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 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.
+Added: The following table is a comparative summary of operating results for the three and six months ended December 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.
Products and services that do not meet our definition of skin care, makeup, fragrance and hair care have been included in the “other” category.
+Added: During the fiscal 2024 second quarter, we identified and corrected misclassifications of net sales and operating income between certain of our product categories in our Management’s Discussion and Analysis of Financial Condition and Results of Operations for the three and six months ended December 31, 2023 and 2022.
+Added: See Note 13 – Segment Data and Related Information for additional details.
Three Months Ended
+Added: December 31 Six Months Ended
(In millions) 2023 2022 2023 2022
4 unchanged sentences
Hair Care 173 183 321 340
+Added: Other 30 14 62 27
+Added: 4,280 4,621 7,798 8,556
Returns associated with restructuring and other activities (1) (1) (1) (6)
4 unchanged sentences
Asia/Pacific 1,449 1,570 2,507 2,700
+Added: 4,280 4,621 7,798 8,556
Returns associated with restructuring and other activities (1) (1) (1) (6)
6 unchanged sentences
Hair Care (3) 4 (25) (8)
+Added: Other 9 (1) 27 (2)
+Added: 582 565 682 1,232
Charges associated with restructuring and other activities (8) (9) (10) (15)
4 unchanged sentences
Asia/Pacific 258 241 396 449
+Added: 582 565 682 1,232
Charges associated with restructuring and other activities (8) (9) (10) (15)
5 unchanged sentences
Three Months Ended
+Added: December 31 Six Months Ended
+Added: 2023 2022 2023 2022
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
4 unchanged sentences
Restructuring and other charges 0.2 0.2 0.1 0.1
+Added: Impairment of other intangible assets — 4.5 — 2.4
Total operating expenses 59.6 61.6 62.9 59.5
7 unchanged sentences
Net earnings attributable to redeemable noncontrolling interest
+Added: (0.3) (0.1) (0.2) —
Net earnings attributable to The Estée Lauder Companies Inc.
+Added: 7.3 % 8.5 % 4.4 % 10.3 %
Not adjusted for differences caused by rounding
29 unchanged sentences
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: • Our skin care net sales declined 22%, primarily driven by lower net sales from Estée Lauder and La Mer.
−Removed: 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.
−Removed: 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: • Our skin care net sales declined 10% for the three months ended December 31, 2023, primarily driven by lower net sales from Estée Lauder and Clinique.
+Added: The decrease in net sales from Estée Lauder primarily reflected the impacts from the ongoing softness in overall prestige beauty in mainland China.
+Added: Also contributing to the decrease in net sales from Estée Lauder and primarily driving the decrease in net sales from Clinique, was a decline in our Asia travel retail business, primarily due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels, including the response to changes in government and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers.
Partially offsetting the decrease in skin care net sales were higher net sales from The Ordinary, reflecting growth in every geographic region.
−Removed: • 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.
−Removed: 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.
−Removed: • 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.
−Removed: • 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 makeup net sales decreased 8% for the three months ended December 31, 2023, primarily driven by lower net sales from M·A·C and Estée Lauder.
+Added: Net sales from M·A·C decreased, primarily driven by the phasing out of select products in preparation for new product launches and the unfavorable year-over-year impact resulting from the recognition of previously deferred revenue due to changes to the BACK 2 M·A·C take back program during the fiscal 2023 second quarter.
+Added: Net sales from Estée Lauder decreased, primarily due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels and lower conversion of travelers to consumers.
+Added: Partially offsetting the makeup net sales decrease were higher net sales from Clinique, primarily driven by new product launches and continued success of hero products.
+Added: • Our fragrance net sales were flat for the three months ended December 31, 2023, primarily driven by higher net sales from Le Labo and Jo Malone London.
+Added: Net sales from Le Labo increased, reflecting 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: The increase in net sales from Jo Malone London was primarily driven by new product launches.
+Added: Partially offsetting the increase in fragrance net sales was lower net sales from Estée Lauder and the unfavorable year-over-year impact of residual net sales in fiscal 2023 related to the transition of licenses due to the license terminations related to certain of our designer fragrances effective June 30, 2022.
+Added: The decrease in net sales from Estée Lauder for the three months ended December 31, 2023 was driven by an unfavorable impact due to timing of holiday shipments compared to the prior-year period.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: • Our hair care net sales declined 5% for the three months ended December 31, 2023, primarily attributable to lower net sales from Aveda, reflecting a decline in North America, in the salon channel and in our online business.
Our global distribution capability and operations allow us to focus on targeted expanded consumer reach wherever consumer demographics and trends are attractive.
3 unchanged sentences
We continuously strengthen our presence in large, image-building core markets, while broadening our presence in emerging markets.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: • Net sales in The Americas increased 8%, primarily driven by higher net sales in the United States, Mexico and Brazil.
−Removed: 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.
−Removed: The region also benefited from incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand.
−Removed: Net sales in Mexico and Brazil increased in all product categories, led by makeup, and benefited from targeted expanded consumer reach.
−Removed: • Net sales in Europe, the Middle East & Africa decreased 26%, primarily driven by our Asia travel retail business.
−Removed: 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.
−Removed: • 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.
−Removed: 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.
−Removed: 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.
+Added: • Net sales in The Americas remained virtually flat for the three months ended December 31, 2023, primarily driven by higher net sales in Latin America, led by Brazil and Mexico, primarily driven by growth in makeup and benefiting from the success of holiday and key shopping moments.
+Added: These increases were partially offset by lower net sales in the United States, primarily driven by the unfavorable year-over-year impact resulting from the recognition of previously deferred revenue due to changes to the BACK 2 M·A·C take back program during the fiscal 2023 second quarter, partially offset by incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of $15 million.
+Added: • Net sales in Europe, the Middle East & Africa decreased 13% for the three months ended December 31, 2023, primarily driven by our Asia travel retail business.
+Added: The decline in our Asia travel retail business was primarily due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels, including the response to changes in government and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers.
+Added: • Net sales in Asia/Pacific decreased 8% for the three months ended December 31, 2023, primarily reflecting the impacts from the ongoing softness in overall prestige beauty in mainland China, partially offset by higher net sales in Hong Kong SAR, primarily 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 the ongoing softness in overall prestige beauty in mainland China, as well as further business disruption in Israel and other parts of the Middle East.
+Added: 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.
+Added: These challenges are collectively 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.
+Added: We have also experienced, and are expecting to continue to experience, under absorption of manufacturing variances due to lower production volumes.
