as well as the
impact of foreign currency translation.
(2)Percentages are calculated on an
individual basis
The Americas
- Net sales declined 3%, driven by the negative impact from lower
replenishment orders in the United States primarily impacting the
Skin Care category. Conversely, net sales grew in both the
Fragrance and Makeup categories.
- The license terminations related to certain of the Company’s
designer fragrances contributed approximately 2 percentage points
to the decline in reported net sales.
- In Latin America, net sales rose double digits, fueled by
growth in the Makeup and Fragrance categories.
- Operating income in The Americas decreased, primarily
reflecting lower intercompany royalty income due to the decline in
income from the Company’s travel retail business, other intangible
asset impairments of $107 million relating to Too Faced and
Smashbox, combined, and the decline in net sales.
Europe, the Middle East &
Africa
- Net sales declined 17%, primarily due to the ongoing
COVID-related impacts, affecting Asia travel retail.
- The license terminations related to certain of the Company’s
designer fragrances contributed approximately 1 percentage point to
the decline in reported net sales.
- Global travel retail net sales decreased double digits,
reflecting the ongoing COVID-related impacts that led to reduced
travel in Asia, particularly to Hainan. Travel retail net sales
grew in Europe, the Middle East & Africa and The Americas,
benefiting from an increase in professional and personal travel
compared to the prior-year period.
- Net sales in the United Kingdom grew mid-single-digits, powered
by the progression of the makeup renaissance as usage occasions
returned, as well as strong growth in Fragrance and Skin Care.
- Net sales from most emerging markets in the region increased
double digits, led by India and Turkey, driven by growth in the
Makeup category. Developed markets also grew, led by France, Spain
and Italy.
- Operating income decreased, driven by the decline in net sales,
partially offset by a lower intercompany royalty expense due to the
decline in income from the Company’s travel retail business and
disciplined expense management.
Asia/Pacific
- Net sales declined 7%, due to the ongoing COVID-related impacts
affecting brick-and-mortar in Greater China and Dr.Jart+ travel
retail in Korea.
- In other markets in Asia/Pacific, COVID recovery drove strong
net sales growth in most countries, led by Japan, Australia,
Malaysia and the Philippines. In Korea, double-digit growth from
most brands was more than offset by the decline from Dr.Jart+’s
travel retail business.
- Fragrance and Hair Care net sales grew double digits in the
region.
- Operating income decreased, driven by the decline in net sales
and an other intangible asset impairment of $100 million related to
Dr.Jart+, partially offset by disciplined expense management.
Six-Months Results
- For the six months ended December 31, 2022, the Company
reported net sales of $8.55 billion, a 14% decrease compared with
$9.93 billion in the prior-year period. Organic net sales decreased
8%.
- Net earnings3 were $0.88 billion, and diluted earnings per
share was $2.45. In the prior year six months, the Company reported
net earnings of $1.78 billion and diluted earnings per share of
$4.85.
__________________________________
3 Net earnings attributable to The Estée
Lauder Companies Inc. which excludes net (earnings) attributable to
redeemable noncontrolling interests for the six months ended
December 31, 2022 and noncontrolling interests for the six months
ended December 31, 2021.
- During the six-months ended December 31, 2022, the Company
recorded restructuring and other charges, other intangible asset
impairments, and change in fair value of acquisition-related stock
options, that, combined, resulted in an unfavorable impact of $219
million ($167 million less the portion attributable to redeemable
noncontrolling interest and net of tax), equal to $.46 per diluted
share, as detailed on page 16. The prior-year period results
include restructuring and other charges, change in fair value of
acquisition-related stock options, and other income related to a
gain on previously held equity investment in Deciem Beauty Group
Inc. that, combined, resulted in a favorable impact of $22 million
($18 million after tax), equal to $.05 per diluted share.
