What changed in this filing

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Item 1. Business

2021-08-27 compared with 2020-08-28 · 185 added, 78 removed, 195 unchanged (57% of the section changed)

The Estée Lauder Companies Inc., founded in 1946 by Estée and Joseph Lauder, is one of the world’s leading manufacturers and marketers of quality skin care, makeup, fragrance and hair care products.

The Estée Lauder Companies Inc., founded in 1946 by Estée and Joseph Lauder, is one of the world’s leading manufacturers, marketers and sellers of quality skin care, makeup, fragrance and hair care products.

Our products are sold in approximately 150 countries and territories under a number of well-known brand names including:

Estée Lauder, Clinique, Origins, M·A·C, Bobbi Brown, La Mer, Aveda, Jo Malone London, Too Faced and Dr.

Estée Lauder, Clinique, Origins, M·A·C, Bobbi Brown, La Mer, Aveda, Jo Malone London, Too Faced, Dr.

Jart+, and The Ordinary.

We are also the global licensee for fragrances, cosmetics and/or related products sold under various designer brand names.

Each brand is distinctly positioned within the market for cosmetics and other beauty products.

We believe we are a leader in the beauty industry due to the global recognition of our brand names, our leadership in product innovation, our strong position in key geographic markets and the consistently high quality of our products and “High-Touch” services.

We sell our prestige products through distribution channels that complement the luxury image and prestige status of our brands.

We believe we are a leader in the beauty industry due to the global recognition of our brand names, our excellence in product innovation, our strong position in key geographic markets and the consistently high quality of our products and “High-Touch” services.

We sell our prestige products through distribution channels that complement the luxury image and prestige status of our brands, and we provide “High-Touch” consumer experiences across our distribution channels.

Our products are sold on our own and authorized retailer websites, on third-party online malls, in stores in airports, in duty-free locations and in our own and authorized freestanding stores.

In addition, our products are sold in brick-and-mortar retail stores, including department stores, specialty-multi retailers, upscale perfumeries and pharmacies and prestige salons and spas.

We believe that our strategy of pursuing selective distribution strengthens our relationships with retailers and consumers, enables our brands to be among the best-selling product lines at the stores and online, and heightens the aspirational quality of our brands.

For a discussion of recent developments, see Item 7.

We believe that our strategy of pursuing selective distribution heightens the aspirational quality of our brands.

For a discussion of recent developments, including the impacts to consumer preferences and market trends due to the COVID-19 pandemic, see Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations – Overview .

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We have been controlled by the Lauder family since the founding of our Company.

Members of the Lauder family, some of whom are directors, executive officers and/or employees, beneficially own, directly or indirectly, as of August 20, 2020, shares of Class A Common Stock and Class B Common Stock having approximately 86% of the outstanding voting power of the Common Stock.

Members of the Lauder family, some of whom are directors, executive officers and/or employees, beneficially own, directly or indirectly, as of August 20, 2021, shares of our Company's Class A Common Stock and Class B Common Stock having approximately 85% of the outstanding voting power of the Common Stock.

Skin Care - Our broad range of skin care products addresses various skin care needs.

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The brand is known for bold, sensorial products that deliver instant results, and its unconventional philosophy that high performance skin care should also be fun and sexy.

Acquired in 2016, By Kilian is a prestige fragrance brand that embodies timeless sophistication and modern luxury.

Acquired in 2016, BECCA is the makeup brand known for its complexion products and iconic glow.

The brand is committed to inclusivity and has shades for the lightest to darkest skin tones.

Its formulas harness innovative light technology to provide a range of glow from start to finish.

Acquired in 2016, Kilian Paris is a prestige fragrance brand that embodies timeless sophistication and modern luxury.

Acquired in 2016, Too Faced is a serious makeup brand that knows how to have fun.

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Its high-quality masks, moisturizers and serums are distributed primarily through travel retail, specialty-multi and online channels.

In 2021, we increased our investment in Deciem Beauty Group Inc.

(“DECIEM”) to approximately 76%.

Known as “The Abnormal Beauty Company,” DECIEM is a Toronto-based, vertically integrated multi-brand beauty company rooted in a consumer-focused and functional approach.

Its portfolio includes The Ordinary, an ingredient-focused brand, and NIOD, a science-driven skin care brand.

Under exclusive global license arrangements with Tommy Hilfiger, Donna Karan New York, DKNY, Michael Kors and Ermenegildo Zegna, we manage a diversified designer fragrance portfolio.

In addition to the brands described above, we manufacture and sell products under the Prescriptives, RODIN olio lusso and Do The Right Thing brands.

We also develop and sell products under a license from Kiton.

We also have minority investments in (i) a company based in Canada that manufactures, markets and sells skin care and other products under a number of brand names, including The Ordinary, primarily in North America, the United Kingdom and Europe, and (ii) a company based in India that manufactures, markets and sells Ayurvedic skin care and other products under the Forest Essentials brand name, primarily in India.

In addition to the brands described above, we manufacture and sell products under the Do The Right Thing brand.

