What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-10-31 compared with 2024-05-01 · 229 added, 390 removed, 448 unchanged (58% of the section changed)

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.

The following table is a comparative summary of operating results for the three and nine months ended March 31, 2024 and 2023, and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies for all periods presented.

The following table is a comparative summary of operating results for the three months ended September 30, 2024 and 2023, 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.

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 nine months ended March 31, 2023.

See Note 13 – Segment Data and Related Information for additional details.

Three Months Ended

March 31 Nine Months Ended

(In millions) 2024 2023

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Hair Care 139 148

Other 26 11 88 38

3,940 3,755 11,738 12,311

Returns associated with restructuring and other activities — —

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Asia/Pacific 944 1,058

3,940 3,755 11,738 12,311

Returns associated with restructuring and other activities — —

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Hair Care (18) (22)

Other 11 9 38 7

549 315 1,231 1,547

Charges associated with restructuring and other activities (106) (2)

Operating income $ 531 $ 297 $ 1,203 $ 1,514

Operating income (loss)

By Region (1) :

2 unchanged sentences

Asia/Pacific 63 138

549 315 1,231 1,547

Charges associated with restructuring and other activities (106) (2)

Operating income $ 531 $ 297 $ 1,203 $ 1,514

Operating income (loss)

(1) The net sales from the Company's travel retail business are included in the Europe, the Middle East & Africa region, and operating income attributable to these net sales are included in that region and in The Americas.

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THE ESTÉE LAUDER COMPANIES INC.

The following table presents certain consolidated earnings data as a percentage of net sales:

The following table presents certain consolidated earnings (loss) data as a percentage of net sales:

Three Months Ended

March 31 Nine Months Ended

2024 2023 2024 2023

Net sales 100.0 % 100.0 %

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Restructuring and other charges 2.9 —

Impairment of other intangible assets — — — 1.7

Talcum litigation settlement agreements

Total operating expenses 76.0 66.8

Operating income 13.5 7.9 10.2 12.3

Operating income (loss)

Interest expense 2.7 2.7

1 unchanged sentence

Other components of net periodic benefit cost 0.1 (0.1)

Earnings before income taxes 12.3 7.5 9.0 11.7

Provision for income taxes 3.8 3.3 3.0 3.3

Net earnings 8.5 4.1 5.9 8.5

Net loss (earnings) attributable to redeemable noncontrolling interest

(0.1) — (0.2) —

Net earnings attributable to The Estée Lauder Companies Inc.

Earnings (loss) before income taxes

Provision (benefit) for income taxes

Net earnings (loss)

Net earnings attributable to redeemable noncontrolling interest

Net earnings (loss) attributable to The Estée Lauder Companies Inc.

(4.6) % 0.9 %

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Within prestige beauty, we are diversified by product category, geography, brand, product sub-category, channel, consumer segment and price point.

We also leverage consumer analytics and insights with agility by deploying our brands to fast growing and profitable opportunities.

These analytics and insights, combined with our creativity, inform our innovation to provide a broad, locally-relevant and inclusive range of prestige products allowing us to compete effectively for a greater share of a consumer's beauty routine.

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.

• Our skin care net sales increased 8% for the three months ended March 31, 2024, primarily driven by higher net sales from La Mer and Estée Lauder, reflecting higher net sales from our Asia travel retail business.

The growth in Asia travel retail was driven by higher shipments reflecting significant sequential improvement in retail sales trends and continued progress in achieving targeted retailer inventory levels as well as lower shipments in the prior-year period due, in part, to transitory headwinds.

• Our makeup net sales increased 3% for the three months ended March 31, 2024, primarily reflecting higher net sales from Estée Lauder, within our Asia travel retail business, driven by higher shipments reflecting significant sequential improvement in retail sales trends and continued progress in achieving targeted retailer inventory levels as well as lower shipments in the prior-year period due, in part, to transitory headwinds, and higher net sales from Clinique, partially offset by lower net sales from Bobbi Brown.

• Our fragrance net sales were virtually flat for the three months ended March 31, 2024, including the unfavorable impact of foreign currency translation of 1%.

Reported fragrance net sales reflected lower net sales from Estée Lauder, 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, and lower net sales from TOM FORD, partially offset by higher net sales from Jo Malone London and Le Labo.

• Our hair care net sales declined 3% for the three months ended March 31, 2024, primarily attributable to lower net sales from Aveda, driven by declines in North America, primarily reflecting softness in the salon and direct-to-consumer channels.

We also leverage consumer analytics and insights by deploying our brands to grow sales and pursue profitable opportunities.

These analytics and insights, combined with our creativity, inform our innovation to provide a broad, locally-relevant and inclusive range of prestige products with the aim of competing effectively for a greater share of a consumer's beauty routine.

Elements of our strategy are described below, as well as in the Overview on page 31 of our Annual Report on Form 10-K for the year ended June 30, 2024.

• Our skin care net sales decreased 7% for the three months ended September 30, 2024, primarily driven by lower net sales from La Mer and Estée Lauder.

Net sales from La Mer decreased, primarily driven by lower net sales in our Asia travel retail business, due to lower replenishment orders reflecting (i) the challenging retail environment, including worsened consumer sentiment in China, (ii) travelers diverting spending towards experiences, which continued to dampen conversion for beauty products and (iii) inventory pressure given the further retail market deceleration.

The decrease in net sales from Estée Lauder was primarily driven by lower net sales in mainland China, reflecting the impacts from further softening in overall prestige beauty in mainland China, due in large part to worsened consumer sentiment.

• Our makeup net sales decreased 2% for the three months ended September 30, 2024, primarily reflecting lower net sales from M·A·C, and to a lesser extent, Too Faced and Smashbox.

The decrease in net sales from M·A·C was primarily driven by lower net sales in North America, reflecting softness in the brand's retail sales, resulting in lower replenishment orders, and lower net sales in the Middle East reflecting ongoing business disruption.

Partially offsetting the decrease in makeup net sales was higher net sales from Clinique and, to a lesser extent, Estée Lauder.

• Our fragrance net sales decreased 1% for the three months ended September 30, 2024, reflecting lower net sales from TOM FORD, Clinique, and Estée Lauder.

Net sales from TOM FORD decreased, primarily driven by lower net sales in North America, reflecting softness in the brand's retail sales, resulting in lower replenishment orders.

The decrease in net sales from Clinique reflected lower replenishment orders in our global travel retail business and in other parts of Europe, the Middle East & Africa primarily due to lower demand.

Net sales from Estée Lauder decreased, primarily driven by lower net sales across our product portfolio.

Partially offsetting the decrease in fragrance net sales were higher net sales from Le Labo and Kilian Paris.

• Our hair care net sales decreased 6% for the three months ended September 30, 2024, primarily attributable to lower net sales from Aveda and to a lesser extent, The Ordinary.

The decrease in net sales from Aveda was primarily driven by the timing of shipments and continued softness in our North America salon channel and our direct-to-consumer business.

THE ESTÉE LAUDER COMPANIES INC.

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Our regional organizations, and the expertise of our people there, enable our brands to be more locally and culturally relevant in both product assortment and communications.

We are evolving the way we connect with our consumers in stores, online and where they travel, including by expanding our digital and social media presence and the engagement of global and local influencers to amplify brand or product stories.

We are continually evolving the way we connect with our consumers in stores, online and where they travel, including by expanding our digital and social media presence and the engagement of global and local influencers to amplify brand or product stories.

We tailor implementation of our strategy by market to drive consumer engagement and embrace inclusion and cultural diversity.

We continuously strengthen our presence in large, image-building core markets, while broadening our presence in emerging markets.

• Net sales in The Americas increased 3% for the three months ended March 31, 2024, primarily driven by an increase in net sales in Mexico, the United States, and Brazil.

Net sales in Mexico and Brazil increased, primarily reflecting growth in makeup, led by M·A·C.

The increase in net sales in the United States primarily reflected incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand and growth in fragrance, driven by our luxury fragrances, partially offset by a decline in makeup, 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.

• Net sales in Europe, the Middle East & Africa increased 12% for the three months ended March 31, 2024, primarily driven by higher net sales from our Asia travel retail business.

• Net sales in Asia/Pacific decreased 1% for the three months ended March 31, 2024, primarily driven by the unfavorable impact of foreign currency translation of 5%, resulting in a decrease in net sales in mainland China, and lower net sales in Korea, attributable to the Dr.Jart+ travel retail business in Korea, and Australia, partially offsetting the net sales decrease in Asia/Pacific for the three months ended March 31, 2024 was an increase in net sales in Hong Kong SAR.

We have experienced challenges within our business, including in our Asia travel retail business, and we expect volatility to continue.

We have experienced, and are expecting to continue to experience, ongoing softness in overall prestige beauty in mainland China, as well as further 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.

We strive to strengthen our presence in large, image-building core markets, while broadening our presence in emerging markets.

• Net sales in The Americas decreased 2% for the three months ended September 30, 2024, primarily reflecting lower net sales in North America and Mexico.

The decrease in net sales in North America reflected the challenges from M·A·C, Aveda, TOM FORD, Too Faced and Smashbox.

Partially offsetting these pressures in North America was the launch of seven brands to-date in Amazon's U.S.

Beauty store.

Net sales in Mexico decreased, primarily driven by the unfavorable impact of foreign currency translation.

• Net sales in Europe, the Middle East & Africa decreased 2% for the three months ended September 30, 2024, primarily driven by lower net sales from our Asia travel retail business and the United Kingdom.

Asia travel retail net sales declined, due to lower replenishment orders reflecting (i) the challenging retail environment, including worsened consumer sentiment in China, (ii) travelers diverting spending towards experiences, which continued to dampen conversion for beauty products and (iii) inventory pressure given the further retail market deceleration.

