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Item 7. Management’s Discussion and Analysis

2025-08-20 compared with 2024-08-19 · 385 added, 371 removed, 399 unchanged (65% of the section changed)

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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 fiscal 2024, 2023 and 2022 and reflects the basis of presentation described in Item 8.

Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies and Note 24 – Segment Data and Related Information for all periods presented.

Products, services, and royalty revenue from license arrangements 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 misstatements 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 fiscal 2023 and fiscal 2022.

See Note 24 – Segment Data and Related Information for additional details.

Year Ended June 30,

2025 2024 2023

($ in millions)

Net sales $ 14,326 100.0 % $ 15,608 100.0 % $ 15,910 100.0 %

Cost of sales 3,729 26.0 4,424 28.3 4,564 28.7

Gross profit 10,597 74.0 11,184 71.7 11,346 71.3

Operating expenses:

Selling, general and administrative 9,456 66.0 9,621 61.6 9,575 60.2

Restructuring and other charges 481 3.4 122 0.8 55 0.3

Goodwill impairment 13 0.1 291 1.9 — —

Impairment of other intangible assets

1,273 8.9 180 1.2 207 1.3

Talcum litigation settlement agreements

159 1.1 — — — —

Total operating expenses 11,382 79.4 10,214 65.4 9,837 61.8

Operating (loss) income

(785) (5.5) 970 6.2 1,509 9.5

Interest expense 357 2.5 378 2.4 255 1.6

Interest income and investment income, net 114 0.8 167 1.1 131 0.8

Other components of net periodic benefit cost 12 0.1 (13) (0.1) (12) (0.1)

(Loss) earnings before income taxes

(1,040) (7.3) 772 4.9 1,397 8.8

Provision for income taxes

93 0.6 363 2.3 387 2.4

Net (loss) earnings

(1,133) (7.9) 409 2.6 1,010 6.3

Net earnings attributable to redeemable noncontrolling interest

— — (19) (0.1) (4) —

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

$ (1,133) (7.9) % $ 390 2.5 % $ 1,006 6.3 %

Percentages not adjusted for differences caused by rounding

The following table is a comparative summary of operating results for fiscal 2025, 2024 and 2023, for our product categories and geographic regions and reflects the basis of presentation described in Item 8.

Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies and Note 24 – Segment Data and Related Information , for our product categories that meet the definition of reportable segments, for all periods presented.

Royalty revenue from license arrangements, and products and services that do not fit within our definitions of skin care, makeup, fragrance and hair care have been included in the “other” category.

Year Ended June 30,

(In millions) 2025 2024 2023

By Product Category:

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Net sales $ 14,326 $ 15,608 $ 15,910

By Region (1) :

By Geographic Region (1) :

The Americas $ 4,411 $ 4,581 $ 4,518

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Net sales $ 14,326 $ 15,608 $ 15,910

OPERATING INCOME (LOSS)

OPERATING (LOSS) INCOME

By Product Category:

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Charges associated with restructuring and other activities (486) (124) (85)

Operating income $ 970 $ 1,509 $ 3,170

By Region (1) :

Operating (loss) income

$ (785) $ 970 $ 1,509

By Geographic Region (1) :

The Americas $ (918) $ 34 $ (73)

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Charges associated with restructuring and other activities (486) (124) (85)

Operating income $ 970 $ 1,509 $ 3,170

Operating (loss) income

$ (785) $ 970 $ 1,509

(1) The net sales from the Company’s travel retail business are included in the Europe, the Middle East & Africa region, with the exception of net sales of Dr.Jart+ in the travel retail channel that are reflected in Korea in the Asia/Pacific region.

Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.

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

Year Ended June 30

2024 2023 2022

Net sales 100.0 % 100.0 % 100.0 %

Cost of sales 28.3 28.7 24.3

Gross profit 71.7 71.3 75.7

Operating expenses:

Selling, general and administrative 61.6 60.2 55.7

Restructuring and other charges 0.8 0.3 0.8

Goodwill impairment 1.9 — —

Impairment of other intangible and long-lived assets 1.2 1.3 1.4

Total operating expenses 65.4 61.8 57.9

Operating income 6.2 9.5 17.9

Interest expense 2.4 1.6 0.9

Interest income and investment income, net 1.1 0.8 0.2

Other components of net periodic benefit cost (0.1) (0.1) —

Other income, net — — —

Earnings before income taxes 4.9 8.8 17.1

Provision for income taxes 2.3 2.4 3.5

Net earnings 2.6 6.3 13.6

Net earnings attributable to noncontrolling interests — — —

Net earnings attributable to redeemable noncontrolling interest

(0.1) — (0.1)

Net earnings attributable to The Estée Lauder Companies Inc.

2.5 % 6.3 % 13.5 %

Not adjusted for differences caused by rounding

This is primarily due to certain capabilities related to the travel retail business that are centralized in The Americas region and, as such, a component of the operating income generated by this business is transferred to The Americas through an intercompany royalty.

Period-over-period changes in our net sales are generally attributable to the impacts from (i) pricing on our base portfolio, including changes in mix and those due to strategic pricing actions, (ii) volume, including changes driven by the impact of new product innovation, (iii) acquisitions and/or divestitures, and/or (iv) foreign currency translation.

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Prices of skin care and fragrance products are typically higher than makeup and hair care products.

New product innovation includes the introduction of new products, as well as changes related to existing products or where they are sold, including reformulations, regional expansion, repackaging and sets.

New product innovation includes the introduction of new products, as well as changes related to existing products or markets where they are sold, including reformulations, regional expansion, repackaging and sets.

A product is considered "new innovation" for the twelve-month period following the initial shipment date.

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Accordingly, fluctuations in foreign currency exchange rates can affect our results of operations.

Therefore, we present certain net sales, operating results and diluted net earnings per common share information excluding the effect of foreign currency rate fluctuations to provide a framework for assessing the performance of our underlying business outside the United States.

Therefore, we present certain net sales, operating results, provision for income taxes and diluted net (loss) earnings per common share information excluding the effect of foreign currency rate fluctuations to provide a framework for assessing the performance of our underlying business outside the United States.

Constant currency information compares results between periods as if exchange rates had remained constant period-over-period.

We calculate constant currency information by translating current-period results using monthly average foreign currency exchange rates and adjusting for the period-over-period impact of foreign currency cash flow hedging activities.

We calculate constant currency information by translating current-period results using prior year monthly average foreign currency exchange rates and adjusting for the period-over-period impact of foreign currency cash flow hedging activities.

We are a leader in prestige beauty, which combines the repeat purchase and relative affordability of consumer goods with high quality products and services.

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 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.

• Our skin care net sales declined 4% in fiscal 2024, driven by declines from Estée Lauder, Clinique and Dr.Jart+.

The decrease in net sales from Estée Lauder, Clinique and Dr.Jart+ was primarily driven by declines in mainland China and in our Asia travel retail business.

In mainland China, net sales declined, primarily driven by ongoing softness in overall prestige beauty.

Asia travel retail net sales declined, driven by a decline in the first half of fiscal 2024, primarily due to actions that we and our retailers took to reset inventory levels, in part in response to changes in government policies that began in the second half of fiscal 2023, as well as lower conversion.

The net sales decrease in Asia travel retail for Estée Lauder was partially offset by the return to growth in the second half of fiscal 2024 primarily driven by a favorable comparison to the prior-year period due to the aforementioned changes in government policies as well as higher shipments.

Also contributing to the net sales decrease from Dr.Jart+ was lower demand.

These decreases were partially offset by higher net sales from La Mer and The Ordinary.

• Our makeup net sales decreased slightly in fiscal 2024, primarily driven by lower net sales from M·A·C, reflecting 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 fiscal 2023, and to a lesser extent, TOM FORD and La Mer, partially offset by higher net sales from Clinique.

• Our fragrance net sales increased slightly in fiscal 2024, primarily driven by growth in Le Labo and Jo Malone London, partially offset by lower net sales from Estée Lauder and the unfavorable year-over-year impact of residual net sales in fiscal 2023 related to the terminations of certain of our designer fragrance licenses effective June 30, 2022.

• Our hair care net sales decreased 4% in fiscal 2024, driven by lower net sales from Aveda due to declines in North America, primarily reflecting softness in the salon channel and our direct-to-consumer business.

We also leverage consumer analytics and insights across our brand portfolio to grow sales and pursue profitable opportunities.

These analytics and insights, combined with our creativity, also 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.

Our global distribution capability and operations allow us to focus on targeted expanded consumer reach wherever consumer demographics and trends are attractive.

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

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

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

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, recruitment and loyalty.

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

• Net sales in The Americas increased slightly in fiscal 2024, primarily driven by higher net sales in Mexico, Brazil and, to a lesser extent, the United States.

The increase in net sales from Mexico and Brazil was primarily driven by growth in makeup, led by M·A·C, as well as growth in skin care and fragrance.

Net sales in the United States increased slightly, primarily reflecting incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand and higher net sales in fragrance, led by our luxury fragrances, partially offset by a decline in makeup reflecting 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 in fiscal 2023, and to a lesser extent, decreases in hair care and skin care.

• Net sales in Europe, the Middle East & Africa decreased slightly in fiscal 2024, primarily reflecting lower net sales from our Asia travel retail business.

The net sales decrease in Asia travel retail was partially offset by the return to growth in the second half of fiscal 2024 primarily driven by a favorable comparison to the prior-year period due to the aforementioned changes in government policies as well as higher shipments.

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

• Net sales in Asia/Pacific decreased 6% in fiscal 2024, reflecting lower net sales from mainland China, and to a lesser extent Korea, partially offset by an increase in net sales in Hong Kong SAR.