- Excluding restructuring and other charges and adjustments
referred to in the previous bullet, adjusted diluted net earnings
per common share for the six months ended December 31, 2022 was
$2.91, and declined 36% in constant currency. For the six months
ended December 31, 2022, the unfavorable impact of foreign currency
translation on diluted net earnings per common share was $.22.
Cash Flows
- For the six months ended December 31, 2022, net cash flows
provided by operating activities were $0.75 billion, compared with
$1.85 billion in the prior-year period. This reflects lower
earnings before taxes, excluding non-cash items, and the negative
impact from changes in working capital, primarily accounts payable,
due to the timing of payments.
- Capital Expenditures decreased to $419 million compared to $459
million last year, primarily reflecting timing of investments.
- The Company ended the quarter with $3.73 billion in cash and
cash equivalents after returning $0.71 billion cash to stockholders
through dividends and share repurchases.
- In November 2022, the Company announced it signed an agreement
to acquire the TOM FORD brand. The transaction is expected to be
completed in the fiscal 2023 fourth quarter and to be funded
through a combination of cash, debt and deferred payments to the
sellers.
Outlook for Fiscal 2023 Third Quarter
and Full Year The Company expects the remainder of the
fiscal year to be volatile, including risks associated with the
uncertain pace of recovery of consumers in travel retail, and
pressured by the ongoing disruptions due to the evolving COVID-19
environment, inflation, supply chain disruptions, and the risk of a
slowdown in certain markets globally.
The Company remains optimistic 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, including investments in advertising,
innovation, its innovation center in Shanghai and its manufacturing
facility in Japan. In the near-term, these investments will have a
greater impact to diluted net earnings per common share due to the
expected decline in net sales. With multiple engines of growth
across regions, brands, product categories and channels, the
Company is well-positioned to drive diversified long-term growth
across its portfolio.
The second half outlook reflects the following assumptions and
expectations:
- A shift in the return to growth in Asia Travel Retail and
mainland China from the fiscal 2023 third quarter to the fourth
quarter, reflecting:
- The normalization of inventory levels in Hainan, given the
disruptions from the COVID-related impacts in November and
December.
- The transitory pressure to the Company’s travel retail business
with its Korean duty free retailers due to the potential roll-back
of temporary COVID-related government supportive measures in Korea
duty free.
- An acceleration of retail sales in the fourth quarter of fiscal
2023 in travel retail, primarily due to the resumption of outbound
Chinese traveling consumers.
- A moderate return to net sales growth in mainland China, given
the disruption from the COVID-related impacts in November and
December that slowed expected brick-and-mortar retail traffic in
the second quarter and is continuing to dampen traffic in the third
quarter.
- Increased productive distribution throughout the year to
retailers that provide new consumer reach and continued strategic
entry into new countries for some of the Company’s brands.
- The mitigation of most inflationary pressures 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 25.5%.
The full year outlook does not reflect the net sales and the
slight dilution to earnings per share from the acquisition of the
TOM FORD brand that is expected to be completed in the fiscal 2023
fourth quarter.
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; foreign
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 its cost base and consumer behaviors.
Third Quarter Fiscal 2023
Sales Outlook
- Reported net sales are forecasted to decrease between 14% and
12% versus the prior-year period. This range includes:
- A shift in the return to growth in Asia Travel Retail and
mainland China, as detailed above.
- A negative 3% due to foreign currency translation.
- 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.
- 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 foreign currency translation, are forecasted to decrease
between 10% and 8%.
Earnings per Share Outlook
- Reported diluted net earnings per common share are projected to
be between $.32 and $.43. Excluding restructuring and other
charges, diluted net earnings per common share are projected to be
between $.37 and $.47.
- Adjusted diluted earnings per common share are expected to
decrease between 79% and 73% on a constant currency basis. Currency
exchange rates are volatile and difficult to predict. Using
December 30, 2022 spot rates for the third quarter of fiscal 2023:
- The negative foreign currency translation impact equates to
about $.04 of diluted earnings per share.