+Added: As a result of continuing to operate at a reduced capacity, we expect to recognize the impact of reduced manufacturing volumes on our standard cost within cost of sales in the fiscal 2024 third quarter.
+Added: Additionally, we are continually evaluating our inventory position and actions we may take to reduce the balance, which could result in increased charges in future periods.
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.
1 unchanged sentence
We plan to build upon and leverage our history of outstanding creativity and innovation, high quality products and services, and engaging communications while investing for long-term sustainable growth.
+Added: THE ESTÉE LAUDER COMPANIES INC.
We continue to monitor the effects of the global macro environment, including the risk of recession;
13 unchanged sentences
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.
−Removed: 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.
−Removed: 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.
−Removed: Our investigation into the identification of the impacted systems and the unauthorized access is complete.
−Removed: We determined that the unauthorized third party obtained some data from our systems.
−Removed: 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).
−Removed: We took steps, and continue to take steps, to enhance the security of our systems, and are continuing to coordinate with law enforcement authorities.
−Removed: 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.
+Added: Our investigation into the cybersecurity incident is complete.
+Added: We determined that the unauthorized third party obtained some data from our systems, including consumer and employee data.
+Added: We continue to take steps to enhance the security of our systems and coordinate with law enforcement authorities.
+Added: We provided notification to governmental authorities in certain jurisdictions and also notified, and will continue to notify, affected individuals where required by law.
+Added: The incident did not have a material impact on net sales and was $.01 and $.07 dilutive to earnings per common share for the three and six months ended December 31, 2023, respectively, and based on this information is not expected to have a material impact on net sales and is expected to be dilutive approximately $.07 to earnings per common share for the fiscal 2024 full year.
+Added: Restructuring Program Component of the Profit Recovery Plan
+Added: As previously communicated on November 1, 2023, we launched a Profit Recovery Plan to help progressively rebuild our profit margins in fiscal years 2025 and 2026.
+Added: The Profit Recovery Plan is focused on rebuilding stronger, more sustainable profitability, supporting sales growth acceleration and increasing speed and agility.
+Added: The plan is designed to improve gross margin, lower the cost base and reduce overhead expenses, while increasing investments in key consumer-facing activities.
+Added: Upon completion of this plan, we expect to have improved our gross margin and expense base to drive greater operating leverage for the future.
+Added: As a component of the Profit Recovery Plan, on February 5, 2024, we announced a two-year restructuring program.
+Added: The restructuring program’s main focus includes the reorganization and rightsizing of certain areas of our business as well as simplification and acceleration of processes.
+Added: We committed to this course of action on February 1, 2024.
+Added: In connection with the restructuring program, at this time we estimate a net reduction in the range of approximately 1,800 to 3,000 positions globally, which is about 3-5% of our positions including temporary and part-time employees as of June 30, 2023.
+Added: This reduction takes into account the elimination of some positions as well as retraining and redeployment of certain employees in select areas.
+Added: We plan to substantially complete specific initiatives under the restructuring program through fiscal 2026.
+Added: We expect that the restructuring program will result in restructuring and other charges totaling between $500 million and $700 million, before taxes, consisting of employee-related costs, contract terminations, asset write-offs and other costs associated with implementing these initiatives.
+Added: Once fully implemented, we expect the restructuring program to yield annual target gross benefits of between $350 million and $500 million, before taxes, a portion of which is expected to be reinvested in consumer-facing activities.
+Added: The net benefits are in addition to the between $800 million and $1,000 million previously communicated as part of the Profit Recovery Plan.
THE ESTÉE LAUDER COMPANIES INC.
−Removed: Based on the information available to date, we believe the incident is contained.
−Removed: 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 $.08 to earnings per share for the fiscal 2024 full year.
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The total net sales decrease was impacted by approximately $11 million of unfavorable foreign currency translation.
+Added: Reported net sales decreased during the three and six months ended December 31, 2023, primarily driven by declines in our Asia travel retail business, primarily due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels, including the response to changes in government and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers, as well as the impacts from the ongoing softness in overall prestige beauty in mainland China.
+Added: The total net sales decrease was impacted by approximately $8 million of favorable and $3 million of unfavorable foreign currency translation for the three and six months ended December 31, 2023, respectively.
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 months ended September 30, 2022 of $5 million.
−Removed: 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.
+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 and six months ended December 31, 2023 of $1 million, and for the three and six months ended December 31, 2022 of $1 million and $6 million, respectively.
+Added: Reported net sales decreased 7% for the three months ended December 31, 2023, driven by the decrease from volume of 12%, partially offset by an increase from pricing of 4% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
+Added: Reported net sales decreased 9% for the six months ended December 31, 2023, driven by the decrease from volume of 13%, partially offset by an increase from pricing of 3% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
THE ESTÉE LAUDER COMPANIES INC.
1 unchanged sentence
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: Reported skin care net sales decreased, primarily driven by lower net sales from Estée Lauder and La Mer, combined, of approximately $437 million.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: The skin care net sales decrease was impacted by approximately $17 million of unfavorable foreign currency translation.
−Removed: 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%.
−Removed: 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.
+Added: Reported skin care net sales decreased for the three months ended December 31, 2023, reflecting lower net sales from Estée Lauder and Clinique, combined, of approximately $261 million.
+Added: The decrease in net sales from Estée Lauder primarily reflected the impacts from the ongoing softness in overall prestige beauty in mainland China.
+Added: Also contributing to the decrease in net sales from Estée Lauder and primarily driving the decrease in net sales from Clinique, was a decline in our Asia travel retail business.
+Added: This decline was primarily due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels, including the response to changes in government and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers.
+Added: Also contributing to the decline in net sales from Clinique was the impacts from the ongoing softness in overall prestige beauty in mainland China.
+Added: Reported skin care net sales decreased for the six months ended December 31, 2023, reflecting lower net sales from Estée Lauder, La Mer, and Clinique, combined, of approximately $726 million, primarily driven by the declines in our Asia travel retail business, primarily due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels, including the response to changes in government and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers, as well as declines in mainland China, reflecting the impacts from the ongoing softness in overall prestige beauty.
+Added: Partially offsetting these decreases in skin care net sales for the three and six months ended December 31, 2023 were higher net sales from The Ordinary, driven by growth in every geographic region, reflecting continued success of hero products, new product launches and successful performance during holiday and key shopping moments.
+Added: The skin care net sales decrease was impacted by approximately $1 million and $18 million of unfavorable foreign currency translation for the three and six months ended December 31, 2023, respectively.
