01—Abstract
Summary
Summary of the 10-Q filed October 31, 2024. Cited figures are marked; the original filing is the authoritative source.
The Estée Lauder Companies Inc. reported net sales of $3,361 milliona for the three months ended September 30, 2024, down from $3,518 million a year earlier, a 4% decline (5% in constant currency).
The company posted an operating loss of $121 millionb and a net loss attributable to The Estée Lauder Companies Inc. of $156 million, or $(0.43) per diluted share, compared with net earnings of $31 million, or $0.09 per diluted share, in the prior-year quarter. The results were driven by a $159 million charge for talcum litigation settlement agreements and $106 million of charges associated with restructuring and other activities. Excluding these items and the change in fair value of acquisition-related stock options, operating income rose 33% to $144 million and diluted EPS was $0.14 versus $0.11 in the prior year, per the company's non-GAAP reconciliation.
The top-line weakness was broad-based, with lower net sales in all product categories and all regions. Skin care fell 7%c, makeup 2%, fragrance 1% and hair care 6%. Asia/Pacific net sales declined 11%, driven by mainland China and Hong Kong SAR, and management cited worsened consumer sentiment in China and inventory pressure in Asia travel retail.
Management expects continued volatility and inflationary pressure, and it cited ongoing competitive pressures in North America. Cash and cash equivalents fell to $2,350 milliond from $3,395 million at June 30, 2024, and net cash used for operating activities was $670 million in the quarter. The filing also details the Profit Recovery and Growth Plan, with expected restructuring and other charges of $500 million to $700 million, before taxes, and an estimated net reduction of 1,800 to 3,000 positions.
The company disclosed 151 pending talc cases as of September 30, 2024, down from 273 at June 30, 2024, and an agreement to resolve over 200 pending matters and a process for future claims through 2029. Total debt as a percent of total capitalization was 61%, compared with 59% at June 30, 2024. The October 30, 2024 dividend declaration of $0.35 per share represents a reduction from the $0.66 per share quarterly dividend declared during the quarter.
02—Key points
Key Highlights
- Net sales were $3,361 million, down 4% from $3,518 million, with volume declines of 8% partially offset by pricing of 3%.
- Operating loss of $121 million versus operating income of $98 million a year earlier, reflecting a $159 million talcum litigation settlement charge and $106 million of restructuring and other charges.
- Net loss attributable to The Estée Lauder Companies Inc. was $156 million, or $(0.43) per diluted share, compared with net earnings of $31 million, or $0.09 per diluted share.
- Adjusted diluted EPS (non-GAAP) was $0.14 versus $0.11 a year earlier, a 33% increase, excluding restructuring, talc settlement and acquisition-related stock option adjustments.
- Asia/Pacific net sales fell 11%, driven by mainland China and Hong Kong SAR, while skin care net sales declined 7%, led by La Mer and Estée Lauder.
- Cash and cash equivalents declined to $2,350 million from $3,395 million, with net cash used for operating activities of $670 million in the quarter.
- Total debt as a percent of total capitalization rose to 61% from 59%, and the October 30, 2024 dividend declaration was $0.35 per share versus $0.66 previously.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q1 FY2025, Estée Lauder Companies lost $0.05.
- Revenue$3.36B100.0%
- Cost of revenue−$928.0M27.6%
- Gross profit$2.43B72.4%
- Operating costs−$2.55B76.0%
- Operating income−$121.0M3.6%
- Interest, other & tax−$35.0M1.0%
- Net income−$156.0M4.6%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2025filed October 31, 2024Financial Statements
Q1 FY2025 against Q1 FY2024
| Line item | Q1 FY2025Q1 FY2024 | Change |
|---|---|---|
| Revenue | $3.36B$3.52B | −4.5% |
| Cost of Revenue | $928.00M$1.07B | −13.3% |
| Gross Profit | $2.43B$2.45B | −0.6% |
| SG&A Expenses | $2.30B$2.35B | −2.2% |
| Operating Expenses | $2.55B$2.35B | +8.7% |
| Operating Income | -$121.00M$98.00M | −223.5% |
| Net Income | -$156.00M$31.00M | −603.2% |
| EPS (Basic) | $-0.43$0.09 | −577.8% |
| EPS (Diluted) | $-0.43$0.09 | −577.8% |
| Shares Outstanding (Basic) | 359.60M358.40M | +0.3% |
| Shares Outstanding (Diluted) | 359.60M360.50M | −0.2% |
05—Questions
Frequently Asked Questions
Why did Estée Lauder report a net loss this quarter?
The net loss of $156 million was driven primarily by a $159 million charge for talcum litigation settlement agreements and $106 million of charges associated with restructuring and other activities, alongside a 4% decline in net sales to $3,361 million. Operating expenses rose to 76.0% of net sales from 66.8% a year earlier.
What are the main drivers of the sales decline?
Net sales decreased in all product categories and regions. Skin care fell 7%, primarily from La Mer and Estée Lauder, and Asia/Pacific fell 11%, driven by mainland China and Hong Kong SAR. The company cited worsened consumer sentiment in China, travelers diverting spending toward experiences, and inventory pressure in Asia travel retail, and volume fell 8% overall.
What is the status of the talc litigation?
As of September 30, 2024, 151 individual cases were pending, down from 273 at June 30, 2024. From the end of August through October 2024, the company reached agreements with certain plaintiff law firms to resolve over 200 pending matters and to establish a process for future claims expected from January 1, 2025 through December 31, 2029. The company recorded a $159 million charge for these agreements.
What is the Profit Recovery and Growth Plan expected to deliver?
The company expects restructuring and other charges of $500 million to $700 million, before taxes, through fiscal 2026, with an estimated net reduction of 1,800 to 3,000 positions. Once fully implemented, the restructuring program is expected to yield annual target gross benefits of $350 million to $500 million, and net PRGP benefits of $1,100 million to $1,400 million.
How did the company's liquidity and dividend change?
Cash and cash equivalents fell to $2,350 million from $3,395 million at June 30, 2024, and net cash used for operating activities was $670 million. The company declared a $0.66 per share dividend in August 2024 and, on October 30, 2024, declared a $0.35 per share dividend payable December 16, 2024. The company suspended share repurchases in December 2022 and may resume them in the future.
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