In fiscal 2021, we made the decision to exit the global distribution of BECCA products, a makeup brand we acquired in 2016.

We expect to substantially complete this exit during fiscal 2022.

During fiscal 2021, we ceased global distribution of Prescriptives and Rodin olio lusso products and did not renew the license with Kiton.

From time to time, we also make strategic minority investments in other companies, mainly in the beauty industry.

In some cases, we have acquired the remaining interest or a majority interest (e.g., Have & Be Co.

Jart+) and Deciem Beauty Group Inc., respectively).

Our current minority investments include a company based in India that manufactures, markets and sells Ayurvedic skin care and other products under the Forest Essentials brand name, primarily in India.

Our “heritage brands” are Estée Lauder, Clinique and Origins.

Our “makeup artist brands” are M·A·C and Bobbi Brown.

Our “luxury brands” are La Mer, Jo Malone London, Tom Ford, AERIN, RODIN olio lusso, Le Labo, Editions de Parfums Frédéric Malle and By Kilian.

Our “designer fragrances” are sold under the Tommy Hilfiger, Donna Karan New York, DKNY, Michael Kors, Kiton and Ermenegildo Zegna brand names, which we license from their respective owners.

We sell our prestige products through distribution channels that complement the luxury image and prestige status of our brands.

Our “luxury brands” are La Mer, Jo Malone London, Tom Ford Beauty, AERIN, Le Labo, Editions de Parfums Frédéric Malle and Kilian Paris.

Our “designer fragrances” are sold under the Tommy Hilfiger, Donna Karan New York, DKNY, Michael Kors, and Ermenegildo Zegna brand names, which we license from their respective owners.

Social Impact and Sustainability

In fiscal 2021, we continued to further integrate social impact and sustainability into our strategy and business operations.

Our social impact and sustainability initiatives help drive innovation, growth and efficiency across the business and within our brand portfolio.

Areas of focus include climate and energy;

responsible sourcing;

ingredient transparency;

inclusion, diversity and equity;

employee health and safety;

and social investments.

We have set goals or made commitments for these focus areas.

For example, our goals related to climate and energy support efficiency and conservation within our facilities and internal supply chain, and some of these goals are also intended to help us reduce cost and waste.

Our Nominating and ESG Committee, one of our Board committees, has oversight responsibility for our Company’s environmental, social and governance (“ESG”) activities and practices, including citizenship and sustainability matters.

Our social impact and sustainability efforts are led by our Executive Chairman and our President and Chief Executive Officer.

Other members of senior management, along with employees across the organization, help to drive our strategic initiatives concerning social impact and sustainability.

Additional information related to our social impact and sustainability matters can be found at www.elcompanies.com .

Our products are sold on our own and authorized retailer websites, on third-party online malls, in stores in airports, in duty-free locations and in our own and authorized freestanding stores.

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Our general practice is to accept returns of our products from customers if properly requested and approved.

In fiscal 2020, we continued to strategically open new points of distribution globally, and exited certain locations when appropriate.

In fiscal 2021, we were impacted by the dramatic shifts in our distribution landscape and consumer behaviors attributable to the COVID-19 pandemic.

While we and certain retailers and distributors closed or decreased our presence in a number of existing points of distribution, we also continued to strategically open new points of distribution globally and saw an expansion of online sales globally.

Online, we sell products from most of our brands direct-to-consumer through our brand.com sites and third-party online malls.

We also sell our products wholesale to authorized retailers that resell online through retailer.com and pure-play sites.

Our sites are in approximately 50 countries.

While today a majority of these online sales are generated in mainland China, the United States and the United Kingdom, we continue to expand rapidly in other markets globally.

As of June 30, 2021, we operated approximately 1,600 freestanding stores.

Most are operated under a single brand name, such as M·A·C, Jo Malone London, Aveda, Origins or Le Labo.

There are also more than 800 Company-branded freestanding stores around the world operated by authorized third parties, primarily in Europe, the Middle East & Africa.

Products from most of our brands are sold online through Company-owned and operated e-commerce and m-commerce sites, through various sites operated by authorized retailers and through third-party online malls.

These sites and/or malls are in approximately 50 countries.

While today a majority of these online sales are generated in mainland China, the United States and the United Kingdom, we have additional opportunity to expand online sales globally.

The total reflects the net impact during fiscal 2021 of store closures related to the Post-COVID Business Acceleration Program, the decision not to renew leases at certain locations, certain freestanding stores previously operated by authorized third parties that were transitioned to us and existing DECIEM stores due to the increase in our ownership in that company.

Most freestanding stores are operated by us under a single brand name, such as M·A·C, Jo Malone London, Aveda, Origins, Le Labo or DECIEM.

We also operate over 200 multi-branded company stores in outlet malls.

There are also approximately 700 Company-branded freestanding stores around the world operated by authorized third parties, primarily in Europe, the Middle East & Africa and Asia/Pacific.

We maintain dedicated sales teams that manage our retail accounts.

