What changed in this filing

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Item 1A. Risk Factors

2021-08-27 compared with 2020-08-28 · 76 added, 80 removed, 121 unchanged (56% of the section changed)

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If any of the events contemplated by the following discussion of risks should occur or other risks arise or develop, our business, which includes our prospects, financial condition and results of operations, the trading prices of our securities and our reputation, may be adversely affected.

Risks related to our Business and our Industry

The extent to which the COVID-19 pandemic could materially adversely affect our financial results will depend on future developments that are highly uncertain and difficult to predict.

The outbreak and global spread of the COVID-19 pandemic has continued to significantly disrupt our operating environment, including retail stores, travel retail, and the ability of some of our customers to operate.

We have also seen shifts in consumer preferences and practices.

Considerable uncertainty remains regarding this pandemic, including responsive measures being taken by various authorities and others.

As we continue to monitor COVID-19 developments, including the impacts on our consumers, customers and suppliers, we have taken and will continue to take further measures.

Some of the actions we take could adversely impact our business, and there is no certainty that our actions will be sufficient to mitigate the risks and the impacts of COVID-19.

The degree to which COVID-19 continues to impact our business will depend on future developments that are highly uncertain and cannot be predicted, many of which are outside our control, including the extent to which there are sustainable improvements in the retail environment and general economic conditions.

The beauty business is highly competitive, and if we are unable to compete effectively our results will suffer.

We face vigorous competition from companies throughout the world, including multinational consumer product companies.

Some competitors have greater resources than we do, some others are newer companies (some backed by private-equity investors), and some are competing in distribution channels where we are less represented.

In some cases, our competitors may be able to respond to changing business and economic conditions more quickly than us.

Some competitors have greater resources than we do, others are newer companies (some backed by private-equity investors), and some are competing in distribution channels where we are less represented.

In some cases, we may not be able to respond to changing business and economic conditions as quickly as our competitors.

Competition in the beauty business is based on a variety of factors including pricing of products, innovation, perceived value, service to the consumer, promotional activities, advertising, special events, new product introductions, e-commerce and m-commerce initiatives and other activities.

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Our inability to anticipate and respond to market trends and changes in consumer preferences could adversely affect our financial results.

Our continued success depends on our ability to anticipate, gauge and react in a timely and cost-effective manner to changes in consumer tastes for skin care, makeup, fragrance and hair care products, attitudes toward our industry and brands, as well as to where and how consumers shop.

Our continued success depends on our ability to anticipate, gauge and react in a timely and cost-effective manner to changes in consumer preferences for skin care, makeup, fragrance and hair care products, attitudes toward our industry and brands, as well as to where and how consumers shop.

We must continually work to develop, manufacture and market new products, maintain and adapt our “High-Touch” services to existing and emerging distribution channels, maintain and enhance the recognition of our brands, achieve a favorable mix of products, successfully manage our inventories, and modernize and refine our approach as to how and where we market and sell our products.

While we devote considerable effort and resources to shape, analyze and respond to consumer preferences, we recognize that consumer tastes cannot be predicted with certainty and can change rapidly.

The issue is compounded by the increasing use of digital and social media by consumers and the speed by which information and opinions are shared.

We recognize that consumer preferences cannot be predicted with certainty and can change rapidly, driven by the use of digital and social media by consumers and the speed by which information and opinions are shared.

If we are unable to anticipate and respond to sudden challenges that we may face in the marketplace, trends in the market for our products and changing consumer demands and sentiment, our financial results will suffer.

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In key markets, such as the United States, we have seen a decline in retail traffic in our department store customers and in our freestanding stores.

We continue to see the shift in consumer preference to the online channel, which accelerated in response to COVID-19.

We continue to see the shift in consumer preference to the online channel, which accelerated in response to the COVID-19 pandemic.

Consolidation or liquidation in the retail trade, from these or other factors, may result in us becoming increasingly dependent on key retailers and could result in an increased risk related to the concentration of our customers.