The decrease in net sales in mainland China was primarily driven by ongoing softness in overall prestige beauty.

The lower net sales in Korea were primarily due to lower demand in the Dr.Jart+ travel retail business in Korea.

We approach distribution strategically by product category and location and seek to optimize distribution by matching our brands with appropriate opportunities while seeking to maintain high productivity per door.

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We also focus on brand-building retail activities, technology-driven activations and omnichannel capabilities that enhance the shopping experience for consumers.

• As part of this strategy, we have built a leadership position in the global travel retail channel, that historically allowed us to leverage the robust and growing international passenger traffic.

While the Asia travel retail business continued to be pressured in fiscal 2024, we believe that global travel retail is a long-term growth opportunity.

Travel retail continues to be an important channel for brand building, particularly for those consumers who experience our brands for the first time while traveling.

We continue to expand our strategic presence in travel retail across duty-free locations primarily in airports and downtown stores and increasingly through online retail.

As examples, we engage consumers at the airport through pop-up activations in non-traditional commercial areas, and we tailor communications and curated assortments for targeted consumer groups.

At the same time, travel retail is susceptible to a number of external factors, including fluctuations in currency exchange rates, changes in regulations or enforcement, and consumers’ willingness and ability to travel and spend.

• We continue to support e-commerce sites of our own, collaborate with our retailers on their e-commerce sites, and sell through select third-party online malls.

We believe our success in the channel is a result of adapting our strategy to meet local market and cultural needs.

We also continue to develop and implement omnichannel concepts, virtual try-on tools and compelling content to deliver an integrated consumer experience and better serve consumers as they shop across channels.

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 declines in overall prestige beauty due to current consumer sentiment in mainland China, which is also expected to impact Asia travel retail.

In North America, we are experiencing ongoing competitive pressures along with a 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% of consolidated net sales in each of fiscal 2023 and fiscal 2024.

We have experienced challenges within our business and we expect volatility and uncertainty to continue.

Although there are early signs of stabilization in mainland China, travel retail continues to be weak and challenges persist in the West, including subdued sentiment in the U.S.

and Western Europe.

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 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.

We plan to build upon and leverage our history of outstanding creativity and innovation, high quality products and services, and engaging communications while investing for long-term sustainable growth.

We are continuing to monitor and assess the potential effects of new and existing tariffs in the United States as well as in other markets in which we operate.

These tariffs have led to significant volatility and uncertainty in global markets and difficulty in forecasting demand.

We have implemented and are continuing to implement and consider additional mitigation measures.

The impact was not material to fiscal 2025 profitability and cash flows, however, even if we can minimize some of these impacts, we anticipate higher tariff rates to have an adverse effect on fiscal 2026 profitability and cash flows, and depending on actual rates and countries imposing tariffs such adverse impacts could be material.

We continue to 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 product categories, brands, geographic regions, channels of distribution and functions designed to grow our sales, provide cost efficiencies, leverage our strengths, such as our history of outstanding creativity and innovation, high quality products and services, and engaging communications, and make us more productive and profitable.

With the transition of leadership in the second and third quarters of fiscal 2025, we have embarked on "Beauty Reimagined," a strategic vision which focuses on accelerating best-in-class consumer coverage, creating transformative innovation, boosting consumer-facing investments, fueling sustainable growth through bold efficiencies and reimagining the way we work, including through the expansion of the Profit Recovery and Growth Plan ("PRGP"), as discussed below.

We continue to monitor the effects of the global macro environment, including the risk of recession;

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competitive pressures;

regulatory matters, including the imposition of tariffs and sanctions;

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

geopolitical tensions;

and global security issues.

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.

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.

In December 2021, the Organization for Economic Cooperation and Development (“OECD”) issued "Pillar Two" Global Anti-Base Erosion model rules for countries to enact into domestic law that would establish a 15% global minimum tax applied on a country-by-country basis for multinational companies.

Certain countries have enacted or are expected to enact legislation incorporating the global minimum tax, which will be effective for us beginning in fiscal 2025.

We are continuing to evaluate the potential impact of such newly enacted legislation and we anticipate an increase to our global effective tax rate as a result of these changes.

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 was $.07 dilutive to earnings per common share for the year ended June 30, 2024, after reflecting the benefit of insurance recoveries received in fiscal 2024.

We are also mindful of inflationary pressures (including those caused by tariffs) on our cost base and are monitoring the impact on consumer preferences, the impact of changes being made in the organization, including those related to Beauty Reimagined and the PRGP, as well as the potential impact of changes expected to be made as part of the PRGP on suppliers, retailers and others, and challenges relating to successfully outsourcing select services.

In our outlook, we have made assumptions relating to these and other internal and external factors and challenges.

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

In December 2021, the Organization for Economic Cooperation and Development issued "Pillar Two" Global Anti-Base Erosion model rules for countries to enact into domestic law that would establish a 15% global minimum tax applied on a country-by-country basis for multinational companies.

In certain countries that have enacted legislation incorporating the global minimum tax, it became effective for the Company at the beginning of fiscal 2025.

The estimated tax impact of such legislation has been included in the provision for income taxes for the fiscal year ended June 30, 2025 and was not material.

We are continuing to monitor and evaluate the potential impact of newly enacted legislation incorporating the global minimum tax in additional countries.

On July 4, 2025, new U.S tax legislation was enacted.

Known as the One Big Beautiful Bill Act, this legislation includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of certain business tax provisions.

The legislation has multiple effective dates, with certain provisions becoming effective in fiscal 2026.

We are currently evaluating the impact of the new legislation.

We are also monitoring certain provisions in global tax regulations that may expire during fiscal 2026, which, if not extended, could increase our effective tax rate.

Restructuring Program Component of the Profit Recovery and Growth Plan

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

As announced on November 1, 2023, we launched the 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.

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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.

The restructuring program’s main focus included 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, we estimated a net reduction in the range of approximately 1,800 to 3,000 positions globally, which was about 3-5% of our positions including temporary and part-time employees as of June 30, 2023.

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

We planned to substantially complete specific initiatives under the restructuring program through fiscal 2026.

We expected that the restructuring program would result in restructuring and other charges totaling between $500 million and $700 million, before taxes, consisting of employee-related costs, contract terminations, asset write-offs and other costs associated with implementing these initiatives.

After reviewing additional potential initiatives and the progress of previously approved initiatives, on February 3, 2025, we committed to the expansion of the PRGP, including an expansion of the restructuring program.

The expansion of the overall PRGP is focused on three key areas.

First, we plan to adopt a more competitive approach to procurement, a key pillar of savings, by further consolidating spending and strategically re-evaluating key supplier relationships.

Second, we plan to further improve efficiencies within our supply chain network through a zero-waste approach, aiming to improve demand forecasting and innovation planning to minimize excess inventory and product destruction.

Third, we are outsourcing select services to proven global partners.

The expanded component of the restructuring program began during our fiscal 2025 third quarter with all initiatives to be approved by the end of fiscal 2026.

Specific initiatives under the expanded component of the restructuring program are expected to be substantially completed by the end of fiscal 2027.

The focus of the now expanded restructuring program (now, collectively the “Restructuring Program”) includes (i) reorganization and rightsizing of certain areas and (ii) simplification and acceleration of processes, along with the newly added focus on (i) outsourcing of select services and (ii) evolution of go-to-market footprint and selling models.

In connection with the Restructuring Program, as of June 30, 2025 we estimate a net reduction in the range of approximately 5,800 to 7,000 positions globally, which is about 9-11% 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.

We plan to substantially complete specific initiatives under the restructuring program through fiscal 2026.

We expect that the restructuring program will result in restructuring and other charges totaling between $500 million and $700 million, before taxes, consisting of employee-related costs, contract terminations, asset write-offs and other costs associated with implementing these initiatives.

This net reduction takes into account the elimination of positions after retraining and redeployment of certain employees in select areas.

We expect that the Restructuring Program will result in restructuring and other charges totaling between $1,200 million and $1,600 million, before taxes, consisting of employee-related costs, asset-related costs, contract terminations and other costs associated with implementing these initiatives, which other than the non-cash charges, are expected to result in future cash expenditures funded from cash provided by operations.

Once fully implemented, we expect the Restructuring Program to yield annual target gross benefits of between $800 million and $1,000 million, before taxes, a portion of which is expected to be reinvested in consumer-facing activities.

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 8 – Charges Associated with Restructuring and Other Activities herein.

The net benefits of the PRGP, which includes the Restructuring Program, are expected to enable a return to a double-digit operating margin over the next few years.

Further information about the Restructuring Program Component of the Profit Recovery and Growth Plan, is described in Item 8.

Financial Statements and Supplementary Data – Note 8 – Charges Associated with Restructuring and Other Activities .

Impairment Analysis

Based on our annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2024, we determined that the carrying value of the Dr.Jart+ reporting unit and trademark exceeded their estimated fair values.

Given the lower-than-expected growth within key geographic regions, the reporting unit has made a strategic shift in its operating plan to exit the travel retail channel.

This revised strategy also includes increased direct investment in other areas of the business, including in China, to support the brand’s future growth.

As a result of these changes in strategy, we made revisions to the internal forecasts relating to the Dr.Jart+ reporting unit which were finalized and approved in the fiscal 2024 fourth quarter, and reflected in the goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2024.

These changes in circumstances were also indicators that the carrying amounts of its respective long-lived assets may not be recoverable.

We concluded that the carrying value of the trademark intangible asset exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded an impairment charge of $180 million.