Partially offsetting the decrease in net sales in Europe, the Middle East & Africa were higher net sales in Germany, the Nordic countries and Russia.

• Net sales in Asia/Pacific decreased 11% for the three months ended September 30, 2024, primarily driven by lower net sales from mainland China and Hong Kong SAR, reflecting worsened consumer sentiment.

This drove further softening in overall prestige beauty in mainland China and low conversion rates among traveling consumers in Hong Kong SAR.

We have experienced challenges within our business, including in our Asia travel retail business, and we expect volatility and uncertainty to continue including inventory pressure in Asia travel retail given the further retail market deceleration.

We have experienced, and are expecting to continue to experience, weakness in overall prestige beauty due in large part to worsened consumer sentiment in China, which is also expected to impact Asia travel retail.

Looking ahead, we are cautiously optimistic about the potential medium- to long-term growth opportunities presented by the new economic stimulus measures in China, but volatility and uncertainty remain elevated in the near-term.

In North America, we are experiencing ongoing competitive pressures along with the continued slowdown in prestige beauty growth.

We also expect further business disruption in Israel and other parts of the Middle East.

Net sales from Israel and the Middle East accounted for approximately 2% and 3% of consolidated net sales in fiscal 2024 and the first quarter of fiscal 2025, respectively.

These challenges are collectively expected to impact net sales and profitability, including impacts to our effective tax rate from changes to our geographical mix of earnings.

We have also experienced, and are expecting to continue to experience, under absorption of manufacturing variances due to lower production volumes, and will be recognizing the impact of reduced manufacturing volumes on our standard cost within cost of sales for the remainder of fiscal 2024.

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.

We believe that the best way to increase long-term stockholder value is to provide superior products and services in the most efficient and effective manner while recognizing shifts in consumers’ behaviors and shopping practices.

Accordingly, our long-term strategy has numerous initiatives across geographic regions, product categories, brands, channels of distribution and functions designed to grow our sales, provide cost efficiencies, leverage our strengths and make us more productive and profitable.

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social and political issues;

regulatory matters, including the imposition of tariffs and sanctions;

competitive pressures;

legal and regulatory matters, including the imposition of tariffs and sanctions;

geopolitical tensions;

and global security issues.

For example, the strengthening of the U.S.

dollar could negatively impact results within Europe, the Middle East & Africa due to pricing pressures on our retail customers and consumers in key international travel retail locations.

Additionally, we continue to monitor the geopolitical tensions between the United States and China, which could have a material adverse effect on our business.

We are also mindful of inflationary pressures on our cost base and are monitoring the impact on consumer preferences.

A decline in net sales and profitability may adversely impact the goodwill and other intangible assets associated with our brands, as well as long-lived assets, potentially resulting in impairments.

For example, the geopolitical tensions between the United States and China could have a material adverse effect on our business.

We are also mindful of inflationary pressures on our cost base and are monitoring the impact on consumer preferences, and the impact of changes being made in the organization, including those related to the Profit Recovery and Growth Plan.

Declines in net sales and profitability may adversely impact the goodwill and other intangible assets associated with our brands, as well as long-lived assets, potentially resulting in impairments.

THE ESTÉE LAUDER COMPANIES INC.

Cybersecurity Incident Disclosed in July 2023

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.

Our investigation into the cybersecurity incident is complete.

We determined that the unauthorized third party obtained some data from our systems, including consumer and employee data.

We continue to take steps to enhance the security of our systems and coordinate with law enforcement authorities.

We provided notification to governmental authorities in certain jurisdictions and also notified affected individuals where required by law.

The incident did not have a material impact on net sales and had less than a $0.01 dilutive impact to the three months ended March 31, 2024 and was $.08 dilutive to earnings per common share for the nine months ended March 31, 2024, 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, after reflecting the benefit of insurance recoveries in April 2024.

Restructuring Program Component of the Profit Recovery Plan

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.

The Profit Recovery Plan is focused on rebuilding stronger, more sustainable profitability, supporting sales growth acceleration and increasing speed and agility.

Restructuring Program Component of the Profit Recovery and Growth Plan

As previously communicated on November 1, 2023, we launched the Profit Recovery and Growth Plan ("PRGP"), to help progressively rebuild our profit margins in fiscal years 2025 and 2026.

The PRGP is focused on rebuilding stronger, more sustainable profitability, supporting sales growth acceleration and increasing speed and agility.

The plan is designed to improve gross margin, lower the cost base and reduce overhead expenses, while increasing investments in key consumer-facing activities.

Upon completion of this plan, we expect to have improved our gross margin and expense base to drive greater operating leverage for the future.

As a component of the Profit Recovery Plan, on February 5, 2024, we announced a two-year restructuring program.

As a component of the PRGP, on February 5, 2024, we announced a two-year restructuring program.

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.

We committed to this course of action on February 1, 2024.

In connection with the restructuring program, as of March 31, 2024, 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.

In connection with the restructuring program, as of September 30, 2024, we continue to 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.

This reduction takes into account the elimination of some positions as well as retraining and redeployment of certain employees in select areas.

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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.

The net benefits are in addition to the between $800 million and $1,000 million previously communicated as part of the Profit Recovery Plan.

Further information about the Restructuring Program Component of the Profit Recovery Plan, is described in Notes to Consolidated Financial Statements, Note 3 – Charges Associated with Restructuring and Other Activities herein.

The net benefits of the PRGP, which includes the restructuring program, are expected to be between $1,100 million and $1,400 million.

Further information about the Restructuring Program Component of the Profit Recovery and Growth Plan, is described in Notes to Consolidated Financial Statements, Note 3 – Charges Associated with Restructuring and Other Activities herein.

Talcum Litigation Settlement Agreements

From the end of August 2024 through October 2024, we reached agreements with certain plaintiff law firms (collectively, the “talcum litigation settlement agreements”) for:

(i) the resolution of pending cosmetic talcum powder matters handled by those firms as well as (ii) a process for resolving potential future cosmetic talcum powder claims expected to be brought on behalf of plaintiffs by those firms from January 1, 2025 through December 31, 2029, with annual capped amounts per year for each participating law firm.

To account for the talc litigation settlement agreements, we recorded a charge of $159 million for the three months ended September 30, 2024 for the amount agreed to settle these current and potential future claims.

Further information about the talcum litigation settlement agreements, is described in Notes to Consolidated Financial Statements, Note 8 – Commitments and Contingencies herein.

THE ESTÉE LAUDER COMPANIES INC.

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

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Non-GAAP Financial Measure (1) :

% Change from prior-year period in constant currency adjusting for returns associated with restructuring and other activities 6 % (4) %

% Change from prior-year period in constant currency

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 51 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported net sales increased during the three months ended March 31, 2024, primarily driven by higher net sales in our Asia travel retail business.

Reported net sales decreased during the nine months ended March 31, 2024, primarily reflecting lower net sales from our Asia travel retail business and in mainland China.

For the nine months ended March 31, 2024, Asia travel retail net sales declined, primarily driven by the actions that we and our retailers took to reset retailer inventory levels, including the response to changes in government regulatory and retailer policies in the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers.

In mainland China, net sales declined, primarily driven by the impacts from the ongoing softness in overall prestige beauty reflecting subdued consumer confidence.

Reported net sales was impacted by approximately $51 million and $54 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2024, 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.

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 nine months ended March 31, 2024 of $1 million, and for the three and nine months ended March 31, 2023 of $4 million and $10 million, respectively.

Reported net sales increased 5% for the three months ended March 31, 2024, driven by an increase from pricing of 10%, due to the favorable impact from strategic pricing actions and changes in mix, partially offset by the decrease from volume of 4% and the unfavorable impact from foreign currency translation of 1% .

Reported net sales decreased 5% for the nine months ended March 31, 2024, driven by the decrease from volume of 10%, partially offset by an increase from pricing of 5% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.

THE ESTÉE LAUDER COMPANIES INC.

Reported net sales decreased for the three months ended September 30, 2024, reflecting a decrease in net sales in all product categories, primarily driven by skin care.

The decrease in skin care net sales was primarily driven by lower net sales from La Mer and Estée Lauder.

By region, reported net sales decreased for the three months ended September 30, 2024, reflecting lower net sales across all regions, primarily driven by Asia/Pacific.

The decrease in net sales in Asia/Pacific was primarily driven by lower net sales from mainland China and Hong Kong SAR.

Reported net sales were impacted by approximately $18 million of favorable foreign currency translation for the three months ended September 30, 2024.

Reported net sales decreased 4% for the three months ended September 30, 2024, driven by the decrease from volume of 8%.

Partially offsetting this decrease was an increase from pricing of 3% 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%.

Returns 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.

For the three months ended September 30, 2024 and 2023, there were no returns associated with restructuring and other activities.

Product Categories

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

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GAAP measures.

Reported skin care net sales increased for the three months ended March 31, 2024, primarily driven by higher net sales from La Mer and Estée Lauder, combined, of approximately $164 million, reflecting higher net sales in our Asia travel retail business.

The increase in net sales from La Mer and Estée Lauder for the three months ended March 31, 2024 also reflected the success of hero products and new product launches.

Partially offsetting the increase in net sales from Estée Lauder was a decrease in net sales in mainland China, primarily driven by the impacts from the ongoing softness in overall prestige beauty reflecting subdued consumer confidence.

Partially offsetting the increase in skin care net sales for the three months ended March 31, 2024 was lower net sales from Clinique, primarily driven by declines in serums and moisturizers.

Reported skin care net sales decreased for the nine months ended March 31, 2024, reflecting lower net sales from Estée Lauder and Clinique, combined, of approximately $572 million, primarily driven by declines in our Asia travel retail business and in mainland China.

