01—Abstract
Summary
Summary of the 10-Q filed May 1, 2025. Cited figures are marked; the original filing is the authoritative source.
The Estée Lauder Companies Inc. reported net sales of $3.55 billiona for the three months ended March 31, 2025, down from $3.94 billion a year earlier, and net sales of $10.92 billion for the nine months, down from $11.74 billion.
Reported net sales decreased 10%b for the quarter, driven by volume declines of 9%, partially offset by pricing of 1%, with a 1% unfavorable currency impact. Skin care, makeup, and hair care declined in the quarter, with lower Asia travel retail, retailer destocking in North America, and softness in Asia/Pacific, particularly mainland China and Korea. Profitability was sharply lower on a reported basis.
For the nine months, the company recorded an operating loss of $395 millionc, compared with operating income of $1.20 billion a year earlier, and a net loss attributable to the company of $587 million, or $(1.63) per diluted share. The decline reflects impairment charges of $861 million on goodwill and other intangible assets, principally TOM FORD and Too Faced trademarks, a $159 million talcum litigation settlement charge, and restructuring and other charges of $375 million. Gross margin improved to 75.0% in the quarter from 71.9%, and operating margin was 8.6% compared with 13.5% in the prior-year quarter.
Diluted EPS for the quarter was $0.44d, compared with $0.91 a year earlier. Liquidity remained substantial with cash and cash equivalents of $2.63 billion at March 31, 2025, against total debt of $7.30 billion. Operating cash flow was $671 million for the nine months, versus $1.47 billion a year earlier.
Total equity fell to $4.35 billion from $5.31 billion. Management expanded its Profit Recovery and Growth Plan, now estimating restructuring charges of $1.2 billion to $1.6 billion and a net reduction of approximately 5,800 to 7,000 positions. Management said it does not anticipate a material impact on fiscal 2025 profitability from tariffs, but expects a high rate of tariffs to have a material adverse effect on fiscal 2026 profitability and cash flows.
02—Key points
Key Highlights
- Net sales of $3.55 billion in the quarter, down 10% as reported and 8% in constant currency; nine-month net sales of $10.92 billion, down 7%.
- Nine-month operating loss of $395 million versus operating income of $1.20 billion a year earlier, driven by $861 million of goodwill and intangible impairments and a $159 million talcum litigation settlement charge.
- Net loss attributable to the company of $587 million for the nine months, or $(1.63) per diluted share, versus net earnings of $674 million a year earlier.
- Quarterly gross margin rose to 75.0% from 71.9%, while operating margin fell to 8.6% from 13.5%.
- Restructuring Program expanded: estimated charges now $1.2 billion to $1.6 billion, with a net reduction of approximately 5,800 to 7,000 positions and targeted annual gross benefits of $800 million to $1 billion.
- Operating cash flow of $671 million for the nine months versus $1.47 billion a year earlier; cash and cash equivalents of $2.63 billion at March 31, 2025.
- Dividend declared of $0.35 per share on April 30, 2025, and share repurchases remain suspended since December 2022.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2025, Estée Lauder Companies kept $0.04.
- Revenue$3.55B100.0%
- Cost of revenue−$889.0M25.0%
- Gross profit$2.66B75.0%
- Operating costs−$2.35B66.3%
- Operating income$306.0M8.6%
- Interest, other & tax−$147.0M4.1%
- Net income$159.0M4.5%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2025filed May 1, 2025Financial Statements
Q3 FY2025 against Q3 FY2024
| Line item | Q3 FY2025Q3 FY2024 | Change |
|---|---|---|
| Revenue | $3.55B$3.94B | −9.9% |
| Cost of Revenue | $889.00M$1.11B | −19.7% |
| Gross Profit | $2.66B$2.83B | −6.1% |
| SG&A Expenses | $2.26B$2.28B | −1.1% |
| Operating Expenses | $2.35B$2.30B | +2.3% |
| Operating Income | $306.00M$531.00M | −42.4% |
| Net Income | $159.00M$330.00M | −51.8% |
| EPS (Basic) | $0.44$0.92 | −52.2% |
| EPS (Diluted) | $0.44$0.91 | −51.6% |
| Shares Outstanding (Basic) | 360.30M359.10M | +0.3% |
| Shares Outstanding (Diluted) | 361.40M360.80M | +0.2% |
05—Questions
Frequently Asked Questions
What drove the nine-month operating loss?
The nine-month operating loss of $395 million reflects goodwill and other intangible asset impairments of $861 million, primarily the TOM FORD trademark ($773 million) and Too Faced trademark and goodwill, along with a $159 million talcum litigation settlement charge and $384 million of charges associated with restructuring and other activities. Lower net sales also contributed.
What is the outlook for tariffs and profitability?
Management does not anticipate a material impact to fiscal 2025 profitability from new and existing U.S. tariffs, but anticipates a high rate of tariffs, unless meaningful trade negotiation resolution is achieved, to have a material adverse effect on fiscal 2026 profitability and cash flows.
How is the company addressing its profitability?
The company expanded its Profit Recovery and Growth Plan, focusing on procurement consolidation, supply chain efficiency, outsourcing select services, and go-to-market changes. It expects restructuring charges of $1.2 billion to $1.6 billion and targets annual gross benefits of $800 million to $1 billion, with a portion reinvested in consumer-facing activities, and expects a return to a double-digit operating margin over the next few years.
How is the balance sheet and liquidity position?
At March 31, 2025, cash and cash equivalents were $2.63 billion and total debt was $7.30 billion. Total debt as a percent of total capitalization was 63%, up from 59% at June 30, 2024. Total equity declined to $4.35 billion. The company stated that its cash, operating cash flow, credit lines and credit market access will be adequate for its needs.
What is the credit rating status?
As of April 24, 2025, the company's long-term debt was rated A- with a negative outlook by Standard & Poor's and A2 with a negative outlook by Moody's.
06—Continue