We then performed a recoverability analysis of the Dr.Jart+ long-lived asset group and, based on the estimated undiscounted cash flows of the asset group, concluded that the carrying amount of the long-lived assets were recoverable.

After adjusting the carrying value of the trademark, we completed a quantitative impairment test for goodwill.

As the carrying value of the reporting unit exceeded its estimated fair value, we recorded a goodwill impairment charge of $291 million.

The estimated fair value of the reporting unit was based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting units.

The significant assumptions used in these approaches include revenue growth rates and profit margins, terminal value, weighted average cost of capital used to discount future cash flows, comparable market multiples for the reporting unit, and royalty rate for the trademark.

The most significant unobservable input used to estimate the fair value of the reporting unit and trademark intangible asset was the weighted-average cost of capital, which was 10.5%.

A summary of the impairment charges for the twelve months ended June 30, 2024 and the remaining trademark and goodwill carrying values as of June 30, 2024 are as follows:

During the fiscal 2025 second quarter, the TOM FORD brand experienced lower-than-expected growth within key geographic regions and channels, including in mainland China, Asia travel retail and Hong Kong SAR.

Also during the fiscal 2025 second quarter, the Too Faced reporting unit experienced lower-than-expected results in key geographic regions and channels.

As a result, we made revisions to the internal forecasts relating to our TOM FORD brand and Too Faced reporting unit.

Additionally, there were increases in the weighted average cost of capital for both the TOM FORD brand and Too Faced reporting unit as compared to the prior-year annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2024.

We concluded that the changes in circumstances in the TOM FORD brand and Too Faced reporting unit, along with increases in the weighted average cost of capital, triggered the need for interim impairment reviews of the TOM FORD trademark and the Too Faced trademark and goodwill.

These changes in circumstances were also an indicator that the carrying amounts of Too Faced’s long-lived assets, including customer lists, may not be recoverable.

Accordingly, we performed interim impairment tests for the TOM FORD and Too Faced trademarks and Too Faced goodwill as well as a recoverability test for the Too Faced long-lived assets as of December 31, 2024.

We concluded that the carrying value of the trademark intangible assets exceeded their estimated fair values, which were determined utilizing the relief-from-royalty method, and recorded an impairment charge of $773 million for TOM FORD and $75 million for Too Faced.

We concluded that the carrying amounts of the long-lived assets for Too Faced were recoverable.

Additionally, as a result of the interim impairment review, the remaining carrying value of Too Faced’s goodwill was not recoverable and we recorded an impairment charge of $13 million, reducing the carrying value to zero.

The significant assumptions used in the relief-from-royalty method include revenue growth rates and profit margins, terminal values, weighted average cost of capital used to discount future cash flows and royalty rates.

The most significant unobservable input used to estimate the fair value of the TOM FORD and Too Faced trademark intangible assets was the weighted average cost of capital, which was 11.5% and 14%, respectively.

Based on our annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2025, we determined that the carrying value of the Dr.Jart+ and Too Faced trademarks exceeded their estimated fair values.

As it relates to Dr.Jart+, a decision was made in the prior year in the reporting unit’s operating plan to exit the travel retail channel.

A revised strategy was implemented that included increased direct investment in other areas of the business, including in mainland China, to support the brand’s future growth.

However, given the lower-than-expected growth within key geographic regions in fiscal 2025, specifically within mainland China and Korea, it was determined that revisions to the internal forecasts were necessary which were finalized and approved in the fiscal 2025 fourth quarter in connection with the brand’s annual planning process, and reflected in the goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2025.

The Too Faced reporting unit continued to experience lower-than-expected results in key geographic regions and channels and, as such, it was determined that revisions to the internal forecasts were necessary.

These changes in circumstances were also indicators that the carrying amounts of their respective long-lived assets, including customer lists, may not be recoverable.

For purposes of calculating the estimated fair values of the trademark intangible assets, we utilized the relief-from-royalty method, and recorded an impairment charge of $83 million for Dr.Jart+ and $50 million for Too Faced.

We then performed a recoverability analysis of the Dr.Jart+ and Too Faced long-lived asset groups and, based on the estimated undiscounted cash flows of the asset groups, concluded that the carrying amount of the long-lived assets for Dr.Jart+ were not recoverable, whereas for Too Faced were recoverable.

For purposes of calculating the impairment charge for the long-lived assets of Dr.Jart+, the asset group was determined to be the reporting unit.

The estimated fair value of the asset group was based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the asset group.

As a result, the calculated impairment charge to be allocated to the long-lived assets of Dr.Jart+ was $292 million.

We concluded that the carrying value of the Dr.Jart+ customer list intangible asset exceeded its estimated fair value, which was determined utilizing the multi-period excess earnings income approach by discounting the incremental after-tax cash flows over multiple periods.

The estimated fair value of all other long-lived assets of Dr.

Jart+ exceeded their carrying values.

As a result, the $292 million impairment charge was allocated entirely to the Dr.Jart+ customer list intangible asset.

The significant assumptions used in the calculations of the Dr.Jart+ and Too Faced trademark and Dr.Jart+ customer list impairments include revenue growth rates and profit margins, terminal values, weighted average cost of capital used to discount future cash flows and royalty rates for trademarks.

The most significant unobservable input used to estimate the impairments was the weighted average cost of capital, which was 10.5% for Dr.Jart+ for both the trademark and customer list impairments, and 13.5% for Too Faced.

A summary of the impairment charges for the three and twelve months ended June 30, 2025 and the remaining trademark, customer list and goodwill carrying values as of June 30, 2025, for the TOM FORD brand and the Too Faced and Dr.Jart+ reporting units, are as follows:

Impairment Charges (1)

Carrying Value

(In millions)

(In millions) Three Months Ended

June 30, 2025

Twelve Months Ended

1 unchanged sentence

As of June 30, 2025

Reporting Unit

Geographic Region

Brand/Reporting Unit Geographic Region Trademark Customer List

Goodwill Trademark Customer List

Goodwill Trademark (2)

Customer List

TOM FORD The Americas $ — $ — $ — $ 773 $ — $ — $ 1,805 $ — $ —

Too Faced The Americas 50 — — 125 — 13 62 50 —

83 292 — 83 292 — 42 189 —

The impairment charges for the twelve months ended June 30, 2024 were reflected in the skin care product category.

Based on our annual goodwill impairment testing as of April 1, 2024, the estimated fair values of all reporting units, which were determined based on qualitative or quantitative assessments, with material goodwill were substantially in excess of their respective carrying values, with the exception of the Dr.Jart+ reporting unit, which we recorded an impairment charge of $291 million related to the Dr.Jart+ goodwill balance reducing the carrying value of goodwill to zero.

Based on our annual other indefinite-lived intangible asset impairment testing as of April 1, 2024, the estimated fair value of the Dr.Jart+ trademark was equal to its carrying value subsequent to the impairment charges taken in the fiscal 2024 fourth quarter.

The estimated fair value of the Too Faced trademark approximated its carrying value of $186 million and the estimated fair value of the TOM FORD trademark exceeded its carrying value of $2,578 million by 3%.

For the TOM FORD trademark, if all other assumptions are held constant, a decrease of 4% in the estimated future net sales, inclusive of the terminal value, or an increase of 20 basis points in the weighted average cost of capital, would have caused the carrying value of the trademark to approximate its estimated fair value.

The key assumptions used to determine the estimated fair value of the reporting units and their respective trademarks are primarily predicated on the success of future new product launches, the ability to secure strategic price increases, the achievement of distribution expansion plans, and the realization of cost reduction and other efficiency efforts.

If such plans do not materialize, or if there are further challenges in the business environments where the reporting units operate, resulting changes in the key assumptions could negatively impact the estimated fair value of the reporting units and their respective trademarks.

Total $ 133 $ 292 $ — $ 981 $ 292 $ 13 $ 1,909 $ 239 $ —

(1) The date of the fair value measurement for the TOM FORD trademark intangible asset was December 31, 2024.

The dates of the fair value measurement for the Too Faced trademark intangible asset and Too Faced reporting unit were December 31, 2024 and April 1, 2025.

The date of the fair value measurement for the Dr.

Jart+ trademark intangible asset and asset group was April 1, 2025.

(2) The carrying values of the trademark intangible assets, immediately subsequent to the impairment charges, are equal to their estimated fair values.

(3) The carrying value of the Dr.Jart+ asset group, immediately subsequent to the customer list impairment charge, was equal to its estimated fair value.

The impairment charge related to the TOM FORD trademark intangible asset of $773 million was reflected in the fragrance, makeup and other product categories of $549 million, $170 million and $54 million, respectively.

The trademark and goodwill impairment charges related to Too Faced were reflected in the makeup product category.

The trademark and customer list impairment charges related to Dr.Jart+ were reflected in the skin care product category.

The aggregate trademark and customer list impairments are recorded in the Impairment of other intangible assets line item in the accompanying consolidated statements of (loss) earnings.

Based on our annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2025, the estimated fair value of the Too Faced and Dr.Jart+ trademarks were equal to their carrying value, immediately subsequent to the impairment charges taken in the fiscal 2025 fourth quarter.

Additionally, the carrying value of the Dr.Jart+ asset group was equal to its estimated fair value immediately subsequent to the impairment charges that were allocated to the customer list intangible asset.

For the TOM FORD trademark, immediately subsequent to the impairment charges taken in the fiscal 2025 second quarter the estimated fair value of the trademark was equal to its carrying value.

Based on our annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2025, the estimated fair value of the TOM FORD trademark exceeded its carrying value of $1,805 million by 22%.

This was primarily driven by a decrease of 150 basis points in the weighted average cost of capital as of April 1, 2025 compared to December 31, 2024.