In mainland China, net sales declined, primarily driven by the impacts from the ongoing softness in overall prestige beauty reflecting subdued consumer confidence.

Partially offsetting these decreases in skin care net sales for the nine months ended March 31, 2024 were higher net sales from The Ordinary, driven by growth in every geographic region, reflecting continued success of hero products, new product launches and targeted expanded consumer reach.

Skin care net sales were impacted by approximately $34 million and $52 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2024, respectively.

Reported skin care net sales increased 8% for the three months ended March 31, 2024, driven by an increase from pricing of 14%, due to the favorable impact from strategic pricing actions and changes in mix, partially offset by the decrease from volume of 4% and the unfavorable impact from foreign currency translation of 2%.

Reported skin care net sales decreased 9% for the nine months ended March 31, 2024, driven by the decrease from volume of 15% and the unfavorable impact of foreign currency translation of 1%.

Partially offsetting these decreases was an increase from pricing of 6%, due to the favorable impact from strategic pricing actions and changes in mix.

THE ESTÉE LAUDER COMPANIES INC.

Reported skin care net sales decreased for the three months ended September 30, 2024, reflecting lower net sales from La Mer and Estée Lauder, combined, of approximately $117 million.

Net sales from La Mer decreased, primarily driven by declines in our Asia travel retail business, due to lower replenishment orders reflecting (i) the challenging retail environment, including worsened consumer sentiment in China, (ii) travelers diverting spending towards experiences, which continued to dampen conversion for beauty products and (iii) inventory pressure given the further retail market deceleration.

The decrease in net sales from Estée Lauder was primarily driven by declines in mainland China, reflecting the impacts from further softening in overall prestige beauty in mainland China, due in large part to worsened consumer sentiment.

Skin care net sales were impacted by approximately $13 million of favorable foreign currency translation for the three months ended September 30, 2024.

Reported skin care net sales decreased 7% for the three months ended September 30, 2024, driven by the decrease from volume of 8%.

Partially offsetting this decrease was an increase from pricing of 1%, 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%.

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

6 unchanged sentences

GAAP measures.

Reported makeup net sales increased for the three months ended March 31, 2024, reflecting higher net sales from Estée Lauder and Clinique, combined, of approximately $55 million.

The increase in net sales from Estée Lauder was primarily driven by our Asia travel retail business.

Net sales from Clinique increased, primarily driven by the success of hero products.

Partially offsetting the increase in makeup net sales for the three months ended March 31, 2024 was lower net sales from Bobbi Brown, primarily driven by declines across the foundation, eye and lip subcategories.

Reported makeup net sales decreased for the nine months ended March 31, 2024, reflecting lower net sales from M·A·C and Estée Lauder, combined, of approximately $88 million.

Net sales from M·A·C decreased, primarily due to 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, the phasing out of select products in preparation for new product launches, partially offset by the success of new product launches.

The decrease in net sales from Estée Lauder was primarily driven by a decline in our Asia travel retail business.

For the nine months ended March 31, 2024, Asia travel retail net sales declined, primarily driven by the actions that we and our retailers took to reset retailer inventory levels, including the response to changes in government regulatory and retailer policies during the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers.

Also partially offsetting the decrease in net sales from Estée Lauder was the success of recent product launches.

Partially offsetting the makeup net sales decrease for the nine months ended March 31, 2024 were higher net sales from Clinique, primarily driven by the success of hero products.

Makeup net sales were impacted by approximately $10 million of unfavorable foreign currency translation for the three months ended March 31, 2024.

Reported makeup net sales increased 3% for the three months ended March 31, 2024, driven by an increase from pricing of 6%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.

Partially offsetting this increase was the decrease from volume of 2% and the unfavorable impact of foreign currency translation of 1%.

Reported makeup net sales decreased 2% for the nine months ended March 31, 2024, driven by the decrease from volume of 5%, partially offset by an increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.

Reported makeup net sales decreased for the three months ended September 30, 2024, reflecting lower net sales from M·A·C, and to a lesser extent, Too Faced and Smashbox, combined, of approximately $55 million.

Net sales from Too Faced decreased, primarily driven by North America, reflecting lower net sales in the lip and mascara subcategories.

Net sales from Smashbox decreased, primarily driven by North America, reflecting lower net sales in the foundation, concealer and lip subcategories.

Partially offsetting the makeup net sales decrease for the three months ended September 30, 2024 were higher net sales from Clinique and, to a lesser extent, Estée Lauder, combined, of approximately $34 million.

Net sales from Clinique increased across all geographic regions, driven by the success of hero products.

Net sales from Estée Lauder increased, primarily driven by higher net sales in the foundation, concealer and corrector subcategories.

Makeup net sales were impacted by approximately $2 million of favorable foreign currency translation for the three months ended September 30, 2024.

Reported makeup net sales decreased 2% for the three months ended September 30, 2024, driven by the decrease from volume of 9%.

Partially offsetting this decrease was an increase from pricing of 6% due to the favorable impact from strategic pricing actions and changes in mix.

THE ESTÉE LAUDER COMPANIES INC.

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

6 unchanged sentences

GAAP measures.

Reported fragrance net sales were virtually flat for the three months ended March 31, 2024, including the unfavorable impact of foreign currency translation of 1%.

Net sales from Estée Lauder decreased, primarily driven by lower net sales from the Beautiful, Estée Lauder Pleasures and Modern Muse product franchises.

Net sales from TOM FORD decreased, primarily reflecting strong performance in the prior-year period within our Asia travel retail business.

Partially offsetting these decreases were higher net sales from Jo Malone London and Le Labo, combined, of approximately $24 million.

The increase in net sales from Jo Malone London for the three months ended March 31, 2024, was driven by the success of hero products and recent product launches.

Net sales from Le Labo increased, primarily reflecting targeted expanded consumer reach, including the brand's launch in mainland China during the fiscal 2023 fourth quarter and success of hero products.

Reported fragrance net sales increased for the nine months ended March 31, 2024, primarily driven by higher net sales from Le Labo and Jo Malone London, combined, of approximately $82 million.

Net sales from Le Labo increased, primarily reflecting growth of hero products, including the successful City Exclusive collection, targeted expanded consumer reach, including the brand's launch in mainland China during the fiscal 2023 fourth quarter, and new product launches.

Net sales from Jo Malone London increased, primarily driven by the success of hero products.

Partially offsetting the increase in fragrance net sales for the nine months ended March 31, 2024, was 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, and lower net sales from Estée Lauder, combined, of approximately $72 million.

The decrease in net sales from Estée Lauder for the nine months ended March 31, 2024 was driven by lower net sales from the Beautiful product franchise.

Fragrance net sales were impacted by approximately $7 million and $4 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2024, respectively.

Reported fragrance net sales were virtually flat for the three months ended March 31, 2024, driven by the decrease from volume of 7% and the unfavorable impact from foreign currency translation of 1%.

These decreases were partially offset by an increase from pricing of 7%, due to the favorable impact from strategic pricing actions and changes in mix.

Reported fragrance net sales increased 2% for the nine months ended March 31, 2024, driven by an increase from pricing of 5%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.

This increase was partially offset by the decrease from volume of 3%.

THE ESTÉE LAUDER COMPANIES INC.

Reported fragrance net sales decreased for the three months ended September 30, 2024, reflecting lower net sales from TOM FORD, Clinique, and Estée Lauder, combined, of approximately $29 million.

Net sales from TOM FORD decreased, primarily driven by lower net sales in North America, reflecting softness in the brand's retail sales, resulting in lower replenishment orders.

The decrease in net sales from Clinique was primarily due to lower replenishment orders in our global travel retail business and in other parts of Europe, the Middle East & Africa, primarily due to lower demand.

Net sales from Estée Lauder decreased, primarily driven by lower net sales across its fragrance portfolio.

Partially offsetting the reported fragrance net sales decrease for the three months ended September 30, 2024, were higher net sales from Le Labo and Kilian Paris, combined, of approximately $18 million.

Net sales from Le Labo increased, primarily reflecting targeted expanded consumer reach, growth of hero products and new product launches.

The increase in net sales from Kilian Paris reflected the success of new product launches.

Fragrance net sales were impacted by approximately $3 million of favorable foreign currency translation for the three months ended September 30, 2024.

Reported fragrance net sales decreased 1% for the three months ended September 30, 2024, driven by the decrease from volume of 7%.

Partially offsetting this decrease was an increase from pricing of 6% due to the favorable impact from strategic pricing actions and changes in mix.

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

6 unchanged sentences

GAAP measures.

Reported hair care net sales decreased for the three and nine months ended March 31, 2024, driven by lower net sales from Aveda, driven by declines in North America, primarily reflecting softness in the salon and direct-to-consumer channels.

Hair care net sales were impacted by approximately $1 million and $3 million of favorable foreign currency translation for the three and nine months ended March 31, 2024, respectively.

Reported hair care net sales decreased 3% for the three months ended March 31, 2024, driven by the decrease from volume of 18%.

This decrease was partially offset by the increase from pricing of 14%, due to the favorable impact from strategic pricing actions and changes in mix, and the favorable impact from foreign currency translation of 1%.

Reported hair care net sales decreased 5% for the nine months ended March 31, 2024, driven by the decrease from volume of 13%.

This decrease was partially offset by the increase from pricing of 8%, due to the favorable impact from strategic pricing actions and changes in mix, and the favorable impact of foreign currency translation of 1%.

THE ESTÉE LAUDER COMPANIES INC.

Reported hair care net sales decreased for the three months ended September 30, 2024, driven by lower net sales from Aveda and to a lesser extent, The Ordinary, combined, of approximately $9 million.

