01—Abstract
Summary
Summary of the 8-K filed October 31, 2024. Cited figures are marked; the original filing is the authoritative source.
The Estée Lauder Companies Inc. reported fiscal 2025 first-quarter results (quarter ended September 30, 2024) in Exhibit 99.1, a press release furnished under Item 2.02.
Net sales were $3.36 billiona, down 4% from $3.52 billion, and organic net sales decreased 5%, driven mainly by weaker consumer sentiment in mainland China, low conversion rates in Asia travel retail and Hong Kong SAR, and lower replenishment orders. The company reported a net loss of $156 million, or $(.43) per diluted share, versus net earnings of $31 million ($.09) a year earlier, largely due to $159 million in talcum litigation settlement charges and $106 million of restructuring and other charges. Adjusted diluted EPS was $.14, up 33% as reported and up 7% in constant currency.
The company withdrew its full-year fiscal 2025 outlook and issued only a second-quarter outlook, citing difficulty forecasting market stabilization in China and Asia travel retail and leadership changes. For the December 2024 quarter, it expects reported and organic net sales to decline 8%b to 6%, reported diluted EPS of $.02 to $.19, and adjusted diluted EPS of $.20 to $.35. It also reduced its quarterly dividend to $.35 per share, declared payable December 16, 2024, to a more appropriate payout ratio.
Stéphane de La Faverie is named as the next President and CEO effective January 1, 2025. Cash used for operating activities was $670 millionc, compared with $408 million a year earlier, and the company ended the quarter with $2.35 billion in cash and cash equivalents. Capital expenditures fell to $141 million from $295 million.
02—Key points
Key Highlights
- Net sales of $3.36 billion, down 4% reported and down 5% organic, led by China, Asia travel retail and Hong Kong SAR.
- GAAP net loss of $156 million, or $(.43) per diluted share, versus net earnings of $31 million ($.09) a year earlier.
- Charges included $159 million for talcum litigation settlement agreements and $106 million for restructuring and other activities.
- Adjusted diluted EPS of $.14, up 33% as reported and up 7% in constant currency; gross margin rose to 72.4% from 69.6%.
- Full-year fiscal 2025 outlook withdrawn; only a second-quarter outlook provided, with net sales expected to decline 8% to 6% and adjusted EPS of $.20 to $.35 for the quarter.
- Quarterly dividend reduced to $.35 per share from the prior level to a more appropriate payout ratio, which the company says adds financial flexibility.
- Cash used in operations rose to $670 million from $408 million, and capital expenditures fell to $141 million from $295 million.
03—Questions
Frequently Asked Questions
Why did The Estée Lauder Companies report a net loss this quarter?
The net loss of $156 million was driven primarily by $159 million in charges tied to talcum litigation settlement agreements, which cover approximately 70% of the talcum cases outstanding in the quarter and provide for future claims at annual capped amounts starting January 1, 2025. Restructuring and other charges of $106 million under the Restructuring Program component of the Profit Recovery and Growth Plan also contributed.
What is the company's outlook after withdrawing its fiscal 2025 guidance?
The company is providing only a second-quarter fiscal 2025 outlook, expecting reported and organic net sales to decline 8% to 6% and reported diluted EPS of $.02 to $.19. Adjusted diluted EPS is expected to be $.20 to $.35. It cited the difficulty of forecasting stabilization in mainland China and Asia travel retail and leadership changes as reasons for withdrawing the full-year outlook.
Why is the dividend being reduced, and what is the new amount?
The company is reducing its dividend to a more appropriate payout ratio, citing complex prestige beauty conditions and the need for financial flexibility for incoming leadership. It declared a quarterly dividend of $.35 per share, payable in cash on December 16, 2024 to stockholders of record on November 29, 2024.
What drove the decline in sales by region and category?
Asia/Pacific net sales fell 11%, led by mainland China and Hong Kong SAR, while EMEA fell 4% and The Americas fell 2%. By category, Skin Care fell 7%, Makeup fell 2%, Fragrance fell 1%, and Hair Care fell 6%. Declines reflected weaker consumer sentiment in China, low conversion in Asia travel retail, and lower replenishment orders, partly offset by growth in Japan and Skin Care in EMEA.
04—Continue