Using the December 31, 2024 weighted average cost of capital in the April 1, 2025 annual goodwill and other indefinite-lived intangible asset impairment testing would have caused the carrying value of the trademark to approximate its estimated fair value.

Based on our annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2025, the estimated fair values of the DECIEM trademarks exceeded their carrying values of $1,069 million by 3%.

If all other assumptions are held constant, a decrease of 3% in the estimated future net sales, inclusive of the terminal value, or an increase of 20 basis points in the weighted average cost of capital, would have caused the carrying values of the trademarks to approximate their estimated fair values.

The key assumptions used to determine the estimated fair value of the reporting units and their respective trademarks and long-lived assets are primarily predicated on the success of future new product launches, the ability to secure strategic price increases, the achievement of distribution expansion plans, and the realization of cost reduction and other efficiency efforts.

This could potentially lead to recognizing additional impairment charges in the future.

1 unchanged sentence

Financial Statements and Supplementary Data – Note 6 – Goodwill and Other Intangible Assets.

Deferred Tax Asset Valuation Allowance

During fiscal 2025, we established a U.S.

valuation allowance of $172 million against general foreign tax credit and research and development tax credit carryforwards as it was determined more-likely-than-not that these deferred tax assets would not be realized.

This determination was driven by our weighing of relevant evidence including lower U.S.

taxable income in fiscal 2025 as compared to recent years, reflecting reduced income from our travel retail business, and the resulting uncertainty about the ability to realize the carryforwards prior to expiration.

Our ability to recognize deferred tax assets, inclusive of utilizing net operating loss carryforwards, tax credits, and other carryforwards is dependent on the generation of sufficient taxable income in future periods.

Accordingly, there can be no assurance that additional valuation allowances on our deferred tax assets will not be required should our financial performance be negatively impacted in the future.

Such valuation allowance could be material.

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 talcum litigation settlement agreements, we recorded a charge of $159 million during the fiscal 2025 first quarter for the amount agreed to settle the current claims and an estimated amount for potential future claims.

Further information about the talcum litigation settlement agreements, is described in Item 8.

Financial Statements and Supplementary Data – Note 17 – Commitments and Contingencies .

Fiscal 2024 as Compared with Fiscal 2023

10 unchanged sentences

GAAP measures.

Reported net sales decreased in fiscal 2024, primarily reflecting a decrease in skin care, and to a lesser extent, decreases in makeup and hair care, partially offset by an increase in fragrance.

The decrease in skin care net sales was primarily driven by lower net sales from Estée Lauder, Clinique and Dr.Jart+, partially offset by higher net sales from La Mer and The Ordinary.

By region, reported net sales decreased in fiscal 2024, primarily reflecting lower net sales in Asia/Pacific, and to a lesser extent, lower net sales in Europe, the Middle East & Africa, partially offset by an increase in net sales in The Americas.

The decrease in net sales in Asia/Pacific was primarily driven by lower net sales from mainland China, reflecting ongoing softness in overall prestige beauty, partially offset by higher net sales in Hong Kong SAR.

Reported net sales decreased in fiscal 2025, primarily reflecting a decrease in skin care, and to a lesser extent, decreases in makeup and hair care.

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

By geographic region, reported net sales decreased across all geographic regions in fiscal 2025, primarily reflecting lower net sales in our travel retail business, and to a lesser extent, in mainland China, North America and Korea.

The fiscal 2025 reported net sales decrease was impacted by approximately $28 million of unfavorable foreign currency translation.

Reported net sales decreased 2% in fiscal 2024, driven by the decrease from volume of 8% and the unfavorable impact from foreign currency translation of 1%.

Partially offsetting these decreases was an increase from pricing of 7%, due to the favorable impact from strategic pricing actions and changes in mix.

Reported net sales decreased 8% in fiscal 2025, driven by the decrease from volume of 10%.

Partially offsetting this decrease was an increase from pricing of 2%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.

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 a Company-wide initiative to redesign, resize and reorganize select areas of the business.

Accordingly, the following discussions of Net sales by Product Categories and Geographic Regions exclude the fiscal 2024 and fiscal 2023 impacts of returns associated with restructuring and other activities of approximately $1 million and $27 million, respectively.

Accordingly, the following discussions of Net sales by Product Categories and Geographic Regions exclude the fiscal 2025 and fiscal 2024 impacts of returns/(return adjustments) associated with restructuring and other activities of approximately $(3) million and $1 million, respectively.

Product Categories

Reported net sales for our product categories for the years ended June 30, 2025 and 2024 were as follows:

Year Ended June 30,

($ in millions) 2024 2023

($ in millions) 2025 2024 $ Change

% Change in Constant Currency (1)

Skin Care $ 6,962 $ 7,908 $ (946) (12) % (12) %

Makeup 4,205 4,470 (265) (6) (5)

Fragrance 2,491 2,487 4 — —

Hair Care 565 629 (64) (10) (10)

Other 100 115 (15) (13) (13)

14,323 15,609 (1,286) (8) (8)

Returns associated with restructuring and other activities 3 (1) 4 100+ 100+

Net sales $ 14,326 $ 15,608 $ (1,282) (8) % (8) %

$ Change from prior year (341) (1,653)

% Change from prior year (4) % (17) %

Non-GAAP Financial Measure (1) :

% Change from prior year in constant currency (3) % (13) %

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported skin care net sales decreased in fiscal 2024, reflecting lower net sales from Estée Lauder, Clinique and Dr.Jart+, combined, of approximately $514 million, primarily driven by declines in mainland China and in our Asia travel retail business.

In mainland China, net sales declined, primarily driven by ongoing softness in overall prestige beauty.

Also contributing to the net sales decrease in Dr.Jart+ was lower demand.

Partially offsetting these decreases in skin care net sales for fiscal 2024 were higher net sales from La Mer and The Ordinary, combined, of approximately $267 million.

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

The increase in net sales from The Ordinary was driven by growth in every geographic region, reflecting new product launches, continued success of hero products, and targeted expanded consumer reach.

Reported skin care net sales decreased $946 million, or 12%, in fiscal 2025, reflecting lower net sales from Estée Lauder and La Mer, combined, of approximately $829 million, primarily driven by declines in our Asia travel retail business.

The decrease in net sales from our Asia travel retail business reflected ongoing subdued sentiment and lower conversion from Chinese consumers, the difficult comparison to the prior year due to our resumption of replenishment orders in the fiscal 2024 third quarter and our strategic decision to reduce our exposure to reseller activity, as well as retailer shifts in strategies toward more profitable duty free business models in both Korea and mainland China, which led to lower replenishment orders.

Also contributing to the decrease in net sales from Estée Lauder was lower net sales in mainland China, reflecting the overall challenging retail environment, including subdued consumer sentiment.

Skin care net sales were impacted by approximately $2 million of unfavorable foreign currency translation.

Reported skin care net sales decreased 4% in fiscal 2024, driven by the decrease from volume of 11% and the unfavorable impact from foreign currency translation of 1%.

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

Year Ended June 30

($ in millions) 2024 2023

Net sales $ 4,470 $ 4,532

$ Change from prior year (62) (138)

% Change from prior year (1) % (3) %

Non-GAAP Financial Measure (1) :

% Change from prior year in constant currency (1) % 1 %

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 46 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported makeup net sales decreased slightly in fiscal 2024, reflecting lower net sales primarily from M·A·C, and to a lesser extent, TOM FORD and La Mer, combined, of approximately $127 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 in fiscal 2023 and the net impact of phasing out select products in preparation for new product launches in fiscal 2024.

Net sales from TOM FORD decreased, primarily driven by lower net sales from the lip subcategory.

The decrease in net sales from La Mer was primarily driven by a decline in our Asia travel retail business, reflecting actions that we and our retailers took to reset inventory levels, in part in response to changes in government policies in the second half of fiscal 2023, and lower conversion, as well as the impact of rationalizing product assortment within travel retail.

Partially offsetting the decrease in makeup net sales were higher net sales from Clinique, primarily driven by the success of hero products and targeted expanded consumer reach.

Reported skin care net sales decreased 12% in fiscal 2025, driven by the decrease from volume of 13%.

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.

Reported makeup net sales decreased $265 million, or 6%, in fiscal 2025, reflecting lower net sales primarily from M·A·C, and to a lesser extent, Estée Lauder, Too Faced and Bobbi Brown, combined, of approximately $241 million.

The decrease in net sales from M·A·C was primarily driven by lower net sales in the face subcategory and retail softness for the brand, which led to elevated levels of inventory and retailer destocking.

Net sales from Estée Lauder decreased, primarily driven by lower net sales in the face subcategory, reflecting the aforementioned challenges in our Asia travel retail business.

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

Bobbi Brown net sales decreased, primarily driven by lower net sales in the face subcategory.

Partially offsetting the reported makeup net sales decrease were higher net sales from Clinique across all geographic regions, led by North America, reflecting higher net sales associated with the fiscal 2024 third quarter launch in Amazon's U.S.

Premium Beauty store, as well as the success of hero product franchises, including new product launches.

Makeup net sales were impacted by approximately $20 million of unfavorable foreign currency translation.

Reported makeup net sales decreased 1% in fiscal 2024, driven by the decrease from volume of 6%, partially offset by an increase from pricing of 5%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.

Year Ended June 30

($ in millions) 2024 2023

Net sales $ 2,487 $ 2,451

$ Change from prior year 36 (40)

% Change from prior year 1 % (2) %

Non-GAAP Financial Measure (1) :

% Change from prior year in constant currency 2 % 3 %

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 46 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported fragrance net sales increased slightly in fiscal 2024, reflecting higher net sales from Le Labo and Jo Malone London, combined, of approximately $96 million.