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Financial Statements and Supplementary Data – Note 22 – Segment Data and Related Information .

Our strategy is to build strong relationships globally with select retailers, and our senior management works with executives of our major retail accounts on a regular basis.

Our strategy is to build strong relationships globally with select retailers, and our senior management works with executives of our major retail accounts on a regular basis in support of these relationships.

We believe we are viewed as an important supplier to these customers.

In addition, we connect with our consumers directly through freestanding stores, e-commerce sites and social media to build a robust omnichannel experience.

In addition, we connect with our consumers directly through freestanding stores, e-commerce sites and social media to build a robust omnichannel experience that allows a consumer to shop in these and other channels.

Our largest customer in fiscal 2021 sells products primarily in China travel retail and accounted for 14% of our consolidated net sales for fiscal 2021, 7% for fiscal 2020 and 5% for fiscal 2019, and 10%, and 24%, of our accounts receivable at June 30, 2021 and 2020, respectively.

Our strategy to market and promote our products begins with our well-diversified portfolio of more than 25 distinctive brands across four product categories.

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Our “High-Touch” approach is demonstrated through our integrated consumer engagement models that leverage our product specialists and technology to provide the consumer with a distinct and truly personalized experience that can include personal consultations with beauty advisors, in person or online, who demonstrate and educate the consumer on product usage and application.

As our business has grown and channel mix has evolved, we have further expanded our marketing philosophy and “High-Touch” execution to build both online and offline personalized consumer experiences through both digital and physical demonstration, targeted digital media and tailored trial-to-loyalty pathways.

As our business has grown and channel mix has evolved, we have further expanded our marketing philosophy and “High-Touch” execution to build both online and offline personalized consumer experiences through digital and physical demonstration, targeted digital media and tailored trial-to-loyalty pathways.

We plan to continue to leverage our core strengths, including the quality of our products, our “High-Touch” consumer engagement and a diversified portfolio of brands, channels and geographies.

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This enables us to elevate the consumer experience as we attract new consumers, create trial, build loyalty, drive consumer advocacy and address the transformation of consumer shopping behaviors.

Hero products are at the core of the brand marketing strategies and have become the key drivers of repeat sales and loyalty.

Hero products are at the core of our brand marketing strategies.

They are the pillars of our brands and historically have provided strong results through high repeat sales and consumer loyalty.

In addition to continuing to attract existing consumers, our hero products provide an opportunity for new consumers to be introduced to our desirable products, creating consumer traffic across all channels of distribution.

We aim to further strengthen our hero products through continuous review of our product portfolio and strategic innovation.

Our marketing planning approach leverages local insights to optimize allocation of resources across different media outlets and retail touch points to resonate with our most discerning consumers most effectively.

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We are investing in new analytical capabilities to promote a more personalized experience across our distribution channels.

We continue to innovate to better meet consumer online shopping preferences (e.g., how-to videos, ratings and reviews and mobile phone and tablet applications), support e-commerce and m-commerce businesses via digital and social marketing activities designed to build brand equity and “High-Touch” consumer engagement, in order to continue to offer unparalleled service and set the standard for prestige beauty shopping online.

We continue to innovate to better meet consumer online shopping preferences (e.g., how-to videos, ratings and reviews and mobile phone and tablet applications), support e-commerce and m-commerce businesses via digital and social marketing activities designed to build brand equity and “High-Touch” consumer engagement, in order to continue to offer better experiences and services and set the standard for prestige beauty shopping online.

We also support our authorized retailers to strengthen their e-commerce businesses and drive sales of our brands on their websites.

We have opportunities to expand our brand portfolio online around the world, and we are investing in and testing new omnichannel concepts in the United States, China and other markets to increase brand loyalty by better serving consumers as they shop across channels and travel corridors.

We have opportunities to expand our brand portfolio online around the world, and we continue to invest in new omnichannel concepts in the United States, China and other markets to increase brand loyalty by better serving consumers as they shop across channels and travel corridors.

We have dedicated resources to implement creative, coordinated, brand-enhancing strategies across all online activities to increase our direct access to consumers.

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Sampling is a key promotional activity as the quality and perceived benefits of sample products are very effective inducements to purchases by new and existing consumers.

Such activities attract consumers to our counters and websites and keep existing consumers engaged.

Such activities attract consumers and keep existing consumers engaged.

Our marketing and sales executives spend considerable time in the field meeting with consumers, retailers, beauty advisors and makeup artists at the points of sale to enable us to offer a seamless experience across channels of distribution.

The COVID-19 pandemic has had a significant impact on consumer behaviors and has accelerated the trend for a digital-first consumer journey and e-commerce.

This provided a catalyst for redesigning each brand's high-touch experience and accelerated the implementation of new direct-to-consumer business models and consumer engagement programs, such as selling through social media and web conferencing platforms ("Social Selling").

These models and programs provide distinct one-to-one and one-to-many high-touch omnichannel services and personalized experiences by leveraging technology and our talented beauty advisors, consultants, and makeup artists.