+Added: Reported skin care net sales decreased 10% for the three months ended December 31, 2023, driven by the decrease from volume of 16%, partially offset by an increase from pricing of 6%, due to the favorable impact from strategic pricing actions and changes in mix.
+Added: Reported skin care net sales decreased 16% for the six months ended December 31, 2023, driven by the decrease from volume of 19%, partially offset by an increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
+Added: THE ESTÉE LAUDER COMPANIES INC.
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: 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.
−Removed: The increase in net sales from M·A·C was primarily driven by the success of hero products and new product launches.
−Removed: The increase in net sales from Too Faced reflected the success of hero products, targeted expanded consumer reach, and new product launches.
−Removed: Net sales from Clinique increased, reflecting the fiscal 2024 first quarter launch of High Impact High-Fi Full Volume Mascara.
−Removed: Net sales from TOM FORD increased, benefiting from solid performance in the lip, eye and face subcategories.
−Removed: 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.
−Removed: The makeup net sales increase was impacted by approximately $3 million of favorable foreign currency translation.
−Removed: 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.
−Removed: Partially offsetting this increase was the decrease from volume of 2%.
+Added: Reported makeup net sales decreased for the three and six months ended December 31, 2023, reflecting lower net sales from M·A·C and Estée Lauder, combined, of approximately $101 million and $123 million, respectively.
+Added: In both periods, net sales from M·A·C decreased, primarily due to the phasing out of select products in preparation for new product launches and the unfavorable year-over-year impact resulting from the recognition of previously deferred revenue due to changes to the BACK 2 M·A·C take back program during the fiscal 2023 second quarter.
+Added: Also contributing to the decrease in net sales from M·A·C and primarily driving the decrease in net sales from Estée Lauder for the three and six months ended December 31, 2023 was a decline in our Asia travel retail business.
+Added: This decline was primarily due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels and lower conversion of travelers to consumers.
+Added: The decrease in net sales from M·A·C and Estée Lauder were partially offset in both periods by the success of new product launches.
+Added: Partially offsetting the makeup net sales decrease for the three and six months ended December 31, 2023 were higher net sales from Clinique, primarily driven by continued success of hero products and new product launches.
+Added: The makeup net sales decrease was impacted by approximately $6 million and $10 million of favorable foreign currency translation for the three and six months ended December 31, 2023, respectively.
+Added: Reported makeup net sales decreased 8% for the three months ended December 31, 2023, driven by a decrease from volume of 11%, partially offset by the increase from pricing of 2% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
+Added: Reported makeup net sales decreased 4% for the six months ended December 31, 2023, driven by a decrease from volume of 7%, partially offset by the increase from pricing of 3% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: 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.
−Removed: Fragrance net sales were impacted by approximately $2 million of favorable foreign currency translation.
−Removed: 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.
−Removed: The impact from volume was flat period-over-period.
THE ESTÉE LAUDER COMPANIES INC.
+Added: Reported fragrance net sales were flat for the three months ended December 31, 2023, primarily reflecting higher net sales from Le Labo and Jo Malone London, combined, of approximately $29 million, and increased for the six months ended December 31, 2023, primarily reflecting higher net sales from Le Labo, Jo Malone London and TOM FORD, combined, of approximately $70 million.
+Added: Net sales from Le Labo increased in both periods, reflecting growth of hero products, including the successful City Exclusives collection, new product launches, successful performance during holiday and key shopping moments and targeted expanded consumer reach due to the brand's launch in mainland China during the fiscal 2023 fourth quarter.
+Added: The increase in net sales from Jo Malone London for the three and six months ended December 31, 2023, was driven by new product launches and successful performance during holiday and key shopping moments.
+Added: The increase in net sales from TOM FORD for the six months ended December 31, 2023, reflected the continued success of Signature and Private Blend fragrances and expanded distribution.
+Added: Partially offsetting the increases in fragrance net sales for the three and six months ended December 31, 2023 were lower net sales from Estée Lauder and the unfavorable year-over-year impact of residual net sales in fiscal 2023 related to the transition of licenses due to the license terminations related to certain of our designer fragrances effective June 30, 2022, combined, of approximately $36 million and $44 million, respectively.
+Added: The decrease in net sales from Estée Lauder for the three months ended December 31, 2023 was driven by an unfavorable impact due to timing of holiday shipments compared to the prior-year period.
+Added: The decrease in net sales from Estée Lauder for the six months ended December 31, 2023 was primarily driven by business disruptions in Israel and other parts of the Middle East.
+Added: Fragrance net sales were impacted by approximately $2 million and $3 million of favorable foreign currency translation for the three and six months ended December 31, 2023, respectively.
+Added: Reported fragrance net sales were flat for the three months ended December 31, 2023, driven by the increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
+Added: This increase was partially offset by the decrease from volume of 4%.
+Added: Reported fragrance net sales increase 3% for the six months ended December 31, 2023, driven by the increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
+Added: This increase was partially offset by the decrease from volume of 1%.
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: 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.
−Removed: The hair care net sales decrease was impacted by approximately $1 million of favorable foreign currency translation.
−Removed: Reported hair care net sales decreased 6% for the three months ended September 30, 2023, driven by the decrease from volume of 11%.
−Removed: 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%.
+Added: Reported hair care net sales decreased for the three and six months ended December 31, 2023, driven by lower net sales from Aveda, primarily 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 and $2 million of favorable foreign currency translation for the three and six months ended December 31, 2023, respectively.
+Added: Reported hair care net sales decreased 5% for the three months ended December 31, 2023, driven by the decrease from volume of 12%.
+Added: This decrease was partially offset by the increase from pricing of 6%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix, and the favorable impact of foreign currency translation of 1%.
+Added: Reported hair care net sales decreased 6% for the six months ended December 31, 2023, driven by the decrease from volume of 11%.
+Added: This decrease was partially offset by the increase from pricing of 5%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix, and the favorable impact of foreign currency translation of 1%.
+Added: THE ESTÉE LAUDER COMPANIES INC.
Geographic Regions
1 unchanged sentence
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: Net sales in The Americas were impacted by approximately $2 million of unfavorable foreign currency translation.
+Added: The increase in reported net sales in The Americas for the three months ended December 31, 2023 was primarily driven by an increase in net sales in Latin America, led by Brazil and Mexico, of approximately $19 million.
+Added: The increase in net sales in Brazil and Mexico was led by growth in makeup and benefited from the success of holiday and key shopping moments.