Net sales from Le Labo increased in every geographic region, led by Asia/Pacific and primarily reflected 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 new product launches and the success of hero products.

Partially offsetting the increase in fragrance net sales was lower net sales from Estée Lauder, as well as the unfavorable year-over-year impact of residual net sales in fiscal 2023 related to the transition of licenses due to the termination of certain of our designer fragrance licenses effective June 30, 2022, combined, of approximately $83 million.

The decrease in net sales from Estée Lauder was driven by softer retail sales during holiday and key shopping moments and pressure in our Asia travel retail business that led to lower shipments for replenishment orders compared to the prior year, as well as lower net sales from new product innovation.

Reported makeup net sales decreased 6% in fiscal 2025, driven by the decrease from volume of 9%.

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.

Reported fragrance net sales increased slightly in fiscal 2025, reflecting higher net sales from Le Labo and to a lesser extent, KILIAN PARIS combined, of approximately $87 million, largely offset by lower net sales from Estée Lauder, Clinique, and TOM FORD, combined, of approximately $82 million.

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

The increase in net sales from KILIAN PARIS primarily reflected the success of new product launches.

The decrease in net sales from Estée Lauder was primarily driven by lower net sales from the Estée Lauder Beautiful and Estée Lauder Pleasures franchises.

Net sales from Clinique decreased, primarily driven by lower net sales from the Clinique Happy franchise line of products.

The decrease in net sales from TOM FORD was primarily driven by lower net sales in North America, reflecting softness in the brand's retail sales which led to elevated levels of inventory, resulting in retailer destocking, as well as an unfavorable year-over-year impact of prior-year launches.

Fragrance net sales were impacted by approximately $4 million of unfavorable foreign currency translation.

Reported fragrance net sales increased 1% in fiscal 2024, driven by an increase from pricing of 6%, due to the favorable impact from strategic pricing actions and changes in mix.

This increase was partially offset by the decrease from volume of 4%.

Year Ended June 30

($ in millions) 2024 2023

Net sales $ 629 $ 652

$ Change from prior year (23) 21

% Change from prior year (4) % 3 %

Non-GAAP Financial Measure (1) :

% Change from prior year in constant currency (4) % 6 %

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 46 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported hair care net sales decreased in fiscal 2024, driven by lower net sales from Aveda, due to declines in North America, primarily reflecting softness in the salon channel and our direct-to-consumer business.

Reported hair care net sales decreased 4% in fiscal 2024, driven by the decrease from volume of 11%, 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 slightly in fiscal 2025, driven by an increase from pricing of 6%, due to the favorable impact from strategic pricing actions and changes in mix, largely offset by the decrease from volume of 6%.

Reported hair care net sales decreased $64 million, or 10%, in fiscal 2025, driven by lower net sales from Aveda, and to a lesser extent, Bumble and bumble and The Ordinary, combined of approximately $66 million.

Net sales from Aveda decreased, primarily reflecting our softness in brick-and-mortar channels and freestanding store closures, partially offset by the impact from its launch in Amazon's U.S.

Premium Beauty store during the fiscal 2025 fourth quarter.

Net sales from Bumble and bumble decreased, primarily reflecting our softness in the salon and specialty-multi channels, partially offset by higher net sales associated with its fiscal 2024 fourth quarter launch in Amazon's U.S.

Premium Beauty store.

Hair care net sales were impacted by approximately $2 million of unfavorable foreign currency translation.

Reported hair care net sales decreased 10% in fiscal 2025, driven by the decrease from volume of 10%.

The impact of pricing was flat year-over-year, due to the favorable impact of strategic pricing actions offset by changes in mix.

Geographic Regions

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

Reported net sales by geographic region for the years ended June 30, 2025 and 2024 were as follows:

Year Ended June 30,

($ in millions) 2024 2023

Net sales $ 4,581 $ 4,518

$ Change from prior year 63 (105)

% Change from prior year 1 % (2) %

Non-GAAP Financial Measure (1) :

% Change from prior year in constant currency 1 % (3) %

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 46 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported net sales in The Americas increased slightly in fiscal 2024, primarily reflecting higher net sales in Mexico, Brazil, and, to a lesser extent, the United States, combined, of approximately $57 million.

The increase in net sales in Mexico and Brazil was primarily driven by growth in makeup, led by M·A·C, reflecting successful performance during key shopping moments and new product launches, as well as growth in skin care and fragrance.

In the United States, net sales increased slightly, primarily driven by incremental royalty revenue associated with the fiscal 2023 fourth quarter acquisition of the TOM FORD brand and higher net sales in fragrance, led by our luxury fragrances, partially offset by a decline in makeup reflecting 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 in fiscal 2023, and to a lesser extent, decreases in hair care and skin care.

Reported net sales in The Americas included approximately $4 million of unfavorable foreign currency translation.

Reported net sales in The Americas increased 1% in fiscal 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%.

These increases were partially offset by the decrease from volume of 2%.

($ in millions) 2025 2024 $ Change

% Change in Constant Currency (1)

The Americas $ 4,411 $ 4,581 $ (170) (4) % (3) %

Europe, the Middle East & Africa 5,375 6,140 (765) (12) (13)

Year Ended June 30

($ in millions) 2024 2023

Net sales $ 6,140 $ 6,225

$ Change from prior year (85) (1,456)

% Change from prior year (1) % (19) %

Non-GAAP Financial Measure (1) :

% Change from prior year in constant currency (2) % (16) %

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 46 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported net sales decreased slightly in Europe, the Middle East & Africa in fiscal 2024, primarily reflecting lower net sales from our Asia travel retail business.

The net sales decrease in Asia travel retail was partially offset by the return to growth in the second half of fiscal 2024, primarily driven by a favorable comparison to the prior-year period due to the aforementioned changes in government policies as well as higher shipments.

Partially offsetting the decrease in Europe, the Middle East & Africa in fiscal 2024 was higher net sales in the United Kingdom, the Nordic countries and Germany, combined, of approximately $129 million.

The increase in net sales from the United Kingdom was primarily driven by the favorable impact from foreign currency translation and growth from The Ordinary, reflecting targeted expanded consumer reach.

The increase in net sales from the Nordic region was primarily driven by higher net sales across all major product categories, led by skin care.

The increase in net sales from Germany was primarily driven by higher net sales in makeup.

Reported net sales in Europe, the Middle East & Africa included approximately $54 million of favorable foreign currency translation.

Reported net sales in Europe, the Middle East & Africa decreased 1% in fiscal 2024, driven by the decrease from volume of 11%.

This decrease was partially offset by an increase from pricing of 9%, due to the favorable impact from strategic pricing actions and changes in mix, and the favorable impact from foreign currency translation of 1%.

Year Ended June 30

($ in millions) 2024 2023

Asia/Pacific 4,537 4,888 (351) (7) (7)

14,323 15,609 (1,286) (8) (8)

Returns associated with restructuring and other activities 3 (1) 4 100+ 100+

Net sales $ 14,326 $ 15,608 $ (1,282) (8) % (8) %

$ Change from prior year (306) (243)

% Change from prior year (6) % (4) %

Non-GAAP Financial Measure (1) :

% Change from prior year in constant currency (3) % 4 %

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported net sales decreased in Asia/Pacific in fiscal 2024, reflecting lower net sales from mainland China, and to a lesser extent Korea, combined, of approximately $401 million.

The decrease in net sales from mainland China was primarily driven by ongoing softness in overall prestige beauty.

The net sales decrease in Korea was led by the Dr.Jart+ travel retail business in Korea reflecting lower demand.

Partially offsetting the net sales decrease in Asia/Pacific in fiscal 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.

The net sales decrease in Asia/Pacific included approximately $155 million of unfavorable foreign currency translation.

Reported net sales in Asia/Pacific decreased 6% in fiscal 2024, driven by the decrease from volume of 11% 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.

Reported net sales decreased in fiscal 2025 across all geographic regions, primarily driven by lower net sales in our travel retail business, and to a lesser extent, in mainland China, North America and Korea, combined, of approximately $1,150 million.

The decrease in net sales from our travel retail business, which is reported in the Europe, the Middle East & Africa geographic region, was primarily driven by Asia travel retail, reflecting ongoing subdued sentiment and lower conversion from Chinese consumers, the difficult comparison to the prior year due to our resumption of replenishment orders in the second half of fiscal 2024 and our strategic decision to reduce our exposure to reseller activity, as well as retailer shifts in strategies toward more profitable duty free business models in both Korea and mainland China, which led to lower replenishment orders.

The decrease in net sales in mainland China reflected the overall challenging retail environment, including subdued consumer sentiment.

The decrease in net sales in North America reflected ongoing retail softness for some brands, and pressure from subdued consumer confidence and sentiment in the second half of fiscal 2025, which led to elevated inventory levels and destocking at certain retailers, as well as the timing of shipments, which further pressured net sales compared to the prior year.

Partially offsetting the net sales decline for North America in fiscal 2025 was the impact from the launch of eleven brands in Amazon's U.S.

Premium Beauty store as of June 2025 compared to three brands as of June 2024, as well as the launch of three brands in the Amazon.ca (Canada) Premium Beauty store in fiscal 2025.

The net sales decline in Korea reflects the impact of political and social unrest, which reduced retail traffic and dampened retail sales, as well as the exit of Dr.Jart+ from the travel retail channel in Korea during the fiscal 2025 second quarter.

Reported net sales in The Americas decreased 4% in fiscal 2025, driven by the decrease from volume of 8% and the unfavorable impact from foreign currency translation of 1%.

