2 unchanged sentences
We manufacture, market and sell beauty products including those in the skin care, makeup, fragrance and hair care categories, which are distributed in approximately 150 countries and territories.
−Removed: The following table is a comparative summary of operating results for the three and nine months ended March 31, 2023 and 2022, and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies for all periods presented.
+Added: The following table is a comparative summary of operating results for the three months ended September 30, 2023 and 2022, and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies for all periods presented.
Products and services that do not meet our definition of skin care, makeup, fragrance and hair care have been included in the “other” category.
Three Months Ended
−Removed: March 31 Nine Months Ended
(In millions) 2023 2022
4 unchanged sentences
Hair Care 148 158
−Removed: Other 11 11 39 40
−Removed: 3,755 4,246 12,311 14,179
Returns associated with restructuring and other activities — (5)
4 unchanged sentences
Asia/Pacific 1,058 1,130
−Removed: 3,755 4,246 12,311 14,179
Returns associated with restructuring and other activities — (5)
6 unchanged sentences
Hair Care (22) (12)
−Removed: Other 9 — 8 3
−Removed: 315 761 1,547 3,135
Charges associated with restructuring and other activities (2) (6)
4 unchanged sentences
Asia/Pacific 138 208
−Removed: 315 761 1,547 3,135
Charges associated with restructuring and other activities (2) (6)
Operating income $ 98 $ 661
−Removed: (1) The net sales from the Company's travel retail business are included in the Europe, the Middle East & Africa region, with the exception of net sales of Dr.Jart+ in the travel retail channel that are reflected in Korea in the Asia/Pacific region.
−Removed: Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.
+Added: (1) The net sales from the Company's travel retail business are included in the Europe, the Middle East & Africa region, and operating income attributable to these net sales are included in that region and in The Americas.
+Added: The exception is for net sales and operating income of Dr.Jart+ in the travel retail channel in Korea that are reflected in Korea in the Asia/Pacific region.
THE ESTÉE LAUDER COMPANIES INC.
1 unchanged sentence
Three Months Ended
−Removed: March 31 Nine Months Ended
−Removed: 2023 2022 2023 2022
Net sales 100.0 % 100.0 %
4 unchanged sentences
Restructuring and other charges — 0.1
−Removed: Impairment of other intangible assets — 5.1 1.7 1.5
Total operating expenses 66.8 57.2
6 unchanged sentences
Net earnings 1.0 12.5
−Removed: Net earnings attributable to noncontrolling interests — (0.1) — (0.1)
−Removed: Net loss (earnings) attributable to redeemable noncontrolling interest — (0.3) — (0.1)
+Added: Net earnings attributable to redeemable noncontrolling interest
Net earnings attributable to The Estée Lauder Companies Inc.
−Removed: 4.2 % 13.1 % 8.4 % 16.5 %
Not adjusted for differences caused by rounding
Period-over-period changes in our net sales are generally attributable to the impacts from (i) pricing on our base portfolio, including changes in mix and those due to strategic pricing actions, (ii) volume, including changes driven by the impact of new product innovation, (iii) acquisitions and/or divestitures, and/or (iv) foreign currency translation.
−Removed: The net sales impact from pricing consists of changes in list prices, due to strategic pricing actions, and mix shifts within and among product categories, geographic regions and distribution channels.
+Added: The percentages disclosed for these impacts are calculated on an individual basis.
+Added: The net sales impact from pricing consists of changes in list prices, due to strategic pricing actions, and mix shifts within and among product categories, geographic regions, brands and distribution channels.
The prices at which we sell our products vary by brand, distribution channel (e.g., wholesale or direct-to-consumer) and may also vary by country.
16 unchanged sentences
We operate on a global basis, with the majority of our net sales generated outside the United States.
−Removed: Accordingly, fluctuations in foreign currency exchange rates can affect our results of operations.
+Added: Accordingly, fluctuations in foreign currency exchange rates affect our results of operations.
Therefore, we present certain net sales, operating results and diluted net earnings per common share information excluding the effect of foreign currency rate fluctuations to provide a framework for assessing the performance of our underlying business outside the United States.
1 unchanged sentence
We calculate constant currency information by translating current-period results using monthly average foreign currency exchange rates and adjusting for the period-over-period impact of foreign currency cash flow hedging activities.
−Removed: Business Update
We are a leader in prestige beauty, which combines the repeat purchase and relative affordability of consumer goods with high quality products and services.
−Removed: Within prestige beauty, we are well diversified by product category, geography, brand, product sub-category, channel, consumer segment and price point.
+Added: Within prestige beauty, we are diversified by product category, geography, brand, product sub-category, channel, consumer segment and price point.
We also leverage consumer analytics and insights with agility by deploying our brands to fast growing and profitable opportunities.
1 unchanged sentence
Elements of our strategy are described in the Overview on pages 30-32 of our Annual Report on Form 10-K for the year ended June 30, 2023, as well as below.
−Removed: During the fiscal 2023 third quarter, the phase and pace of recovery from the COVID-19 pandemic continued to vary across markets globally.
−Removed: In the West, in both developed and emerging markets, the momentum of post-COVID-19 recovery growth continued with net sales growth in The Americas and markets in Europe, the Middle East & Africa, excluding travel retail.
−Removed: In Asia/Pacific, markets emerged from COVID-19 restrictions more gradually and over a longer period of time, compared to the pace of recovery experienced in the West.
−Removed: These markets continued to evolve in recovery during the fiscal 2023 third quarter, evidenced by strong net sales growth in many Asia/Pacific markets.
−Removed: While we saw recovery in many markets globally, our Asia travel retail business continued to be pressured by the slower than anticipated recovery from the COVID-19 pandemic.
−Removed: Specifically, in Hainan, while traffic into the island exceeded prior year levels, conversion of travelers to consumers in prestige beauty lagged.
−Removed: This led to the slower than anticipated depletion of elevated levels of retailer inventory and, therefore, lower replenishment orders.
−Removed: In Korea, the shipments to duty free retailers were pressured owing to the transition to post-COVID-19 regulations as traveling consumers gradually return.
−Removed: In Korea, as well as in Asia more broadly, the travel retail recovery was challenged by slower than anticipated resumption of international flights, granting of visas, and organized group tours.
−Removed: Our business also continued to be pressured by the strong U.S.
−Removed: dollar, historically high inflation and recession concerns.
−Removed: During the third quarter of fiscal 2023, net sales decreased 12%, reflecting the impacts noted above.
−Removed: • Our skin care net sales declined 20%, including the unfavorable impact of foreign currency translation of 3%, driven by lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory.
−Removed: • Our makeup net sales decreased 2%, including the unfavorable impact of foreign currency translation of 2%, driven by lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory.
−Removed: Partially offsetting these challenges were higher net sales from M·A·C, primarily driven by the recognition of the previously deferred revenue due to changes to the BACK-To-M·A·C take back program, and Clinique.
−Removed: • Our fragrance net sales increased slightly, primarily driven by growth from Le Labo, TOM FORD Beauty, Estée Lauder, Kilian Paris and Editions de Parfums Frédéric Malle, partially offset by the impact of the license terminations related to certain of our designer fragrances of 10% and the unfavorable impact of foreign currency translation of 3%.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: • Our hair care net sales increased slightly, driven by higher net sales from The Ordinary reflecting growth due to the recent launch of hair care products, offset by lower net sales from Aveda driven by a decline in the salon business and lower online net sales in North America.
−Removed: Our global distribution capability and operations allow us to focus on targeted expanded consumer reach wherever consumer demographics and trends are the most attractive.
+Added: • Our skin care net sales declined 22%, primarily driven by lower net sales from Estée Lauder and La Mer.
+Added: These decreases primarily reflect a decline in our Asia travel retail business, primarily due to our and our retailers' actions to reset retailer inventory levels, and changes in government and retailer policies related to unstructured market activity, that led to lower product shipments compared to the prior-year period.
+Added: The net sales decrease in Estée Lauder was also due to incremental headwinds from a slower-than-expected recovery of overall prestige beauty in mainland China.
+Added: Partially offsetting the decrease in skin care net sales were higher net sales from The Ordinary, reflecting growth in every geographic region.
+Added: • Our makeup net sales increased slightly, primarily driven by higher net sales from M·A·C, Too Faced, Clinique, and TOM FORD, partially offset by lower net sales from Estée Lauder primarily reflecting a decline in our Asia travel retail business.
+Added: This was primarily due to our and our retailers' actions to reset retailer inventory levels, and changes in government and retailer policies related to unstructured market activity, that led to lower product shipments compared to the prior-year period.
+Added: • Our fragrance net sales increased 5%, primarily driven by growth from Le Labo, benefiting from the growth of hero products, new product launches and targeted expanded consumer reach due to the brand's launch in mainland China during the fiscal 2023 fourth quarter.
+Added: • Our hair care net sales declined 6%, primarily attributable to lower net sales from Aveda, reflecting a decline in North America, in the salon channel and in our online business.
+Added: Our global distribution capability and operations allow us to focus on targeted expanded consumer reach wherever consumer demographics and trends are attractive.
Our regional organizations, and the expertise of our people there, enable our brands to be more locally and culturally relevant in both product assortment and communications.
We are evolving the way we connect with our consumers in stores, online and where they travel, including by expanding our digital and social media presence and the engagement of global and local influencers to amplify brand or product stories.
−Removed: We tailor implementation of our strategy by market to drive consumer engagement and embrace cultural diversity.
+Added: We tailor implementation of our strategy by market to drive consumer engagement and embrace inclusion and cultural diversity.
We continuously strengthen our presence in large, image-building core markets, while broadening our presence in emerging markets.
−Removed: • Net sales in The Americas increased 3%, primarily driven by an increase in the United States, led by higher net sales from The Ordinary, partially offset by the impact of the license terminations related to certain of our designer fragrances effective June 30, 2022.
−Removed: Also contributing to the net sales increase in The Americas was an increase in net sales in Latin America, led by Mexico and Brazil, reflecting the continued recovery in makeup.
−Removed: • Net sales in Europe, the Middle East & Africa decreased 26% driven by lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory.
−Removed: • Net sales in Asia/Pacific remained virtually flat, driven by the unfavorable impact of foreign currency translation of 7%, partially offset by growth in Hong Kong, Australia and Southeast Asia as the region recovers from the COVID-19 pandemic.
−Removed: We are experiencing a more gradual and prolonged recovery from the COVID-19 pandemic, particularly in our Asia travel retail business.
−Removed: In Asia travel retail, there have been, and are likely to continue to be, impacts on our business in the near-term, from the slower than anticipated depletion of elevated levels of retailer inventory and, therefore, lower replenishment orders, as well as the slower than anticipated resumption of international flights, granting of visas, and organized group tours.
−Removed: Additionally, in Korea, the shipments to duty free retailers were pressured owing to the transition to post-COVID-19 regulations as traveling consumers gradually return.
−Removed: In addition to impacting net sales and profitability, including any unfavorable impacts to our effective tax rate from changes to our geographical mix of earnings, these and other challenges may adversely impact the goodwill and other intangible assets associated with our brands, as well as long-lived assets (i.e.
−Removed: potentially resulting in impairments).
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: • Net sales in The Americas increased 8%, primarily driven by higher net sales in the United States, Mexico and Brazil.
