Estee Lauder Companies Inc EL reported upbeat fourth-quarter results, but issued worse-than-expected FY25 EPS outlook on Monday. The company reported sales growth of 7% Y/Y to $3.87 billion, beating the analyst consensus estimate of $3.83 billion. Estee Lauder's operating loss was $233 million, compared to a $5 million loss last year. Adjusted EPS of 64 cents beat the analyst consensus estimate of 27 cents. Estée Lauder announced that President and CEO Fabrizio Freda will retire at the end of FY25. The comp ...

Estee Lauder forecasted annual profit and sales below estimates as the global beauty market struggles with slowing demand mainly in the China market and said CEO Fabrizio Freda was retiring after nearly 16 years at the helm. Freda, 66, who is retiring in June, was named the CEO in 2009 and was responsible for expanding the company's skincare portfolio with the addition of brands such as Dr. Jart and The Ordinary owner Deciem. He also steered the company through pandemic-induced supply chain snags when Estee ...

Financial Data and Key Metrics - Organic sales declined 2% for fiscal year 2024, with adjusted operating margin contracting 120 basis points to 10.2% [4] - Fourth quarter organic net sales increased by 8%, with diluted EPS rising to $0.64 from $0.07 last year [21] - Gross margin expanded 380 basis points to 71.8% in Q4, driven by lower obsolescence and overhead charges, and higher skincare sales [24] - Full-year operating income declined 13% to $1.6 billion, with operating margin contracting 120 basis points to 10.2% [30] - Net earnings for the full year were $935 million, with diluted EPS at $2.59, both declining 25% compared to last year [31] Business Line Performance - Skincare organic net sales increased 15% in Q4, driven by La Mer and Estée Lauder, with The Ordinary growing over 20% in fiscal year 2024 [12][23] - Makeup organic net sales increased 1%, with strong performance from Clinique's Almost Lipstick product franchise, offset by declines from M·A·C and TOM FORD [23] - Fragrance organic net sales rose mid-single-digit in fiscal year 2024, led by luxury brands like Jo Malone London and Le Labo [15] - Hair care organic net sales increased 2%, while fragrance net sales rose 1% in Q4 [23] Market Performance - Organic net sales in Asia Pacific decreased 4%, primarily due to softness in mainland China and lower shipments in Hong Kong SAR [22] - Organic net sales in EMEA rose 32%, driven by Asia travel retail and strong performance in developed European and emerging markets [22] - Organic net sales in the Americas decreased 5%, with North America facing intense competition and a slowdown in prestige beauty growth [23] - Online sales grew mid-single-digits in the Americas, benefiting from retailer.com growth and the launch of Clinique on Amazon [23] Strategic Priorities and Industry Competition - The company's strategic priorities for fiscal year 2025 include reigniting skincare, capitalizing on high-end fragrance growth, leveraging fast-growing channels, and enhancing precision marketing [5][6] - The Profit Recovery and Growth Plan (PRGP) aims to accelerate margin expansion, create fuel for growth, and simplify processes for faster execution [34][36] - The company expects the global prestige beauty industry to grow 2% to 3% in fiscal year 2025, with a reacceleration to mid-single-digit growth in fiscal year 2026 [9][10] Management Commentary on Operating Environment and Future Outlook - The company remains unsatisfied with fiscal year 2024 performance, citing challenges in mainland China and Asia travel retail [4] - Management expects fiscal year 2025 to be a transitional year, with continued macroeconomic softness and challenges in key markets, but with early signs of progress in North America [39][41] - The company forecasts fiscal year 2025 organic net sales to range between a decrease of 1% and an increase of 2%, with diluted EPS expected to range between $2.75 and $2.95 [39] Other Important Information - The company completed the acquisition of DECIEM in May 2024 for $859 million, with $829 million paid as of June 30, 2024 [31] - The company recorded $471 million in impairment charges related to Dr.Jart+ in Q4, exiting the brand from heavily discounted travel retail channels [25] - The company expects to take restructuring and other charges of $100 million to $120 million in fiscal year 2025 [36] Q&A Session Summary Question: Succession Planning and Attributes for the Next CEO - Fabrizio Freda emphasized the importance of finding a successor who can drive global growth and reshape the cost structure, with the Board well-advanced in the selection process [45][46] Question: Impact of China and Travel Retail on Earnings - Tracey Travis highlighted the significant pressure on earnings from declines in mainland China and Asia travel retail, with the PRGP helping to offset some of the impact [48] Question: Investment Constraints and Market Competition - Tracey Travis explained that the company is protecting consumer-facing investments, particularly in high-growth areas like fragrance and active derm, while managing expense deleverage [51][52] Question: Travel Retail Inventory Levels and Outlook - Tracey Travis noted higher inventory levels in travel retail due to decelerating sales, with efforts to normalize stock levels in Q1 [55] - Fabrizio Freda added that the company is building a distribution center in Hainan to improve inventory management [56] Question: Channel Shifts and Margin Impact - Tracey Travis discussed the shift to faster-growing channels like Amazon, which is expected to be margin accretive despite varying channel margins [59] - Fabrizio Freda emphasized the efficiency of online channels and the positive long-term impact of channel rebalancing [60] Question: Long-Term Category Growth Expectations - Fabrizio Freda projected a return to mid-single-digit global category growth, assuming stabilization in China and Asia travel retail, with the company aiming to grow at least 1 point ahead of the market [63] Question: North America Competitive Environment - Fabrizio Freda acknowledged the moderation in the US prestige market but highlighted progress in Q4 and July, with brands like Clinique showing strong performance [65]