These decreases were partially offset by an increase from pricing of 6%, due to the favorable impact of strategic pricing actions and changes in mix.

Reported net sales in Europe, the Middle East & Africa decreased 12% in fiscal 2025, driven by the decrease from volume of 10% and a decrease from pricing of 3%.

The decrease from pricing is due to changes in mix, partially offset by the favorable impact from strategic pricing actions.

Reported net sales in Asia/Pacific decreased 7% in fiscal 2025, driven by the decrease from volume of 12%.

Partially offsetting this decrease was an increase from pricing of 5%, due to the favorable impact from strategic pricing actions and changes in mix.

Gross margin in fiscal 2025 increased to 74.0% as compared with 71.7% in fiscal 2024.

10 unchanged sentences

Non-GAAP Gross Margin Basis Point Variance

As reported, the increase in gross margin for fiscal 2024 reflected a favorable impact from our mix of business, reflecting the benefits of strategic pricing actions and changes in brand mix.

The increase in gross margin for fiscal 2024 was partially offset by 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, that was accounted for in the early part of fiscal 2024, 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 cost management, including freight and transportation costs.

The increase in gross margin in fiscal 2025 includes net benefits from the PRGP which drove overall favorability year-over-year, including the favorability within manufacturing costs and other and obsolescence charges.

The impact year-over-year from manufacturing costs and other reflects the favorable impact of cost efficiencies within our global supply chain network, partially offset by the impact of inflation on our costs.

Obsolescence charges decreased year-over-year, due to a reduction in excess inventory.

Partially offsetting the increase in gross margin was the unfavorable impact from our mix of business, reflecting the impact of lower net sales, partially offset by the benefit from net strategic pricing, including from the PRGP.

OPERATING EXPENSES

3 unchanged sentences

General and administrative expenses (90)

Advertising, merchandising, sampling and product development (20)

Advertising, marketing, promotion and product development (1)

Selling (140)

Store operating costs (50)

3 unchanged sentences

Goodwill and other intangible asset impairments

Talcum litigation settlement agreements

Changes in fair value of DECIEM acquisition-related stock options

As Reported Operating Expense Margin Basis Point Variance

2 unchanged sentences

Goodwill and other intangible asset impairments

Talcum litigation settlement agreements

Changes in fair value of DECIEM acquisition-related stock options

Non-GAAP Operating Expense Margin Basis Point Variance

Higher store operating costs and selling expenses in fiscal 2024 reflect our continued investments in our business including through targeted expanded consumer reach and increased demonstration expenses.

(1) Referred to as "advertising and promotional" within the Product Category and Geographic Region Operating Results disclosures below.

The decrease in net sales year-over-year is the primary driver of the increase in operating expense margin in fiscal 2025.

This impact offset the expense reductions realized through our overall disciplined expense management across the business as well as initiatives as part of the PRGP.

Partially offsetting these expense reductions were increased investments in consumer facing areas of the business to drive sales, including advertising, selling, promotion and store operating expenses.

Additionally, general and administrative expenses declined reflecting benefits from the above noted disciplined expense management, however also reflected the year-over-year unfavorable impact of a change in policy related to local government subsidies in China.

OPERATING RESULTS

1 unchanged sentence

($ in millions) 2025 2024

Operating income $ 970 $ 1,509

Operating (loss) income

$ (785) $ 970

$ Change from prior year (1,755) (539)

2 unchanged sentences

Non-GAAP Financial Measure (1) :

% Change in operating income from the prior year adjusting for the impact of charges associated with restructuring and other activities, goodwill and other intangible asset impairments and the change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax

% Change in operating (loss) income from the prior year adjusting for the impact of charges associated with restructuring and other activities, goodwill and other intangible asset impairments, talcum litigation settlement agreements and the change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax

(28) % (13) %

1 unchanged sentence

GAAP measures.

The reported operating margin for fiscal 2024 decreased from the prior year, primarily driven by the decreases in net sales and operating expense margin, partially offset by an increase in gross margin, as discussed above.

The reported operating margin for fiscal 2025 decreased from the prior year, driven by the decrease in net sales as well as an increase in our operating expense margin, reflecting the unfavorable year-over-year impact of goodwill and other intangible asset impairments relating to TOM FORD, Dr.Jart+ and Too Faced, combined, of $1,286 million in fiscal 2025 compared with goodwill and other intangible asset impairments relating to Dr.Jart+ of $471 million in fiscal 2024, partially offset by an increase in gross margin, as 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 fiscal 2024 and 2023 impact of charges associated with restructuring and other activities of $124 million, or approximately 1% of net sales and $85 million, or approximately 1% of net sales, respectively.

Accordingly, the following discussions of Operating (loss) income by Product Categories and Geographic Regions exclude the fiscal 2025 and 2024 impact of charges associated with restructuring and other activities of $486 million, or approximately 3% of net sales and $124 million, or approximately 1% of net sales, respectively.

Product Categories

Reported Operating (loss) income for our product categories for the years ended June 30, 2025 and 2024 were as follows:

Year Ended June 30,

($ in millions) 2024 2023

Operating income $ 735 $ 1,277

$ Change from prior year (542) (1,499)

% Change from prior year (42) % (54) %

($ in millions) 2025 2024 $ Change % Change

(As reported) % Change

(Non-GAAP) (1)

Non-GAAP Financial Measure (1)

% Change in operating income from the prior year adjusting for the impact of goodwill and other intangible asset impairments and the change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax

Skin Care $ 574 $ 735 $ (161) (22) % (23) % Adjusted for the impact of goodwill and other intangible asset impairments and the change in fair value of DECIEM acquisition-related stock options.

Makeup (441) 93 (534) (100+) (72) Adjusted for the impact of goodwill and other intangible asset impairments and talcum litigation settlement agreements.

Fragrance (378) 265 (643) (100+) (35) Adjusted for the impact of other intangible asset impairments.

Hair Care (41) (52) 11 21 21

Other (13) 53 (66) (100+) (23) Adjusted for the impact of other intangible asset impairments.

(299) 1,094 (1,393) (100+) (28)

(1) See “Reconciliations of Non-GAAP Financial Measures” beginning on page 46 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported skin care operating income decreased in fiscal 2024, reflecting lower operating results from Dr.Jart+, Estée Lauder and Clinique, combined, of approximately $580 million.

The decrease in operating income from Dr.Jart+ was primarily driven by the unfavorable year-over-year impact of goodwill and other intangible asset impairments of $371 million as well as a decrease in net sales.

Operating income from Estée Lauder and Clinique decreased, primarily driven by decreases in net sales, partially offset by disciplined advertising and promotional expense management and lower shipping expenses due to the decreases in net sales.

Partially offsetting the decrease in skin care operating income in fiscal 2024 was higher operating results from La Mer and The Ordinary, combined, of approximately $179 million.

The increase in operating income from La Mer was primarily driven by an increase in net sales and a decrease in cost of sales, partially offset by an increase in advertising and promotional expenses to support growth of the business as well as higher selling costs due to an increase in demonstration expenses compared to the prior year and targeted expanded consumer reach.

Operating income from The Ordinary increased, primarily driven by an increase in net sales and 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 offset by an increase in advertising and promotional activities and general and administrative expenses as the brand continues to invest and support the growth of the business.

Year Ended June 30

($ in millions) 2024 2023

Operating income (loss) $ 93 $ (21)

$ Change from prior year 114 (147)

% Change from prior year

Charges associated with restructuring and other activities

(486) (124) (362) (100+) (100+)

Non-GAAP Financial Measure (1) :

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

Operating (loss) income

$ (785) $ 970 $ (1,755) (100+)% (100+)%

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported makeup operating results increased for fiscal 2024, primarily driven by higher results from Clinique and Estée Lauder, combined, of approximately $108 million, and also reflecting the favorable year-over-year impact of other intangible asset impairments related to Too Faced and Smashbox of $107 million.

The increase in operating income from Clinique was primarily driven by an increase in net sales, partially offset by higher selling expenses due to increased demonstration costs compared to the prior year.

Operating income from Estée Lauder increased, primarily driven by disciplined advertising and promotional expense management and an increase in net sales.

Year Ended June 30

($ in millions) 2024 2023

Operating income $ 265 $ 370

$ Change from prior year (105) (71)

% Change from prior year (28) % (16) %

Reported fragrance operating income decreased in fiscal 2024, primarily driven by lower operating results from Clinique, Estée Lauder, and TOM FORD, combined, of approximately $47 million.

The decrease in operating income from Clinique was primarily driven by a decrease in net sales.

Operating income from Estée Lauder decreased, primarily driven by a decrease in net sales, partially offset by disciplined advertising and promotional expense management.

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 selling expenses due to an increase in demonstration expenses compared to the prior year, higher advertising and promotional expenses 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.

Year Ended June 30

($ in millions) 2024 2023

Operating loss $ (52) $ (36)

$ Change from prior year (16) (8)

% Change from prior year (44) % (29) %

Reported hair care operating results decreased in fiscal 2024, primarily reflecting lower net sales, partially offset by disciplined advertising and promotional expense management.

Reported skin care operating income decreased $161 million, or 22% in fiscal 2025, reflecting lower operating income from Estée Lauder and La Mer, combined, of approximately $575 million.

Operating income from Estée Lauder decreased, primarily driven by a decrease in net sales, partially offset by lower cost of sales and disciplined advertising and promotional expense management.

The decrease in operating income from La Mer was primarily driven by a decrease in net sales, partially offset by lower cost of sales.