+Added: The increase in net sales in the United States primarily reflected continued strong performance by The Ordinary in skin care, as well as growth in fragrance, led by Le Labo and TOM FORD.
+Added: The region also benefited from incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand.
+Added: Net sales in Mexico and Brazil increased in all product categories, led by makeup, and benefited from targeted expanded consumer reach.
+Added: • Net sales in Europe, the Middle East & Africa decreased 26%, primarily driven by our Asia travel retail business.
+Added: The decline in our Asia travel retail business was primarily due to our and our retailers' actions to reset retailer inventory levels, and changes in government and retailer policies related to unstructured market activity, that led to lower product shipments compared to the prior-year period.
+Added: • Net sales in Asia/Pacific decreased 6%, including the unfavorable impact of foreign currency translation of 3%, driven by lower net sales in mainland China, reflecting incremental headwinds from a slower-than-expected recovery of overall prestige beauty in mainland China, partially offset by higher net sales in Hong Kong SAR, driven by the resumption of travel from mainland China to Hong Kong SAR due to the lifting of travel restrictions.
+Added: We have experienced, and are expecting to continue to experience, challenges within our Asia travel retail business, as well as incremental headwinds from a slower-than-expected recovery of overall prestige beauty in mainland China.
+Added: These challenges, combined with the risks of business disruption in Israel and other parts of the Middle East (net sales from Israel and the Middle East accounted for approximately 2% of consolidated net sales in each of fiscal 2023 and the first quarter of fiscal 2024), are expected to negatively impact net sales and profitability, including an unfavorable impact to our effective tax rate from changes to our geographical mix of earnings.
We believe that the best way to increase long-term stockholder value is to continue providing superior products and services in the most efficient and effective manner while recognizing shifts in consumers’ behaviors and shopping practices.
13 unchanged sentences
We are also mindful of inflationary pressures on our cost base and are monitoring the impact on consumer preferences.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: As the invasion of Ukraine continues and international sanctions evolve, we have substantially scaled down our operations in Russia based on our current plans.
−Removed: We expect to continue selling a limited selection of products to retailers in Russia.
−Removed: We will continue to monitor the risks and evolving situation that may further affect our business and will adjust our plans accordingly.
−Removed: In fiscal 2022, our net sales in Ukraine and Russia accounted for approximately 1% of consolidated net sales.
−Removed: There are uncertainties related to the future impacts on our business, including possible new sanctions that are difficult to predict due to the high level of geopolitical volatility.
−Removed: On a broader perspective, there could be additional negative impacts to our net sales, earnings, assets and cash flows from such uncertainties.
−Removed: We also note that worsening conditions could exacerbate economic challenges in other countries such as inflationary pressures, energy shortages, recessions or other consequences.
−Removed: Please refer to Risk Factors in Part I, Item 1A of the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2022, for a more complete discussion of the risks we encounter in our business and industry.
−Removed: The uncertainty around the timing, speed and duration of the recovery from the adverse impacts of the COVID-19 pandemic, including the impacts on our business in Asia travel retail and China and the other macro challenges we are facing, will continue to affect our ability to grow sales profitably.
−Removed: We believe we can, to some extent, offset the impact of some of these challenges by continually developing and pursuing a diversified strategy with multiple engines of growth and by accelerating initiatives focused on areas of strength, discipline and agility, including continuing to execute upon and benefit from efficiencies attributable to previously approved initiatives under the Post-COVID Business Acceleration Program.
−Removed: As the current situation continues to progress, if economic and social conditions or the degree of uncertainty or volatility worsen, or the adverse conditions previously described are further prolonged, there could be a further negative effect on consumer confidence, demand, spending and willingness or ability to travel and, as a result, on our business.
−Removed: We are continuing to monitor these and other risks that may affect our business.
−Removed: Post-COVID Business Acceleration Program
−Removed: Information about our restructuring initiative, the Post-COVID Business Acceleration Program, is described in Notes to Consolidated Financial Statements, Note 3 – Charges Associated with Restructuring and Other Activities herein, as well as, in Notes to Consolidated Financial Statements, Note 8 – Charges Associated with Restructuring and Other Activities and in the Overview on page 33 of our Annual Report on Form 10-K for the year ended June 30, 2022.
−Removed: Other Intangible Asset Impairments
−Removed: During the fiscal 2023 second quarter, given the lower-than-expected results in the overall business, we made revisions to the internal forecasts relating to our Smashbox reporting unit.
−Removed: We concluded that the changes in circumstances in the reporting unit triggered the need for an interim impairment review of its trademark intangible asset.
−Removed: The remaining carrying value of the trademark intangible asset was not recoverable and we recorded an impairment charge of $21 million reducing the carrying value to zero.
−Removed: During the fiscal 2023 second quarter, the Dr.Jart+ reporting unit experienced lower-than-expected growth within key geographic regions and channels that continue to be impacted by the spread of COVID-19 variants, resurgence in cases, and the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the financial performance of the reporting unit.
−Removed: In addition, due to macro-economic factors, Dr.Jart+ has experienced lower-than-expected growth within key geographic regions.
−Removed: The Too Faced reporting unit experienced lower-than-expected results in key geographic regions and channels coupled with delays in future international expansion to areas that continue to be impacted by COVID-19.
−Removed: As a result, we made revisions to the internal forecasts relating to our Dr.Jart+ and Too Faced reporting units.
−Removed: Additionally, there were increases in the weighted average cost of capital for both reporting units as compared to the prior year annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2022.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: We concluded that the changes in circumstances in the reporting units, along with increases in the weighted average cost of capital, triggered the need for interim impairment reviews of their trademarks and goodwill.
−Removed: These changes in circumstances were also an indicator that the carrying amounts of Dr.Jart+’s and Too Faced’s long-lived assets, including customer lists, may not be recoverable.
−Removed: Accordingly, we performed interim impairment tests for the trademarks and a recoverability test for the long-lived assets as of November 30, 2022.
−Removed: We concluded that the carrying value of the trademark intangible assets exceeded their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows and recorded an impairment charge of $100 million for Dr.Jart+ and $86 million for Too Faced.
−Removed: We concluded that the carrying amounts of the long-lived assets were recoverable.
−Removed: After adjusting the carrying values of the trademarks, we completed interim quantitative impairment tests for goodwill.
−Removed: As the estimated fair value of the Dr.Jart+ and Too Faced reporting units were in excess of their carrying values, we concluded that the carrying amounts of the goodwill were recoverable and did not record a goodwill impairment charge related to these reporting units.
−Removed: The fair values of these reporting units were based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting units.
−Removed: The significant assumptions used in these approaches include revenue growth rates and profit margins, terminal values, weighted average cost of capital used to discount future cash flows and royalty rates for trademarks.
−Removed: The most significant unobservable input used to estimate the fair values of the Dr.Jart+ and Too Faced trademark intangible assets was the weighted-average cost of capital, which was 11% and 13%, respectively.
−Removed: A summary of the impairment charges for the three and nine months ended March 31, 2023 and the remaining trademark and goodwill carrying values as of March 31, 2023, for each reporting unit, are as follows:
−Removed: Impairment Charges Carrying Value
−Removed: (In millions) Three Months Ended
−Removed: March 31, 2023 Nine Months Ended
−Removed: March 31, 2023 As of March 31, 2023
−Removed: Reporting Unit:
−Removed: Geographic Region Trademarks Goodwill Trademarks Goodwill Trademarks Goodwill
−Removed: Smashbox The Americas $ — $ — $ 21 $ — $ — $ —
−Removed: Dr.Jart+ Asia/Pacific — — 100 — 330 310
−Removed: Too Faced The Americas — — 86 — 186 13
−Removed: Total $ — $ — $ 207 $ — $ 516 $ 323
−Removed: The impairment charges for the nine months ended March 31, 2023 were reflected in the skin care product category for Dr.Jart+ and the makeup product category for Smashbox and Too Faced.
−Removed: The fair value of the Dr.Jart+ and Too Faced trademarks were equal to their carrying values subsequent to the impairment charges taken as of December 31, 2022.
−Removed: Additionally, the estimated fair value of the Dr.Jart+ and Too Faced reporting units exceeded their carrying value by 7% and 10%, respectively.
−Removed: For the Dr.Jart+ and Too faced reporting units, if all other assumptions are held constant, a decrease of 10% in the estimated future cash flows, inclusive of the terminal value, or an increase of 100 basis points in the weighted average cost of capital, would have caused the carrying value of these reporting units to approximate their fair value.
−Removed: The key assumptions used to determine the estimated fair value of the reporting units and their respective trademarks are primarily predicated on the estimated future impacts of COVID-19, the success of future new product launches, the achievement of distribution expansion plans, and the realization of cost reduction and other efficiency efforts.
−Removed: If such plans do not materialize, or if there are further challenges in the business environments in which the reporting unit operates, resulting changes in the key assumptions could have negative impacts on the estimated fair value of the reporting units, and their respective trademarks, and it is possible we could recognize additional impairment charges in the future.
+Added: A decline in net sales and profitability may adversely impact the goodwill and other intangible assets associated with our brands, as well as long-lived assets, potentially resulting in impairments.
+Added: Cybersecurity Incident Disclosed in July 2023
+Added: As initially disclosed on July 18, 2023, we identified a cybersecurity incident in which an unauthorized third party gained access to some of our systems.
+Added: After becoming aware of the incident, we proactively took down some of our systems to help secure our business operations and subsequently brought back online core systems within days.
+Added: While the response to the incident resulted in some disruptions to our business operations, most notably general corporate activities and order processing, our production and sales operations were minimally impacted.
+Added: Our investigation into the identification of the impacted systems and the unauthorized access is complete.
+Added: We determined that the unauthorized third party obtained some data from our systems.
+Added: We are continuing to work to understand the nature and scope of the data obtained, and can confirm, based on the investigation to date, that the data obtained includes some consumer and employee data (such as names, contact information, and dates of birth).
+Added: We took steps, and continue to take steps, to enhance the security of our systems, and are continuing to coordinate with law enforcement authorities.
+Added: We have provided and will continue to provide notification to governmental authorities in certain jurisdictions and we have also notified, and will continue to notify, affected individuals where required by law.
THE ESTÉE LAUDER COMPANIES INC.
+Added: Based on the information available to date, we believe the incident is contained.
+Added: The incident did not have a material impact on net sales and was $.08 dilutive to earnings per share for the fiscal 2024 first quarter and based on this information is not expected to have a material impact on net sales and is expected to be dilutive approximately $.08 to earnings per share for the fiscal 2024 full year.
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: Reported net sales decreased for the three months ended March 31, 2023, driven by lower net sales from the skin care and makeup product categories, partially offset by slightly higher net sales in the fragrance and hair care product categories.
−Removed: For the nine months ended March 31, 2023, reported net sales decreased due to lower net sales from the skin care, makeup and fragrance product categories, partially offset by higher net sales in the hair care product category.
−Removed: For the three months ended March 31, 2023, reported net sales decreased due to lower net sales in Europe, the Middle East & Africa, from our travel retail business, and in Asia/Pacific, partially offset by higher net sales in The Americas.
−Removed: For the nine months ended March 31, 2023, reported net sales decreased due to lower net sales from all geographic regions.