Ownership and Control - The Estée Lauder Companies Inc. has been controlled by the Lauder family, owning approximately 84% of the outstanding voting power of the Common Stock as of August 12, 2024[8]. - The Lauder family controls approximately 84% of the outstanding voting power of the Company's Common Stock as of August 12, 2024[108]. Financial Performance - In fiscal 2024, the company reported a breakdown of net sales by product category, with Skin Care accounting for 56%, Makeup for 28%, Fragrance for 14%, and Hair Care for 2%[10]. - Research and development costs totaled $360 million in fiscal 2024, up from $344 million in 2023 and $307 million in 2022, with approximately 1,430 employees engaged in R&D activities as of June 30, 2024[42]. - The company experiences seasonal fluctuations in net sales, typically higher in the first half of the fiscal year due to special events and holiday seasons[65]. - The financial health of retailers and consumer spending trends are critical, as economic downturns could adversely affect sales and profitability[86]. Market Position and Competition - The company faces significant competition from major brands like L'Oreal and Unilever, as well as independent brands and retailers with their own beauty lines[49][50]. - The beauty business is highly competitive, with challenges from multinational companies and newer entrants, impacting pricing, innovation, and market presence[75]. - The company relies on strong brand reputation and effective use of emerging technologies like AI and data analytics to maintain competitive advantage[76]. Brand and Product Strategy - The company completed the acquisition of the TOM FORD brand on April 28, 2023, which includes luxury fragrance, color cosmetics, and skin care products[20]. - The company has made several minority investments in beauty companies and acquired remaining interests in brands like Dr.Jart+ and DECIEM, enhancing its portfolio[24]. - The company has a diverse brand portfolio, with "Luxury Brands," "Large Brands," "Scaling Brands," and "Developing Brands" categorized to target various market segments[25]. - The company's luxury brands include La Mer, Jo Malone London, TOM FORD, and AERIN Beauty, contributing to its premium market positioning[25]. Digital and E-commerce Strategy - The company continues to expand its online sales, with a majority generated in mainland China, the United States, and the United Kingdom, while also focusing on global market expansion[30]. - The company continues to invest in technology and digital presence, focusing on e-commerce and personalized consumer experiences to drive brand loyalty[36][39]. Sustainability and Social Responsibility - The Estée Lauder Companies Inc. emphasizes sustainability and social impact, integrating these initiatives into its business strategy to drive innovation and efficiency[26]. - The company emphasizes sustainability, with initiatives aimed at waste reduction and investments in renewable energy sources[45]. - The company supports employee volunteerism through the ELC Good Works program, matching cash donations and rewarding volunteer hours[63]. Employee and Workplace Culture - Approximately 71% of the company's 62,000 employees worldwide were full-time as of June 30, 2024, with 80% of employees being female[55]. - The company is committed to enhancing inclusion, diversity, and equity in the workplace to attract and retain top global talent[56]. - Significant progress has been made in gender equity and equitable pay practices, with ongoing focus on cross-generational inclusion[57]. - The talent strategy emphasizes employee engagement, career development, and succession planning to build leadership across the organization[58]. - Employee feedback mechanisms are in place to improve satisfaction and align with the human capital strategy, including the Talent Marketplace (ELC Grow)[59]. - The company offers competitive compensation and benefits packages to attract and retain world-class talent, including health and wellness benefits[62]. Risk Management and Compliance - The company is subject to various regulations by authorities such as the FDA and FTC, impacting product safety, labeling, and marketing practices[64]. - Legal disputes and regulatory proceedings could result in significant expenses and negatively impact the business[97]. - The company is exposed to risks from governmental scrutiny and potential non-compliance with laws, which could lead to fines and interruptions in business[98]. - The company faces risks related to the global scope of operations, including fluctuations in foreign currency exchange rates and geopolitical conditions, which could adversely affect business[92]. - Disruptions in supply chain and operations, including industrial accidents and natural disasters, could have a material adverse effect on the business[93]. - The company has experienced cybersecurity incidents that have caused disruptions and incurred expenses for investigation and remediation[100]. - The Company has implemented a cybersecurity program that includes processes and technologies to manage material risks from cybersecurity threats[112]. - The Audit Committee receives at least semi-annual updates on the cybersecurity strategy and key security metrics from the Chief Information Security Officer (CISO)[115]. - The Company has a formal information security training program for employees, including mandatory training on data privacy and phishing[112]. - The Company has not identified any cybersecurity risks that have materially affected its business strategy or financial condition[114]. - The Company maintains insurance coverage intended to address costs associated with certain aspects of cybersecurity incidents[113]. Strategic Planning and Investments - The company plans to invest in new capabilities, brands, and distribution channels, which may incur short-term costs and could be dilutive to earnings[79]. - Acquisitions and divestitures are under continuous review to expand product offerings and geographic scope, but there are risks associated with integration and management focus[80]. - The Company’s business planning process focuses on long-term growth and profitability rather than achieving short-term earnings targets[105]. - The Company has historically paid dividends and repurchased shares, but may suspend these actions at any time, potentially affecting stock prices[105]. Operational Efficiency - The company operates in over 50 countries, with dedicated sales teams managing retail accounts and a focus on emerging markets in regions such as India, South Africa, and Brazil[31][32]. - The company maintains a flexible global distribution network to meet changing customer demands and improve efficiency[44]. - The research and development group collaborates with dermatology and medical institutions to ensure product safety and compliance[41].