+Added: Partially offsetting the increase in net sales in The Americas for the three months ended December 31, 2023 was a decrease in net sales in the United States, primarily driven by the unfavorable year-over-year impact resulting from the recognition of previously deferred revenue due to changes to the BACK 2 M·A·C take back program during the fiscal 2023 second quarter, partially offset by incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of $15 million.
+Added: The increase in reported net sales in The Americas for the six months ended December 31, 2023 was driven primarily by increased net sales in the United States, Brazil and Mexico, combined, of approximately $80 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 Jo Malone London, TOM FORD, and Le Labo, and incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of $32 million.
+Added: Partially offsetting the increase in net sales in the United States was the unfavorable year-over-year impact resulting from the recognition of previously deferred revenue due to changes to the BACK 2 M·A·C take back program during the fiscal 2023 second quarter.
+Added: The increase in net sales in Brazil and Mexico was led by growth in makeup and benefited from the success of holiday and key shopping moments.
+Added: Net sales in The Americas were impacted by approximately $2 million of unfavorable foreign currency translation for the six months ended December 31, 2023.
+Added: Reported net sales in The Americas increased 1% for the three months ended December 31, 2023, driven by the impact from the royalty revenue from the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of 1% and the increase from volume of 1%.
+Added: These increases were partially offset by a decrease from pricing of 1%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions.
+Added: Reported net sales in The Americas increased 4% for the six months ended December 31, 2023, driven by the increase from volume of 3% and the impact from the royalty revenue from the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of 1%.
+Added: The impact from pricing was virtually flat, due to the unfavorable impact from changes in mix, offset by strategic pricing actions.
THE ESTÉE LAUDER COMPANIES INC.
−Removed: Reported net sales in The Americas increased 8% for the three months ended September 30, 2023, driven by the increase from volume of 5%, the impact from the royalty revenue from the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of 2%, and the impact from pricing of 1%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.
Europe, the Middle East & Africa
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: Reported net sales decreased in Europe, the Middle East & Africa, primarily driven by lower net sales from our Asia travel retail business.
−Removed: 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.
−Removed: Net sales in Europe, the Middle East & Africa were impacted by approximately $29 million of favorable foreign currency translation.
−Removed: 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.
−Removed: Partially offsetting these decreases was the favorable impact from foreign currency translation of 2%.
+Added: Reported net sales decreased in Europe, the Middle East & Africa for the three and six months ended December 31, 2023, 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 the ongoing actions that we and our retailers have taken to reset retailer inventory levels, including the changes in government and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers.
+Added: While these efforts continue, as a result of actions taken to date our retailer inventory levels have decreased.
+Added: Partially offsetting the decrease in Europe, the Middle East & Africa for the six months ended December 31, 2023 were higher net sales in the United Kingdom, primarily driven by strong performance by The Ordinary.
+Added: Net sales in Europe, the Middle East & Africa were impacted by approximately $23 million and $52 million of favorable foreign currency translation for the three and six months ended December 31, 2023, respectively.
+Added: Reported net sales in Europe, the Middle East & Africa decreased 13% for the three months ended December 31, 2023, driven by the decrease from volume of 21%.
+Added: This decrease was partially offset by the increase from pricing of 7%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix, and the favorable impact from foreign currency translation of 1%.
+Added: Reported net sales in Europe, the Middle East & Africa decreased 19% for the six months ended December 31, 2023, driven by the decrease from volume of 23%.
+Added: This decrease was partially offset by the increase from pricing of 3%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix, and the favorable impact from foreign currency translation of 1%.
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 2023 2022
6 unchanged sentences
GAAP measures.
−Removed: 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: 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.
−Removed: Net sales in Asia/Pacific were impacted by approximately $38 million of unfavorable foreign currency translation.
−Removed: 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: Reported net sales decreased in Asia/Pacific for the three and six months ended December 31, 2023, primarily reflecting the impacts from the ongoing softness in overall prestige beauty in mainland China.
+Added: Partially offsetting the net sales decrease in Asia/Pacific for the three and six months ended December 31, 2023 was an increase in net sales in Hong Kong SAR, primarily 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 $15 million and $53 million of unfavorable foreign currency translation for the three and six months ended December 31, 2023, respectively.
+Added: Reported net sales in Asia/Pacific decreased 8% for the three months ended December 31, 2023, driven by the decrease from volume of 13% and the unfavorable impact from foreign currency translation of 1%.
Partially offsetting these decreases was the increase from pricing of 6%, due to the favorable impact from strategic pricing actions and changes in mix.
−Removed: Gross margin decreased to 69.6% for the three months ended September 30, 2023, as compared with 74.0% in the prior-year period.
+Added: Reported net sales in Asia/Pacific decreased 7% for the six months ended December 31, 2023, driven by the decrease from volume of 12% and the unfavorable impact from foreign currency translation of 2%.
+Added: Partially offsetting these decreases was the increase from pricing of 7%, due to the favorable impact from strategic pricing actions and changes in mix.
+Added: Gross margin decreased to 73.0% and 71.5% for the three and six months ended December 31, 2023, respectively, as compared with 73.6% and 73.8% in the prior-year periods.
Favorable (Unfavorable) Basis Points
−Removed: September 30, 2023
−Removed: Three Months Ended
+Added: December 31, 2023
+Added: Three Months Ended Six Months Ended
Mix of business 65 (10)
2 unchanged sentences
Foreign exchange transactions (80) (85)
−Removed: 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.
−Removed: 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.
−Removed: The unfavorable impact from our mix of business is primarily driven by higher costs associated with promotional items.
+Added: Total (60) (230)
+Added: The decrease in gross margin for the three months ended December 31, 2023 reflected higher obsolescence charges, primarily due to excess inventory on hand, both driven by the lower than expected demand primarily within our travel retail business and mainland China, and the 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, partially offset by the favorable impact from a change in our manufacturing variance deferral period as well as favorability in freight and transportation costs.
+Added: Partially offsetting the decrease in gross margin for the three months ended December 31, 2023 was a favorable impact from our mix of business, primarily driven by brand mix, reflecting the favorable impact from the shift of manufacturing production volume from third-party manufacturers to our own facilities for The Ordinary, and decreased sales of our lower margin skin care product sets compared to the prior-year period.
+Added: These favorable impacts within our mix of business were partially offset by higher costs associated with promotional items.
+Added: The decrease in gross margin for the six months ended December 31, 2023 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, partially offset by the favorable impact from a change in deferral period as well as favorability in freight and transportation costs, and 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.
THE ESTÉE LAUDER COMPANIES INC.