The decrease in net sales from Aveda was driven by the timing of shipments and continued softness in our North America salon channel and our direct-to-consumer business.

Reported hair care net sales decreased 6% for the three months ended September 30, 2024, driven by the decrease from volume of 5% and a decrease from pricing of 1%, due to changes in mix, partially offset by the favorable impact from strategic pricing actions.

Geographic Regions

We strategically time our new product launches by geographic market, which may account for differences in regional sales growth.

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

6 unchanged sentences

GAAP measures.

THE ESTÉE LAUDER COMPANIES INC.

The increase in reported net sales in The Americas for the three months ended March 31, 2024 was primarily driven by an increase in net sales in Mexico, the United States, and Brazil, combined, of approximately $28 million.

Net sales in Mexico and Brazil increased, primarily reflecting growth in makeup, led by M·A·C.

The increase in reported net sales in The Americas for the nine months ended March 31, 2024 was primarily driven by an increase in the United States, Mexico, and Brazil, combined, of approximately $108 million.

The increase in net sales in the United States primarily reflected growth in fragrance, driven by our luxury fragrances, incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand, and higher net sales in skin care, led by The Ordinary, partially offset 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 and lower net sales in hair care, led by Aveda.

Net sales in Mexico and Brazil increased, driven by growth in makeup, led by M·A·C.

Net sales in The Americas were impacted by approximately $3 million and $1 million of favorable foreign currency translation for the three and nine months ended March 31, 2024, respectively.

Reported net sales in The Americas increased 3% for the three months ended March 31, 2024, driven by an increase from pricing of 7%, due to the favorable impact from strategic pricing actions and changes in mix, and the impact from the royalty revenue from the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of 1%.

These increases were partially offset by a decrease from volume of 6%.

Reported net sales in The Americas increased 3% for the nine months ended March 31, 2024, driven by an increase from pricing of 2%, due to the favorable impact of strategic pricing actions, partially offset by changes in mix, and the impact from the royalty revenue from the fiscal 2023 fourth quarter acquisition of the TOM FORD brand of 1%.

The impact from volume was virtually flat.

Reported net sales in The Americas decreased for the three months ended September 30, 2024, primarily reflecting lower net sales in North America and Mexico, combined, of approximately $18 million.

The decrease in net sales in North America reflected the challenges from M·A·C, Aveda, TOM FORD, Too Faced and Smashbox as previously mentioned.

Partially offsetting these pressures in North America was the launch of seven brands to-date in Amazon's U.S.

Premium Beauty store.

Net sales in Mexico decreased, primarily driven by the unfavorable impact of foreign currency translation.

Net sales in The Americas were impacted by approximately $11 million of unfavorable foreign currency translation for the three months ended September 30, 2024.

Reported net sales in The Americas decreased 2% for the three months ended September 30, 2024, driven by the decrease from volume of 6% and the unfavorable impact from foreign currency translation of 1%.

These decreases were partially offset by an increase from pricing of 5%, due to the favorable impact of strategic pricing actions.

Europe, the Middle East & Africa

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

6 unchanged sentences

GAAP measures.

Reported net sales increased in Europe, the Middle East & Africa for the three months ended March 31, 2024, primarily driven by higher net sales from our Asia travel retail business.

Reported net sales decreased in Europe, the Middle East & Africa for the nine months ended March 31, 2024, primarily driven by lower net sales from our Asia travel retail business.

For the nine months ended March 31, 2024, Asia travel retail net sales declined, primarily driven by the actions that we and our retailers took to reset retailer inventory levels, including the response to changes in government regulatory and retailer policies during the second half of fiscal 2023 related to unstructured market activity, and lower conversion of travelers to consumers.

THE ESTÉE LAUDER COMPANIES INC.

Partially offsetting the decrease in Europe, the Middle East & Africa for the nine months ended March 31, 2024 were higher net sales in the United Kingdom, primarily driven by strong performance by The Ordinary.

Net sales in Europe, the Middle East & Africa were impacted by approximately $1 million and $53 million of favorable foreign currency translation for the three and nine months ended March 31, 2024, respectively.

Reported net sales in Europe, the Middle East & Africa increased 12% for the three months ended March 31, 2024, driven by an increase from pricing of 13%, due to the favorable impact from strategic pricing actions and changes in mix, partially offset by the decrease from volume of 1%.

Reported net sales in Europe, the Middle East & Africa decreased 10% for the nine months ended March 31, 2024, driven by the decrease from volume of 17%.

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 from foreign currency translation of 1%.

Reported net sales decreased in Europe, the Middle East & Africa for the three months ended September 30, 2024, primarily reflecting lower net sales from our Asia travel retail business, due to lower replenishment orders reflecting (i) the challenging retail environment, including worsened consumer sentiment in China, (ii) travelers diverting spending towards experiences, which continued to dampen conversion for beauty products and (iii) inventory pressure given the further retail market deceleration.

Partially offsetting the decrease in Europe, the Middle East & Africa in fiscal 2024 was higher net sales in Germany, the Nordic countries and Russia, combined, of approximately $29 million.

The increase in net sales from Germany was driven by the favorable year-over-year impact relating to the timing of shipments.

Net sales from the Nordic countries increased, primarily driven by the favorable year-over-year impact relating to the expansion of The Ordinary towards the end of the fiscal 2024 first quarter.

The increase in net sales from Russia was primarily driven by growth in fragrance and makeup.

Net sales in Europe, the Middle East & Africa were impacted by approximately $23 million of favorable foreign currency translation for the three months ended September 30, 2024.

Reported net sales in Europe, the Middle East & Africa decreased 2% for the three months ended September 30, 2024, driven by the decrease from volume of 4%, partially offset by the favorable impact from foreign currency translation of 2%.

The impact of pricing was flat compared to the prior-year period.

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

6 unchanged sentences

GAAP measures.

Reported net sales decreased in Asia/Pacific for the three months ended March 31, 2024, primarily driven by the unfavorable impact of foreign currency translation of 5%, resulting in a decrease in net sales in mainland China, and lower net sales in Korea, led by the Dr.Jart+ travel retail business in Korea, and Australia, combined, of approximately $41 million.

Partially offsetting the unfavorable impact of foreign currency translation in mainland China was higher net sales as a result of lower retail traffic in the beginning of the prior-year period due to the rise in COVID-19 cases.

Net sales in Korea, led by the Dr.Jart+ travel retail business in Korea, decreased, reflecting the timing impact on Dr.Jart+ from new government regulations during the fiscal 2024 third quarter to further control unstructured market activity, as well as lower conversion.

The decrease in net sales in Australia was primarily driven by an unfavorable impact due to timing of shipments compared to the prior-year period.

Reported net sales decreased in Asia/Pacific for the nine months ended March 31, 2024, reflecting lower net sales from mainland China, primarily driven by the impacts from the ongoing softness in overall prestige beauty reflecting subdued consumer confidence.

Partially offsetting the net sales decrease in Asia/Pacific for the three and nine months ended March 31, 2024 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 which began during the fiscal 2023 third quarter.

Net sales in Asia/Pacific were impacted by approximately $55 million and $108 million of unfavorable foreign currency translation for the three and nine months ended March 31, 2024, respectively.

Reported net sales in Asia/Pacific decreased 1% for the three months ended March 31, 2024, driven by the decrease from volume of 7% and the unfavorable impact from foreign currency translation of 5%.

Partially offsetting these decreases was an increase from pricing of 10%, due to the favorable impact from strategic pricing actions and changes in mix.

Reported net sales decreased in Asia/Pacific for the three months ended September 30, 2024, primarily driven by lower net sales from mainland China, and Hong Kong SAR, combined, of approximately $105 million, reflecting worsened consumer sentiment.

This drove further softening in overall prestige beauty in mainland China and low conversion rates among traveling consumers in Hong Kong SAR..

Net sales in Asia/Pacific were impacted by approximately $6 million of favorable foreign currency translation for the three months ended September 30, 2024.

Reported net sales in Asia/Pacific decreased 11% for the three months ended September 30, 2024, driven by the decrease from volume of 15%.

Partially offsetting this decrease was an increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix, and the favorable impact of foreign currency translation of 1%.

THE ESTÉE LAUDER COMPANIES INC.

Reported net sales in Asia/Pacific decreased 5% for the nine months ended March 31, 2024, driven by the decrease from volume of 10% and the unfavorable impact from foreign currency translation of 3%.

Partially offsetting these decreases was an increase from pricing of 8%, due to the favorable impact from strategic pricing actions and changes in mix.

Gross margin increased to 71.9% and decreased to 71.6% for the three and nine months ended March 31, 2024, respectively, as compared with 69.1% and 72.4% in the prior-year periods.

Gross margin increased to 72.4% for the three months ended September 30, 2024, as compared with 69.6% in the prior-year period.

Favorable (Unfavorable) Basis Points

March 31, 2024

Three Months Ended Nine Months Ended

September 30, 2024

Three Months Ended

Mix of business (60)

2 unchanged sentences

Foreign exchange transactions 10

Total 280 (80)

The increase in gross margin for the three months ended March 31, 2024 reflected the favorable impact from our mix of business, primarily driven by the increase in skin care net sales, strategic pricing actions, and the favorable impact from the shift of manufacturing production volume from third-party manufacturers to our own facilities and increased automation for The Ordinary.

Obsolescence charges decreased for the three months ended March 31, 2024, primarily reflecting increased charges in the prior-year period due to lower demand, as well as our progress to reduce excess inventory.

The unfavorable impacts from manufacturing costs and other was driven primarily by the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales, partially offset by favorability in freight and transportation costs.

The decrease in gross margin for the nine months ended March 31, 2024 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 as well as the impact from the recognition of reduced manufacturing volumes on our standard cost within cost of sales in the fiscal 2024 third quarter, partially offset by favorability in freight and transportation costs.