- As reported and adjusted diluted earnings per share in constant
currency are expected to be negatively impacted 1% from certain
foreign currency transactions in key international travel retail
locations.
Full Year Fiscal 2023
Sales Outlook
- Reported net sales are forecasted to decrease between 7% and 5%
versus the prior-year period. This range includes:
- A shift in the return to growth in Asia Travel Retail and
mainland China, as detailed above.
- A negative 4% due to foreign currency translation, as well as
an additional 1% due to certain foreign currency transactions in
key international travel retail locations.
- 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.
- 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 foreign currency translation, are forecasted to be down
2% to flat. This includes the negative impact related to foreign
currency transactions, noted above.
Earnings per Share Outlook
- Reported diluted net earnings per common share are projected to
be between $4.25 and $4.44. Excluding restructuring and other
charges, diluted net earnings per common share are projected to be
between $4.87 and $5.02.
- Adjusted diluted earnings per common share are expected to
decrease between 29% and 27% on a constant currency basis. Currency
exchange rates are volatile and difficult to predict. Using
December 30, 2022 spot rates for fiscal 2023:
- The negative foreign currency translation impact equates to
about $.29 of diluted earnings per share.
- As reported and adjusted diluted earnings per share in constant
currency are expected to be negatively impacted by 4% from certain
foreign currency transactions in key international travel retail
locations.
Reconciliation between GAAP
and Non-GAAP - Net Sales Growth (Unaudited)
Three Months Ending
Twelve Months Ending
March 31, 2023(F)
June 30, 2023(F)
As Reported - GAAP(1)
(14%) - (12
%)
(7%) - (5
%)
Organic, Non-GAAP(2)
(10%) - (8
%)
(2%) - 0
%
Impact of the license terminations related
to certain of the Company’s
designer fragrances
(1
)
(1
)
Impact of foreign currency translation
(3
)
(4
)
Returns associated with restructuring and
other activities
—
—
As Reported - GAAP(1)
(14%) - (12
%)
(7%) - (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 (the license
terminations related to certain of the Company’s designer
fragrances); as well as the impact of foreign currency
translation.
(F)Represents forecast
Reconciliation between GAAP
and Non-GAAP - Diluted Net Earnings Per Share (“EPS”)
(Unaudited)
Three Months Ending
Twelve Months Ending
March 31
June 30
2023(F)
2022
Growth
2023(F)
2022
Variance
Forecasted/As Reported EPS -
GAAP(1)
$0.32 - $0.43
$
1.53
(79%) - (72%)
$4.25 - $4.44
$
6.55
(35%) - (32%)
Non-GAAP
Restructuring and other charges
.04 - .05
.05
.15 - .19
.31
Change in fair value of
acquisition-related stock
options (less the portion attributable
to
redeemable noncontrolling interest)
—
(.13
)
(.01
)
(.12
)
Other intangible asset
impairments
—
.45
.44
.50
Forecasted/Adjusted EPS -
Non-GAAP
$0.37 - $0.47
$
1.90
(81%) - (75%)
$4.87 - $5.02
$
7.24
(33%) - (31%)
Impact of foreign currency translation
.04
.29
Forecasted/Adjusted Constant Currency
EPS -
Non-GAAP
$0.41 - $0.51
$
1.90
(79%) - (73%)
$5.16 - $5.31
$
7.24
(29%) - (27%)
(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, February 2, 2023 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: 7167229). 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 the Company’s
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, the Company’s
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. Although the Company believes that its expectations
are based on reasonable assumptions within the bounds of its
knowledge of its business and operations, actual results may differ
materially from the Company’s expectations.
Factors that could cause actual results to differ from
expectations include, without limitation:
(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 the Company’s 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 the Company’s 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, 2022.