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The failure to realize benefits, which may be due to our inability to execute plans, global or local economic conditions, competition, changes in the beauty industry and the other risks described herein, could have a material adverse effect on our business.

Acquisitions may expose us to additional risks.

Acquisitions and divestitures may expose us to additional risks.

We continuously review acquisition and strategic investment opportunities that would expand our current product offerings, our distribution channels, increase the size and geographic scope of our operations or otherwise offer growth and operating efficiency opportunities.

There can be no assurance that we will be able to identify suitable candidates or consummate these transactions on favorable terms.

In addition, we periodically review our brand portfolio, and our strategy includes potential divestitures of certain brands as we rationalize product offerings.

There can be no assurance that we will be able to identify these strategic actions and consummate such transactions on favorable terms.

Acquisitions including strategic investments or alliances entail numerous risks, which may include:

(i) difficulties in integrating acquired operations or products, including the loss of key employees from, or customers, consumers or suppliers of, acquired businesses;

(ii) diversion of management’s attention from our existing businesses;

(iii) adverse effects on existing business relationships with suppliers, customers and consumers of ours or the companies in which we invest;

(iv) adverse impacts of margin and product cost structures different from those of our current mix of business;

(v) reputational risks associated with the activities of the businesses that we acquire or in which we invest;

and (vi) risks of entering distribution channels, categories or markets in which we have limited or no prior experience.

If required, the financing for these transactions could result in an increase in our indebtedness, dilute the interests of our stockholders or both.

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If the performance of any such acquired business exceeds such operating results, then we may incur additional charges and be required to pay additional amounts.

Acquisitions including strategic investments or alliances entail numerous risks, which may include:

• difficulties in integrating acquired operations or products, including the loss of key employees from, or customers of, acquired businesses;

• diversion of management’s attention from our existing businesses;

• adverse effects on existing business relationships with suppliers and customers;

• adverse impacts of margin and product cost structures different from those of our current mix of business;

• risks of entering distribution channels, categories or markets in which we have limited or no prior experience.

Our failure to successfully complete the integration of any acquired business or to achieve the long-term plan for such business, as well as any other adverse consequences associated with our acquisition and investment activities, could have a material adverse effect on our business.

Completed acquisitions typically result in additional goodwill and/or an increase in other intangible assets on our balance sheet.

We are required at least annually, or as facts and circumstances exist, to test goodwill and other intangible assets with indefinite lives to determine if impairment has occurred.

If the testing performed indicates that impairment has occurred, we are required to record a non-cash impairment charge for the difference between the carrying value of the goodwill or other intangible assets with indefinite lives and the fair value of the goodwill or the fair value of other intangible assets with indefinite lives in the period the determination is made.

We cannot accurately predict the amount and timing of any impairment of assets.

Should the value of goodwill or other intangible assets become impaired, there could be a material adverse effect on our business.

Our business could be negatively impacted by corporate citizenship and sustainability matters.

There is an increased focus from certain investors, customers, consumers, employees, and other stakeholders concerning corporate citizenship and sustainability matters.

From time to time, we announce certain initiatives, including goals, regarding our focus areas, which include environmental matters, packaging, responsible sourcing, social investments and inclusion and diversity.

We could fail, or be perceived to fail, in our achievement of such initiatives or goals, or we could fail in accurately reporting our progress on such initiatives and goals.

Our failure to achieve the long-term plan for acquired businesses, as well as any other adverse consequences associated with our acquisition, divestiture and investment activities, could have a material adverse effect on our business.

Our business could be negatively impacted by social impact and sustainability matters.

There is an increased focus from certain investors, customers, consumers, employees, and other stakeholders concerning social impact and sustainability matters.

From time to time, we announce certain initiatives, including goals and commitments, regarding our focus areas, which include environmental matters, packaging, responsible sourcing, social investments and inclusion and diversity.

