01—Abstract
Summary
Summary of the 10-K filed August 24, 2022. Cited figures are marked; the original filing is the authoritative source.
The Estée Lauder Companies Inc. reported fiscal 2022 (year ended June 30, 2022) net sales of $17.74 billiona, up from $16.22 billion in fiscal 2021, with reported net sales increasing 9% and 10% in constant currency.
Growth was led by fragrance (up 30%), makeup (up 11%) and hair care (up 11%), while skin care rose 4%. Reported operating income increased to $3.17 billionb from $2.62 billion, with operating margin rising to 17.9% from 16.1%. Net earnings attributable to the company fell to $2.39 billion from $2.87 billion, and diluted EPS declined to $6.55 from $7.79; fiscal 2021 included a $848 million gain on DECIEM, which drove the comparison.
Adjusted diluted EPS rose to $7.24c from $6.45 on a non-GAAP basis. The company recorded goodwill and intangible impairments totaling $241 million, including a $230 million charge on Dr.Jart+ trademarks in Asia/Pacific, and restructuring charges tied to the Post-COVID Business Acceleration Program, now estimated at $500 million to $515 million in total. Management expects annual benefits of $390 million to $410 million once that program is fully implemented.
Net cash from operations was $3.04 billiond, down from $3.63 billion, while capital expenditures rose to $1.04 billion. Cash and equivalents ended at $3.96 billion, and the company paid $2.31 billion to repurchase treasury stock during the year.
The Lauder family controls about 84% of voting power, and China-related exposure remained significant, with mainland China accounting for approximately 34% of net sales in fiscal 2022. The company declared a quarterly dividend of $0.60 per share on August 17, 2022.
02—Key points
Key Highlights
- Net sales rose 9% to $17.74 billion, with 10% growth in constant currency, led by a 30% increase in fragrance and 11% increases in makeup and hair care.
- Operating income increased to $3.17 billion from $2.62 billion, and operating margin improved to 17.9% from 16.1%.
- Diluted EPS fell to $6.55 from $7.79 because fiscal 2021 included a $848 million gain on the previously held DECIEM investment; adjusted diluted EPS rose to $7.24 from $6.45.
- Goodwill and other intangible and long-lived asset impairments totaled $241 million, including a $230 million Dr.Jart+ trademark impairment in Asia/Pacific.
- Post-COVID Business Acceleration Program charges are now estimated at $500 million to $515 million, with annual benefits raised to $390 million to $410 million.
- Operating cash flow declined to $3.04 billion from $3.63 billion, while capital expenditures increased to $1.04 billion.
- The Lauder family holds about 84% of voting power, and the company is a controlled company under NYSE rules; mainland China represented about 34% of fiscal 2022 net sales.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Estée Lauder Companies kept $0.13.
- Revenue$17.74B100.0%
- Cost of revenue−$4.30B24.3%
- Gross profit$13.43B75.7%
- Operating costs−$10.26B57.9%
- Operating income$3.17B17.9%
- Interest, other & tax−$780.0M4.4%
- Net income$2.39B13.5%
Where FY2022 revenue went
$17.74B- SG&A: $9.89B, 56% of revenue
- Cost of revenue: $4.30B, 24% of revenue
- Net income: $2.39B, 13% of revenue
- Other operating costs: $374.0M, 2.1% of revenue
- Interest, other & tax: $780.0M, 4.4% of revenue
Kept 13% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed August 24, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $17.74B$16.21B | +9.4% |
| Cost of Revenue | $4.30B$3.83B | +12.3% |
| Gross Profit | $13.43B$12.38B | +8.5% |
| SG&A Expenses | $9.89B$9.37B | +5.5% |
| Operating Expenses | $10.26B$9.76B | +5.1% |
| Operating Income | $3.17B$2.62B | +21.1% |
| Interest Expense | $167.00M$173.00M | −3.5% |
| Net Income | $2.39B$2.87B | −16.7% |
| EPS (Basic) | $6.64$7.91 | −16.1% |
| EPS (Diluted) | $6.55$7.79 | −15.9% |
| Shares Outstanding (Basic) | 360.00M362.90M | −0.8% |
| Shares Outstanding (Diluted) | 364.90M368.20M | −0.9% |
05—Questions
Frequently Asked Questions
Why did diluted EPS decline despite higher operating income?
Fiscal 2021 included a $848 million gain on the previously held equity method investment in DECIEM, which contributed to that year's earnings. Fiscal 2022 had no comparable gain, so net earnings attributable to the company fell to $2.39 billion from $2.87 billion even though operating income increased to $3.17 billion. On an adjusted basis, diluted EPS rose 12% to $7.24.
Which product categories and regions drove fiscal 2022 growth?
Fragrance net sales rose 30% to $2.51 billion, led by Jo Malone London, Tom Ford Beauty and Le Labo. Makeup grew 11% to $4.67 billion, led by M·A·C and Estée Lauder. The Americas rose 22% to $4.62 billion, while Asia/Pacific declined 1% to $5.44 billion due to COVID-19 restrictions in China and elsewhere.
What are the main risks highlighted in the filing?
The filing highlights continued COVID-19 uncertainty affecting retail and travel retail, dependence on China (about 34% of fiscal 2022 net sales from mainland China), intense competition, and the impact of geopolitical tensions and the invasion of Ukraine. It also notes goodwill and trademark impairment risk, particularly for DECIEM and Too Faced, where the fair values exceeded carrying values by 3% and 13%, respectively, for trademarks.
How much capital is the company returning to shareholders?
The company paid $2.31 billion to repurchase treasury stock and $840 million in dividends to stockholders in fiscal 2022. On August 17, 2022, the board declared a $0.60 per share quarterly dividend, payable September 15, 2022. Subsequent to June 30, 2022 and as of August 17, 2022, the company purchased about 0.2 million additional shares for $63 million.
What is the Post-COVID Business Acceleration Program and how is it progressing?
The PCBA Program, announced August 20, 2020, is a restructuring intended to shift sales online and rebalance resources to growth areas. Total charges are now estimated at $500 million to $515 million, up from $400 million to $500 million, and the net workforce reduction estimate is 2,500 to 3,000 positions. Approximately 10% to 15% of freestanding stores are expected to close, and the program is expected to be substantially complete through fiscal 2023.
06—Continue