OPERATING EXPENSES
−Removed: 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.
+Added: Operating expenses as a percentage of net sales was 59.6% and 62.9% for the three and six months ended December 31, 2023, respectively, as compared with 61.6% and 59.5% in the prior-year periods.
Favorable (Unfavorable) Basis Points
−Removed: September 30, 2023
−Removed: Three Months Ended
+Added: December 31, 2023
+Added: Three Months Ended Six Months Ended
General and administrative expenses — (100)
3 unchanged sentences
Store operating costs (80) (90)
+Added: Shipping (10) (10)
Foreign exchange transactions — 10
Subtotal (260) (570)
−Removed: Charges associated with restructuring and other activities 10
+Added: Other intangible asset impairments 450 240
Changes in fair value of acquisition-related stock options 10 (10)
−Removed: 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.
−Removed: 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.
−Removed: Also contributing to the increase in general and administrative expenses were expenses incurred related to the July 2023 cybersecurity incident.
+Added: Total 200 (340)
+Added: The favorable change in operating expense margin for the three months ended December 31, 2023 was partially offset by the impact of the decrease in net sales, as well as higher selling costs and store operating costs as we continue to invest in our business including through increased demonstration expenses and targeted expanded consumer reach, while also decreasing certain expenses through disciplined expense management.
+Added: The unfavorable change in operating expense margin for the six months ended December 31, 2023 was driven by the impact of the decrease in net sales and higher general and administrative expenses, as well as higher selling expenses and store operating costs as we continue to invest in our business including through increased demonstration expenses and targeted expanded consumer reach, 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, as well as annual increases to salaries and wages, partially offset by lower incentive compensation.
+Added: THE ESTÉE LAUDER COMPANIES INC.
OPERATING RESULTS
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 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 and the change in fair value of acquisition-related stock options
+Added: % 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 (25) % (52) %
(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 56 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.
GAAP measures.
−Removed: 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.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
+Added: The increase in reported operating margin for the three months ended December 31, 2023 was primarily driven by a decrease in operating expense margin, partially offset by a decrease in net sales and a decrease in gross margin, discussed above.
+Added: The decrease in reported operating margin for the six months ended December 31, 2023 was primarily driven by a decrease in net sales, decrease in gross margin and the increase in operating expense margin, discussed above.
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 for the three months ended September 30, 2023 and 2022 of $2 million and $6 million, respectively.
+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 and six months ended December 31, 2023 of $8 million and $10 million, and for the three and six months ended December 31, 2022 of $9 million and $15 million, respectively.
+Added: THE ESTÉE LAUDER COMPANIES INC.
Product Categories
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 2023 2022
3 unchanged sentences
Non-GAAP Financial Measure (1) :
−Removed: % Change in operating income from the prior-year period adjusting for the change in fair value of acquisition-related stock options
+Added: % 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 (22) % (57) %
(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 56 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.
GAAP measures.
−Removed: 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.
−Removed: 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.
+Added: Reported skin care operating income decreased for the three months ended December 31, 2023, reflecting lower operating results from Estée Lauder and, to a lesser extent, Clinique, combined, of approximately $146 million, primarily driven by decreases in net sales, partially offset by disciplined advertising and promotional expense management.
+Added: Reported skin care operating income decreased for the six months ended December 31, 2023, reflecting lower operating results from Estée Lauder and La Mer, combined, of approximately $523 million.
+Added: The decrease in operating results from Estée Lauder was primarily driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management.
+Added: Operating results from La Mer decreased, primarily driven by the decrease in net sales and investments in advertising and promotional activities.
+Added: The decrease in skin care operating income for the three and six months ended December 31, 2023 also included 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, and for the six months ended December 31, 2023, higher employee-related costs, including an increase in stock-based compensation expense, partially offset by lower incentive compensation, as discussed above.
+Added: Partially offsetting the decrease in skin care operating income for the three and six months ended December 31, 2023 was the favorable year-over-year impact of the fiscal 2023 second quarter other intangible asset impairment related to Dr.Jart+ of $100 million, as well as higher results from The Ordinary, primarily driven by an increase in net sales.
+Added: Also contributing to the increase in operating results from The Ordinary for the three months ended December 31, 2023 was a decrease in cost of sales primarily driven by the favorable impact from the shift of manufacturing production volume from third-party manufacturers to our own facilities for The Ordinary, partially offset by higher shipping costs to support key shopping moments.
+Added: The increase in operating results from The Ordinary for the six months ended December 31, 2023 also reflected an increase in advertising and promotional activities and general and administrative expenses as the brand continues to invest and support the growth of the business.
+Added: THE ESTÉE LAUDER COMPANIES INC.
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 2023 2022
2 unchanged sentences
% Change from prior-year period 100+% (100+)%
−Removed: 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.
−Removed: 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.
−Removed: 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: Non-GAAP Financial Measure (1) :
+Added: % Change in operating income from the prior-year period adjusting for the impact of other intangible asset impairments
+Added: (64) % (100+)%
+Added: (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 56 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.
+Added: GAAP measures.
+Added: Reported makeup operating income increased for the three months ended December 31, 2023 primarily reflecting the favorable year-over-year impact of other intangible asset impairments related to Too Faced and Smashbox of $107 million, and higher results from Clinique, primarily driven by an increase in net sales.
+Added: Partially offsetting the increase in makeup operating income for the three months ended December 31, 2023 and primarily driving the decrease in makeup operating income for the six months ended December 31, 2023 were lower results from M·A·C and Estée Lauder, combined, of approximately $54 million and $86 million, respectively.
+Added: In both periods, the decrease in operating income from M·A·C was primarily driven by a decrease in net sales, partially offset by lower advertising and promotional expenses, due to timing of advertising activities and disciplined expense management.
+Added: Operating income from Estée Lauder decreased for the three and six months ended December 31, 2023, primarily driven by a decrease in net sales, partially offset by lower advertising and promotional expenses due to disciplined expense management.
+Added: The increase in makeup operating income for the three months ended December 31, 2023 was also partially offset by 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.
+Added: The decrease in makeup operating income for the six months ended December 31, 2023 also reflected 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, including an increase in stock-based compensation expense, partially offset by lower incentive compensation, as discussed above.
+Added: Partially offsetting the decrease in operating income in makeup for the six months ended December 31, 2023 was the favorable year-over-year impact of other intangible asset impairments related to Too Faced and Smashbox of $107 million and higher operating results from TOM FORD and Clinique, combined, of approximately $31 million.