This provided a catalyst for redesigning each brand's “High-Touch” experience and accelerated changes to our direct-to-consumer business models and consumer engagement programs, such as selling through social media and web conferencing platforms (“Virtual Selling”).

These models and programs continue to provide distinct one-to-one and one-to-many “High-Touch” omnichannel services and personalized experiences by leveraging technology and our talented beauty advisors, consultants, and makeup artists.

Information Technology

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This allows for a more scalable platform to support current and future requirements and improves our agility and flexibility to respond to the demands of the business by leveraging more advanced technologies.

We recognize that technology presents opportunities for competitive advantage, and we continue to invest in new capabilities across various aspects of our business.

During fiscal 2020, we improved our remote working infrastructure and resilience plans, deployed capabilities to enhance data analytics, launched new marketing capabilities to drive deeper consumer engagement and elevated the in-store experience through innovative technologies.

Over the next few years, we plan to expand our seamless omni-retail capabilities, expand our Social Selling, create manufacturing and distribution facilities of the future powered by technology and utilize predictive analytics to optimize our supply and demand planning.

We recognize that technology presents opportunities for competitive advantage, and we continue to invest in new capabilities and the use of emerging technologies across various aspects of our business.

During fiscal 2021, we responded to shifting consumer and employee behaviors driven by the COVID-19 pandemic.

We invested in new marketing and consumer engagement capabilities globally with a focus on innovative digital experiences across our omnichannel landscape, as well as enabling productivity of an increasingly remote workforce through new solutions.

Our strategy over the next few years includes continuing to build a strong and secure technology infrastructure to adapt to evolving business dynamics, which includes the expansion of our seamless omnichannel capabilities and our Virtual Selling, the creation of more modernized manufacturing and distribution facilities (including upgrades to existing facilities) powered by technology and the utilization of predictive analytics to optimize our supply and demand planning.

Research and Development

We believe that we are an industry leader in the development of new products.

Our research and development group, which includes scientists, engineers and other employees involved in product innovation and packaging design and development, works closely with our marketing and product development teams and third-party suppliers to generate ideas, develop new products and product-line extensions, create new packaging concepts, and improve, redesign or reformulate existing products.

In addition, these research and development personnel provide ongoing technical assistance and know-how to quality assurance and manufacturing personnel on a worldwide basis, to ensure consistent global standards for our products and to deliver products that meet or exceed consumer expectations.

The research and development group has long-standing working relationships with several U.S.

and international medical and educational facilities, which supplement internal capabilities.

Members of the research and development group are also responsible for regulatory compliance matters.

As our business continues to grow globally, and to satisfy the demand for locally relevant consumer products, we have increased our focus on innovation in Asia/Pacific, especially in China, as well as in Korea and Japan.

Our research and development group, which includes scientists, engineers, analysts, and other employees involved in product and packaging innovation, works closely with our marketing and product development teams and third-party suppliers to generate ideas, develop new products and product-line extensions, create new packaging concepts, and improve, redesign or reformulate existing products.

In addition, these research and development personnel provide ongoing technical assistance and know-how to quality assurance and manufacturing personnel on a worldwide basis, to ensure consistent global standards for our products and to deliver environmentally responsible products that meet or exceed consumer expectations.

The research and development group has both long-standing and continually growing research-based working relationships with several U.S.

and international dermatology and medical institutions, research universities and educational facilities, which supplement internal capabilities.

Members of the research and development group are also responsible for product safety, registration and regulatory compliance matters.

In fiscal 2021, we began construction at a newly leased site that will become our innovation center in Shanghai, as we aim to better meet the needs of consumers through local relevancy with superior capabilities in product and package design and consumer and clinical testing.

Construction is in progress and the facility is expected to be operational in late fiscal 2022.

Our research and development costs totaled $243 million, $228 million and $202 million in fiscal 2021, 2020 and 2019, respectively, and are expensed as incurred.

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Manufacturing, Warehousing and Raw Materials

We manufacture our products primarily in the United States, Belgium, Switzerland, the United Kingdom and Canada and leverage global third-party manufacturing networks.

We manufacture our products primarily in our own facilities in the United States, Belgium, Switzerland, the United Kingdom and Canada and also leverage global third-party manufacturing networks.

We continue to streamline our manufacturing processes and identify sourcing opportunities to improve innovation, increase efficiencies, minimize our impact on the environment, ensure supply sufficiency and reduce costs.

Our plants are modern, and our manufacturing processes are substantially automated.

In fiscal 2021, we began construction of a new manufacturing facility near Tokyo, which is expected to enable us to better meet demand and increase speed to market in the Asia/Pacific region.

Construction is in progress and the facility is expected to be operational in early fiscal 2023.

While we believe that our manufacturing network of internal and external sites is sufficient to meet current and reasonably anticipated increased requirements, we continue to implement improvements in capacity, technology, and productivity and align our manufacturing with regional sales demand to be more agile.