We could fail, or be perceived to fail, in our achievement of such initiatives, or in accurately reporting our progress on such initiatives.

Such failures could be due to changes in our business (e.g., shifts in business among distribution channels or acquisitions).

Moreover, the standards by which citizenship and sustainability efforts and related matters are measured are developing and evolving, and certain areas are subject to assumptions.

The standards or assumptions could change over time.

In addition, we could be criticized for the scope of such initiatives or goals or perceived as not acting responsibly in connection with these matters.

Any such matters, or related corporate citizenship and sustainability matters, could have a material adverse effect on our business.

Moreover, the standards by which citizenship and sustainability efforts and related matters are measured are developing and evolving, and certain areas are subject to assumptions that could change over time.

In addition, we could be criticized for the scope of our initiatives or goals or perceived as not acting responsibly in connection with these matters.

Any such matters, or related social impact and sustainability matters, could have a material adverse effect on our business.

A general economic downturn, or sudden disruption in business conditions may affect consumer purchases of discretionary items and/or the financial strength of our customers that are retailers, which could adversely affect our financial results.

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We may also assume more credit risk relating to the receivables from that retailer.

In the event of a retailer liquidation, we may incur additional costs if we choose to purchase the retailer’s inventory of our products to protect brand equity.

Our inability to collect receivables from our largest customers or from a group of customers could have a material adverse effect on our business.

If a retailer was to liquidate, we may incur additional costs if we choose to purchase the retailer’s inventory of our products to protect brand equity.

In addition, sudden disruptions in local or global business conditions, for example, from events such as a pandemic or other health issues, geo-political or local conflicts, civil unrest, terrorist attacks, adverse weather conditions, climate changes or seismic events, can have a short-term and, sometimes, long-term impact on consumer spending.

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Additionally, we continue to monitor the effects of the global macroeconomic environment;

social and political issues;

social, political and human rights issues;

regulatory matters, including the imposition of tariffs;

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This could leave us with reduced borrowing capacity or unhedged against certain foreign currency or interest rate exposures which could have a material adverse effect on our business.

The extent to which the COVID-19 pandemic could materially adversely affect our financial results will depend on future developments that are highly uncertain and difficult to predict.

The outbreak and global spread of COVID-19 has significantly disrupted our operating environment, including retail stores, travel retail, manufacturing, distribution, and the ability of many of our customers to operate.

We have also seen s hifts in consumer preferences and practices .

There is considerable uncertainty regarding this pandemic, including measures being taken by various authorities and others to try to contain the pandemic, as well as the timing of the identification and distribution of any vaccine or cure.

We are modifying our business practices, including in response to legislation, executive orders and guidance from government entities and healthcare authorities.

Some of these changes to our business practices create operational challenges and may adversely impact our business.

As we continue to monitor COVID-19 developments, including the impacts on our consumers, customers and suppliers, we have taken and will continue to take further measures.

Some of the actions we take could adversely impact our business, and there is no certainty that our actions will be sufficient to mitigate the risks and the impacts of COVID-19.

The pandemic has significantly increased economic uncertainty, raising concerns about an economic slowdown and the possibility of a global recession.

History has not provided any comparable recent events that provide guidance concerning the impacts of a global pandemic like COVID-19.

The degree to which COVID-19 impacts our business will depend on future developments that are highly uncertain and cannot be predicted, many of which are outside our control, including the identification and distribution of any vaccine or cure and to what extent there are sustainable improvements in the retail environment and general economic conditions.

Changes in laws, regulations and policies that affect our business could adversely affect our financial results.

Our business is subject to numerous laws, regulations and policies around the world.

Changes in these laws, regulations and policies, including the interpretation or enforcement thereof, that affect our business could adversely affect our financial results.

These changes include accounting standards, laws and regulations relating to tax matters, trade, data privacy (e.g., General Data Protection Regulation (GDPR)), anti-corruption, advertising, marketing, manufacturing, distribution, customs matters, product registration, ingredients, chemicals, packaging, selective distribution, environmental or climate change matters.