−Removed: The total net sales decrease was impacted by approximately $106 million and $564 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
+Added: Reported net sales decreased during the three months ended September 30, 2023, primarily driven by lower net sales from the skin care product category of $466 million.
+Added: Reported net sales decreased during the three months ended September 30, 2023, primarily reflecting lower net sales from Europe, the Middle East & Africa and, to a lesser extent, Asia/Pacific, partially offset by higher net sales in The Americas.
+Added: Net sales for the three months ended September 30, 2023, reflects $17 million of incremental royalty revenue included in The Americas region and the other category from the new revenue stream associated with the TOM FORD trademark as a result of the fiscal 2023 fourth quarter acquisition of the TOM FORD brand.
+Added: The total net sales decrease was impacted by approximately $11 million of unfavorable foreign currency translation.
Returns associated with restructuring and other activities are not allocated to our product categories or geographic regions because they result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select corporate functions and go-to-market structures.
−Removed: Accordingly, the following discussions of Net sales by Product Categories and Geographic Regions exclude the impact of returns associated with restructuring and other activities for the three and nine months ended March 31, 2023 of $4 million and $10 million, respectively, and for the three and nine months ended March 31, 2022 of $1 million and $3 million, respectively.
−Removed: Reported net sales decreased 12% for the three months ended March 31, 2023, driven by the decrease from volume of 7%, the unfavorable impact from foreign currency translation of 3%, the impact from the license terminations of certain of our designer fragrances of 1% and a decrease from pricing of 1%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions.
−Removed: Reported net sales decreased 13% for the nine months ended March 31, 2023, driven by the decrease from volume of 9%, the unfavorable impact from foreign currency translation of 4% and the impact from the license terminations of certain of our designer fragrances of 1%.
−Removed: Partially offsetting these decreases was an increase from pricing of 1%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
+Added: Accordingly, the following discussions of Net sales by Product Categories and Geographic Regions exclude the impact of returns associated with restructuring and other activities for the three months ended September 30, 2022 of $5 million.
+Added: Reported net sales decreased 10% for the three months ended September 30, 2023, driven by the decrease from volume of 13%, partially offset by an increase from pricing of 2% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
THE ESTÉE LAUDER COMPANIES INC.
1 unchanged sentence
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: Reported skin care net sales decreased for the three months ended March 31, 2023, reflecting lower net sales from La Mer, Estée Lauder, Dr.Jart+, Origins and Clinique, combined, of approximately $538 million, primarily driven by lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory.
−Removed: Reported skin care net sales decreased for the nine months ended March 31, 2023, reflecting lower net sales from Estée Lauder, La Mer, Dr.Jart+, Clinique and Origins, combined, of approximately $1,701 million, primarily driven by the evolution of the COVID-19 environment, including restrictions in mainland China and the rising number of COVID-19 cases (collectively the "COVID-19-Related Impacts") affecting Asia travel, including the tightening of inventory by certain of our retailers, retail traffic in mainland China and the Dr.Jart+ travel retail business in Korea during the first half of fiscal 2023.
−Removed: In addition, contributing to the decrease for the nine months ended March 31, 2023 was the lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory for the three months ended March 31, 2023.
−Removed: Partially offsetting these decreases in skin care net sales for the three and nine months ended March 31, 2023 were higher net sales from The Ordinary and M·A·C, combined, of approximately $78 million and $104 million, respectively.
−Removed: The increase in net sales from The Ordinary in both periods was driven by success of hero products, new product launches and expanded distribution.
−Removed: The increase in net sales from M·A·C for the three and nine months ended March 31, 2023 was primarily driven by the fiscal 2023 third quarter launch of the Hyper Real franchise line of products.
−Removed: The skin care net sales decrease was impacted by approximately $61 million and $298 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
−Removed: Reported skin care net sales decreased 20% for the three months ended March 31, 2023, driven by the decrease from volume of 14%, the unfavorable impact from foreign currency translation of 3% and a decrease from pricing of 3%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions.
−Removed: Reported skin care net sales decreased 20% for the nine months ended March 31, 2023, driven by the decrease from volume of 15%, the unfavorable impact from foreign currency translation of 4% and a decrease from pricing of 1%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
+Added: Reported skin care net sales decreased, primarily driven by lower net sales from Estée Lauder and La Mer, combined, of approximately $437 million.
+Added: These decreases primarily reflect a decline in our Asia travel retail business, primarily due to our and our retailers' actions to reset retailer inventory levels, and changes in government and retailer policies related to unstructured market activity, that led to lower product shipments compared to the prior-year period.
+Added: The net sales decrease in Estée Lauder was also due to incremental headwinds from a slower-than-expected recovery of overall prestige beauty in mainland China.
+Added: Partially offsetting these decreases in skin care net sales were higher net sales from The Ordinary, driven by growth in every geographic region, reflecting success of hero products, new product launches and targeted expanded consumer reach.
+Added: The skin care net sales decrease was impacted by approximately $17 million of unfavorable foreign currency translation.
+Added: Reported skin care net sales decreased 22% for the three months ended September 30, 2023, driven by the decrease from volume of 22% and the unfavorable impact from foreign currency translation of 1%.
+Added: These decreases were partially offset by an increase from pricing of 1%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: Reported makeup net sales decreased for the three months ended March 31, 2023, reflecting lower net sales from Estée Lauder and La Mer, combined, of approximately $89 million, primarily driven by lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory.
−Removed: Reported makeup net sales decreased for the nine months ended March 31, 2023, reflecting lower net sales from Estée Lauder, TOM FORD Beauty and La Mer, combined, of approximately $339 million, primarily driven by COVID-19-Related Impacts affecting Asia travel retail, and retail traffic in mainland China, during the first half of fiscal 2023.
−Removed: In addition, contributing to the decrease for the nine months ended March 31, 2023 was lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory during the three months ended March 31, 2023.
−Removed: Partially offsetting these decreases in makeup net sales for the three and nine months ended March 31, 2023 was an increase in net sales from M·A·C and Clinique, combined, of approximately $37 million and $79 million, respectively.
−Removed: The increase in net sales from M·A·C in both periods was driven by the recognition of previously deferred revenue due to changes to the BACK-To-M·A·C take back program.
−Removed: Net sales from Clinique increased in both periods, benefiting from solid performance in the lip, concealer and eye subcategories.
−Removed: Also partially offsetting the decreases in makeup net sales for the three months ended March 31, 2023, were increases in net sales from TOM FORD Beauty due to strength from products in the lip subcategory and increases in net sales from Too Faced driven by hero products, combined, of approximately $16 million.
−Removed: The makeup net sales decrease was impacted by approximately $28 million and $151 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
−Removed: Reported makeup net sales decreased 2% for the three months ended March 31, 2023, driven by the decrease from volume of 3% and the unfavorable impact from foreign currency translation of 2%.
−Removed: Partially offsetting these decreases was an increase from pricing of 3% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
−Removed: Reported makeup net sales decreased 7% for the nine months ended March 31, 2023, driven by the decrease from volume of 5% and the unfavorable impact from foreign currency translation of 4%.
−Removed: Partially offsetting these decreases was an increase from pricing of 2% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
THE ESTÉE LAUDER COMPANIES INC.
+Added: Reported makeup net sales increased, primarily driven by higher net sales from M·A·C, Too Faced, Clinique, and TOM FORD, combined, of approximately $49 million.
+Added: The increase in net sales from M·A·C was primarily driven by the success of hero products and new product launches.
+Added: The increase in net sales from Too Faced reflected the success of hero products, targeted expanded consumer reach, and new product launches.
+Added: Net sales from Clinique increased, reflecting the fiscal 2024 first quarter launch of High Impact High-Fi Full Volume Mascara.
+Added: Net sales from TOM FORD increased, benefiting from solid performance in the lip, eye and face subcategories.
+Added: Partially offsetting the increase in makeup net sales was a decrease in net sales from Estée Lauder, primarily reflecting a decline in our Asia travel retail business, primarily due to our and our retailers' actions to reset retailer inventory levels, and changes in government and retailer policies related to unstructured market activity, that led to lower product shipments compared to the prior-year period.
+Added: The makeup net sales increase was impacted by approximately $3 million of favorable foreign currency translation.
+Added: Reported makeup net sales increased 1% for the three months ended September 30, 2023, driven by an increase from pricing of 3% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
+Added: Partially offsetting this increase was the decrease from volume of 2%.
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: Reported fragrance net sales increased for the three months ended March 31, 2023, primarily reflecting higher net sales from Le Labo, TOM FORD Beauty, Estée Lauder, Kilian Paris and Editions de Parfums Frédéric Malle combined, of approximately $74 million.
−Removed: The increase in net sales from Le Labo reflected the continued success of hero product franchises and targeted expanded consumer reach.
−Removed: Net sales from Estée Lauder increased, reflecting a favorable year-over-year impact due to incremental sales of fragrance sets during the three months ended March 31, 2023, and success of the Beautiful and Estée Lauder Pleasures franchise line of products.
−Removed: The increase in net sales from TOM FORD Beauty reflected the continued success of Signature and Private Blend fragrances, expanded distribution and new product launches.
−Removed: Net sales from Kilian Paris increased, primarily driven by continued success of hero product franchises and new product launches.
−Removed: The increase in net sales from Editions de Parfums Frederic Malle reflected success of hero products and expanded distribution.
−Removed: Partially offsetting the increase in fragrance net sales for the three months ended March 31, 2023 was the impact of the license terminations related to certain of our designer fragrances effective June 30, 2022 and lower net sales from Jo Malone London, combined, of approximately $70 million.
−Removed: Net sales from Jo Malone London decreased driven by lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory.
−Removed: Reported fragrance net sales decreased for the nine months ended March 31, 2023, primarily reflecting the impact of the license terminations related to certain of our designer fragrances effective June 30, 2022 and lower net sales from Jo Malone London, combined, of approximately $233 million.
−Removed: The decrease in net sales from Jo Malone London primarily reflected COVID-19-Related Impacts affecting Asia travel retail, and retail traffic in mainland China, during the first half of fiscal 2023.
−Removed: In addition, contributing to the decrease for the nine months ended March 31, 2023 was lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory during the three months ended March 31, 2023.
−Removed: Partially offsetting the decrease in fragrance net sales for the nine months ended March 31, 2023 were higher net sales from Estée Lauder, TOM FORD Beauty, Le Labo and Clinique, combined, of approximately $201 million.
−Removed: Net sales from Estée Lauder increased, reflecting the continued success from the Beautiful franchise line of products and successful performance during holiday and key shopping moments.
−Removed: Net sales from Le Labo increased, reflecting the continued success of hero product franchises, targeted expanded consumer reach and successful performance during holiday and key shopping moments.
−Removed: The increase in net sales from TOM FORD Beauty reflected the continued success of Signature and Private Blend fragrances, expanded distribution, new product launches and successful performance during holiday and key shopping moments.
−Removed: Net sales from Clinique increased, primarily reflecting growth in the Clinique Happy franchise line of products.
−Removed: Fragrance net sales were impacted by approximately $16 million and $100 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
−Removed: Reported fragrance net sales increased 1% for the three months ended March 31, 2023, driven by the increase from volume of 9% and the increase from pricing of 5%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
−Removed: Partially offsetting these increases was the impact from the license terminations of certain of our designer fragrances of 10% and the unfavorable impact from foreign currency translation of 3%.