From time to time, demand changes may challenge our capacity for certain subcategories on a short-term basis, but we believe, this will not impact our ability to meet our annual or longer-term strategic objectives.

To capitalize on innovation and other supply chain benefits, we continue to utilize a network of third-party manufacturers on a global basis.

From time-to-time, demand changes may challenge our capacity for certain subcategories on a short-term basis, but we believe, this will not impact our ability to meet our annual or long-term strategic objectives.

We have established a flexible global distribution network of logistic providers that are managed by us or third parties.

The network is designed to meet the changing demands of our customers while maintaining service levels.

We are continuously evaluating and adjusting this physical distribution network.

We have established regional and local distribution centers, including those maintained by third parties, strategically positioned throughout the world in order to facilitate efficient delivery of our products to our customers.

We continue to focus on citizenship and sustainability across our operations.

Focus areas include employee safety and minimizing our impact on the environment.

This is achieved, in part, through investment in equipment meeting safety regulations while enhancing the work environment through safe practices and capabilities.

Our equipment and buildings are also continually improved to support and deliver our sustainability goals and reduce our impact on the environment.

We are continuously evaluating and adjusting this physical distribution network, particularly as we work to anticipate and respond to channel shifts.

As discussed above, we continue to focus on social impact and sustainability across our operations.

Focus areas include employee health and safety and minimizing our impact on the environment.

This is achieved, in part, through investment in equipment while enhancing the work environment through safe practices and capabilities.

We also engage in initiatives to improve our equipment and buildings to support and deliver our sustainability goals and reduce our impact on the environment.

Environmental efforts include waste reduction, zero industrial waste to landfill and investment in renewable energy sources.

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In addition, we focus on supply sourcing within the region of manufacture to allow for improved supply chain efficiencies, lead-time reduction and reduced carbon footprint.

Some of our products rely on a single or limited number of suppliers;

however, we believe that our portfolio of suppliers has adequate resources and facilities to overcome most unforeseen interruptions of supply.

In the past, we have been able to obtain an adequate supply of essential raw materials and currently believe we have adequate sources of supply for virtually all components of our products.

To further ensure the adequacy of supply, we utilize sophisticated planning tools and deploy various tactics such as strategic inventory buffer and multi-sourcing solutions.

We are continually benchmarking the performance of our supply chain, and we augment our supply base and adjust our distribution networks and manufacturing footprint based upon the changing needs of the business.

Some of our products rely on single-source or a limited number of suppliers;

however, we believe we have a robust business continuity strategy, sophisticated capacity planning tools and strategic inventory buffer and multi-sourcing solutions.

In the past, we have been able to obtain an adequate supply of essential raw materials and packaging components for virtually all materials used in the production of our products.

We currently believe we have adequate resources of supply and that our portfolio of suppliers has the resources and facilities to overcome most unforeseen interruptions of supply.

We are continually benchmarking the performance of our supply chain, and we augment our supply base and adjust our distribution networks and manufacturing plants and networks based upon the changing needs of the business.

As we integrate acquired brands, we continually seek new ways to leverage our production and sourcing capabilities to improve our overall supply chain performance.

As a response to the COVID-19 pandemic, we have leveraged our network of global supply, manufacturing and distribution, to help mitigate disruption to our supply chain and help enable our expected return to normal operations.

By the end of the first quarter of fiscal 2021, and throughout fiscal 2021, all of our manufacturing and distribution facilities were operating at sufficient levels.

There is significant competition within each market where our skin care, makeup, fragrance and hair care products are sold.

Brand recognition, product quality and effectiveness, distribution channels, accessibility, and price point are some of the factors that impact consumers’ choices among competing products and brands.

Marketing, merchandising, in-store experiences and demonstrations, and new product innovations also have an impact on consumers’ purchasing decisions.

With our portfolio of diverse brands sold in a variety of channels, we are one of the world’s leading manufacturers and marketers of skin care, makeup, fragrance and hair care products.

Marketing, merchandising, in-store and online experiences and demonstrations, and new product innovations also have an impact on consumers’ purchasing decisions.

There continues to be increased interest and awareness from our customers and consumers in environmentally sustainable products, and we believe we are well-positioned to benefit from the resulting change in consumer preferences due to our social impact and sustainability efforts.

With our portfolio of diverse brands sold in a variety of channels, we are one of the world’s leading manufacturers, marketers and sellers of skin care, makeup, fragrance and hair care products.

We compete against a number of global and local companies.

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Shiseido Company, Ltd.;

Natura & Co.;

LVMH Moët Hennessey Louis Vuitton;

and Amorepacific Corp.

and LG Household & Health Care.

We also face competition from a number of independent brands, some of which are backed by private-equity investors, as well as some retailers that have their own beauty brands.