Partially offsetting the decrease in reported skin care operating income in fiscal 2025 was lower cost of sales for the product category overall, driven by the aforementioned impacts disclosed in the consolidated gross margin discussion above, as well as the favorable year-over-year impact of goodwill and other intangible asset impairment charges related to Dr.Jart+ of $96 million.

Reported makeup operating results decreased $534 million, or over 100%, in fiscal 2025, primarily driven by other intangible asset impairment charges in fiscal 2025 relating to TOM FORD and Too Faced, combined, of $295 million and a goodwill impairment charge in fiscal 2025 relating to Too Faced of $13 million, as well as the charge in the fiscal 2025 first quarter associated with the talcum litigation settlement agreements of $159 million.

Also contributing to the reported makeup operating results decrease in fiscal 2025 was a decrease in operating income from Estée Lauder and M·A·C, combined, of approximately $124 million.

The decrease in operating income from Estée Lauder was primarily driven by lower net sales and an increase in advertising and promotional activities to support new product launches, partially offset by lower cost of sales.

Operating income from M·A·C decreased, primarily driven by a decrease in net sales, partially offset by lower cost of sales and disciplined advertising and promotional expense management.

Partially offsetting the decrease in reported makeup operating results in fiscal 2025 was lower cost of sales for the product category overall, driven by the aforementioned impacts disclosed in the consolidated gross margin discussion above.

Reported fragrance operating results decreased $643 million, or over 100%, in fiscal 2025, primarily driven by lower operating results from TOM FORD, and to a lesser extent, a decrease in operating income from Jo Malone London, combined, of approximately $648 million.

The decrease in operating results from TOM FORD was primarily driven by the fiscal 2025 other intangible asset impairment charge of $549 million, and to a lesser extent, a decline in net sales, as well as an increase in advertising and promotional activities and an increase in selling expenses to support sales, partially offset by lower cost of sales.

The decrease in operating income from Jo Malone London was primarily driven by higher selling expenses, including higher staffing costs to support key campaigns and targeted expanded consumer reach, higher advertising and promotional activities to support key campaigns and higher store operating costs to support targeted expanded consumer reach, partially offset by an increase in net sales.

Partially offsetting the decline in fragrance operating results in fiscal 2025 was lower cost of sales for the product category overall, driven by the aforementioned impacts disclosed in the consolidated gross margin discussion above.

Reported hair care operating loss decreased $11 million or 21% in fiscal 2025, driven by lower operating expenses and cost of sales, partially offset by lower net sales.

Geographic Regions

1 unchanged sentence

($ in millions)

Operating income $ 34 $ (73)

$ Change from prior year 107 (1,232)

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

2025 2024 $ Change

(As Reported)

(Non-GAAP) (1)

Non-GAAP Financial Measure (1)

% Change in operating income from the prior year adjusting for the impact of other intangible asset impairments and the change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax

(14) % (95) %

(1) See “Reconciliations of Non-GAAP Financial Measures” beginning on page 46 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported operating results increased in The Americas in fiscal 2024, primarily reflecting higher operating results in Canada and the United States, combined, of approximately $89 million.

These operating results include the full-year true-up of charges among the Company’s geographic regions to reflect the updated value of investments in innovation centralized in The Americas region of $174 million, with a corresponding decrease in Europe, the Middle East & Africa of $131 million and Asia/Pacific of $43 million.

In Canada, the higher operating results were primarily driven by an increase in operating income from The Ordinary, reflecting the shift of the brand's manufacturing production volume from third-party manufacturers to our own facilities and increased automation.

In the United States, also contributing to the increase in operating results 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.

Partially offsetting these increases was a decrease in intercompany royalty income of $55 million compared to the prior year, driven by a decrease in net sales in our travel retail business, 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, as well as an increase in store operating costs and product development costs as we continue to invest in our business.

The Americas $ (918) $ 34 $ (952) (100+)% 100+% Adjusted for the impact of goodwill and other intangible asset impairments, talcum litigation settlement agreements and change in fair value of DECIEM acquisition-related stock options

Europe, the Middle East & Africa 610 836 (226) (27) (28)

Year Ended June 30

($ in millions) 2024 2023

Operating income $ 836 $ 843

$ Change from prior year (7) (517)

% Change from prior year (1) % (38) %

Non-GAAP Financial Measure (1) :

% Change in operating income from the prior year adjusting for the impact of the change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax

(1) See “Reconciliations of Non-GAAP Financial Measures” beginning on page 46 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported operating income in Europe, the Middle East & Africa decreased 1% in fiscal 2024, primarily reflecting lower operating results in Germany, the United Kingdom and in our travel retail business, combined, of approximately $72 million.

These operating results, as well the results for other countries in the region, include the full-year true-up of charges among the Company’s geographic regions to reflect the updated value of investments in innovation centralized in The Americas region resulting in lower operating income of $131 million, with a corresponding increase in operating income in The Americas.

In addition, the decrease in operating results from our travel retail business also reflected the decrease in net sales, partially offset by favorability in cost of sales, and a decrease in intercompany royalty expense to The Americas of $55 million driven by the decrease in net sales.

Partially offsetting these decreases in operating income in Europe, the Middle East & Africa for fiscal 2024, were higher results from the Balkans primarily driven by an increase in net sales.

Year Ended June 30

($ in millions) 2024 2023

Operating income $ 224 $ 824

$ Change from prior year (600) 29

% Change from prior year (73) % 4 %

Non-GAAP Financial Measure (1) :

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

Asia/Pacific 9 224 (215) (96) (45) Adjusted for the impact of goodwill and other intangible asset impairments

(299) 1,094 (1,393) (100+) (28)

Charges associated with restructuring and other activities

(486) (124) (362) (100+) (100+)

Operating (loss) income

$ (785) $ 970 $ (1,755) (100+)% (100+)%

(1) See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported operating income decreased in Asia/Pacific in fiscal 2024, primarily driven by Korea, led by the Dr.Jart+ travel retail business in Korea, and lower results in mainland China, combined, of approximately $562 million.

The decrease in operating income from Korea, led by the Dr.Jart+ travel retail business in Korea, was primarily driven by the unfavorable year-over-year impact of goodwill and other intangible asset impairments relating to Dr.Jart+ of $371 million and an increase in cost of sales.

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.

Included within the decrease for Korea above, as well as in other countries in Asia/Pacific, is the full-year true-up of charges among the Company’s geographic regions to reflect the updated value of investments in innovation centralized in The Americas region resulting in lower operating income of $43 million, with a corresponding increase in operating income in The Americas.

The decrease in reported operating results in fiscal 2025 was primarily driven by lower operating results in North America, and to a lesser extent, a decrease in operating income in mainland China and in our travel retail business, combined, of approximately $1,273 million.

Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.

The decrease in operating results in North America was primarily driven by other intangible asset impairment charges in fiscal 2025 relating to TOM FORD and Too Faced of $898 million and a goodwill impairment charge in fiscal 2025 relating to Too Faced of $13 million, the unfavorable year-over-year impact relating to net intercompany activity, including $334 million of lower intercompany royalty income due to the decline in income from our global travel retail business, the charge in the fiscal 2025 first quarter associated with the talcum litigation settlement agreements of $159 million, and a decrease in net sales, partially offset by lower cost of sales.

The decrease in operating income in mainland China was primarily driven by a decrease in net sales and the year-over-year unfavorable impact of a change in policy related to local government subsidies in China.

The decrease in operating income from our travel retail business, which is reported in Europe, the Middle East & Africa, was primarily driven by a decrease in net sales, partially offset by a favorable year-over-year impact of net intercompany activity, including $334 million of lower intercompany royalty expense due to the decline in income, lower cost of sales, disciplined advertising and promotional expense management and lower shipping costs reflecting the decrease in net sales.

INTEREST AND INVESTMENT INCOME

3 unchanged sentences

Interest income and investment income, net $ 114 $ 167

Interest expense increased for fiscal 2024, primarily reflecting a higher debt balance, due in part to the financing of our acquisition of the TOM FORD brand, including the issuance of Senior Notes in May 2023, as well as the issuance of Senior Notes in February 2024.

Also contributing to the increase in interest expense was higher interest rates compared to the prior year.

Interest income and investment income, net increased, primarily reflecting higher interest rates compared to the prior year.

Interest expense decreased in fiscal 2025, primarily reflecting a lower average debt balance compared to the prior year.

Interest income and investment income, net decreased in fiscal 2025, primarily reflecting a lower average cash balance and lower interest rates compared to the prior year.

PROVISION FOR INCOME TAXES

1 unchanged sentence

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 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 year-to-year 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.

Our effective tax rate will change from year to year 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, changes to valuation allowance, the interaction of various global tax strategies and the impact from certain acquisitions.

Year Ended June 30,

($ in millions) 2025 2024

Earnings before income taxes:

(Loss) earnings before income taxes:

$ (1,040) $ 772

3 unchanged sentences

Effective rate for income taxes 38.8 % 31.0 %

(1) Excludes the net impact on the effective tax rates of charges associated with restructuring and other activities, goodwill and other intangible asset impairments and changes in the fair value of DECIEM acquisition-related stock options inclusive of payroll tax.

The effective tax rate for fiscal 2024 increased approximately 1,930 basis points.

The increase was primarily attributable to the impact of nondeductible goodwill impairment charges associated with the our Dr.Jart+ reporting unit of approximately 790 basis points, as well as a higher effective tax rate on the our foreign operations of approximately 730 basis points, due to the our geographical mix of earnings for fiscal 2024, and an unfavorable impact associated with previously issued stock-based compensation of approximately 380 basis points.

NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.