−Removed: Reported fragrance net sales decreased 1% for the nine months ended March 31, 2023, driven by the impact from the license terminations of certain of our designer fragrances of 10% and the unfavorable impact from foreign currency translation of 5%.
+Added: Reported fragrance net sales increased, driven by higher net sales from Le Labo, benefiting from the growth of hero products, including the successful City Exclusives collection, new product launches and targeted expanded consumer reach due to the brand's launch in mainland China during the fiscal 2023 fourth quarter.
+Added: Fragrance net sales were impacted by approximately $2 million of favorable foreign currency translation.
+Added: Reported fragrance net sales increased 5% for the three months ended September 30, 2023, driven by the increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
+Added: The impact from volume was flat period-over-period.
THE ESTÉE LAUDER COMPANIES INC.
−Removed: Partially offsetting these decreases was the increase from volume of 10% and the increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: Reported hair care net sales increased for the three and nine months ended March 31, 2023, driven by higher net sales from The Ordinary reflecting growth due to the recent launch of hair care products, partially offset by a decrease in net sales from Aveda.
−Removed: For the three months ended March 31, 2023, Aveda net sales decreased, due to a decline in the salon business and lower online net sales in North America.
−Removed: Net sales from Aveda decreased for the nine months ended March 31, 2023, primarily driven by an unfavorable impact of foreign currency translation, partially offset by the fiscal 2023 first quarter distribution expansion into mainland China, new product launches and successful performance during holiday and key shopping moments.
−Removed: The hair care net sales increase was impacted by approximately $2 million and $14 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
−Removed: Reported hair care net sales increased 1% for the three months ended March 31, 2023, driven by the increase from volume of 4%, partially offset by the unfavorable impact from foreign currency translation of 2% and the decrease from pricing of 1%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions.
−Removed: Reported hair care net sales increased 3% for the nine months ended March 31, 2023, driven by an increase from pricing of 7%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
−Removed: Partially offsetting this increase was the decrease from volume of 1% and the unfavorable impact from foreign currency translation of 3%.
+Added: Reported hair care net sales decreased, driven by lower net sales from Aveda, reflecting a decline in North America, in the salon channel and in our online business.
+Added: The hair care net sales decrease was impacted by approximately $1 million of favorable foreign currency translation.
+Added: Reported hair care net sales decreased 6% for the three months ended September 30, 2023, driven by the decrease from volume of 11%.
+Added: This decrease was partially offset by the increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix, and the favorable impact from foreign currency translation of 1%.
Geographic Regions
We strategically time our new product launches by geographic market, which may account for differences in regional sales growth.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: Reported net sales in The Americas increased for the three months ended March 31, 2023, primarily driven by an increase in the United States and Latin America, combined of approximately $38 million.
−Removed: The increase in net sales in the United States for the three months ended March 31, 2023 was led by higher net sales from The Ordinary, partially offset by the impact of the license terminations related to certain of our designer fragrances effective June 30, 2022.
−Removed: Net sales in Latin America increased, led by Mexico and Brazil, reflecting continued recovery in makeup.
−Removed: Reported net sales in The Americas decreased for the nine months ended March 31, 2023, primarily driven by a decrease in net sales in the United States of approximately $108 million, reflecting the tightening of inventory from certain of our retailers, lower shipments of replenishment orders in the fiscal 2023 second quarter and the impact of the license terminations related to certain of our designer fragrances.
−Removed: Partially offsetting the decrease in The Americas for the nine months ended March 31, 2023 was an increase in net sales in Latin America of approximately $28 million, led by Brazil and Mexico, reflecting continued recovery in makeup.
−Removed: Net sales in The Americas were impacted by approximately $1 million of unfavorable and $13 million of favorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
−Removed: Reported net sales in The Americas increased 3% for the three months ended March 31, 2023, driven by the increase from volume of 6%, partially offset by the impact from the license terminations related to certain of our designer fragrances of 2% and the unfavorable impact from foreign currency translation of 1%.
−Removed: The impact from pricing was flat period-over-period, due to the favorable impact from strategic pricing actions offset by changes in mix.
−Removed: Reported net sales in The Americas decreased 3% for the nine months ended March 31, 2023, driven by the decrease from volume of 4% and the impact from the license terminations related to certain of our designer fragrances of 3%.
−Removed: Partially offsetting this decrease was an increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
+Added: The increase in reported net sales in The Americas was driven primarily by increased net sales in the United States, Mexico and Brazil, combined, of approximately $82 million.
+Added: The increase in net sales in the United States primarily reflected strong performance by The Ordinary, as well as growth in fragrance, led by Le Labo and TOM FORD.
+Added: Also contributing to the increase in net sales in the United States was incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of $17 million.
+Added: The increase in net sales in Mexico and Brazil was driven by growth across all product categories, led by makeup, and benefited from targeted expanded consumer reach.
+Added: Net sales in The Americas were impacted by approximately $2 million of unfavorable foreign currency translation.
THE ESTÉE LAUDER COMPANIES INC.
+Added: Reported net sales in The Americas increased 8% for the three months ended September 30, 2023, driven by the increase from volume of 5%, the impact from the royalty revenue from the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of 2%, and the impact from pricing of 1%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
Europe, the Middle East & Africa
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: Reported net sales decreased in Europe, the Middle East & Africa for the three months ended March 31, 2023, primarily driven by lower net sales from our travel retail business of approximately $589 million, driven by lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory.
−Removed: Partially offsetting the decrease in net sales in Europe, the Middle East & Africa for the three months ended March 31, 2023 was higher net sales from the United Kingdom and Germany combined, of approximately $31 million.
−Removed: The increase in net sales in the United Kingdom for the three months ended March 31, 2023 reflected higher net sales primarily in skin care, led by The Ordinary.
−Removed: Net sales in Germany increased for the three months ended March 31, 2023, primarily driven by brick-and-mortar recovery.
−Removed: Reported net sales decreased in Europe, the Middle East & Africa for the nine months ended March 31, 2023, primarily driven by lower net sales from our travel retail business, Russia and the United Kingdom, combined, of approximately $1,273 million.
−Removed: The decrease in net sales from our travel retail business for the nine months ended March 31, 2023 reflects the COVID-19-Related Impacts affecting Asia travel retail, including the tightening of inventory by certain of our retailers during the first half of fiscal 2023.
−Removed: In addition, contributing to the decrease in our travel retail business for the nine months ended March 31, 2023 was lower demand in our Asia travel retail business that resulted in lower product shipments as retailers reduced inventory during the three months ended March 31, 2023.
−Removed: N et sales from Russia decreased for the nine months ended March 31, 2023, as we sold a limited selection of products to certain retailers, and completed the closure of all of our freestanding stores during the first half of fiscal 2023 .
−Removed: The decrease in net sales from the United Kingdom for the nine months ended March 31, 2023 is driven by the unfavorable impact of foreign currency translation, partially offset by brick-and-mortar recovery, reflecting an increase in traffic, compared to the prior-year period.
−Removed: Partially offsetting the decreases in net sales in Europe, the Middle East & Africa for the nine months ended March 31, 2023 were increases in net sales from Turkey and India, combined, of approximately $37 million.
−Removed: The net sales increase in Turkey was driven by growth in makeup and skin care.
−Removed: Net sales in India increased for the nine months ended March 31, 2023 led by growth in makeup.
−Removed: Net sales in Europe, the Middle East & Africa were impacted by approximately $20 million and $205 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
−Removed: Reported net sales in Europe, the Middle East & Africa decreased 26% for the three months ended March 31, 2023, driven by the decrease from volume of 21%, a decrease from pricing of 3%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions, the unfavorable impact from foreign currency translation of 1% and the impact from the license terminations related to certain of our designer fragrances of 1%.
−Removed: Reported net sales in Europe, the Middle East & Africa decreased 20% for the nine months ended March 31, 2023, driven by the decrease from volume of 15%, the unfavorable impact from foreign currency translation of 3%, a decrease from pricing of 1%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions, and the impact from the license terminations related to certain of our designer fragrances of 1%.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
+Added: Reported net sales decreased in Europe, the Middle East & Africa, primarily driven by lower net sales from our Asia travel retail business.
+Added: The decrease in net sales from our Asia travel retail business was primarily due to our and our retailers' actions to reset retailer inventory levels, and changes in government and retailer policies related to unstructured market activity, that led to lower product shipments compared to the prior-year period.
+Added: Net sales in Europe, the Middle East & Africa were impacted by approximately $29 million of favorable foreign currency translation.
+Added: Reported net sales in Europe, the Middle East & Africa decreased 26% for the three months ended September 30, 2023, driven by the decrease from volume of 26% and a decrease from pricing of 1%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions.
+Added: Partially offsetting these decreases was the favorable impact from foreign currency translation of 2%.
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: Reported net sales decreased in Asia/Pacific for the three months ended March 31, 2023, primarily driven by the unfavorable impact of foreign currency translation of 7%, resulting in a decrease in net sales in mainland China, and lower net sales in Korea, led by the Dr.Jart+ travel retail business in Korea, combined, of approximately $68 million.
−Removed: The decrease in Asia/Pacific net sales for the three months ended March 31, 2023 reflected lower demand in our Dr.Jart+ travel retail business that resulted in lower product shipments as retailers reduced inventory.
−Removed: Reported net sales decreased in Asia/Pacific for the nine months ended March 31, 2023 was primarily driven by a decrease in net sales in mainland China and Korea, led by the Dr.Jart+ travel retail business in Korea, combined, of approximately $559 million, reflecting COVID-19-Related Impacts during the first half of fiscal 2023, combined with lower demand in our Dr.Jart+ travel retail business that resulted in lower product shipments as retailers reduced inventory.
−Removed: Partially offsetting the net sales decrease in Asia/Pacific for the three and nine months ended March 31, 2023 were increases in Hong Kong, Australia and Southeast Asia, combined, of approximately $67 million, and increases in Southeast Asia, combined of $46 million, respectively, driven by the continued progression towards COVID-19 recovery.
−Removed: Net sales in Asia/Pacific were impacted by approximately $86 million and $373 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2023, respectively.
−Removed: Reported net sales in Asia/Pacific decreased 1% for the three months ended March 31, 2023, driven by the unfavorable impact from foreign currency translation of 7% and the negative impact from the license terminations related to certain of our designer fragrances of 1%.
−Removed: Partially offsetting these decreases was the increase from volume of 6% and the increase from pricing of 1%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
−Removed: Reported net sales in Asia/Pacific decreased 12% for the nine months ended March 31, 2023, driven by the unfavorable impact from foreign currency translation of 8%, the decrease from volume of 4% and the impact from the license terminations related to certain of our designer fragrances of 1%.
−Removed: Partially offsetting these decreases was an increase from pricing of 1%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
+Added: Reported net sales decreased in Asia/Pacific, primarily driven by incremental headwinds from a slower-than-expected recovery of overall prestige beauty in mainland China.
THE ESTÉE LAUDER COMPANIES INC.
−Removed: Gross margin decreased to 69.1% and 72.4% for the three and nine months ended March 31, 2023, respectively, as compared with 76.6% and 76.9% in the prior-year periods.
