Estée Lauder(EL) - 2025 Q3 - Quarterly Report

Sales Performance - Skin care net sales decreased by 12% to $1,807 million for the three months ended March 31, 2025, compared to$2,060 million in the same period of 2024[185]. - Makeup net sales decreased by 9% to $1,035 million for the three months ended March 31, 2025, compared to$1,136 million in the same period of 2024[185]. - Fragrance net sales decreased by 3% to $557 million for the three months ended March 31, 2025, compared to$575 million in the same period of 2024[185]. - Hair care net sales decreased by 12% to $126 million for the three months ended March 31, 2025, compared to$143 million in the same period of 2024[185]. - Net sales decreased by 10% to $3,550 million for the three months ended March 31, 2025, compared to$3,940 million in the prior year[223]. - The Americas region net sales were $1,052 million for the three months ended March 31, 2025, down from$1,117 million in the same period of 2024[185]. - Europe, the Middle East & Africa region net sales decreased to $1,358 million for the three months ended March 31, 2025, compared to$1,647 million in the same period of 2024[185]. - Asia/Pacific region net sales decreased to $1,140 million for the three months ended March 31, 2025, compared to$1,176 million in the same period of 2024[185]. - Net sales in The Americas decreased by 6%, primarily due to lower sales in North America and ongoing retail softness[197]. - Net sales in Europe, the Middle East & Africa decreased by 18%, driven by lower sales in the Asia travel retail business and strategic decisions to reduce exposure to reseller activity[197]. - Net sales in Asia/Pacific decreased by 3%, with declines in Korea, Hong Kong SAR, Singapore, Taiwan, and Australia, partially offset by growth in mainland China and Japan[197]. Operating Income and Expenses - Operating income decreased to $306 million for the three months ended March 31, 2025, compared to$531 million in the same period of 2024[185]. - Total operating expenses increased to 66.3% of net sales for the three months ended March 31, 2025, compared to 58.4% in the same period of 2024[187]. - Operating income decreased by 42% for the three months ended March 31, 2025, with an operating margin of 8.6%, down from 13.5% in the prior-year period[276]. - The unfavorable change in operating expense margin for the three months ended March 31, 2025 was influenced by higher advertising and merchandising expenses to support sales[274]. - Charges associated with restructuring and other activities for the three months ended March 31, 2025 amounted to $97 million, impacting overall operating income[277]. Earnings and Profitability - Net earnings attributable to The Estée Lauder Companies Inc. were 4.5$159 million, a decrease of 52% from $330 million in the prior year[301]. - Operating income as reported for the nine months ended March 31, 2025, was a loss of$395 million, compared to a profit of $1,203 million in the prior year, representing a decline of over 100$(1.63), a decrease of over 100% from $1.87 in the prior year[309]. - The company reported a decrease in operating income as adjusted to$1,009 million for the nine months ended March 31, 2025, down 19% from $1,239 million in the prior year[309]. Restructuring and Future Plans - The company expects restructuring charges from the Profit Recovery and Growth Plan (PRGP) to total between$1,200 million and $1,600 million, before taxes[213]. - The PRGP aims to yield annual gross benefits of between$800 million and $1,000 million, before taxes, to support sales growth and improve profitability[214]. - The restructuring program is expected to result in a net reduction of approximately 5,800 to 7,000 positions globally, representing about 9-11$2,631 million, down from $3,395 million at June 30, 2024[320]. - Total debt as a percentage of total capitalization increased to 63$671 million, a decrease from $1,471 million in the same period of 2024[331]. - The company’s outstanding borrowings totaled$7,301 million as of March 31, 2025, with long-term debt accounting for $7,298 million and current debt at$3 million[327]. Market Risks and Challenges - The company acknowledges potential risks affecting future performance, including increased competition in the skin care, makeup, fragrance, and hair care sectors[349]. - Future operating results may depend on the successful development, production, and marketing of new products[349]. - The company faces challenges from retail industry consolidations and potential bankruptcies, which could decrease the number of stores selling its products[349]. - Changes in consumer preferences regarding value perception and shopping habits may impact sales[349]. - The company is exposed to foreign currency fluctuations that could affect operational results and asset values[349]. - Global or local conditions, including economic policies and supply chain challenges, may influence consumer purchasing behavior[349]. - Shipment delays and increased production costs could arise from operational disruptions at manufacturing or distribution facilities[349].