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Trademarks, Patents and Copyrights

We own the trademark rights used in connection with the manufacturing, marketing, distribution and sale of our products both in the United States and in the other principal countries where such products are sold, including Estée Lauder, Clinique, Aramis, Prescriptives, Lab Series, Origins, M·A·C, Bobbi Brown, La Mer, Aveda, Jo Malone London, Bumble and bumble, Darphin, Smashbox, Le Labo, RODIN olio lusso, Editions de Parfums Frédéric Malle, GLAMGLOW, By Kilian, BECCA, Too Faced, Dr.

Jart+ and the names of many of the products sold under these brands.

We are the exclusive worldwide licensee for fragrances, cosmetics and/or related products for Tommy Hilfiger, Donna Karan New York, DKNY, Kiton, Michael Kors, Tom Ford, Dr.

We own the trademark rights used in connection with the manufacturing, marketing, distribution and sale of our products both in the United States and in the other principal countries where such products are sold, including Estée Lauder, Aramis, Clinique, Lab Series, Origins, M·A·C, Bobbi Brown, La Mer, Aveda, Jo Malone London, Bumble and bumble, Darphin, Smashbox, Le Labo, Editions de Parfums Frédéric Malle, GLAMGLOW, Kilian Paris, Too Faced, Dr.

Jart+, DECIEM and The Ordinary and the names of many of the products sold under these brands.

We are the exclusive worldwide licensee for fragrances, cosmetics and/or related products for Tommy Hilfiger, Donna Karan New York, DKNY, Michael Kors, Tom Ford, Dr.

Andrew Weil, Ermenegildo Zegna and AERIN.

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While we consider these patents and copyrights, and the protection thereof, to be important, no single patent or copyright, or group of patents or copyrights, is considered material to the conduct of our business.

At June 30, 2020, we had approximately 48,000 full-time employees worldwide (including demonstrators at points of sale who are employed by us).

Human Capital

We strive to operate responsibly and to build a sustainable business based on uncompromising ethics, integrity, fairness, diversity and trust, consistent with our Company values.

We view human capital management and the strength of our employees as integral to the long-term success and resilience of our business.

Our human capital management includes the following strategic areas, each of which is discussed further below:

• Inclusion, Diversity and Equity - Fostering an inclusive, diverse and equitable culture that provides our employees with personal and professional development opportunities, which helps to attract and retain the best talent and drive long-term growth.

• Talent Recruitment, Retention, Learning and Development - Affording our employees learning opportunities to drive career development and enhance innovation, which helps to create strong and sustainable leadership across the organization and support ongoing development of new products and services.

• Health and Safety - Striving to provide a healthy and safe workplace for our employees, which we believe also enhances productivity.

• Employee Rewards - Offering competitive compensation and benefit packages to support our employees’ physical, mental and financial well-being, which helps us attract, incentivize and retain world-class talent.

• Volunteerism and Community Engagement - Supporting volunteer efforts by our employees because our long-term success is closely tied to the vitality of the communities where we have a presence.

Our Board of Directors and its committees provide oversight to management on a wide range of human capital matters, including inclusion and diversity, health and safety, pay equity and compensation and benefits.

We had approximately 62,000 and 75,000 employees worldwide, including demonstrators at points of sale who are employed by us, as of June 30, 2021 and 2020, respectively.

The fiscal 2021 reduction in employees was driven primarily by fewer point of sale employees due to the COVID-19 pandemic, including a combination of door closures and on-going in-store capacity restrictions, decisions to reduce the number of on-call and temporary employees, and voluntary resignations.

At June 30, 2021, approximately 72% of our global employees were full-time, approximately 15% were temporary and approximately 13% were part-time employees, with approximately 30% of our global employees located in the United States and approximately 70% located outside of the United States.

We recognize the importance of female representation, and, as of June 30, 2021, approximately 82% of our employees were female and approximately 55% of our employees at the level of Vice President and above were female.

We have no employees in the United States that are covered by a collective bargaining agreement.

A limited number of employees outside of the United States are covered by a works council agreement or other syndicate arrangements.

A limited number of employees outside of the United States are covered by works council agreements or other syndicate arrangements.

Inclusion, Diversity and Equity

We are committed to supporting an inclusive and diverse workplace that better enables us to create innovative products and services as we continually strive to meet the evolving needs of our diverse global consumers.

Our objective in creating an environment of inclusion, diversity and equity is to enhance our ability to attract and retain the best talent globally and promote a sense of belonging.

We continuously encourage a culture of fairness, equal access to opportunities, including positions of leadership, and transparency in employment matters.

We have enhanced our strategy in many areas including hiring, employee engagement, development and talent management to further support inclusion, diversity and equity across the organization.

We are proud of our history of driving awareness and acceptance around the world and for standing up for the rights of individuals in the workplace and beyond.

We have accelerated our efforts to make racial equity a priority by announcing a series of commitments across our business, focusing on U.S.

Areas where we have made commitments include programs related to listening and learning, talent and opportunity, representation, suppliers and investing in change.

We are also committed to gender equity and equitable pay practices.

We have a number of programs to help accelerate the development and promotion of women, such as our Women's Leadership Network, and during fiscal 2021, we announced a plan to achieve gender pay equity across the organization.