Disputes and other legal or regulatory proceedings could adversely affect our financial results.

We are, and may in the future become, party to litigation, other disputes or regulatory proceedings across a wide range of matters, including ones relating to employment, real estate, environmental, regulatory, advertising, trade relations, tax, privacy and product liability matters (including asbestos-related claims).

In general, claims made by us or against us in litigation, disputes or other proceedings can be expensive and time consuming to bring or defend against and could result in settlements, injunctions or damages that could significantly affect our business.

It is not possible to predict the final resolution of the litigation, disputes or proceedings to which we currently are or may in the future become party to, and the impact of certain of these matters on our business could be material .

Government reviews, inquiries, investigations and actions could harm our business.

As we operate in various locations around the world, our operations are subject to governmental scrutiny and may be adversely impacted by the results of such scrutiny.

The regulatory environment with regard to our business is evolving, and officials often exercise broad discretion in deciding how to interpret and apply applicable regulations.

From time to time, we may receive formal and informal inquiries from various government regulatory authorities, as well as self-regulatory organizations, about our business and compliance with local laws, regulations or standards.

Any determination that our operations or activities, or the activities of our employees, are not in compliance with existing laws, regulations or standards could negatively impact us in a number of ways, including the imposition of substantial fines, interruptions of business, loss of supplier, vendor or other third-party relationships, termination of necessary licenses and permits, or similar results, all of which could potentially harm our business.

Regardless of the outcomes, these reviews, inquiries, investigations and actions could create negative publicity which could harm our business.

Our success depends, in part, on the quality, efficacy and safety of our products.

If our products are found to be defective or unsafe, our product claims are found to be deceptive, or our products otherwise fail to meet our consumers’ expectations, our relationships with customers or consumers could suffer, the appeal of one or more of our brands could be diminished, and we could lose sales and become subject to liability or claims, any of which could result in a material adverse effect on our business.

In addition, third parties may sell counterfeit versions of some of our products.

These counterfeit products may pose safety risks, may fail to meet consumers’ expectations, and may have a negative impact on our business.

If our products are found to be defective or unsafe, our product claims are found to be deceptive, or our products otherwise fail to meet our consumers’ expectations, our relationships with customers or consumers could suffer, the appeal of our brands could be diminished, and we could lose sales and become subject to liability or claims, any of which could result in a material adverse effect on our business.

In addition, counterfeit versions of some of our products may be sold by third parties, which may pose safety risks, may fail to meet consumers’ expectations, and may have a negative impact on our business.

Our success depends, in part, on our key personnel.

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The unexpected loss of, or misconduct by, one or more of our key employees could adversely affect our business.

Our success also depends, in part, on our continuing ability to identify, hire, train and retain other highly qualified personnel.

Competition for these employees can be intense.

We may not be able to attract, assimilate or retain qualified personnel in the future, and our failure to do so could have a material adverse effect on our business.

This risk may be exacerbated by the stresses associated with the implementation of our strategic plan and other initiatives.

Our success also depends, in part, on our continuing ability to identify, hire, train and retain personnel across all levels of our business.

Competition for employees can be intense.

We may not be able to attract, assimilate or retain necessary personnel in the future, and our failure to do so could have a material adverse effect on our business.

This risk may be exacerbated by the stresses associated with the implementation of our strategic plan and other initiatives, as well as by market conditions.

We are subject to risks related to the global scope of our operations.

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Our global operations are subject to many risks and uncertainties, including:

• fluctuations in foreign currency exchange rates and the relative costs of operating in different places, which can affect our results of operations, the value of our foreign assets, the relative prices at which we and competitors sell products in the same markets, the cost of certain inventory and non-inventory items required in our operations, and the relative prices at which we sell our products in different markets;

• foreign or U.S.