+Added: Partially offsetting the net sales decrease in Asia/Pacific was an increase in net sales in Hong Kong SAR, driven by the resumption of travel from mainland China to Hong Kong SAR due to the lifting of travel restrictions.
+Added: Net sales in Asia/Pacific were impacted by approximately $38 million of unfavorable foreign currency translation.
+Added: Reported net sales in Asia/Pacific decreased 6% for the three months ended September 30, 2023, driven by the decrease from volume of 11% and the unfavorable impact from foreign currency translation of 3%.
+Added: Partially offsetting these decreases was the increase from pricing of 8%, due to the favorable impact from strategic pricing actions and changes in mix.
+Added: Gross margin decreased to 69.6% for the three months ended September 30, 2023, as compared with 74.0% in the prior-year period.
Favorable (Unfavorable) Basis Points
−Removed: March 31, 2023
−Removed: Three Months Ended Nine Months Ended
+Added: September 30, 2023
+Added: Three Months Ended
Mix of business (85)
2 unchanged sentences
Foreign exchange transactions (90)
−Removed: Total (750) (450)
−Removed: The decrease in gross margin for the three and nine months ended March 31, 2023 reflected unfavorable impacts from our mix of business, higher obsolescence charges and higher manufacturing costs and other.
−Removed: The unfavorable impact from our mix of business in both periods is primarily driven by brand mix, reflecting the lower gross margin of The Ordinary products, and category mix, driven by the decrease in skin care net sales, as well as higher costs associated with promotional items.
−Removed: The unfavorable impact from obsolescence charges is primarily due to excess inventory on hand and increased levels of inventory destruction driven by lower demand that resulted in lower product shipments.
−Removed: In both periods, manufacturing costs and other increased, driven by higher costs within our inventory deferrals recognized during the current-year periods for freight and material commodities.
+Added: The decrease in gross margin reflected unfavorable impacts from higher manufacturing costs and other, driven primarily by the under absorption of manufacturing variances due to lower production volumes in the second half of fiscal 2023.
+Added: The unfavorable impact from obsolescence charges is primarily due to excess inventory on hand driven by lower than expected demand primarily within our travel retail business and mainland China.
+Added: The unfavorable impact from our mix of business is primarily driven by higher costs associated with promotional items.
+Added: THE ESTÉE LAUDER COMPANIES INC.
OPERATING EXPENSES
−Removed: Operating expenses as a percentage of net sales was 61.2% and 60.0% for the three and nine months ended March 31, 2023, respectively, as compared with 59.2% and 55.1% in the prior-year periods.
+Added: Operating expenses as a percentage of net sales was 66.8% for the three months ended September 30, 2023 as compared with 57.2% in the prior-year period.
Favorable (Unfavorable) Basis Points
−Removed: March 31, 2023
−Removed: Three Months Ended Nine Months Ended
+Added: September 30, 2023
+Added: Three Months Ended
General and administrative expenses (300)
3 unchanged sentences
Store operating costs (100)
−Removed: Shipping (40) (70)
Foreign exchange transactions 20
1 unchanged sentence
Charges associated with restructuring and other activities 10
−Removed: Other intangible asset impairments 510 (20)
Changes in fair value of acquisition-related stock options (20)
−Removed: Total (200) (490)
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: The unfavorable change in operating expense margin for the three months ended March 31, 2023, reflected unfavorable impacts relating to advertising, merchandising, sampling and product development, general and administrative expenses and selling expenses primarily driven by the decrease in net sales, as well as the unfavorable year-over-year impact for the change in fair value of acquisition-related stock options of $61 million relating to the fiscal 2021 increase in our investment in DECIEM, partially offset by the fiscal 2022 third quarter impact of other intangible asset impairments of $216 million.
−Removed: The unfavorable change in operating expense margin for the nine months ended March 31,2023 reflected unfavorable impacts relating to advertising, merchandising, sampling and product development, selling expenses, shipping expenses, and general and administrative expenses, driven by the decrease in net sales, as well as an unfavorable impact relating to store operating costs due to the brick-and-mortar recovery.
+Added: The unfavorable change in operating expense margin was driven by the decrease in net sales and also reflected unfavorable impacts relating to advertising, merchandising, sampling and product development, general and administrative expenses, selling expenses and store operating costs, as we continue to invest in our business, while also decreasing certain expenses through disciplined expense management.
+Added: The increase in general and administrative expense, including stock-based compensation, reflected higher employee-related costs, primarily driven by the unfavorable year-over-year comparisons in the recognition of expenses and adjustments related to our performance share units, restricted stock units and incentive compensation, as well as annual increases to salaries and wages.
+Added: Also contributing to the increase in general and administrative expenses were expenses incurred related to the July 2023 cybersecurity incident.
OPERATING RESULTS
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
4 unchanged sentences
Non-GAAP Financial Measure (1) :
−Removed: % Change in operating income from the prior-year period adjusting for the impact of charges associated with restructuring and other activities, other intangible asset impairments and the change in fair value of acquisition-related stock options (66) % (47) %
+Added: % Change in operating income from the prior-year period adjusting for the impact of charges associated with restructuring and other activities and the change in fair value of acquisition-related stock options
(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 44 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.
GAAP measures.
−Removed: The decrease in reported operating margin for the three and nine months ended March 31, 2023 was primarily driven by a decrease in net sales, decrease in gross margin and the decrease in operating expense margin, discussed above.
−Removed: Charges associated with restructuring and other activities are not allocated to our product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business.
−Removed: Accordingly, the following discussions of Operating income by Product Categories and Geographic Regions exclude the impact of charges associated with restructuring and other activities.
+Added: The decrease in reported operating margin was primarily driven by a decrease in net sales, decrease in gross margin and the increase in operating expense margin as discussed above.
THE ESTÉE LAUDER COMPANIES INC.
+Added: Charges associated with restructuring and other activities are not allocated to our product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business.
+Added: Accordingly, the following discussions of Operating income by Product Categories and Geographic Regions exclude the impact of charges associated with restructuring and other activities for the three months ended September 30, 2023 and 2022 of $2 million and $6 million, respectively.
Product Categories
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
3 unchanged sentences
Non-GAAP Financial Measure (1) :
−Removed: % Change in operating income from the prior-year period adjusting for the impact of other intangible asset impairments and the change in fair value of acquisition-related stock options (69) % (50) %
+Added: % Change in operating income from the prior-year period adjusting for the change in fair value of acquisition-related stock options
(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 44 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.
GAAP measures.
−Removed: Reported skin care operating income decreased for the three months ended March 31, 2023 reflecting lower operating results from Estée Lauder, La Mer and Clinique, combined, of approximately $529 million and decreased for the nine months ended March 31, 2023, reflecting lower operating results from Estée Lauder, La Mer, Clinique and Origins, combined, of approximately $1,321 million, primarily driven by decreases in net sales.
−Removed: Skin care operating income also decreased for the three and nine months ended March 31, 2023, reflecting the unfavorable year-over-year impact for the change in fair value of acquisition-related stock options of $59 million and $54 million, respectively, relating to the fiscal 2021 increase in our investment in DECIEM.
−Removed: Also contributing to the decrease in operating income from Clinique for the three months ended March 31, 2023 was higher cost of sales due to higher costs for promotional items.
−Removed: The decrease in operating results from Estée Lauder for the nine months ended March 31, 2023 also reflected a higher cost of sales, due, in part to an increase related to promotional items.
−Removed: Partially offsetting the decrease in operating results from La Mer for the nine months ended March 31, 2023 was disciplined advertising and promotional expense management.
−Removed: Partially offsetting the decrease in operating results from Origins for the nine months ended March 31, 2023 was disciplined advertising and promotional expense management, lower cost of sales due to the net sales decrease and lower selling expenses due to the closure of freestanding stores during fiscal 2023.
−Removed: Partially offsetting the decrease in skin care operating income for the three and nine months ended March 31, 2023 was the favorable year-over-year impact of other intangible asset impairments related to Dr.Jart+ of $205 million and $105 million, respectively.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
+Added: Reported skin care operating income decreased, reflecting lower operating results from Estée Lauder and La Mer, combined, of approximately $400 million, primarily driven by decreases in net sales.
+Added: Also contributing to the decrease in skin care operating income was higher obsolescence charges primarily due to excess inventory on hand driven by lower than expected demand primarily within our travel retail business and mainland China, as well as an increase in stock-based compensation expense and higher employee-related costs, as discussed above.
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
2 unchanged sentences
% Change from prior-year period (100+)%
−Removed: Non-GAAP Financial Measure (1) :
−Removed: % Change in operating income from the prior-year period adjusting for the impact of other intangible asset impairments and the change in fair value of acquisition-related stock options (100+)% (69) %
−Removed: (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.
−Removed: GAAP measures.
−Removed: Reported makeup operating income decreased for the three and nine months ended March 31, 2023, reflecting lower results from Estée Lauder and La Mer, combined, of approximately $54 million and $213 million, respectively, primarily driven by a decrease in net sales.
−Removed: For the three and nine months ended March 31, 2023, the decrease in operating income from Estée Lauder was partially offset by disciplined advertising and promotional expense management.
−Removed: For the three and nine months ended March 31, 2023, the decrease in operating income from La Mer was partially offset by a decrease in cost of sales due to lower net sales compared to the prior-year period.
−Removed: Also contributing to the decrease in makeup operating income for the nine months ended March 31, 2023 was the fiscal 2023 second quarter other intangible asset impairments related to Too Faced and Smashbox of $107 million, combined, and lower results from TOM FORD Beauty, driven by a decrease in net sales.
−Removed: Partially offsetting the decreases in makeup operating income for the three months ended March 31, 2023 were higher results from Clinique and TOM FORD Beauty, combined, of approximately $16 million, driven by increases in net sales, partially offset by higher cost of sales, due, in part to an increase in promotional items.
−Removed: Partially offsetting the decrease in makeup operating income for the nine months ended March 31, 2023 were higher results from M·A·C, primarily driven by the recognition of previously deferred revenue due to changes to the BACK-To-M·A·C take back program and disciplined advertising and promotional expense management, partially offset by an increase in cost of sales.
+Added: Reported makeup operating income decreased, reflecting lower results from Estée Lauder, primarily driven by a decrease in net sales, an increase in selling expenses due to higher staffing costs compared to the prior-year period, and an increase in advertising and promotional activities to support strategic investments to drive growth.
+Added: Also contributing to the decrease in makeup operating income was higher obsolescence charges primarily due to excess inventory on hand driven by lower than expected demand primarily within our travel retail business and mainland China, as well as higher employee-related costs and an increase in stock-based compensation expense, as discussed above.
+Added: Partially offsetting the decrease in makeup operating income were improved results from TOM FORD, primarily driven by an increase in net sales, and the decrease in royalty expense compared to the prior-year period due to the fiscal 2023 fourth quarter acquisition of the TOM FORD brand.
+Added: THE ESTÉE LAUDER COMPANIES INC.
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
2 unchanged sentences
% Change from prior-year period (19) %
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: Reported fragrance operating income decreased for the three and nine months ended March 31, 2023, reflecting lower results from Jo Malone London, driven by a decrease in net sales and higher cost of sales, due, in part to an increase in promotional items, as well and the impact of license terminations related to certain of our designer fragrances effective June 30, 2022, combined, of approximately $34 million and $127 million, respectively.