We continue to prioritize cross-generational inclusion and diversity to help cultivate talent within our workforce.

We are committed to various programs to continue our investment at all levels of seniority and tenure, including our Global Reverse Mentor Program that pairs seasoned leaders with more junior talent and was designed to give insights to the leadership team on current millennial and Gen Z habits, preferences and trends.

Talent Recruitment, Retention, Learning and Development

Hiring, retaining and developing the best talent globally is key to our success in sustaining long-term growth.

Our talent strategy is focused on employee engagement and investments in career development, as well as measuring, recognizing and rewarding performance.

Our investments include providing programs to ensure our employees are equipped with the right skillsets and knowledge, as well as opportunities to transfer to other functions or regions through short-term and long-term assignments.

We believe these programs and opportunities create a pipeline of talent and leadership, necessary to drive and deliver on our long-term strategy.

To enhance our culture and measure our human capital objectives, we regularly engage with our employees.

We provide several mechanisms for our employees to provide their feedback, including direct discussions with managers, employee surveys and interactive townhall meetings.

Key topics covered during employee engagement include inclusion, diversity and equity, learning and development, work-life structure, and employee benefits.

Based on our review of employee survey results, action plans are implemented to enhance employee satisfaction and to ensure alignment with our overall human capital strategy.

An important element of our talent strategy is succession planning and building leadership at various levels across the organization.

We regularly discuss potential successors to key roles, review relevant backgrounds and capabilities and develop succession plans accordingly.

To enhance innovation, productivity and our speed to market, we aim to foster an environment of curiosity and to create a workplace that encourages continuous learning and development.

We offer training and development programs that are focused on strengthening leadership and professional skills at various stages of an employee’s career.

Our programs are offered through in-person, online or virtual learning experiences.

In response to the COVID-19 pandemic, we adjusted and reprioritized our training and development programs and delivery methods to meet the needs of our employees who are working from home.

These changes included delivering learning experiences around subject matters such as managing remotely, mental health awareness and building resilience during uncertain times, as well as pivoting traditional in-person sessions to virtual instructor-led learning.

In addition, we continue to curate digital content to support “business as usual” focus areas, such as performance development, as well as socially relevant information around racial justice and inclusion and diversity.

Health and Safety

We are committed to providing a healthy and safe workplace for our employees.

We establish and update safety policies and procedures, train employees on our safety guidelines and local requirements, and create a culture focused on safety through ongoing communication, awareness and engagement.

Throughout the COVID-19 pandemic, we implemented new health and safety protocols and modified a number of our business practices to protect our employees, including allowing our office-based employees to work remotely, imposing restrictions for business travel, and implementing safety measures for on-site employees.

Employee Rewards

We offer compelling and competitive compensation packages with the objectives to attract, motivate and retain world-class talent, and we are committed to fair and equitable pay across the organization.

Employee compensation is based on specific circumstances, including role and experience, geographic location and performance.

In addition to base pay, we offer annual incentive awards and equity awards for employees at certain job grades.

To support the health and well-being of our employees, we offer competitive benefit packages that may include pension and post-retirement benefit plans, health and wellness benefits, flexible working arrangements, parental (maternal and paternal) leave, adoption assistance and education-related benefits, which may vary by country.

In response to the challenges stemming from the COVID-19 pandemic, we developed several employee initiatives that were implemented at the global, regional and local levels with the objective to support the physical, mental and financial well-being of our employees.

Volunteerism and Community Engagement

We are dedicated to being active and respectful citizens, and we engage in philanthropic and employee volunteering efforts to enhance the communities we touch.

We are inspired by the generosity of our employees and encourage them to become involved in their communities by offering programs to support the causes that matter to them.

To empower employees, ELC Good Works, our global charitable and volunteerism program, allows eligible employees to create and participate in volunteer activities, with their cash donations matched by the Company and volunteer hours rewarded through additional cash donations by the Company.

Government Regulation

We and our products are subject to regulation by the Food and Drug Administration and the Federal Trade Commission in the United States, as well as by various other federal, state, local and international regulatory authorities and the regulatory authorities in the countries in which our products are produced or sold.

Such regulations relate to a wide range of matters including ingredients, manufacturing, labeling, packaging, marketing, advertising, transport, the environment and the sale, disposal and safety of our products.

There are no material capital expenditures for environmental control facilities either planned in the current year or expected in the near future.

Compliance with environmental laws and regulations is not expected to have a material adverse effect on the Company’s capital expenditures, earnings or competitive position.

Such laws and regulations relate to a wide range of matters including ingredients, manufacturing, labeling, packaging, marketing, advertising, transport and the sale, disposal and safety of our products, as well as environmental matters.

Compliance with these laws and regulations has not had and is not expected to have a material adverse effect on the Company’s capital expenditures, including capital expenditures for environmental control facilities, earnings or competitive position.

Our results of operations in total, by region and by product category, are subject to seasonal fluctuations, with net sales in the first half of the fiscal year typically being slightly higher than in the second half of the fiscal year.