The favorable impact from our mix of business was primarily driven by strategic pricing actions, and the favorable impact from the shift of manufacturing production volume from third-party manufacturers to our own facilities and increased automation for The Ordinary.

Charges associated with restructuring and other activities

As Reported Gross Margin Basis Point Variance

Non-GAAP Financial Measure Adjustments

Charges associated with restructuring and other activities

Non-GAAP Gross Margin Basis Point Variance

The increase in gross margin for the three months ended September 30, 2024 was driven by lower obsolescence charges, due to a reduction in excess inventory.

Also contributing to the increase in gross margin was the favorable impact from manufacturing costs and other, reflecting the impact in the three months ended September 30, 2024 from the recognition of manufacturing variances associated with reduced manufacturing volumes on our standard cost within cost of sales in the fiscal 2024 third quarter, as well as favorability in cost management, partially offset by the impact of inflation on our costs.

These increases were partially offset by an unfavorable impact from our mix of business, driven by the impact of lower net sales, including the change in category mix reflecting a decrease in skin care net sales which typically have higher margins than other product categories.

These increases in mix of business were partially offset by the benefit of strategic pricing actions.

THE ESTÉE LAUDER COMPANIES INC.

OPERATING EXPENSES

Operating expenses as a percentage of net sales was 58.4% and 61.4% for the three and nine months ended March 31, 2024, respectively, as compared with 61.2% and 60.0% in the prior-year periods.

Operating expenses as a percentage of net sales was 76.0% for the three months ended September 30, 2024, as compared with 66.8% in the prior-year period.

Favorable (Unfavorable) Basis Points

March 31, 2024

Three Months Ended Nine Months Ended

September 30, 2024

Three Months Ended

General and administrative expenses (20)

1 unchanged sentence

Selling (120)

Stock-based compensation (30) (60)

Store operating costs (30)

Shipping 50 10

Foreign exchange transactions 20 10

Subtotal 300 (290)

Stock-based compensation —

Charges associated with restructuring and other activities (290)

Other intangible asset impairments — 170

Talcum litigation settlement agreements

Changes in fair value of acquisition-related stock options 30

Total 280 (140)

The favorable change in operating expense margin for the three months ended March 31, 2024 was primarily driven by lower overall advertising and promotional expenses, due to disciplined expense management, while we continued to strategically invest in higher growth opportunities.

Partially offsetting the favorable operating expense margin were higher store operating costs, driven by targeted expanded consumer reach.

The unfavorable change in operating expense margin for the nine months ended March 31, 2024 was driven by higher store operating costs and selling expenses as we continue to invest in our business including through targeted expanded consumer reach and increased demonstration expenses, as well as an increase in stock-based compensation, primarily driven by the unfavorable year-over-year comparisons in the recognition of expenses, and adjustments related to our performance share units.

The unfavorable impact of advertising, merchandising, sampling and product development expenses was driven by the decrease in net sales.

THE ESTÉE LAUDER COMPANIES INC.

As Reported Operating Expense Margin Basis Point Variance

Non-GAAP Financial Measure Adjustments:

Impact of restructuring and other activities

Talcum litigation settlement agreements

Changes in fair value of acquisition-related stock options (30)

Non-GAAP Operating Expense Margin Basis Point Variance

Higher selling expenses in the fiscal 2025 first quarter were driven by continued investments in our business, including in support of new product launches and targeted expanded consumer reach.

OPERATING RESULTS

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

Operating income $ 531 $ 297 $ 1,203 $ 1,514

Operating income (loss)

$ Change from prior-year period (219)

2 unchanged sentences

Non-GAAP Financial Measure (1) :

% 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 75 % (29) %

% Change in operating income from the prior-year period adjusting for the impact of charges associated with restructuring and other activities, talcum litigation settlement agreements and the change in fair value of acquisition-related stock options 33 %

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 51 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

The increase in reported operating margin for the three months ended March 31, 2024 was primarily driven by an increase in net sales, an increase in gross margin, and a decrease in operating expense margin, discussed above.

The decrease in reported operating margin for the nine months ended March 31, 2024 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.

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 nine months ended March 31, 2024 of $18 million and $28 million, and for the three and nine months ended March 31, 2023 of $18 million and $33 million, respectively.

THE ESTÉE LAUDER COMPANIES INC.

The decrease in reported operating margin for the three months ended September 30, 2024 was primarily driven by a decrease in net sales and an increase in operating expense margin, partially offset by an increase in gross margin, as discussed above.

Accordingly, the following discussions of Operating income (loss) by Product Categories and Geographic Regions exclude the impact of charges associated with restructuring and other activities for the three months ended September 30, 2024 and 2023 of $106 million and $2 million, respectively.

Product Categories

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

3 unchanged sentences

Non-GAAP Financial Measure (1) :

% 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 75 % (31) %

% Change in operating income from the prior-year period adjusting for the change in fair value of acquisition-related stock options

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 51 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported skin care operating income increased for the three months ended March 31, 2024, reflecting higher operating results from La Mer and Estée Lauder, combined, of approximately $222 million.

The increase in operating income from La Mer was primarily driven by an increase in net sales.

Operating income from Estée Lauder increased, primarily reflecting a decrease in cost of sales, due in part to lower freight and transportation costs and obsolescence charges as well as a decrease in promotional items, disciplined advertising and promotional expense management, and an increase in net sales.

The increase in skin care operating income for the three months ended March 31, 2024 was partially offset by the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales.

Reported skin care operating income decreased for the nine months ended March 31, 2024, reflecting lower operating results from Estée Lauder and Clinique, combined, of approximately $322 million, primarily driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management.

Also contributing to the decrease in operating results from Estée Lauder was lower shipping costs due to the decrease in net sales.

Also contributing to the decrease in skin care operating income for the nine months ended March 31, 2024 was the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales.

Partially offsetting the decrease in skin care operating income for the nine months ended March 31, 2024 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 operating results from The Ordinary, primarily driven by an increase in net sales and a decrease in cost of sales due in part to the favorable impact from the shift of manufacturing production volume from third-party manufacturers to our own facilities, increased automation within such facilities, and lower obsolescence charges.

Partially offsetting the increase in operating income from The Ordinary was an increase in advertising and promotional activities as the brand continues to invest and support the growth of the business.

Reported skin care operating income increased for the three months ended September 30, 2024, reflecting favorability in cost of sales across the category, including lower obsolescence charges compared to the prior-year period due to a reduction in excess inventory, as well as higher operating results from Clinique, primarily driven by a decrease in cost of sales, due in part, to a decrease in promotional items, and lower advertising and promotional expenses due to the timing of advertising and promotional activities compared to the prior-year period.

Partially offsetting the increase in reported skin care operating income for the three months ended September 30, 2024 was lower operating results from La Mer, driven by a decrease in net sales, partially offset by lower cost of sales.

THE ESTÉE LAUDER COMPANIES INC.

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

Operating income (loss) $ 66 $ (5) $ 56 $ (9)

Operating loss

$ (185) $ (40)

$ Change from prior-year period (145)

1 unchanged sentence

Non-GAAP Financial Measure (1) :

% Change in operating income from the prior-year period adjusting for the impact of other intangible asset impairments

% Change in operating income from the prior-year period adjusting for the impact of talcum litigation settlement agreements

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 51 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported makeup operating income increased for the three months ended March 31, 2024, primarily reflecting higher operating results from Estée Lauder, Clinique, M·A·C, and TOM FORD, combined, of approximately $101 million.

The increase in operating results from Estée Lauder was primarily driven by an increase in net sales and disciplined advertising and promotional expense management.

Operating income from Clinique increased, primarily driven by an increase in net sales and a decrease in cost of sales, due in part to a decrease in promotional items.

The increase in operating results from M·A·C was primarily driven by lower cost of sales reflecting lower freight and transportation costs compared to the prior-year period and disciplined advertising and promotional expense management.

Operating results from TOM FORD increased, primarily driven by disciplined advertising and promotional expense management, lower cost of sales, due in part to lower obsolescence charges, and a decrease in royalty expense as a result of the fiscal 2023 fourth quarter acquisition of TOM FORD brand, partially offset by a decrease in net sales.

The increase in makeup operating income for the three months ended March 31, 2024 was partially offset by the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales.

Reported makeup operating income increased for the nine months ended March 31, 2024, 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 and TOM FORD, combined, of approximately $70 million.

The increase in operating income from Clinique was primarily driven by an increase in net sales.

Operating income from TOM FORD increased, primarily driven by lower cost of sales due in part to lower freight and transportation costs compared to the prior-year period and a decrease in royalty expense as a result of the fiscal 2023 fourth quarter acquisition of TOM FORD brand.

Partially offsetting the increase in makeup operating income for the nine months ended March 31, 2024, was lower operating results from M·A·C, primarily driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management.

Also partially offsetting the increase in makeup operating income for the nine months ended March 31, 2024 was the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales, and an increase in general and administrative expenses, reflecting higher employee-related costs, primarily driven by the increase to stock-based compensation related to the unfavorable year-over-year comparisons in the recognition of expenses, as well as adjustments related to our performance share units, and annual increases to salaries and wages, partially offset by lower incentive compensation.

THE ESTÉE LAUDER COMPANIES INC.

Reported makeup operating loss increased for the three months ended September 30, 2024, primarily reflecting the talcum litigation settlement agreements of $159 million, as well as lower operating results from M·A·C and Too Faced, combined, of approximately $23 million.

The decrease in operating results from M·A·C was primarily driven by a decrease in net sales, partially offset by a decrease in cost of sales, including lower obsolescence charges compared to the prior-year period due to a reduction in excess inventory, and lower advertising and promotional expenses due to disciplined expense management and the timing of advertising and promotional activities compared to the prior-year period.

