01—Abstract
Summary
Summary of the 10-Q filed February 4, 2025. Cited figures are marked; the original filing is the authoritative source.
The Estée Lauder Companies Inc. reported a net loss attributable to the company of $590 milliona for the three months ended December 31, 2024, compared with net earnings of $313 million a year earlier, and a net loss of $746 million for the six months, versus earnings of $344 million.
Net sales were $4.00 billionb for the quarter, down from $4.28 billion, and $7.37 billion for the six months, down from $7.80 billion. The decline was driven by $861 million of goodwill and other intangible asset impairments, mainly a $773 million charge on the TOM FORD trademark and a $75 million charge on the Too Faced trademark, along with a $13 million Too Faced goodwill impairment. Reported net sales decreased 6% for both periods, with volume declines partly offset by pricing, and Asia/Pacific and Europe, the Middle East & Africa were the weakest regions.
Restructuring charges rose sharply. The company expanded its Profit Recovery and Growth Plan on February 3, 2025, and now estimates a net reduction of approximately 5,800 to 7,000 positions and restructuring and other charges of $1.2 billion to $1.6 billionc before taxes, with annual target gross benefits of $800 million to $1 billion. The company also recorded a $159 million charge for talcum litigation settlement agreements in the first quarter.
Total equity fell to $4.17 billiond from $5.31 billion at June 30, 2024, and total debt as a percent of total capitalization rose to 64% from 59%. Cash and cash equivalents declined to $2.59 billion, and operating cash flow for the six months was $387 million versus $937 million a year earlier.
The company repaid a $500 million Senior Note at maturity and did not repurchase shares beyond tax-withholding purchases. As of January 28, 2025, the long-term debt rating was A with a negative watch from S&P and A2 with a negative outlook from Moody's.
02—Key points
Key Highlights
- Operating loss of $580 million for the quarter versus operating income of $574 million a year earlier, driven by $861 million in impairment charges on goodwill and other intangible assets.
- Net sales fell 6% for both the three and six months ended December 31, 2024, with volume down 11% in the quarter and pricing up 4%.
- Asia/Pacific net sales decreased 11% in the quarter, reflecting weakness in mainland China, Korea and Hong Kong SAR, while The Americas fell 2%.
- Restructuring Program expanded: estimated net reduction of 5,800 to 7,000 positions and total charges of $1.2 billion to $1.6 billion, with target gross benefits of $800 million to $1 billion annually.
- Gross margin improved to 76.1% for the quarter from 73.0%, mainly from lower obsolescence charges.
- Talcum litigation settlement agreements produced a $159 million charge in the first quarter, and cosmetic talcum cases pending fell to 84 from 273.
- Total equity declined to $4.17 billion, and total debt as a percent of total capitalization rose to 64% from 59%, with the dividend held at $0.35 per share.
03—One dollar
Follow one dollar
For each $1.00 of revenue in Q2 FY2025, Estée Lauder Companies lost $0.15.
- Revenue$4.00B100.0%
- Cost of revenue−$957.0M23.9%
- Gross profit$3.05B76.1%
- Operating costs−$3.63B90.6%
- Operating income−$580.0M14.5%
- Interest, other & tax−$10.0M0.2%
- Net income−$590.0M14.7%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2025filed February 4, 2025Financial Statements
Q2 FY2025 against Q2 FY2024
| Line item | Q2 FY2025Q2 FY2024 | Change |
|---|---|---|
| Revenue | $4.00B$4.28B | −6.4% |
| Cost of Revenue | $957.00M$1.15B | −17.1% |
| Gross Profit | $3.05B$3.13B | −2.5% |
| SG&A Expenses | $2.58B$2.54B | +1.6% |
| Operating Expenses | $3.63B$2.55B | +42.2% |
| Operating Income | -$580.00M$574.00M | −201.0% |
| Net Income | -$590.00M$313.00M | −288.5% |
| EPS (Basic) | $-1.64$0.87 | −288.5% |
| EPS (Diluted) | $-1.64$0.87 | −288.5% |
| Shares Outstanding (Basic) | 360.00M358.70M | +0.4% |
| Shares Outstanding (Diluted) | 360.00M360.00M | 0.0% |
05—Questions
Frequently Asked Questions
Why did the company report a net loss this quarter?
The net loss of $590 million for the three months ended December 31, 2024 mainly reflects $861 million of goodwill and other intangible asset impairments, including a $773 million charge on the TOM FORD trademark and a $75 million charge on the Too Faced trademark, plus a $13 million Too Faced goodwill impairment. Restructuring and other charges of $181 million also contributed, and net sales declined 6%.
What is the status of the expanded restructuring program?
On February 3, 2025, the company expanded its Profit Recovery and Growth Plan. It now estimates a net reduction of approximately 5,800 to 7,000 positions, or about 9% to 11% of positions as of June 30, 2023, and total restructuring and other charges of $1.2 billion to $1.6 billion before taxes. The expanded component begins in the fiscal 2025 third quarter, with initiatives approved by the end of fiscal 2026 and substantially completed by the end of fiscal 2027. Through January 29, 2025, cumulative approved charges were $537 million.
How did the company's cash position and balance sheet change?
Cash and cash equivalents fell to $2.59 billion at December 31, 2024 from $3.40 billion at June 30, 2024. Operating cash flow for the six months was $387 million versus $937 million a year earlier. Total equity decreased to $4.17 billion from $5.31 billion, and total debt as a percent of total capitalization rose to 64% from 59%. In December 2024, the company repaid $500 million of 2.000% Senior Notes at maturity with cash from operations.
What are the key risks to the outlook?
The company expects volatility and uncertainty to continue given subdued consumer sentiment in China and Korea, pressures from changes in selling policies at several Korean retailers, and continued underperformance in North America. It also cites tariffs, geopolitical tensions and the risk of further impairments if the TOM FORD or Too Faced business assumptions do not materialize. Its S&P rating carries a negative watch and Moody's outlook is negative.
Is the company still returning cash to shareholders?
The company paid dividends of $366 million in the six months ended December 31, 2024, and declared a $0.35 per share dividend on February 3, 2025, payable March 17, 2025. Share repurchases under the public program have been suspended since December 2022, and the only repurchases in the quarter were 364,194 shares at an average of $67.76 to satisfy tax withholding on stock compensation.
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