−Removed: Partially offsetting these decreases in both periods were higher results from Estée Lauder and Le Labo, combined, of approximately $34 million and $62 million, respectively, driven by increases in net sales.
−Removed: Contributing to the increase in operating income from Estée Lauder for the three months ended March 31, 2023 was disciplined advertising and promotional expense management.
−Removed: Contributing to the decrease in operating income from Jo Malone London for the nine months ended March 31, 2023 was higher selling expenses due to increased staffing costs compared to the prior-year period.
−Removed: Also contributing to the decrease in fragrance operating income for the three months ended March 31, 2023 was lower results from TOM FORD Beauty, driven by higher advertising and promotional activities to support hero products and new product launches, and higher cost of sales due to the increase in net sales and selling expenses to support recovery, partially offset by an increase in net sales.
+Added: Reported fragrance operating income decreased, reflecting lower results from Jo Malone London and TOM FORD, combined, of approximately $19 million.
+Added: Operating income from Jo Malone London decreased, driven by an increase in advertising and promotional investment to support both new and existing products, an increase in general and administrative expenses, and an increase in selling expenses driven by increased staffing costs compared to the prior-year period, partially offset by an increase in net sales.
+Added: Operating income from TOM FORD decreased, reflecting higher cost of sales, due in part to an increase in net sales and promotional items, an increase in selling expenses driven by increased staffing costs compared to the prior-year period and higher advertising and promotional activities to support the fiscal 2024 first quarter launch of Café Rose, partially offset by an increase in net sales and the decrease in royalty expense as a result of the fiscal 2023 fourth quarter acquisition of TOM FORD brand.
+Added: Also contributing to the decrease in fragrance operating income were higher employee-related costs and an increase in stock-based compensation expense, as discussed above.
+Added: Partially offsetting the decrease in fragrance operating income were higher results from Le Labo, primarily driven by an increase in net sales, partially offset by higher advertising and promotional activities to support hero products and new product launches, higher selling expenses due to increased staffing costs compared to the prior-year period and higher store operations costs to support targeted expanded consumer reach.
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
2 unchanged sentences
% Change from prior-year period (83) %
−Removed: Reported hair care operating results decreased for the three and nine months ended March 31, 2023, primarily driven by lower results from Aveda and Bumble and bumble, combined, of approximately $20 million and $54 million, respectively.
−Removed: In both periods, the lower results from Aveda were primarily driven by a decrease in net sales, higher cost of sales and higher advertising and promotional activities to support the brand's expansion into mainland China during fiscal 2023.
−Removed: Also contributing to the higher advertising and promotional activities for Aveda for the nine months ended March 31, 2023 were higher advertising and promotional activities to support holiday and key shopping moments.
−Removed: Operating results from Bumble and bumble decreased for the three and nine months ended March 31, 2023, primarily driven by higher cost of sales.
+Added: Reported hair care operating results decreased, primarily driven by lower results from Aveda and Bumble and bumble, combined, of approximately $7 million, driven by a decrease in net sales.
+Added: Partially offsetting the lower results from Aveda was disciplined advertising and promotional expense management.
+Added: Also contributing to the decrease in fragrance operating income were higher employee-related costs and an increase in stock-based compensation expense, as discussed above.
+Added: THE ESTÉE LAUDER COMPANIES INC.
Geographic Regions
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
3 unchanged sentences
Non-GAAP Financial Measure (1) :
−Removed: % Change in operating income from the prior-year period adjusting for the impact of other intangible asset impairments and change in fair value of acquisition-related stock options (100+)% (95) %
+Added: % Change in operating income from the prior-year period adjusting for the change in fair value of acquisition-related stock options
(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 44 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.
GAAP measures.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: Reported operating results decreased in The Americas for the three months ended March 31, 2023, primarily reflecting lower operating results from North America of approximately $501 million.
−Removed: The decrease in operating results in North America is driven by the United States, primarily due to lower intercompany royalty income of $338 million compared to the prior-year-period, driven by a decrease in net sales in our travel retail business and higher cost of sales, partially offset by an increase in net sales.
−Removed: Also contributing to the decrease in operating income in North America was the unfavorable year-over-year impact for the change in fair value of acquisition-related stock options of $61 million relating to the fiscal 2021 increase in our investment in DECIEM.
−Removed: Reported operating results decreased in The Americas for the nine months ended March 31, 2023, primarily reflecting lower operating results from North America of approximately $1,103 million.
−Removed: The decrease in operating results in North America is driven by the United States, primarily due to lower intercompany royalty income of $547 million compared to the prior-year period, driven by a decrease in net sales in our travel retail business, a decrease in net sales, and the unfavorable year-over-year impact of other intangible asset impairments of $96 million.
−Removed: Also contributing to the decrease in operating income in North America was the unfavorable year-over-year impact for the change in fair value of acquisition-related stock options of $56 million relating to the fiscal 2021 increase in our investment in DECIEM.
+Added: Reported operating results decreased in The Americas, primarily reflecting lower operating results from North America of approximately $300 million.
+Added: The decrease in operating results in North America was primarily driven by the United States, reflecting lower intercompany royalty income of $185 million compared to the prior-year period, driven by a decrease in net sales in our travel retail business, higher cost of sales due to higher obsolescence charges primarily due to excess inventory on hand driven by lower demand, higher general and administrative expenses driven by higher stock-based compensation expenses, as discussed above, partially offset by an increase in net sales.
Europe, the Middle East & Africa
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
2 unchanged sentences
% Change from prior-year period (57) %
−Removed: Reported operating income decreased in Europe, the Middle East & Africa for the three and nine months ended March 31, 2023, primarily driven by lower results from our travel retail business of approximately $130 million and $514 million, respectively.
−Removed: For the three and nine months ended March 31, 2023, operating income decreased in our travel retail business reflecting the decrease in net sales, partially offset by the decrease in intercompany royalty expense to The Americas of $338 million and $547 million, respectively, due to the net sales decrease.
−Removed: Partially offsetting the operating income decrease in Europe, the Middle East & Africa for the nine months ended March 31, 2023 was an increase in operating income in the United Kingdom, led by The Ordinary, driven by an increase in net sales.
+Added: Reported operating income decreased in Europe, the Middle East & Africa, primarily driven by lower results from our travel retail business, primarily due to the decrease in net sales, partially offset by the associated decrease in intercompany royalty expense to The Americas of $185 million.
THE ESTÉE LAUDER COMPANIES INC.
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions) 2023 2022
2 unchanged sentences
% Change from prior-year period (34) %
−Removed: Non-GAAP Financial Measure (1) :
−Removed: % Change in operating income from the prior-year period adjusting for the impact of other intangible asset impairments (16) % (16) %
−Removed: (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 59 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.
−Removed: GAAP measures.
−Removed: Reported operating income increased in Asia/Pacific for the three months ended March 31, 2023, primarily reflecting the favorable year-over-year impact of other intangible asset impairments of $205 million, partially offset by lower operating results in Korea.
−Removed: Operating results in Korea decreased for the three months ended March 31, 2023, led by Dr.Jart+, driven by a decrease in net sales.
−Removed: Reported operating income decreased in Asia/Pacific for the nine months ended March 31, 2023, primarily reflecting decreases in operating results in mainland China, Korea and Japan, combined, of approximately $174 million, partially offset by the favorable year-over-year impact of other intangible asset impairments of $105 million and higher results from Southeast Asia due to increases in net sales, combined, of approximately $19 million.
−Removed: The lower operating results in mainland China for the nine months ended March 31, 2023 was driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management and lower selling costs compared to the prior-year period.
−Removed: Operating results in Korea decreased for the nine months ended March 31, 2023, led by Dr.Jart+, due to decreases in net sales, partially offset by lower selling expenses and cost of sales.
−Removed: For the nine months ended March 31, 2023, operating results in Japan decreased, driven by the decrease in net sales.
+Added: Reported operating income decreased in Asia/Pacific, primarily driven by lower operating results from mainland China and Korea, combined, of approximately $85 million.
+Added: The lower operating results in mainland China were driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management.
+Added: Operating income in Korea decreased, led by Dr.Jart+, due to decreases in net sales and an increase in cost of sales, due in part to an increase in promotional items, partially offset by lower selling expenses.
+Added: Partially offsetting the operating income decrease were higher results from Hong Kong SAR, primarily driven by an increase in net sales, partially offset by a higher cost of sales, due in part to an increase in promotional items.
INTEREST AND INVESTMENT INCOME
Three Months Ended
−Removed: March 31 Nine Months Ended
(In millions) 2023 2022
1 unchanged sentence
Interest income and investment income, net $ 41 $ 15
−Removed: Interest expense increased in both periods, reflecting a higher debt balance due to the issuance of commercial paper during the fiscal 2023 third quarter and higher interest rates compared to the prior-year period.
+Added: Interest expense increased, primarily reflecting a higher debt balance, due in part to the financing of our acquisition of the TOM FORD brand, including the issuance of commercial paper primarily in the second half of fiscal 2023, and the issuance of Senior Notes in May 2023.
+Added: Also contributing to the increase in interest expense was higher interest rates compared to the prior-year period.
Interest income and investment income, net increased, primarily reflecting higher interest rates compared to the prior-year period.
5 unchanged sentences
In addition, changes in judgment from the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of change.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
Three Months Ended
−Removed: March 31 Nine Months Ended
−Removed: 2023 2022 2023 2022
Effective rate for income taxes 21.7 % 22.6 %
Basis-point change from the prior-year period (90)
−Removed: For the three months ended March 31, 2023, the increase in the effective tax rate was primarily attributable to a higher effective tax rate on the Company's foreign operations, due to the Company's geographical mix of earnings for fiscal 2023.
−Removed: For the nine months ended March 31, 2023, the increase in the effective tax rate was primarily attributable to a higher effective tax rate on the Company's foreign operations, due to the Company's geographical mix of earnings for fiscal 2023, and a decrease in excess tax benefits associated with stock-based compensation arrangements.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: For the three months ended September 30, 2023, the decrease in the effective tax rate of 90 basis points was primarily attributable to a decrease in income tax reserve adjustments and an increase in the impact of excess tax benefits associated with stock-based compensation arrangements, offset by a higher effective tax rate on our foreign operations, due to our geographical mix of earnings for fiscal 2024.
+Added: The lower amount of earnings before income taxes increased the impact of these tax adjustments in the first quarter of fiscal 2024.
NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.
Three Months Ended
−Removed: March 31 Nine Months Ended
($ in millions, except per share data) 2023 2022
Net earnings attributable to The Estée Lauder Companies Inc.
−Removed: $ 156 $ 558 $ 1,039 $ 2,338
$ Change from prior-year period (458)
3 unchanged sentences
Non-GAAP Financial Measure (1) :
−Removed: % Change in diluted net earnings per common share from the prior-year period adjusting for the impact of charges associated with restructuring and other activities, other intangible asset impairments and the change in fair value of acquisition-related stock options (75) % (50) %
+Added: % Change in diluted net earnings per common share from the prior-year period adjusting for the impact of charges associated with restructuring and other activities and the change in fair value of acquisition-related stock options
(1) See “ Reconciliations of Non-GAAP Financial Measures” below for reconciliations between non-GAAP financial measures and the most directly comparable U.S.