(i) fluctuations in foreign currency exchange rates and the relative costs of operating in different places, which can affect our results of operations, the value of our foreign assets, the relative prices at which we and competitors sell products in the same markets, the cost of certain inventory and non-inventory items required in our operations, and the relative prices at which we sell our products in different markets;

(ii) foreign or U.S.

laws, regulations and policies, including restrictions on trade, immigration and travel, operations, and investments;

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restrictions on imports and exports, including license requirements;

• lack of well-established or reliable legal and administrative systems in certain countries in which we operate;

• adverse weather conditions and natural disasters;

• social, economic and geopolitical conditions, such as a pandemic, terrorist attack, war or other military action.

(iii) lack of well-established or reliable legal and administrative systems in certain countries in which we operate;

(iv) adverse weather conditions and natural disasters;

and (v) social, economic and geopolitical conditions, such as a pandemic, terrorist attack, war or other military action.

These risks could have a material adverse effect on our business.

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In addition, any increases in the costs of goods and services for our business may adversely affect our profit margins if we are unable to pass along any higher costs in the form of price increases or otherwise achieve cost efficiencies in our operations.

As we outsource functions, we become more dependent on the entities performing those functions.

As part of our long-term strategy, we are continually looking for opportunities to provide essential business services in a more cost-effective manner.

In some cases, this requires the outsourcing of functions or parts of functions that can be performed more effectively by external service providers.

These include certain information technology, supply chain, finance and human resource functions.

The failure of one or more such providers to deliver the expected services, provide them on a timely basis or to provide them at the prices we expect may have a material adverse effect on our business.

In addition, when we transition external service providers, we may experience challenges that could have a material adverse effect on our business.

Risks related to Legal and Regulatory Matters

Changes in laws, regulations and policies that affect our business could adversely affect our financial results.

Our business is subject to numerous laws, regulations and policies around the world.

Changes in these laws, regulations and policies, including the interpretation or enforcement thereof, that affect our business could adversely affect our financial results.

Disputes and other legal or regulatory proceedings could adversely affect our financial results.

In general, claims made by us or against us in litigation, disputes or other proceedings can be expensive and time consuming and could result in settlements, injunctions or damages that could significantly affect our business.

Government reviews, inquiries, investigations and actions could harm our business.

As we operate in various locations around the world, our operations are subject to governmental scrutiny and may be adversely impacted by the results of such scrutiny.

The regulatory environment with regard to our business is evolving, and officials often exercise broad discretion in deciding how to interpret and apply applicable regulations.

Regardless of the outcomes, these reviews, inquiries, investigations and actions could create negative publicity which could harm our business.

Risks related to Technology and Cybersecurity Matters

Our information technology and websites may be susceptible to cybersecurity breaches, outages and other risks.

We rely on information technology (outsourced and in-house) that support our business processes, including product development, marketing, sales, order processing, production, distribution, finance and intracompany communications throughout the world.

We rely on information technology that supports our business processes, including product development, marketing, sales, order processing, production, distribution, finance and intracompany communications throughout the world.

We have e-commerce, m-commerce and other Internet websites in the United States and many other countries.

These systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures, break-ins and other events.

Despite the implementation of network security measures, our systems may be vulnerable to constantly evolving cybersecurity threats such as malware, break-ins and similar disruptions from unauthorized tampering.

The occurrence of these or other events could disrupt or damage our information technology and adversely affect our business.

Our systems and data may be vulnerable to constantly evolving cybersecurity threats such as malware, break-ins and similar disruptions from unauthorized tampering.

The occurrence of these or other events could disrupt or damage our information technology, including operational technology, and adversely affect our business.

Insurance policies that may provide coverage with regard to such events may not cover any or all of the resulting financial losses.

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As part of our normal business activities, we collect and store certain information that is confidential, proprietary or otherwise sensitive, including personal information with respect to customers, consumers and employees.