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
December 31
Percentage Change
Six Months Ended
December 31
Percentage Change
($ in millions, except per share data)
2022
2021
2022
2021
Net sales(A)
$
4,620
$
5,539
(17
)%
$
8,550
$
9,931
(14
)%
Cost of sales(A)
1,219
1,223
—
2,242
2,280
(2
)
Gross profit
3,401
4,316
(21
)
6,308
7,651
(18
)
Gross margin
73.6
%
77.9
%
73.8
%
77.0
%
Operating expenses
Selling, general and administrative(B)
2,630
2,885
(9
)
4,874
5,279
(8
)
Restructuring and other charges(A)
8
13
(38
)
10
19
(47
)
Impairment of other intangible
assets(C)
207
—
100
207
—
100
Total operating expenses
2,845
2,898
(2
)
5,091
5,298
(4
)
Operating expense margin
61.6
%
52.3
%
59.5
%
53.3
%
Operating income
556
1,418
(61
)
1,217
2,353
(48
)
Operating income margin
12.0
%
25.6
%
14.2
%
23.7
%
Interest expense
52
42
24
98
84
17
Interest income and investment income,
net
26
10
100
+
41
14
100
+
Other components of net periodic benefit
cost
(2
)
(2
)
—
(5
)
(1
)
(100
+)
Other income
—
—
—
—
1
(100
)
Earnings before income taxes
532
1,388
(62
)
1,165
2,285
(49
)
Provision for income taxes
135
298
(55
)
278
500
(44
)
Net earnings
397
1,090
(64
)
887
1,785
(50
)
Net earnings attributable to
noncontrolling interests
—
(4
)
100
—
(5
)
100
Net loss (earnings) attributable to
redeemable
noncontrolling interest
(3
)
2
(100
+)
(4
)
—
(100
)
Net earnings attributable to The Estée
Lauder
Companies Inc.
$
394
$
1,088
(64
)%
$
883
$
1,780
(50
)%
Net earnings attributable to The Estée
Lauder
Companies Inc. per common share
Basic
$
1.10
$
3.02
(64
)%
$
2.47
$
4.93
(50
)%
Diluted
$
1.09
$
2.97
(63
)%
$
2.45
$
4.85
(50
)%
Weighted-average common shares
outstanding
Basic
357.7
360.6
357.8
361.4
Diluted
360.4
366.0
360.9
367.0
(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 is
expected to 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
approved 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.
(B)For the three and six months ended
December 31, 2022, the Company recorded $(4) million ($(4) million,
less the portion attributable to redeemable noncontrolling interest
and net of tax) and $(3) million ($(3) million, less the portion
attributable to redeemable noncontrolling interest and net of tax),
respectively, of income related to the change in fair value of
acquisition-related stock options related to DECIEM, and recorded
$2 million ($2 million, less the portion attributable to redeemable
noncontrolling interest and net of tax) for the three and six
months ended December 31, 2021.
(C)During the fiscal 2023 second quarter,
given the lower-than-expected results in the overall business, the
Company made revisions to the internal forecasts relating to its
Smashbox 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. The
remaining carrying value of the trademark intangible asset was not
recoverable and the Company recorded an impairment charge of $21
million reducing the carrying value to zero.
During the fiscal 2023 second quarter, the
Dr.Jart+ reporting unit experienced lower-than-expected growth
within key geographic regions and channels that continue to be
impacted by the spread of COVID-19 variants, 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 reporting unit. In addition, due to
macro-economic factors, Dr.Jart+ has experienced
lower-than-expected growth within key geographic regions. The Too
Faced reporting unit experienced lower-than-expected results in key
geographic regions and channels coupled with delays in future
international expansion to areas that continue to be impacted by
COVID-19. As a result, the Company made revisions to the internal
forecasts relating to its Dr.Jart+ and Too Faced reporting units.
Additionally, there were increases in the weighted average cost of
capital for both reporting units as compared to the prior year
annual goodwill and other indefinite-lived intangible asset
impairment testing as of April 1, 2022.