+Added: The increase in operating results from Clinique for the six months ended December 31, 2023 was primarily driven by the increase in net sales.
+Added: The increase in operating results from TOM FORD for the six months ended December 31, 2023 reflected a decrease in royalty expense as a result of the fiscal 2023 fourth quarter acquisition of TOM FORD brand and an increase in net sales.
THE ESTÉE LAUDER COMPANIES INC.
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 2023 2022
2 unchanged sentences
% Change from prior-year period (14) % (14) %
−Removed: Reported fragrance operating income decreased, reflecting lower results from Jo Malone London and TOM FORD, combined, of approximately $19 million.
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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.
+Added: Reported fragrance operating income decreased for the three months ended December 31, 2023, reflecting the unfavorable year-over-year impact of residual net sales in the prior-year period associated with the license terminations related to certain of our designer fragrances effective June 30, 2022 and lower results from Estée Lauder, combined, of approximately $19 million.
+Added: The decrease in operating income from Estée Lauder was primarily driven by decreases in net sales, partially offset by lower advertising and promotional expenses due to disciplined expense management.
+Added: Partially offsetting the fragrance operating income decrease for the three months ended December 31, 2023 were higher results from Jo Malone London, primarily driven by an increase in net sales and lower advertising and promotional expenses due to the timing of advertising activities compared to the prior-year period and disciplined expense management.
+Added: Reported fragrance operating income decreased for the six months ended December 31, 2023, reflecting lower results from Clinique and TOM FORD, combined, of approximately $19 million.
+Added: The decrease in operating income from Clinique was primarily due to a decrease in net sales.
+Added: The decrease in operating income from TOM FORD was primarily driven by an increase in cost of sales, due in part to an increase in promotional items, higher advertising and promotional activities to support key shopping moments and an increase in selling expenses due to increased demonstration expenses compared to the prior-year period, partially offset by a decrease in royalty expense as a result of the fiscal 2023 fourth quarter acquisition of TOM FORD brand and an increase in net sales.
+Added: The decrease in fragrance operating income for the six months ended December 31, 2023 also reflected higher employee-related costs, including an increase in stock-based compensation expense, partially offset by lower incentive compensation, as discussed above.
+Added: Partially offsetting the fragrance operating decrease for the six months ended December 31, 2023 was higher operating results from Le Labo, primarily driven by an increase in net sales, partially offset by higher advertising and promotional activities to support new product launches, an increase in selling expenses due to increased demonstration expenses compared to the prior-year period and increased store operating costs, due to targeted expanded consumer reach.
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 2023 2022
2 unchanged sentences
% Change from prior-year period (100+)% (100+)%
−Removed: 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.
−Removed: Partially offsetting the lower results from Aveda was disciplined advertising and promotional expense management.
−Removed: 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: Reported hair care operating results decreased for the three and six months ended December 31, 2023, primarily driven by lower results from Aveda and Bumble and bumble, combined, of approximately $5 million and $12 million, respectively, reflecting decreases in net sales.
+Added: Partially offsetting the lower results from Aveda in both periods was disciplined advertising and promotional expense management.
+Added: Also contributing to the decrease in hair care operating income for the six months ended December 31, 2023 were higher employee-related costs, including an increase in stock-based compensation expense, partially offset by lower incentive compensation, as discussed above.
THE ESTÉE LAUDER COMPANIES INC.
1 unchanged sentence
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 2023 2022
3 unchanged sentences
Non-GAAP Financial Measure (1) :
−Removed: % Change in operating income from the prior-year period adjusting for the change in fair value of acquisition-related stock options
+Added: % 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+)% (100+)%
(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 56 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.
GAAP measures.
−Removed: Reported operating results decreased in The Americas, primarily reflecting lower operating results from North America of approximately $300 million.
−Removed: 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.
+Added: Reported operating results increased in The Americas for the three months ended December 31, 2023, primarily reflecting the favorable year-over-year impact of other intangible asset impairments relating to Too Faced and Smashbox of $107 million during the fiscal 2023 second quarter, partially offset by lower intercompany royalty income of $85 million compared to the prior-year period, driven by a decrease in net sales in our travel retail business.
+Added: Reported operating results decreased in The Americas for the six months ended December 31, 2023, primarily reflecting lower results from the United States, reflecting lower intercompany royalty income of $270 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, partially offset by the favorable year-over-year impact of other intangible asset impairments relating to Too Faced and Smashbox of $107 million during the fiscal 2023 second quarter, and an increase in net sales.
+Added: Partially offsetting the decrease in operating results in The Americas for the six months ended December 31, 2023, was higher results from Canada, driven by lower cost of sales reflecting the favorable impact from the shift of manufacturing production volume from third-party manufacturers to our own facilities for The Ordinary and an increase in net sales.
Europe, the Middle East & Africa
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 2023 2022
2 unchanged sentences
% Change from prior-year period (7) % (30) %
−Removed: 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.
+Added: Reported operating income decreased in Europe, the Middle East & Africa for the three and six months ended December 31, 2023, 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 $85 million and $270 million, respectively.
THE ESTÉE LAUDER COMPANIES INC.
+Added: Partially offsetting the decrease in operating income in Europe, the Middle East & Africa for the three months ended December 31, 2023 were higher results from Russia, primarily due to an increase in net sales as we continue selling a limited selection of products to retailers in Russia, as well as a decrease in expenses as a result of our scaled down operations, including the closure of all of our freestanding stores.
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions) 2023 2022 2023 2022
2 unchanged sentences
% Change from prior-year period 7 % (12) %
−Removed: Reported operating income decreased in Asia/Pacific, primarily driven by lower operating results from mainland China and Korea, combined, of approximately $85 million.
−Removed: The lower operating results in mainland China were driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management.
−Removed: 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.
−Removed: 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.
+Added: Non-GAAP Financial Measure (1) :
+Added: % Change in operating income from the prior-year period adjusting for the impact of other intangible asset impairments (24) % (28) %
+Added: (1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 56 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.
+Added: GAAP measures.
+Added: Reported operating income increased in Asia/Pacific for the three months ended December 31, 2023, primarily driven by higher results in Korea, led by the Dr.Jart+ travel retail business in Korea, primarily reflecting the favorable year-over-year impact of the fiscal 2023 second quarter other intangible asset impairment relating to Dr.
+Added: Jart+ of $100 million.
+Added: Partially offsetting the increase in operating income for the three months ended December 31, 2023 was lower operating results from mainland China, primarily driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management.