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Fluctuations in net sales and operating income in total and by geographic region and product category in any fiscal quarter may be attributable to the level and scope of new product introductions or the particular retail calendars followed by our customers that are retailers, which may impact their order placement and receipt of goods.

Additionally, gross margins and operating expenses are impacted on a quarter-by-quarter basis by variations in our launch calendar and the timing of promotions, including purchase with purchase and gift with purchase promotions.

Additionally, gross margins and operating expenses are impacted on a quarter-by-quarter basis by key shopping events, as well as variations in our launch calendar and the timing of promotions, including purchase with purchase and gift with purchase promotions.

Availability of Reports

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These documents and any waiver of a provision of the Code granted to any senior officer or director or any material amendment to the Code may be found in the “Investors” section of our website :

www.elcompanies.com under the heading “Corporate Governance.” The charters for the Audit Committee, Compensation Committee and Nominating and Governance Committee may be found in the same location on our website.

www.elcompanies.com under the heading “Corporate Governance.” The charters for the Audit Committee, Compensation Committee and Nominating and ESG Committee may be found in the same location on our website.

Stockholders may also contact Investor Relations at 767 Fifth Avenue, New York, New York 10153 to obtain a hard copy of these documents without charge.

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Name Age Position(s) Held

Roberto Canevari (1)

55 Executive Vice President – Global Supply Chain

John Demsey 65 Executive Group President

Fabrizio Freda 63 President, Chief Executive Officer and a Director

Carl Haney 57 Executive Vice President, Global Research and Development, Corporate Product Innovation, Package Development

Carl Haney 58 Executive Vice President, Global Research Product and Innovation Officer

Jane Hertzmark Hudis 61 Executive Group President

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Michael O’Hare 53 Executive Vice President – Global Human Resources

Polcer 65 Executive Vice President – Global Supply Chain

66 Executive Vice President – Global Supply Chain

Cedric Prouvé 61 Group President – International

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Travis 59 Executive Vice President and Chief Financial Officer

Trower 55 Executive Vice President – Global Communications

*as of August 20, 2020

All of the executive officers named above have been employees of the Company for more than five years, with the exception of Deirdre Stanley.

56 Executive Vice President – Global Communications

Meridith Webster (2)

45 Executive Vice President – Global Communications and Public Affairs

*as of August 20, 2021, except as otherwise noted below

Canevari joined the Company in April 2021, and Mr.

Polcer retired from the Company effective July 1, 2021.

Webster joined the Company in May 2021, and Ms.

Trower retired from the Company effective July 1, 2021.

All of the executive officers named above have been employees of the Company for more than five years, with the exception of Roberto Canevari, Deirdre Stanley and Meridith Webster.

Canevari joined the Company in 2021;

previously, from July 2019 to April 2021, he served as Executive Vice President, Supply Chain, Europe, at Unilever PLC, a consumer goods company, and from September 2012 to June 2019, he was Chief Supply Chain Officer at Burberry Group PLC, a global luxury brand.

Stanley joined the Company in 2019;

Previously, she served as General Counsel for The Thomson Reuters Corporation, a provider of business information services, and its predecessor company for 17 years.

previously, she served as General Counsel for Thomson Reuters Corporation, a provider of business information services, and its predecessor company for 17 years.

Webster joined the Company in 2021;

previously from January 2021 to May 2021, she served as Chief of Staff, Domestic Policy Council, The White House;

from 2018 to 2021, she was Chief Communications Officer, Vox Media, Inc., an independent media company;

from 2017 to 2018, Ms.

Webster was Managing Director for Public Affairs at Emerson Collective, an organization focused on a wide range of initiatives including education, immigration, climate, and cancer research and treatment, and from 2011 to 2017, she served at Bloomberg L.P., a provider of business and financial information and news, in a variety of roles, including the Global Head of Public Affairs.

Information about our Board of Directors*

Name Principal Occupation or Employment

Charlene Barshefsky Senior International Partner, WilmerHale, a law firm

Charlene Barshefsky Chair, Parkside Global Advisors, an international consulting company, and former Senior International Partner, WilmerHale, a law firm

Rose Marie Bravo, CBE Retail and Marketing Consultant

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Chief Executive Officer of China at Morgan Stanley, a global financial services firm

Lynn Forester de Rothschild Chair, E.L.

Lynn Forester de Rothschild Co-founding partner of Inclusive Capital Partners, an investment manager, and Chair, E.L.

Rothschild LLC, a private investment company

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Former President and Chief Executive Officer, Hallmark Cards, Inc.

Jennifer Hyman Co-Founder and Chief Executive Officer, Rent the Runway, Inc., a company that rents designer clothing and accessories to women

Jennifer Hyman Co-Founder and Chief Executive Officer, Rent the Runway, Inc., a company that enables women to rent, subscribe to, and purchase secondhand clothing

Jane Lauder Executive Vice President, Enterprise Marketing and Chief Data Officer, The Estée Lauder Companies Inc.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business