The Company concluded that the changes in
circumstances in the reporting units, along with increases in the
weighted average cost of capital, 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 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 November 30, 2022. The Company
concluded that the carrying value of the trademark intangible
assets exceeded their estimated fair values, which were determined
utilizing the relief-from-royalty method to determine discounted
projected future cash flows and recorded an impairment charge of
$100 million for Dr.Jart+ and $86 million for Too Faced. The
Company concluded that the carrying amounts of the long-lived
assets were recoverable. 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+ 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. The fair values of these
reporting units were based upon an equal weighting of the income
and market approaches, utilizing estimated cash flows and a
terminal value, discounted at a rate of return that reflects the
relative risk of the cash flows, as well as valuation multiples
derived from comparable publicly traded companies that are applied
to operating performance of the reporting units. The significant
assumptions used in these approaches include revenue growth rates
and profit margins, terminal values, weighted average cost of
capital used to discount future cash flows and royalty rates for
trademarks. The most significant unobservable input used to
estimate the fair values of the Dr.Jart+ and Too Faced trademark
intangible assets was the weighted-average cost of capital, which
was 11% and 13%, respectively.
For the three and six months ended
December 31, 2022, other intangible asset impairment charges were
$207 million ($159 million, net of tax), with an impact of $.44 per
common share in both periods.
Returns and Charges Associated
With Restructuring and Other Activities and Other Adjustments
(Unaudited)
Three Months Ended December
31, 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
$
1
$
1
$
—
PCBA Program
1
—
4
3
8
6
.02
Change in fair value of
acquisition-related
stock options
—
—
—
(4
)
(4
)
(4
)
(.01
)
Other intangible asset impairments
—
—
—
207
207
159
.44
Total
$
1
$
—
$
4
$
207
$
212
$
162
$
.45
Six Months Ended December 31,
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
)
$
3
$
1
$
1
$
—
PCBA Program
6
(1
)
6
3
14
10
.03
Change in fair value of
acquisition-related
stock options
—
—
—
(3
)
(3
)
(3
)
(.01
)
Other intangible asset impairments
—
—
—
207
207
159
.44
Total
$
6
$
(1
)
$
4
$
210
$
219
$
167
$
.46
Three Months Ended December
31, 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
$
—
$
2
$
(2
)
$
5
$
5
$
4
$
.01
PCBA Program
1
(1
)
7
3
10
8
.02
Change in fair value of
acquisition-related
stock options
—
—
—
2
2
2
.01
Total
$
1
$
1
$
5
$
10
$
17
$
14
$
.04
Six Months Ended December 31,
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
$
—
$
2
$
(1
)
$
8
$
9
$
7
$
.02
PCBA Program
2
(2
)
7
5
12
10
.03
Change in fair value of
acquisition-related
stock options
—
—
—
2
2
2
—
Other income
—
—
—
(1
)
(1
)
(1
)
—
Total
$
2
$
—
$
6
$
14
$
22
$
18
$
.05
Results by Product Category
(Unaudited)
Six Months Ended December
31
Net Sales
Percentage Change
Operating Income
(Loss)
Percentage Change
($ in millions)
2022
2021
Reported Basis
Constant
Currency
2022
2021
Reported Basis
Skin Care
$
4,486
$
5,608
(20
)%
(16
)%
$
951
$
1,799
(47
)%
Makeup
2,320
2,560
(9
)
(5
)
(21
)
221
(100
+)
Fragrance
1,382
1,408
(2
)
4
310
341
(9
)
Hair Care
340
328
4
7
(7
)
10
(100
+)
Other
28
29
(3
)
3
(1
)
3
(100
+)
Subtotal
$
8,556
$
9,933
(14
)%
(9
)%
$
1,232
$
2,374
(48
)%
Returns/charges associated with
restructuring and other activities
(6
)
(2
)
(15
)
(21
)
Total
$
8,550
$
9,931
(14
)%
(9
)%
$
1,217
$
2,353
(48
)%
Organic Net Sales Growth -
Reconciliation to GAAP (Unaudited)
Six Months Ended December
31 2022 vs. 2021(2)
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
(16
)%
—
%
(4
)%
(20
)%
Makeup
(5
)
—
(5
)
(9
)
Fragrance
14
(10
)
(6
)
(2
)
Hair Care
7
—
(4
)
4
Other
(3
)
7
(7
)
(3
)
Subtotal
(8
)%
(1
)%
(5
)%
(14
)%
Returns associated with restructuring and
other activities
—
Total
(8
)%
(1
)%
(5
)%
(14
)%
(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 (the license terminations related
to certain of the Company’s designer fragrances); as well as the
impact of foreign currency translation.