9 unchanged sentences
the change in fair value of acquisition-related stock options;
−Removed: other intangible asset impairments;
and the effects of foreign currency translation.
−Removed: The following tables provide reconciliations between these non-GAAP financial measures and the most directly comparable U.S.
−Removed: GAAP measures.
THE ESTÉE LAUDER COMPANIES INC.
+Added: The following table provides reconciliations between these non-GAAP financial measures and the most directly comparable U.S.
+Added: GAAP measures.
($ in millions, except per share data) Three Months Ended
−Removed: March 31 Variance % Change
−Removed: constant currency
−Removed: Net sales, as reported $ 3,751 $ 4,245 $ (494) (12) % (9) %
−Removed: Returns associated with restructuring and other activities 4 1 3
−Removed: Net sales, as adjusted $ 3,755 $ 4,246 $ (491) (12) % (9) %
−Removed: Operating income, as reported $ 297 $ 738 $ (441) (60) % (59) %
−Removed: Charges associated with restructuring and other activities 18 23 (5)
−Removed: Other intangible asset impairments — 216 (216)
−Removed: Change in fair value of acquisition-related stock options 1 (60) 61
−Removed: Operating income, as adjusted $ 316 $ 917 $ (601) (66) % (65) %
−Removed: Diluted net earnings per common share, as reported $ .43 $ 1.53 $ (1.10) (72) % (71) %
−Removed: Charges associated with restructuring and other activities .04 .05 (.01)
−Removed: Other intangible asset impairments — .45 (.45)
−Removed: Change in fair value of acquisition-related stock options (less portion attributable to redeemable noncontrolling interest) — (.13) .13
−Removed: Diluted net earnings per common share, as adjusted $ .47 $ 1.90 $ (1.43) (75) % (74) %
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: ($ in millions, except per share data) Nine Months Ended
−Removed: March 31 Variance % Change
+Added: Variance % Change
constant currency
4 unchanged sentences
Charges associated with restructuring and other activities 2 6 (4)
−Removed: Other intangible asset impairments 207 216 (9)
Change in fair value of acquisition-related stock options 8 1 7
2 unchanged sentences
Charges associated with restructuring and other activities — .02 (.02)
−Removed: Other intangible asset impairments .44 .45 (.01)
Change in fair value of acquisition-related stock options (less portion attributable to redeemable noncontrolling interest) .02 — .02
2 unchanged sentences
THE ESTÉE LAUDER COMPANIES INC.
−Removed: The following tables reconcile the change in net sales by product category and geographic region, as reported, to the change in net sales excluding the effects of foreign currency translation:
+Added: The following table reconciles the change in net sales by product category and geographic region, as reported, to the change in net sales excluding the effects of foreign currency translation:
As Reported Impact of foreign
21 unchanged sentences
THE ESTÉE LAUDER COMPANIES INC.
−Removed: As Reported Impact of foreign
−Removed: currency translation Variance,
−Removed: in constant currency % Change,
−Removed: as reported % Change,
−Removed: in constant currency
−Removed: Nine Months Ended
−Removed: ($ in millions) 2023 2022 Variance
−Removed: By Product Category:
−Removed: Skin Care $ 6,408 $ 8,003 $ (1,595) $ 298 $ (1,297) (20) % (16) %
−Removed: Makeup 3,408 3,674 (266) 151 (115) (7) (3)
−Removed: Fragrance 1,967 1,987 (20) 100 80 (1) 4
−Removed: Hair Care 489 475 14 14 28 3 6
−Removed: Other 39 40 (1) 2 1 (3) 3
−Removed: 12,311 14,179 (1,868) 565 (1,303) (13) (9)
−Removed: Returns associated with restructuring and other activities (10) (3) (7) (1) (8)
−Removed: Total $ 12,301 $ 14,176 $ (1,875) $ 564 $ (1,311) (13) % (9) %
−Removed: The Americas $ 3,447 $ 3,547 $ (100) $ (13) $ (113) (3) % (3) %
−Removed: Europe, the Middle East & Africa 4,972 6,201 (1,229) 205 (1,024) (20) (17)
−Removed: Asia/Pacific 3,892 4,431 (539) 373 (166) (12) (4)
−Removed: 12,311 14,179 (1,868) 565 (1,303) (13) (9)
−Removed: Returns associated with restructuring and other activities (10) (3) (7) (1) (8)
−Removed: Total $ 12,301 $ 14,176 $ (1,875) $ 564 $ (1,311) (13) % (9) %
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: The following tables reconcile the change in operating results by product category and geographic region, as reported, to the change in operating income excluding the impact of other intangible asset impairments and the change in fair value of acquisition-related stock options:
+Added: The following table reconciles the change in operating results by product category and geographic region, as reported, to the change in operating income excluding the change in fair value of acquisition-related stock options:
As Reported Add:
−Removed: Other intangible asset impairments Add:
Change in fair value of acquisition-related stock options Variance, as adjusted % Change, as reported % Change, as adjusted
16 unchanged sentences
Total $ 98 $ 661 $ (563)
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: As Reported Add:
−Removed: Other intangible asset impairments Add:
−Removed: Change in fair value of acquisition-related stock options Variance, as adjusted % Change, as reported % Change, as adjusted
−Removed: Nine Months Ended
−Removed: ($ in millions) 2023 2022 Variance
−Removed: By Product Category:
−Removed: Skin Care $ 1,207 $ 2,466 $ (1,259) $ (116) $ 54 $ (1,321) (51) % (50) %
−Removed: Makeup (36) 228 (264) 107 2 (155) (100+) (69)
−Removed: Fragrance 399 446 (47) — — (47) (11) (11)
−Removed: Hair Care (31) (8) (23) — — (23) (100+) (100+)
−Removed: Other 8 3 5 — — 5 100+ 100+
−Removed: 1,547 3,135 (1,588) $ (9) $ 56 $ (1,541) (51) % (47) %
−Removed: Charges associated with restructuring and other activities (33) (44) 11
−Removed: Total $ 1,514 $ 3,091 $ (1,577)
−Removed: The Americas $ (53) $ 1,044 $ (1,097) $ 96 $ 56 $ (945) (100+)% (95) %
−Removed: Europe, the Middle East & Africa 919 1,366 (447) — — (447) (33) (33)
−Removed: Asia/Pacific 681 725 (44) (105) — (149) (6) (16)
−Removed: 1,547 3,135 (1,588) $ (9) $ 56 $ (1,541) (51) % (47) %
−Removed: Charges associated with restructuring and other activities (33) (44) 11
−Removed: Total $ 1,514 $ 3,091 $ (1,577)
FINANCIAL CONDITION
1 unchanged sentence
Our principal sources of funds historically have been cash flows from operations, borrowings pursuant to our commercial paper program, borrowings from the issuance of long-term debt and committed and uncommitted credit lines provided by banks and other lenders in the United States and abroad.
−Removed: At March 31, 2023, we had cash and cash equivalents of $5,531 million compared with $3,957 million at June 30, 2022.
+Added: At September 30, 2023, we had cash and cash equivalents of $3,090 million compared with $4,029 million at June 30, 2023.
Our cash and cash equivalents are maintained at a number of financial institutions.
1 unchanged sentence
Based on past performance and current expectations, we believe that cash on hand, cash generated from operations, available credit lines and access to credit markets will be adequate to support seasonal working capital needs, currently planned business operations, information technology enhancements, capital expenditures, acquisitions, dividends, stock repurchases, restructuring initiatives, commitments and other contractual obligations on both a near-term and long-term basis.
+Added: THE ESTÉE LAUDER COMPANIES INC.
The Tax Cuts and Jobs Act (“TCJA”) resulted in the Transition Tax on unrepatriated earnings of our foreign subsidiaries and changed the tax law in ways that present opportunities to repatriate cash without additional U.S.
federal income tax.
−Removed: As a result, we changed our indefinite reinvestment assertion related to certain foreign earnings, and we continue to analyze the indefinite reinvestment assertion on our remaining applicable foreign earnings.
−Removed: We do not believe that continuing to reinvest our foreign earnings impairs our ability to meet our domestic debt or working capital obligations.
+Added: During the fiscal 2023 fourth quarter, we changed our assertion regarding our ability and intent to indefinitely reinvest undistributed earnings from certain foreign subsidiaries.
+Added: We continue to analyze the indefinite reinvestment assertion on our remaining applicable foreign earnings.
+Added: We do not believe that continuing to reinvest these remaining applicable foreign earnings impairs our ability to meet our domestic debt or working capital obligations.
If these reinvested earnings were repatriated into the United States as dividends, we would be subject to state income taxes and applicable foreign taxes in certain jurisdictions.
−Removed: The effects of inflation have not been significant to our overall operating results in recent years;
−Removed: however, we have experienced inflationary pressures during the current year.
−Removed: Generally, we have been able to introduce new products at higher prices, increase prices and implement other operating efficiencies to offset some of these cost increases.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: On April 28, 2023, we completed the acquisition of the TOM FORD brand that we announced in November 2022.
−Removed: The amount paid by us at closing was approximately $2,250 million.
−Removed: This amount was funded by cash on hand and proceeds from the issuance of commercial paper, and approximately $250 million received at closing from Marcolin S.p.A.
−Removed: (a continuing TOM FORD licensee).
−Removed: An aggregate amount of $300 million in deferred payments, at 5% interest per annum, to the sellers becomes due from us beginning in July 2025.
−Removed: The completion of the acquisition of the brand resulted in the elimination of the existing license royalty payments on our TOM FORD Beauty business.
+Added: Inflation impacted our operating results in the fiscal 2024 first quarter and we expect it to continue.
+Added: Generally, we have plans to introduce new products at higher prices, increase prices and implement other operating efficiencies which we expect to offset some of these cost increases.
Credit Ratings
3 unchanged sentences
A credit rating is not a recommendation to buy, sell, or hold securities, is subject to revision or withdrawal at any time by the assigning rating organization, and should be evaluated independently of any other rating.
−Removed: As of April 26, 2023, our long-term debt is rated A+ with a stable outlook by Standard & Poor’s and A1 with a stable outlook by Moody’s.
−Removed: At March 31, 2023, our outstanding borrowings were as follows:
+Added: As of October 25, 2023, our long-term debt is rated A+ with a negative outlook by Standard & Poor’s and A1 with a negative outlook by Moody’s.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: At September 30, 2023, our outstanding borrowings were as follows:
($ in millions) Long-term
Debt Total Debt
−Removed: 3.125% Senior Notes, due December 1, 2049 (“2049 Senior Notes”) (1), (12)
+Added: 5.150% Senior Notes, due May 15, 2053 ("2053 Senior Notes") (1), (15)
$ 590 $ — $ 590
+Added: 3.125% Senior Notes, due December 1, 2049 (“2049 Senior Notes”) (2), (15)
4.150% Senior Notes, due March 15, 2047 (“2047 Senior Notes”) (3), (15)
2 unchanged sentences
6.000% Senior Notes, due May 15, 2037 (“2037 Senior Notes”) (6), (15)
−Removed: 5.75% Senior Notes, due October 15, 2033 (“2033 Senior Notes”) (6)
+Added: 5.75% Senior Notes, due October 15, 2033 (“October 2033 Senior Notes”) (7), (15)
+Added: 4.650% Senior Notes, due May 15, 2033 ("May 2033 Senior Notes") (8), (15)
1.950% Senior Notes, due March 15, 2031 ("2031 Senior Notes") (9), (15)
1 unchanged sentence
2.375% Senior Notes, due December 1, 2029 (“2029 Senior Notes”) (11), (15)
+Added: 4.375% Senior Notes, due May 15, 2028 ("2028 Senior Notes") (12), (15)
3.150% Senior Notes, due March 15, 2027 (“2027 Senior Notes”) (13), (15)
1 unchanged sentence
Commercial paper (16)
−Removed: — 2,233 2,233
Other long-term borrowings 31 — 31
3 unchanged sentences
(2) Consists of $650 million principal, unamortized debt discount of $7 million and debt issuance costs of $7 million.