We may share some of this information with vendors who assist us with certain aspects of our business.

We share some of this information with certain vendors who assist us with business matters.

Moreover, the success of our e-commerce and m-commerce operations depends upon the secure transmission of confidential and personal data over public networks, including the use of cashless payments.

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In addition, a security or data privacy breach could require that we expend significant additional resources to enhance our information security systems and could result in a disruption to our operations.

Furthermore, third parties including our suppliers and customers may also rely on information technology and be subject to such cybersecurity breaches.

These breaches may negatively impact their businesses, which could in turn disrupt our supply chain and/or our business.

Furthermore, third parties, including our suppliers and customers, also rely on information technology and may be subject to cybersecurity breaches that could impact their businesses and could in turn disrupt our supply chain and/or our business.

We are subject to risks associated with our global information technology.

Our implementation, maintenance and utilization of global information technology (outsourced, in-house and remote), including operational technology, supply chain and finance systems, human resource management systems, creative asset management and retail operating systems, as well as associated hardware and use of cloud-based models, involve risks and uncertainties.

Our implementation, maintenance and utilization of global information technology, including operational technology, supply chain and finance systems, human resource management systems, creative asset management and retail operating systems, as well as associated hardware and use of cloud-based models, involve risks and uncertainties.

Failure to implement, maintain or utilize these and other systems as planned, in terms of timing, specifications, security policies, costs, or otherwise, could have a material adverse effect on our business.

As we outsource functions, we become more dependent on the entities performing those functions.

As part of our long-term strategy, we are continually looking for opportunities to provide essential business services in a more cost-effective manner.

In some cases, this requires the outsourcing of functions or parts of functions that can be performed more effectively by external service providers.

These include certain information technology, finance and human resource functions.

While we believe we conduct appropriate due diligence before entering into agreements with the outsourcing entity, the failure of one or more entities to provide the expected services, provide them on a timely basis or to provide them at the prices we expect may have a material adverse effect on our business.

In addition, if we transition systems to one or more new, or among existing, external service providers, we may experience challenges that could have a material adverse effect on our business.

Risks related to our Securities and our Ownership Structure

The trading prices of our securities periodically may rise or fall based on the accuracy of predictions of our financial performance.

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This could include forecasts of net sales, earnings per share and other financial metrics or projections.

We assume no responsibility to provide guidance, or to update any guidance we provide, and any longer-term guidance we may provide is based on goals that we believe, at the time guidance is given, are reasonably attainable for growth and performance over a number of years.

We assume no responsibility to provide or update guidance, and any longer-term guidance we may provide is based on goals that we believe, at the time guidance is given, are reasonably attainable for growth and performance over a number of years.

We historically have paid dividends on our common stock and repurchased shares of our Class A Common Stock;

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Nor do we assume any responsibility to correct the predictions of outside analysts or others when they differ from our own internal expectations.

If and when we announce actual results that differ from those that outside analysts or others have been predicting, the market price of our securities could be affected.

If our actual results differ from those that outside analysts or others have been predicting, the market price of our securities could be affected.

Investors who rely on the predictions of outside analysts or others when making investment decisions with respect to our securities do so at their own risk.

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and (3) we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

While we have voluntarily caused our Board to have a majority of independent directors and the written charters of our Nominating and Governance Committee and the Compensation Committee to have the required provisions, we are not requiring our Nominating and Governance Committee and Compensation Committee to be comprised solely of independent directors.

While we have voluntarily caused our Board to have a majority of independent directors and the written charters of our Nominating and ESG Committee and the Compensation Committee to have the required provisions, we are not requiring our Nominating and ESG Committee and Compensation Committee to be comprised solely of independent directors.

As a result of our use of the “controlled company” exemptions, investors will not have the same protection afforded to stockholders of companies that are subject to all of the New York Stock Exchange corporate governance requirements.

Unresolved Staff Comments.

Not applicable

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 1A. Risk Factors