(2)Percentages are calculated on an
individual basis
Results by Geographic
Region (Unaudited)
Six Months Ended December
31
Net Sales
Percentage Change
Operating Income
(Loss)
Percentage
Change
($ in millions)
2022
2021
Reported Basis
Constant
Currency
2022
2021
Reported Basis
The Americas
$
2,358
$
2,494
(5
)%
(6
)%
$
40
$
636
(94
)%
Europe, the Middle East & Africa
3,498
4,211
(17
)
(13
)
743
1,085
(32
)
Asia/Pacific
2,700
3,228
(16
)
(7
)
449
653
(31
)
Subtotal
$
8,556
$
9,933
(14
)%
(9
)%
$
1,232
$
2,374
(48
)%
Returns/charges associated with
restructuring
and other activities
(6
)
(2
)
(15
)
(21
)
Total
$
8,550
$
9,931
(14
)%
(9
)%
$
1,217
$
2,353
(48
)%
Organic Net Sales Growth -
Reconciliation to GAAP
(Unaudited)
Six Months Ended December
31
2022 vs. 2021(2)
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
(3
)%
(3
)%
1
%
(5
)%
Europe, the Middle East & Africa
(12
)
(1
)
(4
)
(17
)
Asia/Pacific
(7
)
—
(9
)
(16
)
Subtotal
(8
)%
(1
)%
(5
)%
(14
)%
Returns associated with restructuring and
other activities
—
Total
(8
)%
(1
)%
(5
)%
(14
)%
(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 (the license terminations related
to certain of the Company’s designer fragrances); as well as the
impact of foreign currency translation.
(2)Percentages are calculated on an
individual basis
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 manner in which 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 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. The Company’s 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 net 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 December
31
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
$
4,620
$
1
$
4,621
$
282
$
4,903
$
5,539
$
1
$
5,540
(17
)%
(11
)%
Cost of sales
1,219
—
1,219
64
1,283
1,223
(1
)
1,222
Gross profit
3,401
1
3,402
218
3,620
4,316
2
4,318
(21
)%
(16
)%
Gross margin
73.6
%
73.6
%
73.8
%
77.9
%
77.9
%
Operating expenses
2,845
(211
)
2,634
150
2,784
2,898
(15
)
2,883
(9
)%
(3
)%
Operating expense
margin
61.6
%
57.0
%
56.8
%
52.3
%
52.0
%
Operating income
556
212
768
68
836
1,418
17
1,435
(46
)%
(42
)%
Operating income
margin
12.0
%
16.6
%
17.1
%
25.6
%
25.9
%
Provision for income
taxes
135
50
185
17
202
298
3
301
(39
)%
(33
)%
Net earnings
attributable to The
Estée Lauder
Companies Inc.