+Added: (3) Consists of $500 million principal, unamortized debt discount of $1 million and debt issuance costs of $5 million.
(4) Consists of $450 million principal, net unamortized debt premium of $8 million and debt issuance costs of $4 million.
2 unchanged sentences
(7) Consists of $200 million principal, unamortized debt discount of $1 million and debt issuance costs of $1 million.
+Added: (8) Consists of $700 million principal, unamortized debt discount of $1 million and debt issuance costs of $4 million.
(9) Consists of $600 million, principal, unamortized debt discount of $3 million, debt issuance costs of $3 million and a $53 million loss to reflect the fair value of interest rate swaps.
1 unchanged sentence
(11) Consists of $650 million principal, unamortized debt discount of $4 million and debt issuance costs of $3 million.
−Removed: (10) Consists of $500 million principal and debt issuance costs of $1 million.
(12) Consists of $700 million principal, unamortized debt discount of $1 million and debt issuance costs of $3 million.
−Removed: (12) The Senior Notes contain certain customary incurrence–based covenants, including limitations on indebtedness secured by liens.
+Added: (13) Consists of $500 million principal and debt issuance costs of $1 million.
(14) Consists of $500 million principal and unamortized debt discount of $1 million.
−Removed: Total debt as a percent of total capitalization was 56% and 49% at March 31, 2023 and June 30, 2022, respectively.
+Added: (15) The Senior Notes contain certain customary covenants, including limitations on indebtedness secured by liens.
+Added: (16) Consists of $1,000 million principal and unamortized debt discount of $3 million.
+Added: Total debt as a percent of total capitalization was 60% and 59% at September 30, 2023 and June 30, 2023, respectively.
THE ESTÉE LAUDER COMPANIES INC.
−Removed: In January 2023, we entered into a $2,000 million senior unsecured revolving credit facility that expires on January 2, 2024 (the “364-Day Facility”) for liquidity support for our commercial paper program and general corporate purposes, of which the entire amount is currently undrawn and available.
−Removed: Interest rates on borrowings under the 364-Day Facility will be based on prevailing market interest rates in accordance with the agreement.
−Removed: In January 2023, in connection with the 364-Day Facility, we increased our commercial paper program under which we may issue commercial paper in the United States from $2,500 million to $4,500 million.
−Removed: As of April 26, 2023, we had $3,410 million outstanding under our commercial paper program.
−Removed: Nine Months Ended
+Added: Three Months Ended
(In millions) 2023 2022
−Removed: Net cash flows provided by operating activities $ 1,017 $ 1,969
+Added: Net cash flows used for operating activities
+Added: $ (408) $ (650)
Net cash flows used for investing activities $ (295) $ (14)
−Removed: Net cash flows provided by (used for) financing activities $ 1,090 $ (2,516)
−Removed: The change in net cash flows provided by operating activities primarily reflected lower earnings before tax, excluding non-cash items, partially offset by the favorable change in working capital, reflecting a favorable change in accounts receivable and inventory and promotional merchandise, partially offset by lower other accrued and noncurrent liabilities, which includes the settlement of net investment hedges and lower accounts payable due to timing of payments.
−Removed: The change in net cash flows used for investing activities primarily reflected a favorable impact from the settlement of net investment hedges, which is offset by the unfavorable change in other accrued liabilities as discussed above.
−Removed: The change in net cash flows provided by (used for) financing activities primarily reflected an increase in current debt due to the increase in proceeds from commercial paper and lower treasury stock repurchases compared to the prior-year period, partially offset by an increase in repayments of long-term debt.
−Removed: For a summary of quarterly cash dividends declared per share on our Class A and Class B Common Stock during the nine months ended March 31, 2023, see Notes to Consolidated Financial Statements, Note 11 – Equity and Redeemable Noncontrolling Interest .
+Added: Net cash flows used for financing activities
+Added: $ (219) $ (304)
+Added: The change in net cash flows used for operating activities was primarily driven by a favorable change in working capital, reflecting a favorable change in inventory and promotional merchandise, other accrued and noncurrent liabilities which includes the settlement of net investment hedges in the prior-year period, accounts payable due to timing of payments, and accounts receivable, partially offset by lower earnings before tax, excluding non-cash items.
+Added: The change in net cash flows used for investing activities reflected an increase in capital expenditures, primarily driven by the investments related to our new manufacturing facility in Japan and an unfavorable impact from the settlement of net investment hedges in the prior-year period, which is offset by the favorable change in other accrued liabilities as discussed above.
+Added: The change in net cash flows used for financing activities primarily reflected a favorable impact in repayments of debt due to the repayment of the outstanding principal balance of our $250 million, 2.35% senior notes that matured during the fiscal 2023 first quarter and lower treasury stock repurchases compared to the prior-year period, partially offset by a decrease in proceeds from the issuance of short-term commercial paper compared to the prior-year period.
+Added: For a summary of quarterly cash dividends declared per share on our Class A and Class B Common Stock during the three months ended September 30, 2023, see Notes to Consolidated Financial Statements, Note 11 – Equity and Redeemable Noncontrolling Interest .
Pension and Post-retirement Plan Funding
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Commitments, Contractual Obligations and Contingencies
−Removed: There have been no other significant changes to our commitments and contractual obligations as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2022, except as disclosed in Notes to Consolidated Financial Statements, Note 8 – Commitments and Contingencies.
+Added: There have been no other significant changes to our commitments and contractual obligations as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2023.
For a discussion of contingencies, see Notes to Consolidated Financial Statements, Note 8 – Commitments and Contingencies .
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For a discussion of credit risk, see Notes to Consolidated Financial Statements, Note 4 – Derivative Financial Instruments (Credit Risk) .
−Removed: THE ESTÉE LAUDER COMPANIES INC.
We address certain financial exposures through a controlled program of market risk management that includes the use of foreign currency forward contracts to reduce the effects of fluctuating foreign currency exchange rates and to mitigate the change in fair value of specific assets and liabilities on the balance sheet.
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A hypothetical 10% weakening of the U.S.
−Removed: dollar against the foreign exchange rates for the currencies in our portfolio would have resulted in a net decrease in the fair value of our portfolio of approximately $301 million and $259 million as of March 31, 2023 and June 30, 2022, respectively.
+Added: dollar against the foreign exchange rates for the currencies in our portfolio would have resulted in a net decrease in the fair value of our portfolio of approximately $248 million and $265 million as of September 30, 2023 and June 30, 2023, respectively.
This potential change does not consider our underlying foreign currency exposures.
+Added: THE ESTÉE LAUDER COMPANIES INC.
We also enter into cross-currency swap contracts to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt.
A hypothetical 10% weakening of the U.S.
−Removed: dollar against the foreign exchange rates for the currencies in our cross-currency swap contracts would have resulted in a net decrease in the fair value of our cross-currency swap contracts of approximately $49 million as of March 31, 2023.
+Added: dollar against the foreign exchange rates for the currencies in our cross-currency swap contracts would have resulted in a net decrease in the fair value of our cross-currency swap contracts of approximately $49 million as of September 30, 2023 and June 30, 2023, respectively.
In addition, we enter into interest rate derivatives to manage the effects of interest rate movements on our aggregate liability portfolio, including future debt issuances.
−Removed: Based on a hypothetical 100 basis point increase in interest rates, the estimated fair value of our interest rate derivatives would decrease by approximately $11 million and $41 million as of March 31, 2023 and June 30, 2022, respectively.
+Added: Based on a hypothetical 100 basis point increase in interest rates, the estimated fair value of our interest rate derivatives would decrease by approximately $52 million and $55 million as of September 30, 2023 and June 30, 2023, respectively.
Our sensitivity analysis represents an estimate of reasonably possible net losses that would be recognized on our portfolio of derivative financial instruments assuming hypothetical movements in future market rates and is not necessarily indicative of actual results, which may or may not occur.
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These estimates and assumptions can be subjective and complex, and consequently, actual results could differ from those estimates.
−Removed: Our most critical accounting policies relate to goodwill, other intangible assets and long-lived assets - impairment assessment and income taxes.
−Removed: Since June 30, 2022, there have been no significant changes to the assumptions and estimates related to our critical accounting policies, except as disclosed in Item 2.
−Removed: Management’s Discussion and Analysis of Financial Condition and Results of Operations on pages 39-40.
+Added: Our most critical accounting policies relate to goodwill and other indefinite-lived intangible assets - impairment assessment, income taxes and asset acquisition.
+Added: Since June 30, 2023, there have been no significant changes to the assumptions and estimates related to our critical accounting policies.
RECENTLY ISSUED ACCOUNTING STANDARDS
For a discussion regarding the impact of accounting standards that were recently issued but not yet effective, on the Company’s consolidated financial statements, see Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies .
−Removed: THE ESTÉE LAUDER COMPANIES INC.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
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(1) increased competitive activity from companies in the skin care, makeup, fragrance and hair care businesses;
+Added: THE ESTÉE LAUDER COMPANIES INC.
(2) our ability to develop, produce and market new products on which future operating results may depend and to successfully address challenges in our business;
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(12) shipment delays, commodity pricing, depletion of inventory and increased production costs resulting from disruptions of operations at any of the facilities that manufacture our products or at our distribution or inventory centers, including disruptions that may be caused by the implementation of information technology initiatives, or by restructurings;
−Removed: THE ESTÉE LAUDER COMPANIES INC.
(13) real estate rates and availability, which may affect our ability to increase or maintain the number of retail locations at which we sell our products and the costs associated with our other facilities;
(14) changes in product mix to products which are less profitable;
−Removed: (15) our ability to acquire, develop or implement new information and distribution technologies and initiatives on a timely basis and within our cost estimates and our ability to maintain continuous operations of such systems and the security of data and other information that may be stored in such systems or other systems or media;
+Added: (15) our ability to acquire, develop or implement new information technology, including operational technology and websites, on a timely basis and within our cost estimates;
+Added: to maintain continuous operations of our new and existing information technology;
+Added: and to secure the data and other information that may be stored in such technologies or other systems or media;
(16) our ability to capitalize on opportunities for improved efficiency, such as publicly-announced strategies and restructuring and cost-savings initiatives, and to integrate acquired businesses and realize value therefrom;
(17) consequences attributable to local or international conflicts around the world, as well as from any terrorist action, retaliation and the threat of further action or retaliation;
+Added: THE ESTÉE LAUDER COMPANIES INC.
(18) the timing and impact of acquisitions, investments and divestitures;
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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.