Operating results from Too Faced decreased, primarily driven by a decrease in net sales.

Partially offsetting the decrease in reported makeup operating results for the three months ended September 30, 2024 was higher operating results from Clinique, primarily driven by an increase in net sales.

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

2 unchanged sentences

% Change from prior-year period (44) %

Reported fragrance operating income decreased for the three months ended March 31, 2024, reflecting lower operating results from TOM FORD and Le Labo, combined, of approximately $12 million.

The decrease in operating income from TOM FORD was primarily driven by a decrease in net sales, higher cost of sales, due in part to an increase in promotional items, higher advertising and promotional expenses and an increase in general and administrative expenses, as the brand continues to invest in and support the growth of the business, partially offset by a decrease in royalty expense as a result of the fiscal 2023 fourth quarter acquisition of TOM FORD brand.

Operating income from Le Labo decreased, primarily driven by higher advertising and promotional activities to support the growth of the business, higher store operating costs and higher selling expenses, due to targeted expanded consumer reach, partially offset by an increase in net sales.

Also contributing to the decrease in fragrance operating income for the three months ended March 31, 2024 was the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales.

Partially offsetting the fragrance operating income decrease for the three months ended March 31, 2024, was higher operating results from Jo Malone London, primarily driven by an increase in net sales and lower cost of sales due to a shift in product mix to colognes, which typically have higher margins, partially offset by an increase in selling expenses due to an increase in demonstration expenses compared to the prior-year period and higher store operating costs due to targeted expanded consumer reach.

Reported fragrance operating income decreased for the nine months ended March 31, 2024, primarily driven by lower operating results from TOM FORD and Clinique, combined, of approximately $31 million.

The decrease in operating income from TOM FORD was primarily driven by higher cost of sales, due in part to an increase in promotional items, higher advertising and promotional expenses to support new product launches, higher selling expenses due to an increase in demonstration expenses compared to the prior-year period, and an increase in general and administrative expenses as the brand continues to invest and support the growth of the business, 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.

Operating income from Clinique decreased, primarily driven by a decrease in net sales.

Also contributing to the decrease in fragrance operating income for the nine months ended March 31, 2024 was an increase in general and administrative expenses, reflecting higher employee-related costs, primarily driven by the increase in stock-based compensation related to the unfavorable year-over-year comparisons in the recognition of expenses, as well as adjustments related to our performance share units, and annual increases to salaries and wages, partially offset by lower incentive compensation, and the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales.

Reported fragrance operating income decreased for the three months ended September 30, 2024, reflecting lower operating results from TOM FORD, and to a lesser extent, Jo Malone London, combined, of approximately $32 million.

Operating income from TOM FORD decreased, primarily driven by a decrease in net sales, higher advertising and promotional activities to support new product launches and targeted expanded consumer reach, and higher selling expenses also driven by targeted expanded consumer reach.

The decrease in operating results from Jo Malone London was primarily driven by an increase in selling expenses and store operating costs to support new product launches and targeted expanded consumer reach.

THE ESTÉE LAUDER COMPANIES INC.

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

3 unchanged sentences

% Change from prior-year period 18 %

THE ESTÉE LAUDER COMPANIES INC.

Reported hair care operating loss remained virtually flat for the three months ended March 31, 2024.

reflecting the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales, offset by an increase in the operating results from Aveda and Bumble and bumble, combined, of approximately $11 million.

Operating results from Aveda increased, primarily driven by disciplined advertising and promotional expense management, lower general and administrative expenses, partially offset by a decrease in net sales.

The increase in operating results from Bumble and bumble was driven by a decrease in cost of sales, primarily reflecting the favorable impact of product mix and a decrease in promotional activities due to disciplined expense management, and an increase in net sales.

Reported hair care operating results decreased for the nine months ended March 31, 2024, primarily reflecting the decrease in net sales and the recognition of the impact of reduced manufacturing volumes on our standard cost within cost of sales, partially offset by the benefit from disciplined advertising and promotional expense management.

Reported hair care operating loss decreased during the three months ended September 30, 2024, primarily reflecting lower cost of sales, including lower obsolescence charges compared to the prior-year period due to a reduction in excess inventory, lower general and administrative expenses, and a decrease in advertising and promotional activities, partially offset by a decrease in net sales.

Geographic Regions

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

4 unchanged sentences

Non-GAAP Financial Measure (1) :

% 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 99 % (100+)%

% Change in operating income from the prior-year period adjusting for the impact of talcum litigation settlement agreements and change in fair value of acquisition-related stock options

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 51 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

The reported operating loss decreased in The Americas for the three months ended March 31, 2024, primarily reflecting higher intercompany royalty income of $86 million compared to the prior-year period, driven by an increase in net sales in our travel retail business, and an increase in net sales, partially offset by an increase in stock-based compensation, due to the unfavorable year-over-year comparisons as a result of adjustments related to our performance share units.

Reported operating results decreased in The Americas for the nine months ended March 31, 2024, primarily reflecting lower operating results from the United States, primarily driven by lower intercompany royalty income of $184 million compared to the prior-year period, driven by a decrease in net sales in our travel retail business, and an increase in stock-based compensation, due to the unfavorable year-over-year comparisons in the recognition of expenses, as well as adjustments related to our performance share units.

Partially offsetting the lower operating results in the United States was 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.

Reported operating loss in The Americas decreased for the three months ended September 30, 2024, primarily reflecting lower operating losses in North America, of approximately $20 million.

The decrease in operating loss was primarily driven by lower cost of sales, including lower obsolescence charges compared to the prior-year period due to a reduction in excess inventory, and a favorable year-over-year impact relating to net intercompany activity, largely offset by the talcum litigation settlement agreements of $159 million.

Partially offsetting the decrease in operating loss in The Americas for the three months ended September 30, 2024 was lower operating results in Mexico, reflecting a decrease in net sales and higher selling expenses, partially offset by lower cost of sales.

THE ESTÉE LAUDER COMPANIES INC.

Europe, the Middle East & Africa

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

2 unchanged sentences

% Change from prior-year period (38) %

THE ESTÉE LAUDER COMPANIES INC.

Reported operating income increased in Europe, the Middle East & Africa for the three months ended March 31, 2024, primarily driven by higher operating results from our travel retail business and the United Kingdom, combined, of approximately $117 million.

The higher operating results from our travel retail business were primarily due to an increase in net sales, partially offset by the associated increase in intercompany royalty expense to The Americas of $86 million.

Operating income in the United Kingdom increased, led by The Ordinary, primarily reflecting lower cost of sales due to a favorable impact from the shift of manufacturing production volume from third-party manufacturers to our own facilities, increased automation within such facilities, and lower obsolescence charges.

Reported operating income decreased in Europe, the Middle East & Africa for the nine months ended March 31, 2024, primarily driven by lower results from our travel retail business, primarily due to a decrease in net sales, partially offset by the associated decrease in intercompany royalty expense to The Americas of $184 million.

Partially offsetting the decrease in operating income in Europe, the Middle East & Africa for the nine months ended March 31, 2024, were higher results from the United Kingdom, primarily led by The Ordinary, reflecting an increase in net sales and a decrease in cost of sales, due to a favorable impact from the shift of manufacturing production volume from third-party manufacturers to our own facilities, increased automation within such facilities, and lower obsolescence charges, partially offset by an increase in selling expenses and advertising and promotional expenses to support the growth of the business.

Reported operating income decreased in Europe, the Middle East & Africa for the three months ended September 30, 2024, primarily driven by lower results from our travel retail business and the United Kingdom, combined, of approximately $54 million.

The decrease in operating income from our travel retail business was primarily due to a decrease in net sales and an unfavorable year-over-year impact of net intercompany activity, partially offset by disciplined advertising and promotional expense management.

Operating income decreased in the United Kingdom, primarily driven by an increase in cost of sales, higher advertising and promotional expenses to support key campaigns, and an unfavorable year-over-year impact of net intercompany activity.

Three Months Ended

March 31 Nine Months Ended

($ in millions) 2024 2023

2 unchanged sentences

% Change from prior-year period (54) %

Non-GAAP Financial Measure (1) :

% Change in operating income from the prior-year period adjusting for the impact of other intangible asset impairments 9 % (17) %

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 61 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported operating income increased in Asia/Pacific for the three months ended March 31, 2024, primarily driven by higher results in mainland China and Hong Kong SAR, combined, of approximately $37 million.

The increase in operating results from mainland China was primarily driven by disciplined advertising and promotional expense management, partially offset by higher store operating costs, driven by an unfavorable comparison from a commission rebate benefit received in the prior-year period.

Operating results in Hong Kong SAR increased, primarily driven by an increase in net sales.

Partially offsetting the increase in operating income in Asia/Pacific for the three months ended March 31, 2024, was lower results from Japan, primarily reflecting higher cost of sales, driven by our new manufacturing facility near Tokyo which began limited production in fiscal 2023.

Reported operating income decreased in Asia/Pacific for the nine months ended March 31, 2024, primarily driven by lower results in mainland China, Japan, Taiwan and Thailand, combined, of approximately $145 million.

The decrease in operating income in mainland China was primarily driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management.

Operating income in Japan decreased, primarily reflecting higher cost of sales driven by our new manufacturing facility near Tokyo which began limited production in fiscal 2023.

The decrease in operating results in Taiwan and Thailand were primarily driven by decreases in net sales.

THE ESTÉE LAUDER COMPANIES INC.

Partially offsetting the decrease in operating income in Asia/Pacific for the nine months ended March 31, 2024 was higher operating results from Korea, led by the Dr.Jart+ travel retail business in Korea, and Hong Kong SAR, combined, of approximately $121 million.