$
394
$
162
$
556
$
54
$
610
$
1,088
$
14
$
1,102
(50
)%
(45
)%
Diluted EPS
$
1.09
$
.45
$
1.54
$
.15
$
1.69
$
2.97
$
.04
$
3.01
(49
)%
(44
)%
Six Months Ended December
31
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
$
8,550
$
6
$
8,556
$
458
$
9,014
$
9,931
$
2
$
9,933
(14
)%
(9
)%
Cost of sales
2,242
1
2,243
94
2,337
2,280
—
2,280
Gross profit
6,308
5
6,313
364
6,677
7,651
2
7,653
(18
)%
(13
)%
Gross margin
73.8
%
73.8
%
74.1
%
77.0
%
77.0
%
Operating expenses
5,091
(214
)
4,877
265
5,142
5,298
(21
)
5,277
(8
)%
(3
)%
Operating expense
margin
59.5
%
57.0
%
57.0
%
53.3
%
53.1
%
Operating income
1,217
219
1,436
99
1,535
2,353
23
2,376
(40
)%
(35
)%
Operating income
margin
14.2
%
16.8
%
17.0
%
23.7
%
23.9
%
Other income
—
—
—
—
—
1
(1
)
—
Provision for income
taxes
278
52
330
24
354
500
4
504
(35
)%
(30
)%
Net earnings
attributable to The
Estée Lauder
Companies Inc.
$
883
$
167
$
1,050
$
78
$
1,128
$
1,780
$
18
$
1,798
(42
)%
(37
)%
Diluted EPS
$
2.45
$
.46
$
2.91
$
.22
$
3.13
$
4.85
$
.05
$
4.90
(41
)%
(36
)%
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited, except where
noted)
December 31, 2022
June 30, 2022
December 31, 2021
($ in millions)
(Audited)
ASSETS
Cash and cash equivalents
$
3,725
$
3,957
$
4,603
Accounts receivable, net
1,932
1,629
2,079
Inventory and promotional merchandise
3,069
2,920
2,612
Prepaid expenses and other current
assets
641
792
661
Total current assets
9,367
9,298
9,955
Property, plant and equipment, net
2,908
2,650
2,451
Operating lease right-of-use assets
1,847
1,949
2,102
Other assets
6,609
7,013
7,570
Total assets
$
20,731
$
20,910
$
22,078
LIABILITIES AND EQUITY
Current debt
$
260
$
268
$
272
Accounts payable
1,507
1,822
1,639
Operating lease liabilities
349
365
397
Other accrued liabilities
3,539
3,360
3,454
Total current liabilities
5,655
5,815
5,762
Long-term debt
5,111
5,144
5,259
Long-term operating lease liabilities
1,757
1,868
2,028
Other noncurrent liabilities
1,487
1,651
1,937
Total noncurrent liabilities
8,355
8,663
9,224
Redeemable noncontrolling
interest
819
842
840
Total equity
5,902
5,590
6,252
Total liabilities and equity
$
20,731
$
20,910
$
22,078
SELECT CASH FLOW DATA
(Unaudited)
Six Months Ended December
31
($ in millions)
2022
2021
Net earnings
$
887
$
1,785
Adjustments to reconcile net earnings to
net cash flows from operating
activities:
Depreciation and amortization
359
364
Deferred income taxes
(31
)
(43
)
Impairment of other intangible assets
207
—
Other items
192
212
Changes in operating assets and
liabilities:
Increase in accounts receivable, net
(295
)
(407
)
Increase in inventory and promotional
merchandise
(156
)
(164
)
Decrease (increase) in other assets,
net
33
(57
)
Increase (decrease) in accounts payable
and other liabilities, net
(445
)
156
Net cash flows provided by operating
activities
$
751
$
1,846
Other Investing and Financing Sources
(Uses):
Capital expenditures
$
(419
)
$
(459
)
Settlement of net investment hedges
138
58
Payments to acquire treasury stock
(257
)
(1,428
)
Dividends paid
(451
)
(409
)
Proceeds (repayments) of current debt,
net
244
(4
)
Repayments and redemptions of long-term
debt, net
(258
)
(10
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230202005036/en/
Investors: Rainey Mancini rmancini@estee.com
Media: Jill Marvin jimarvin@estee.com
Estee Lauder Companies (NYSE:EL)
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