+Added: Reported operating income decreased in Asia/Pacific for the six months ended December 31, 2023, primarily driven by lower operating results from mainland China and Taiwan, combined, of approximately $145 million.
+Added: The decrease in operating income in mainland China primarily reflects a decrease in net sales, partially offset by disciplined advertising and promotional expense management.
+Added: Operating income in Taiwan decreased, primarily driven by a decrease in net sales.
+Added: Partially offsetting the decrease in operating income in Asia/Pacific for the six months ended December 31, 2023 was higher operating results from Korea and Hong Kong SAR, combined, of approximately $112 million.
+Added: The increase in operating income from Korea was driven by the favorable year-over-year impact of the fiscal 2023 second quarter other intangible asset impairment relating to Dr.
+Added: Jart+ of $100 million, partially offset by a decrease in net sales from our Asia travel retail business due to the ongoing actions that we and our retailers have taken to reset retailer inventory levels, including the changes in government and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers.
+Added: The higher operating results from Hong Kong SAR was primarily driven by the increase in net sales, partially offset by an increase in cost of sales, due in part to an increase in promotional items.
INTEREST AND INVESTMENT INCOME
Three Months Ended
+Added: December 31 Six Months Ended
(In millions) 2023 2022 2023 2022
1 unchanged sentence
Interest income and investment income, net $ 40 $ 26 $ 81 $ 41
−Removed: 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: THE ESTÉE LAUDER COMPANIES INC.
+Added: Interest expense increased for the three and six months ended December 31, 2023, 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.
Also contributing to the increase in interest expense was higher interest rates compared to the prior-year period.
−Removed: Interest income and investment income, net increased, primarily reflecting higher interest rates compared to the prior-year period.
+Added: Interest income and investment income, net increased in both periods, primarily reflecting higher interest rates compared to the prior-year period.
PROVISION FOR INCOME TAXES
5 unchanged sentences
Three Months Ended
+Added: December 31 Six Months Ended
+Added: 2023 2022 2023 2022
Effective rate for income taxes 37.6 % 25.4 % 36.3 % 23.9 %
Basis-point change from the prior-year period 1,220 1,240
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: 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.
−Removed: The lower amount of earnings before income taxes increased the impact of these tax adjustments in the first quarter of fiscal 2024.
+Added: For the three months ended December 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 2024, and the unfavorable impact associated with previously issued stock-based compensation, partially offset by a decrease in state and local income taxes.
+Added: For the six months ended December 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 2024, and the unfavorable impact associated with previously issued stock-based compensation.
NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.
Three Months Ended
+Added: December 31 Six Months Ended
($ in millions, except per share data) 2023 2022 2023 2022
Net earnings attributable to The Estée Lauder Companies Inc.
+Added: $ 313 $ 394 $ 344 $ 883
$ Change from prior-year period (81) (539)
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 and the change in fair value of acquisition-related stock options
+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, other intangible asset impairments and the change in fair value of acquisition-related stock options (43) % (66) %
(1) See “ Reconciliations of Non-GAAP Financial Measures” below for reconciliations between non-GAAP financial measures and the most directly comparable U.S.
GAAP measures.
+Added: THE ESTÉE LAUDER COMPANIES INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
7 unchanged sentences
the change in fair value of acquisition-related stock options;
+Added: other intangible asset impairments;
and the effects of foreign currency translation.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
−Removed: The following table provides reconciliations between these non-GAAP financial measures and the most directly comparable U.S.
+Added: The following tables provide reconciliations between these non-GAAP financial measures and the most directly comparable U.S.
GAAP measures.
7 unchanged sentences
Charges associated with restructuring and other activities 8 9 (1)
+Added: Other intangible asset impairments — 207 (207)
Change in fair value of acquisition-related stock options (5) (4) (1)
2 unchanged sentences
Charges associated with restructuring and other activities .02 .02 —
+Added: Other intangible asset impairments — .44 (.44)
Change in fair value of acquisition-related stock options (less portion attributable to redeemable noncontrolling interest) (.01) (.01) —
Diluted net earnings per common share, as adjusted $ .88 $ 1.54 $ (.66) (43) % (42) %
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: ($ in millions, except per share data) Six Months Ended
+Added: December 31 Variance % Change
+Added: constant currency
+Added: Net sales, as reported $ 7,797 $ 8,550 $ (753) (9) % (9) %
+Added: Returns associated with restructuring and other activities 1 6 (5)
+Added: Net sales, as adjusted $ 7,798 $ 8,556 $ (758) (9) % (9) %
+Added: Operating income, as reported $ 672 $ 1,217 $ (545) (45) % (43) %
+Added: Charges associated with restructuring and other activities 10 15 (5)
+Added: Other intangible asset impairments — 207 (207)
+Added: Change in fair value of acquisition-related stock options 3 (3) 6
+Added: Operating income, as adjusted $ 685 $ 1,436 $ (751) (52) % (51) %
+Added: Diluted net earnings per common share, as reported $ 0.95 $ 2.45 $ (1.50) (61) % (60) %
+Added: Charges associated with restructuring and other activities .02 .03 (.01)
+Added: Other intangible asset impairments — .44 (.44)
+Added: Change in fair value of acquisition-related stock options (less portion attributable to redeemable noncontrolling interest) .01 (.01) .02
+Added: Diluted net earnings per common share, as adjusted $ .98 $ 2.91 $ (1.93) (66) % (65) %
As diluted net earnings per common share, as adjusted, is used as a measure of the Company’s performance, we consider the impact of current and deferred income taxes when calculating the per-share impact of each of the reconciling items.
THE ESTÉE LAUDER COMPANIES INC.
−Removed: 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:
+Added: 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:
As Reported Impact of foreign
21 unchanged sentences
THE ESTÉE LAUDER COMPANIES INC.