The increase in operating income from Korea, led by the Dr.Jart+ travel retail business in Korea, was primarily driven by the favorable year-over-year impact of the fiscal 2023 second quarter other intangible asset impairment relating to Dr.

Jart+ of $100 million, partially offset by a decrease in net sales.

Operating results from Hong Kong SAR increased, primarily driven by an increase in net sales, partially offset by an increase in advertising and promotional expenses to support the resumption of travel from mainland China to Hong Kong SAR due to the lifting of travel restrictions which began during the fiscal 2023 third quarter, as well as an increase in store operating costs driven by increased sales.

Reported operating income decreased in Asia/Pacific for the three months ended September 30, 2024, primarily driven by lower results in mainland China and Hong Kong SAR, combined, of approximately $55 million.

The decrease in operating results from mainland China was primarily driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management.

Operating results in Hong Kong SAR decreased, primarily driven by a decrease in net sales.

INTEREST AND INVESTMENT INCOME

Three Months Ended

March 31 Nine Months Ended

(In millions) 2024 2023

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Interest income and investment income, net $ 35 $ 41

Interest expense increased for the three and nine months ended March 31, 2024, primarily reflecting a higher debt balance, due in part to the financing of our acquisition of the TOM FORD brand 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.

Interest income and investment income, net increased in both periods, primarily reflecting higher interest rates compared to the prior-year period.

Interest expense decreased for the three months ended September 30, 2024, primarily reflecting a lower average debt balance compared to the prior-year period.

Interest income and investment income, net decreased, primarily reflecting a lower average cash balance compared to the prior-year period, partially offset by higher interest rates compared to the prior-year period.

THE ESTÉE LAUDER COMPANIES INC.

PROVISION FOR INCOME TAXES

The provision for income taxes represents U.S.

The provision or benefit for income taxes represents U.S.

federal, foreign, state and local income taxes.

The effective rate differs from the federal statutory rate primarily due to the effect of state and local income taxes, the tax impact of share-based compensation, the taxation of foreign income and income tax reserve adjustments, which represent changes in our net liability for unrecognized tax benefits including tax settlements and lapses of the applicable statutes of limitations.

Our effective tax rate will change from quarter-to-quarter based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes, tax reserve adjustments, the tax impact of share-based compensation, the interaction of various global tax strategies and the impact from certain acquisitions.

The effective rate differs from the federal statutory rate primarily due to the effect of state and local income taxes, the tax impact of stock-based compensation, the taxation of foreign income and income tax reserve adjustments, which represent changes in our net liability for unrecognized tax benefits including tax settlements and lapses of the applicable statutes of limitations.

Our effective tax rate will change from quarter-to-quarter based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes, tax reserve adjustments, the tax impact of stock-based compensation, the interaction of various global tax strategies and the impact from certain acquisitions.

In addition, changes in judgment from the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of change.

Three Months Ended

March 31 Nine Months Ended

2024 2023 2024 2023

Effective rate for income taxes 13.3 % 21.7 %

Basis-point change from the prior-year period (840)

For the three months ended March 31, 2024, the decrease in the effective tax rate was primarily attributable to a lower effective tax rate on our foreign operations due to the timing of the estimated change in our full year geographical mix of earnings in the current and prior-year periods, partially offset by the unfavorable impact associated with previously issued stock-based compensation.

For the nine months ended March 31, 2024, the increase in the effective tax rate was primarily attributable to a higher effective tax rate on our foreign operations due to our geographical mix of earnings for fiscal 2024, and the unfavorable impact associated with previously issued stock-based compensation.

THE ESTÉE LAUDER COMPANIES INC.

NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.

The decrease in the effective tax rate of 840 basis points was primarily attributable to the impact of the discrete treatment of the charge associated with the talcum litigation settlement agreements and charges associated with restructuring and other activities recorded in the first quarter of fiscal 2025.

The loss before income taxes in the first quarter of fiscal 2025 increased the impact of these discrete items on the effective tax rate.

NET EARNINGS (LOSS) ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.

Three Months Ended

March 31 Nine Months Ended

($ in millions, except per share data) 2024 2023

Net earnings attributable to The Estée Lauder Companies Inc.

$ 330 $ 156 $ 674 $ 1,039

Net earnings (loss) attributable to The Estée Lauder Companies Inc.

$ Change from prior-year period (187)

% Change from prior-year period (100+)%

Diluted net earnings per common share $ .91 $ .43 $ 1.87 $ 2.88

Diluted net earnings (loss) per common share

$ (.43) $ .09

% Change from prior-year period (100+)%

Non-GAAP Financial Measure (1) :

% 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 100+% (42) %

% 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, talcum litigation settlement agreements and the change in fair value of acquisition-related stock options 33 %

(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.

THE ESTÉE LAUDER COMPANIES INC.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

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The following tables present Net sales, Operating income and Diluted net earnings per common share adjusted to exclude the impact of charges associated with restructuring and other activities;

talcum litigation settlement agreements;

the change in fair value of acquisition-related stock options;

other intangible asset impairments;

and the effects of foreign currency translation.

The following tables provide reconciliations between these non-GAAP financial measures and the most directly comparable U.S.

The following table provides reconciliations between these non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

THE ESTÉE LAUDER COMPANIES INC.

($ in millions, except per share data) Three Months Ended

Variance % Change

constant currency

Net sales, as reported $ 3,940 $ 3,751 $ 189 5 % 6 %

Returns associated with restructuring and other activities — 4 (4)

Net sales, as adjusted $ 3,940 $ 3,755 $ 185 5 % 6 %

Operating income, as reported $ 531 $ 297 $ 234 79 % 87 %

Charges associated with restructuring and other activities 18 18 —

Change in fair value of acquisition-related stock options 5 1 4

Operating income, as adjusted $ 554 $ 316 $ 238 75 % 83 %

Diluted net earnings per common share, as reported $ .91 $ .43 $ .48 100+% 100+%

Charges associated with restructuring and other activities .04 .04 —

Change in fair value of acquisition-related stock options (less portion attributable to redeemable noncontrolling interest) .02 — .02

Diluted net earnings per common share, as adjusted $ .97 $ .47 $ .50 100+% 100+%

THE ESTÉE LAUDER COMPANIES INC.

($ in millions, except per share data) Nine Months Ended

March 31 Variance % Change

September 30 Variance % Change

constant currency

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Net sales, as adjusted $ 3,361 $ 3,518 $ (157) (4) % (5) %

Operating income, as reported $ 1,203 $ 1,514 $ (311) (21) % (18) %

Operating income (loss), as reported

$ (121) $ 98 $ (219) (100+)% (100+)%

Charges associated with restructuring and other activities 106 2 104

Other intangible asset impairments — 207 (207)

Talcum litigation settlement agreements

Change in fair value of acquisition-related stock options — 8 (8)

2 unchanged sentences

Charges associated with restructuring and other activities .23 — .23

Other intangible asset impairments — .44 (.44)

Talcum litigation settlement agreements

Change in fair value of acquisition-related stock options (less portion attributable to redeemable noncontrolling interest) — .02 (.02)

2 unchanged sentences

THE ESTÉE LAUDER COMPANIES INC.

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:

The following table reconciles the change in net sales by product category and geographic region, as reported, to the change in net sales excluding the effects of foreign currency translation:

As Reported Impact of foreign

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THE ESTÉE LAUDER COMPANIES INC.

As Reported Impact of foreign

currency translation Variance,

in constant currency % Change,

as reported % Change,

in constant currency

Nine Months Ended

($ in millions) 2024 2023 Variance

By Product Category:

Skin Care $ 5,873 $ 6,454 $ (581) $ 52 $ (529) (9) % (8) %

Makeup 3,365 3,424 (59) — (59) (2) (2)

Fragrance 1,948 1,907 41 4 45 2 2

Hair Care 464 488 (24) (3) (27) (5) (6)

Other 88 38 50 1 51 100+ 100+

11,738 12,311 (573) 54 (519) (5) (4)

Returns associated with restructuring and other activities (1) (10) 9 — 9

Total $ 11,737 $ 12,301 $ (564) $ 54 $ (510) (5) % (4) %

The Americas $ 3,567 $ 3,447 $ 120 $ (1) $ 119 3 % 3 %

Europe, the Middle East & Africa 4,488 4,972 (484) (53) (537) (10) (11)

Asia/Pacific 3,683 3,892 (209) 108 (101) (5) (3)

11,738 12,311 (573) 54 (519) (5) (4)

Returns associated with restructuring and other activities (1) (10) 9 — 9

Total $ 11,737 $ 12,301 $ (564) $ 54 $ (510) (5) % (4) %

THE ESTÉE LAUDER COMPANIES INC.

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:

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 impact of talcum litigation settlement agreements and the change in fair value of acquisition-related stock options:

As Reported Add:

Talcum litigation settlement agreements

Change in fair value of acquisition-related stock options Variance, as adjusted % Change, as reported % Change, as adjusted

16 unchanged sentences

Total $ (121) $ 98 $ (219)

THE ESTÉE LAUDER COMPANIES INC.

