01—Abstract
Summary
Summary of the 10-Q filed May 1, 2024. Cited figures are marked; the original filing is the authoritative source.
The Estée Lauder Companies Inc. reported net sales of $3.94 billiona for the three months ended March 31, 2024, up from $3.75 billion a year earlier, driven primarily by higher net sales in its Asia travel retail business.
For the nine months, net sales declined to $11.74 billionb from $12.30 billion, reflecting lower Asia travel retail and mainland China sales. Reported net earnings attributable to the company were $330 million ($0.91 diluted EPS) for the quarter, compared with $156 million ($0.43) a year earlier, while nine-month net earnings attributable to the company were $674 million ($1.87 diluted EPS) versus $1.04 billion ($2.88) in the prior-year period. Operating income rose to $531 million for the quarter from $297 million, while nine-month operating income fell to $1.20 billion from $1.51 billion.
The company launched a two-year restructuring program as part of a Profit Recovery Plan intended to rebuild profit margins in fiscal 2025 and 2026. It estimates a net reduction of approximately 1,800 to 3,000 positions and expects restructuring and other charges of $500 million to $700 millionc, with target gross annual benefits of $350 million to $500 million once fully implemented. Cash flow from operations was $1.47 billion for the nine months, and cash and cash equivalents stood at $3.70 billion at March 31, 2024.
Total debt was $7.77 billiond, and the company issued $650 million of 5.000% Senior Notes due 2034 in February 2024, with proceeds intended in part to fund the purchase of the remaining interest in DECIEM. The filing also discloses a cybersecurity incident identified in July 2023, a consolidated securities class action filed in the Southern District of New York, and a notice of intent to purchase the remaining DECIEM interests in April 2024. The company suspended share repurchases in December 2022, and it declared a quarterly dividend of $0.66 per share on April 30, 2024.
02—Key points
Key Highlights
- Q3 FY2024 net sales rose 5% to $3.94 billion, driven by pricing of 10% partially offset by volume declines of 4%, with growth led by Asia travel retail shipments.
- Nine-month net sales fell 5% to $11.74 billion, mainly reflecting lower Asia travel retail and mainland China sales.
- Quarterly diluted EPS was $0.91 versus $0.43 a year earlier; nine-month diluted EPS was $1.87 versus $2.88, which included a prior-year $207 million impairment of other intangible assets.
- Restructuring program expected to incur $500–$700 million in charges through fiscal 2026, with target gross annual benefits of $350–$500 million once fully implemented.
- Operating cash flow increased to $1.47 billion for the nine months from $1.02 billion, while capital expenditures were $702 million.
- The company issued $650 million of 5.000% Senior Notes due 2034 in February 2024 and expects to use proceeds in part for the purchase of the remaining DECIEM interest.
- Cybersecurity incident from July 2023 was dilutive by $0.08 to nine-month EPS, with the company expecting approximately $0.07 dilution for fiscal 2024 after insurance recoveries.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, Estée Lauder Companies kept $0.08.
- Revenue$3.94B100.0%
- Cost of revenue−$1.11B28.1%
- Gross profit$2.83B71.9%
- Operating costs−$2.30B58.4%
- Operating income$531.0M13.5%
- Interest, other & tax−$201.0M5.1%
- Net income$330.0M8.4%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed May 1, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $3.94B$3.75B | +5.0% |
| Cost of Revenue | $1.11B$1.16B | −4.5% |
| Gross Profit | $2.83B$2.59B | +9.3% |
| SG&A Expenses | $2.28B$2.28B | +0.1% |
| Operating Expenses | $2.30B$2.29B | +0.3% |
| Operating Income | $531.00M$297.00M | +78.8% |
| Interest Expense | $94.00M$58.00M | +62.1% |
| Net Income | $330.00M$156.00M | +111.5% |
| EPS (Basic) | $0.92$0.44 | +109.1% |
| EPS (Diluted) | $0.91$0.43 | +111.6% |
| Shares Outstanding (Basic) | 359.10M357.90M | +0.3% |
| Shares Outstanding (Diluted) | 360.80M361.20M | −0.1% |
05—Questions
Frequently Asked Questions
How did Estée Lauder perform in the quarter ended March 31, 2024?
Net sales were $3.94 billion, up from $3.75 billion, and operating income was $531 million versus $297 million. Net earnings attributable to the company were $330 million, or $0.91 per diluted share, compared with $156 million, or $0.43, a year earlier. The increase was primarily driven by higher net sales in the Asia travel retail business.
Why did nine-month results decline?
Nine-month net sales fell to $11.74 billion from $12.30 billion, primarily reflecting lower Asia travel retail net sales following retailer inventory resets and lower traveler conversion, along with softness in mainland China. Nine-month operating income declined to $1.20 billion from $1.51 billion, with the company citing lower net sales and gross margin, and higher operating expense as a percentage of sales.
What is the Profit Recovery Plan and its restructuring program?
The Profit Recovery Plan is designed to progressively rebuild profit margins in fiscal 2025 and 2026. Its two-year restructuring program, announced February 5, 2024, targets a net reduction of approximately 1,800 to 3,000 positions globally and is expected to generate $500–$700 million in restructuring and other charges before taxes, with target gross annual benefits of $350–$500 million once fully implemented.
How is the company financing its obligations and what are its debt levels?
At March 31, 2024, total debt was $7.77 billion and cash and cash equivalents were $3.70 billion. The company issued $650 million of 5.000% Senior Notes due 2034 in February 2024 and repaid $785 million of commercial paper with maturities after three months. Total debt as a percent of total capitalization was 57%, compared with 59% at June 30, 2023.
What legal and corporate matters are pending?
The company and its CEO and CFO are defendants in a consolidated securities class action in the Southern District of New York alleging materially false and misleading statements, which the company intends to defend vigorously. In April 2024, the company notified minority holders it would exercise its option to purchase the remaining DECIEM interests, with settlement expected in the fiscal 2024 fourth quarter. A quarterly dividend of $0.66 per share was declared on April 30, 2024.
06—Continue