−Removed: 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:
+Added: As Reported Impact of foreign
+Added: currency translation Variance,
+Added: in constant currency % Change,
+Added: as reported % Change,
+Added: in constant currency
+Added: Six Months Ended
+Added: ($ in millions) 2023 2022 Variance
+Added: By Product Category:
+Added: Skin Care $ 3,813 $ 4,539 $ (726) $ 18 $ (708) (16) % (16) %
+Added: Makeup 2,229 2,320 (91) (10) (101) (4) (4)
+Added: Fragrance 1,373 1,330 43 (3) 40 3 3
+Added: Hair Care 321 340 (19) (2) (21) (6) (6)
+Added: Other 62 27 35 — 35 100+ 100+
+Added: 7,798 8,556 (758) 3 (755) (9) (9)
+Added: Returns associated with restructuring and other activities (1) (6) 5 — 5
+Added: Total $ 7,797 $ 8,550 $ (753) $ 3 $ (750) (9) % (9) %
+Added: The Americas $ 2,450 $ 2,358 $ 92 $ 2 $ 94 4 % 4 %
+Added: Europe, the Middle East & Africa 2,841 3,498 (657) (52) (709) (19) (20)
+Added: Asia/Pacific 2,507 2,700 (193) 53 (140) (7) (5)
+Added: 7,798 8,556 (758) 3 (755) (9) (9)
+Added: Returns associated with restructuring and other activities (1) (6) 5 — 5
+Added: Total $ 7,797 $ 8,550 $ (753) $ 3 $ (750) (9) % (9) %
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: 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:
As Reported Add:
+Added: 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 $ 574 $ 556 $ 18
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: As Reported Add:
+Added: Other intangible asset impairments Add:
+Added: Change in fair value of acquisition-related stock options Variance, as adjusted % Change, as reported % Change, as adjusted
+Added: Six Months Ended
+Added: ($ in millions) 2023 2022 Variance
+Added: By Product Category:
+Added: Skin Care $ 452 $ 969 $ (517) $ (100) $ 6 $ (611) (53) % (57) %
+Added: Makeup (10) (4) (6) (107) — (113) (100+) (100+)
+Added: Fragrance 238 277 (39) — — (39) (14) (14)
+Added: Hair Care (25) (8) (17) — — (17) (100+) (100+)
+Added: Other 27 (2) 29 — — 29 100+ 100+
+Added: 682 1,232 (550) $ (207) $ 6 $ (751) (45) % (52) %
+Added: Charges associated with restructuring and other activities (10) (15) 5
+Added: Total $ 672 $ 1,217 $ (545)
+Added: The Americas $ (237) $ 40 $ (277) $ (107) $ 6 $ (378) (100+)% (100+)%
+Added: Europe, the Middle East & Africa 523 743 (220) — — (220) (30) (30)
+Added: Asia/Pacific 396 449 (53) (100) — (153) (12) (28)
+Added: 682 1,232 (550) $ (207) $ 6 $ (751) (45) % (52) %
+Added: Charges associated with restructuring and other activities (10) (15) 5
+Added: Total $ 672 $ 1,217 $ (545)
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 September 30, 2023, we had cash and cash equivalents of $3,090 million compared with $4,029 million at June 30, 2023.
+Added: At December 31, 2023, we had cash and cash equivalents of $3,939 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.
−Removed: THE ESTÉE LAUDER COMPANIES INC.
+Added: In the fiscal 2024 fourth quarter, we anticipate purchasing the remaining interest in DECIEM, pursuant to the terms of the net Put (Call) Option for a purchase price based on the performance of DECIEM.
+Added: This will result in the settlement of the DECIEM stock options and the redeemable noncontrolling interest balances.
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.
4 unchanged sentences
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: Inflation impacted our operating results in the fiscal 2024 first quarter and we expect it to continue.
+Added: THE ESTÉE LAUDER COMPANIES INC.
+Added: Inflation impacted our overall operating results in the fiscal 2024 second quarter and we expect it to continue.
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.
4 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 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: As of January 29, 2024, our long-term debt is rated A with a negative outlook by Standard & Poor’s and A1 with a negative outlook by Moody’s.
THE ESTÉE LAUDER COMPANIES INC.
−Removed: At September 30, 2023, our outstanding borrowings were as follows:
+Added: At December 31, 2023, our outstanding borrowings were as follows:
($ in millions) Long-term
35 unchanged sentences
(16) Consists of $1,000 million principal and unamortized debt discount of $5 million.
−Removed: Total debt as a percent of total capitalization was 60% and 59% at September 30, 2023 and June 30, 2023, respectively.
+Added: Total debt as a percent of total capitalization was 59% at December 31, 2023 and June 30, 2023.
THE ESTÉE LAUDER COMPANIES INC.
−Removed: Three Months Ended
+Added: Six Months Ended
(In millions) 2023 2022
−Removed: Net cash flows used for operating activities
−Removed: $ (408) $ (650)
+Added: Net cash flows provided by operating activities $ 937 $ 751
Net cash flows used for investing activities $ (557) $ (285)
1 unchanged sentence
$ (489) $ (685)
−Removed: 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.
−Removed: 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.
−Removed: 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.
−Removed: 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 .
+Added: The change in net cash flows provided by operating activities was primarily driven by a favorable change in working capital, reflecting a favorable change in inventory and promotional merchandise and other accrued and noncurrent liabilities which includes the favorable impact from the settlement of foreign currency forward contracts not designated as hedging instruments compared to the prior-year period, 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 compared to the prior-year period, for which there is a partially offsetting favorable impact related to foreign currency forward contracts not designated as hedging instruments that is reflected in working capital noted above.
+Added: The change in net cash flows used for financing activities primarily reflected an increase in proceeds from the issuance of short-term commercial paper compared to the prior-year period, 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 repayments of commercial paper during the fiscal 2024 second quarter.
+Added: For a summary of quarterly cash dividends declared per share on our Class A and Class B Common Stock during the six months ended December 31, 2023, see Notes to Consolidated Financial Statements, Note 11 – Equity and Redeemable Noncontrolling Interest .
Pension and Post-retirement Plan Funding
8 unchanged sentences
For a discussion of credit risk, see Notes to Consolidated Financial Statements, Note 4 – Derivative Financial Instruments (Credit Risk) .
+Added: 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.
1 unchanged sentence
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 $248 million and $265 million as of September 30, 2023 and June 30, 2023, 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 $254 million and $265 million as of December 31, 2023 and June 30, 2023, respectively.
This potential change does not consider our underlying foreign currency exposures.
−Removed: 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 September 30, 2023 and June 30, 2023, respectively.
+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 December 31, 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 $52 million and $55 million as of September 30, 2023 and June 30, 2023, 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 $53 million and $55 million as of December 31, 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.
12 unchanged sentences
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 .
+Added: THE ESTÉE LAUDER COMPANIES INC.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
5 unchanged sentences
(1) increased competitive activity from companies in the skin care, makeup, fragrance and hair care businesses;
−Removed: 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;
9 unchanged sentences
(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;
+Added: 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;
5 unchanged sentences
(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;
−Removed: THE ESTÉE LAUDER COMPANIES INC.
(18) the timing and impact of acquisitions, investments and divestitures;
4 unchanged sentences
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.