As Reported Add:

Other intangible asset impairments Add:

Change in fair value of acquisition-related stock options Variance, as adjusted % Change, as reported % Change, as adjusted

Nine Months Ended

($ in millions) 2024 2023 Variance

By Product Category:

Skin Care $ 920 $ 1,238 $ (318) $ (100) $ 10 $ (408) (26) % (31) %

Makeup 56 (9) 65 (107) — (42) 100+ (43)

Fragrance 267 343 (76) — — (76) (22) (22)

Hair Care (50) (32) (18) — — (18) (56) (56)

Other 38 7 31 — — 31 100+ 100+

1,231 1,547 (316) $ (207) $ 10 $ (513) (20) % (29) %

Charges associated with restructuring and other activities (28) (33) 5

Total $ 1,203 $ 1,514 $ (311)

The Americas $ (243) $ (53) $ (190) $ (107) $ 10 $ (287) (100+)% (100+)%

Europe, the Middle East & Africa 825 919 (94) — — (94) (10) (10)

Asia/Pacific 649 681 (32) (100) — (132) (5) (17)

1,231 1,547 (316) $ (207) $ 10 $ (513) (20) % (29) %

Charges associated with restructuring and other activities (28) (33) 5

Total $ 1,203 $ 1,514 $ (311)

FINANCIAL CONDITION

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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.

At March 31, 2024, we had cash and cash equivalents of $3,701 million compared with $4,029 million at June 30, 2023.

At September 30, 2024, we had cash and cash equivalents of $2,350 million compared with $3,395 million at June 30, 2024.

Our cash and cash equivalents are maintained at a number of financial institutions.

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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.

In April 2024, we notified the minority interest holders that we are exercising our option to purchase the remaining interests in DECIEM, pursuant to the terms of the net Put (Call) Option for a purchase price based on the performance of DECIEM.

This will result in the settlement of the DECIEM stock options and the redeemable noncontrolling interest balances during the fiscal 2024 fourth quarter.

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.

The Tax Cuts and Jobs Act resulted in the Transition Tax on unrepatriated earnings of our foreign subsidiaries and changed the tax law in ways that present opportunities to repatriate cash without additional U.S.

federal income tax.

During the fiscal 2023 fourth quarter, we changed our assertion regarding our ability and intent to indefinitely reinvest undistributed earnings from certain foreign subsidiaries.

We continue to analyze the indefinite reinvestment assertion on our remaining applicable foreign earnings.

We do not believe that continuing to reinvest these remaining applicable foreign earnings impairs our ability to meet our domestic debt or working capital obligations.

We continue to analyze the indefinite reinvestment assertion on our applicable foreign earnings.

We do not believe continuing to reinvest these applicable foreign earnings impairs our ability to meet our domestic debt or working capital obligations.

If these reinvested earnings were repatriated into the United States as dividends, we would be subject to state income taxes and applicable foreign taxes in certain jurisdictions.

THE ESTÉE LAUDER COMPANIES INC.

Inflation impacted our overall operating results in the fiscal 2024 third quarter and we expect it to continue.

Inflation impacted our overall operating results in the fiscal 2025 first 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.

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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.

As of April 24, 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.

As of October 24, 2024, our long-term debt is rated A with a negative outlook by Standard & Poor’s and A2 with a stable outlook by Moody’s.

THE ESTÉE LAUDER COMPANIES INC.

At March 31, 2024, our outstanding borrowings were as follows:

At September 30, 2024, our outstanding borrowings were as follows:

($ in millions) Long-term

33 unchanged sentences

(14) Consists of $500 million principal and debt issuance costs of $1 million.

(15) Consists of $500 million principal and unamortized debt discount of $1 million.

(15) Consists of $500 million principal.

(16) The Senior Notes contain certain customary covenants, including limitations on indebtedness secured by liens.

Total debt as a percent of total capitalization was 57% and 59% at March 31, 2024 and June 30, 2023, respectively.

Total debt as a percent of total capitalization was 61% and 59% at September 30, 2024 and June 30, 2024, respectively.

THE ESTÉE LAUDER COMPANIES INC.

Nine Months Ended

Three Months Ended

(In millions) 2024 2023

Net cash flows provided by operating activities $ 1,471 $ 1,017

Net cash flows used for operating activities

$ (670) $ (408)

Net cash flows used for investing activities $ (160) $ (295)

Net cash flows provided by (used for) financing activities

Net cash flows used for financing activities

$ (226) $ (219)

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.

The change in net cash flows used for investing activities was primarily driven by 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, and an increase in capital expenditures, primarily driven by the timing of payments relating to the manufacturing facility near Tokyo as it nears completion.

The change in net cash flows provided by (used for) financing activities primarily reflected an unfavorable impact in repayments of commercial paper during fiscal 2024 as compared to an increase in proceeds from the issuance of short-term commercial paper in the prior-year period, partially offset by an increase in debt due to the issuance of our $650 million, 5.000% Senior Notes in February 2024, 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.

For a summary of quarterly cash dividends declared per share on our Class A and Class B Common Stock during the nine months ended March 31, 2024, see Notes to Consolidated Financial Statements, Note 12 – Equity and Redeemable Noncontrolling Interest .

The change in net cash flows used for operating activities was primarily driven by the loss before tax for the three months ended September 30, 2024, excluding non-cash items, and an unfavorable change in operating assets and liabilities variances, reflecting an unfavorable change in other accrued and noncurrent liabilities, accounts payable and inventory and promotional merchandise, partially offset by a favorable change in accounts receivable.

The change in net cash flows used for investing activities was primarily driven by a favorable year-over-year impact from payments made relating to the manufacturing facility in Japan, near Tokyo in the prior-year period.

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, 2024, see Notes to Consolidated Financial Statements, Note 11 – Equity and Redeemable Noncontrolling Interest .

Pension and Post-retirement Plan Funding

6 unchanged sentences

Foreign Exchange Risk Management

For a discussion of foreign exchange risk management, see Notes to Consolidated Financial Statements, Note 5 – Derivative Financial Instruments (Cash Flow Hedges, Net Investment Hedges) .

For a discussion of foreign exchange risk management, see Notes to Consolidated Financial Statements, Note 4 – Derivative Financial Instruments (Fair Value Hedges, Cash Flow Hedges and Net Investment Hedges) .

For a discussion of credit risk, see Notes to Consolidated Financial Statements, Note 4 – Derivative Financial Instruments (Credit Risk) .

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.

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 $356 million and $265 million as of March 31, 2024 and June 30, 2023, respectively.

The increase from June 30, 2023 to March 31, 2024 was driven by an increase in the net short foreign currency position of the portfolio.

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 $375 million and $371 million as of September 30, 2024 and June 30, 2024, respectively.

This potential change does not consider our underlying foreign currency exposures.

1 unchanged sentence

A hypothetical 10% weakening of the U.S.

dollar against the foreign exchange rates for the currencies in our cross-currency swap contracts would have resulted in a net decrease in the fair value of our cross-currency swap contracts of approximately $49 million as of March 31, 2024 and June 30, 2023.

THE ESTÉE LAUDER COMPANIES INC.

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.

Based on a hypothetical 100 basis point increase in interest rates, the estimated fair value of our interest rate derivatives would decrease by approximately $50 million and $55 million as of March 31, 2024 and June 30, 2023, respectively.

Based on a hypothetical 100 basis point increase in interest rates, the estimated fair value of our interest rate derivatives would decrease by approximately $49 million and $48 million as of September 30, 2024 and June 30, 2024, 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.

5 unchanged sentences

As disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with U.S.

generally accepted accounting principles.

The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those financial statements.

These estimates and assumptions can be subjective and complex, and consequently, actual results could differ from those estimates.

Our most critical accounting policies relate to goodwill and other indefinite-lived intangible assets - impairment assessment, income taxes and asset acquisition.

Our most critical accounting policies relate to goodwill and other indefinite-lived intangible assets - impairment assessment and income taxes.

Since June 30, 2024, there have been no significant changes to the assumptions and estimates related to our critical accounting policies.

1 unchanged sentence

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 .

THE ESTÉE LAUDER COMPANIES INC.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

6 unchanged sentences

(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;

THE ESTÉE LAUDER COMPANIES INC.

(3) consolidations, restructurings, bankruptcies and reorganizations in the retail industry causing a decrease in the number of stores that sell our products, an increase in the ownership concentration within the retail industry, ownership of retailers by our competitors or ownership of competitors by our customers that are retailers and our inability to collect receivables;

5 unchanged sentences

(9) foreign currency fluctuations affecting our results of operations and the value of our foreign assets, the relative prices at which we and our foreign competitors sell products in the same markets and our operating and manufacturing costs outside of the United States;

(10) changes in global or local conditions, including those due to volatility in the global credit and equity markets, natural or man-made disasters, real or perceived epidemics, supply chain challenges, inflation, or increased energy costs, that could affect consumer purchasing, the willingness or ability of consumers to travel and/or purchase our products while traveling, the financial strength of our customers, suppliers or other contract counterparties, our operations, the cost and availability of capital which we may need for new equipment, facilities or acquisitions, the returns that we are able to generate on our pension assets and the resulting impact on funding obligations, the cost and availability of raw materials and the assumptions underlying our critical accounting estimates;

(11) impacts attributable to the COVID-19 pandemic, including disruptions to our global business;

(10) changes in global or local conditions, including those due to volatility in the global credit and equity markets, government economic policies, natural or man-made disasters, real or perceived epidemics, supply chain challenges, inflation, or increased energy costs, that could affect consumer purchasing, the willingness or ability of consumers to travel and/or purchase our products while traveling, the financial strength of our customers, suppliers or other contract counterparties, our operations, the cost and availability of capital which we may need for new equipment, facilities or acquisitions, the returns that we are able to generate on our pension assets and the resulting impact on funding obligations, the cost and availability of raw materials and the assumptions underlying our critical accounting estimates;

(11) 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;

THE ESTÉE LAUDER COMPANIES INC.

(12) 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;

7 unchanged sentences

(18) additional factors as described in our filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended June 30, 2024.

THE ESTÉE LAUDER COMPANIES INC.

We assume no responsibility to update forward-looking statements made herein or otherwise.

2 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.

What changed 10-Q

Item 2. Management’s Discussion and Analysis