Key Takeaways Estee Lauder ended its fiscal 2024 with mixed results as it faced a drop in demand in China and North America while skin care product sales jumped. The beauty products maker posted a surprise quarterly loss, but adjusted earnings and revenue exceeded forecasts. Estee Lauder said CEO Fabrizio Freda will be retiring at the end of fiscal 2025. Estee Lauder (EL) shares edged higher in intraday trading Monday after the beauty products maker ended a tough fiscal 2024 by posting mostly better-than-ex ...

About this content About Emily Jarvie Emily began her career as a political journalist for Australian Community Media in Hobart, Tasmania. After she relocated to Toronto, Canada, she reported on business, legal, and scientific developments in the emerging psychedelics sector before joining Proactive in 2022. She brings a strong journalism background with her work featured in newspapers, magazines, and digital publications across Australia, Europe, and North America, including The Examiner, The Advocate, The ...

The Estee Lauder Companies Inc. (EL) reported fourth-quarter fiscal 2024 results, wherein the top and bottom lines increased year over year and beat the respective Zacks Consensus Estimate even amid a tough landscape. For fiscal 2025, management expects continued sluggishness in the prestige beauty segment in China, mainly due to ongoing weak consumer sentiment. In other areas of the business, the company plans to deliver improved performance across both developed and emerging markets. Quarter in Detail The ...

Shares of Estee Lauder Companies Inc (NYSE:EL) are brushing off a second-quarter results beat, down 1.3% at $93.73 at last glance, though paring sharper premarket losses. The beauty product name reported a disappointing annual and quarterly revenue forecast, citing weakened sales in China. Plus, long-time CEO Fabrizio Freda announced plans to retire in 2025. Estee Lauder isn't trading too far from its recent Aug. 12 seven-year low of $86.05. Year to date, the equity is down 35%, and at this point in the mon ...

Estee Lauder (EL) reported $3.87 billion in revenue for the quarter ended June 2024, representing a year-overyear increase of 7.3%. EPS of $0.64 for the same period compares to $0.07 a year ago. The reported revenue compares to the Zacks Consensus Estimate of $3.83 billion, representing a surprise of +0.99%. The company delivered an EPS surprise of +156.00%, with the consensus EPS estimate being $0.25. While investors closely watch year-over-year changes in headline numbers -- revenue and earnings -- and ho ...

Estee Lauder (EL) came out with quarterly earnings of $0.64 per share, beating the Zacks Consensus Estimate of $0.25 per share. This compares to earnings of $0.07 per share a year ago. These figures are adjusted for nonrecurring items. This quarterly report represents an earnings surprise of 156%. A quarter ago, it was expected that this beauty products company would post earnings of $0.48 per share when it actually produced earnings of $0.97, delivering a surprise of 102.08%. Over the last four quarters, t ...