(1) Excludes the net impact on the effective tax rates of charges associated with restructuring and other activities, goodwill and other intangible asset impairments, U.S.

deferred tax asset valuation allowance adjustment and talcum litigation settlement agreements for fiscal 2025 and charges associated with restructuring and other activities, goodwill and other intangible asset impairments and changes in the fair value of DECIEM acquisition-related stock options inclusive of payroll tax for fiscal 2024.

See “Reconciliations of Non-GAAP Financial Measures” on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

The effective tax rate for fiscal 2025 decreased approximately 5,590 basis points.

The decrease was primarily attributable to the higher effective tax rate on income from our foreign operations of approximately 2,630 basis points, due to our geographical mix of earnings for fiscal 2025, establishment of a valuation allowance against general foreign tax credit and research and development tax credit carryforwards of approximately 1,651 basis points, the impact of nondeductible goodwill impairment charges associated with the Too Faced reporting unit of approximately 800 basis points and the unfavorable impact associated with previously issued stock-based compensation of approximately 640 basis points.

The loss before income taxes due to the goodwill and other intangible asset impairment charges, as well as the charges associated with restructuring and other activities and talcum litigation settlement agreements increased the impact of these tax adjustments.

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

Year Ended June 30,

($ in millions, except per share data) 2025 2024

Net earnings attributable to The Estée Lauder Companies Inc.

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

$ (1,133) $ 390

1 unchanged sentence

% Change from prior year (100+)% (61) %

Diluted net earnings per common share $ 1.08 $ 2.79

Diluted net (loss) earnings per common share

$ (3.15) $ 1.08

% Change from prior year (100+)% (61) %

Non-GAAP Financial Measure (1) :

% Change in diluted net earnings per common share from the prior year adjusting for the impact of charges associated with restructuring and other activities, goodwill and other intangible asset impairments and the change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax.

% Change in diluted net (loss) earnings per common share from the prior year adjusting for the impact of charges associated with restructuring and other activities, goodwill and other intangible asset impairments, U.S.

deferred tax asset valuation allowance adjustment, talcum litigation settlement agreements and the change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax.

(42) % (25) %

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

(1) See “Reconciliations of Non-GAAP Financial Measures” on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

6 unchanged sentences

While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S.

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;

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

goodwill and other intangible asset impairments;

deferred tax asset valuation allowance adjustment;

talcum litigation settlement agreements;

the change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax;

2 unchanged sentences

GAAP measures.

Year Ended June 30 % Change % Change in Constant Currency

Year Ended June 30,

% Change % Change in Constant Currency

($ in millions, except per share data) 2025 2024 Variance

2 unchanged sentences

Net sales, as adjusted $ 14,323 $ 15,609 $ (1,286) (8) % (8) %

Operating income, as reported $ 970 $ 1,509 $ (539) (36) % (34) %

Operating (loss) income, as reported

$ (785) $ 970 $ (1,755) (100+)% (100+)%

Charges associated with restructuring and other activities 486 124 362

Goodwill and other intangible asset impairments

Goodwill impairment

Impairment of other intangible assets

1,273 180 1,093

Talcum litigation settlement agreements

Change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax

Operating income, as adjusted $ 1,146 $ 1,588 $ (442) (28) % (27) %

Diluted net earnings per common share, as reported $ 1.08 $ 2.79 $ (1.71) (61) % (60) %

Provision for income taxes, as reported

$ 93 $ 363 $ (270) (74) % (73) %

Effective rate for income taxes, as reported

(8.9) % 47.0 %

Charges associated with restructuring and other activities 105 27 78

Goodwill and other intangible asset impairments

deferred tax asset valuation allowance adjustment

(172) — (172)

Talcum litigation settlement agreements

Provision for income taxes, as adjusted

$ 346 $ 431 $ (85) (20) % (19) %

Effective rate for income taxes, as adjusted

38.8 % 31.0 %

Diluted net (loss) earnings per common share, as reported

$ (3.15) $ 1.08 $ (4.23) (100+)% (100+)%

Charges associated with restructuring and other activities 1.06 .27 .79

Goodwill and other intangible asset impairments

2.78 1.19 1.59

deferred tax asset valuation allowance adjustment

Talcum litigation settlement agreements

Change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax (less portion attributable to redeemable noncontrolling interest)

Diluted net earnings per common share, as adjusted

$ 1.51 $ 2.59 $ (1.08) (42) % (41) %

As diluted net earnings per common share, as adjusted, is used as a measure of the Company’s performance, we consider the impact of current and deferred income taxes when calculating the per-share impact of each of the reconciling items.

14 unchanged sentences

Total $ 14,326 $ 15,608 $ (1,282) $ 28 $ (1,254) (8) % (8) %

By Geographic Region:

The Americas $ 4,411 $ 4,581 $ (170) $ 50 $ (120) (4) % (3) %

4 unchanged sentences

Total $ 14,326 $ 15,608 $ (1,282) $ 28 $ (1,254) (8) % (8) %

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 goodwill and other intangible asset impairments and the change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax:

The following table reconciles the change in operating results by product category and geographic region, as reported, to the change in operating results excluding the impact of goodwill and other intangible asset impairments, talcum litigation settlement agreements and the change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax:

As Reported Add:

goodwill and other intangible asset impairments

Change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax

Variance, as adjusted % Change, as reported % Change, as adjusted

Talcum litigation settlement agreements

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

Year Ended June 30,

9 unchanged sentences

Total $ (785) $ 970

By Geographic Region:

The Americas $ (918) $ 34 $ (952) $ 911 $ 159 $ (14) $ 104 (100+)% 100+%

10 unchanged sentences

To mitigate the risk of uninsured balances, we select financial institutions based on their credit ratings and financial strength, and we perform ongoing evaluations of these institutions to limit our concentration risk exposure.

During fiscal 2023, we temporarily reduced our holdings of bank deposits and increased our holdings of government money market funds, due to stresses in the global banking system.

During fiscal 2024, we have rebalanced our cash allocations, increasing our holdings of bank deposits and decreasing our holdings in government money market funds.

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.

The Tax Cuts and Jobs Act (the "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.

5 unchanged sentences

Changes in our credit ratings will likely result in changes in our borrowing costs.

Our credit ratings also impact the cost of our revolving credit facility.

Our credit ratings also impact the cost of our revolving credit facilities.

Downgrades in our credit ratings may reduce our ability to issue commercial paper and/or long-term debt and would likely increase the relative costs of borrowing.

2 unchanged sentences

Debt and Access to Liquidity

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

Total debt as a percent of total capitalization was 65% and 59% at June 30, 2025 and 2024, respectively.

For further information regarding our current and long-term debt and available financing, see Item 8.

4 unchanged sentences

Net cash used for investing activities $ (623) $ (960)

Net cash provided by (used for) financing activities $ (2,035) $ 1,590

The change in net cash flows provided by operating activities was primarily driven by a favorable change in working capital variances, reflecting a favorable change in inventory and promotional merchandise, 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, and a favorable year-over-year impact in accounts payable, 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 a favorable year-over-year impact from the cash paid in connection with the acquisition of the TOM FORD brand during the fiscal 2023 fourth quarter, partially offset to a lesser extent, by an unfavorable impact from the settlement of net investment hedges compared to the prior year, 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.

The change in net cash flows provided by (used for) financing activities primarily reflected an unfavorable impact from the issuance and redemption of long-term debt compared to the prior year, repayments of commercial paper during fiscal 2024 as compared to the proceeds from the issuance of commercial paper in the prior year, and payments associated with the purchase of the remaining interest in DECIEM during the fiscal 2024 fourth quarter, partially offset by lower treasury stock repurchases compared to the prior year.

Net cash used for financing activities

$ (1,144) $ (2,035)

The change in net cash flows provided by operating activities was primarily driven by lower net earnings in fiscal 2025, excluding non-cash items, and an unfavorable change in operating assets and liabilities variances, including the impact from the significant reduction in inventory in the prior year, as compared to the reduction in inventory in the current year.

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

The change in net cash flows used for financing activities primarily reflected the favorable year-over-year impacts of repayments of commercial paper in the prior year, payments associated with the purchase of the remaining interest in DECIEM during fiscal 2024 and a decrease in dividends paid to stockholders in the current year, partially offset by the unfavorable year-over-year impact of the repayment of long-term debt in the current year and issuance of long-term debt in the prior year.

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2024 for the fiscal 2024 to fiscal 2023 comparative discussions.

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Commitments and Contingencies

For a discussion of our contingencies, see to Item 8.

For a discussion of our commitments and contingencies, see Item 8.

Financial Statements and Supplementary Data – Note 17 – Commitments and Contingencies .

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Financial Statements and Supplementary Data – Note 13 – Derivative Financial Instruments (Credit Risk) .

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.

To perform a sensitivity analysis of our foreign currency forward contracts, we assess the change in fair values from the impact of hypothetical changes in foreign currency exchange rates.

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

We also enter into cross-currency swap contracts to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt.

We also enter into cross-currency swap contracts to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt and to hedge a portion of the net investment in certain foreign operations.

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 June 30, 2024 and 2023.

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.

In addition, we enter into interest rate derivatives to manage the effects of interest rate movements on our funded indebtedness, 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 $43 million and $48 million as of June 30, 2025 and 2024, respectively.

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We consider accounting estimates to be critical if the accounting estimate both (i) involves a significant level of estimation uncertainty, and (ii) has had or is reasonably likely to have a material impact on the Company's financial condition or results of operations.

Our critical accounting policies relate to Goodwill and Other Indefinite-lived Intangible Assets - Impairment Assessment and Income Taxes.

Our critical accounting policies relate to Goodwill and Other Indefinite-lived Intangible Assets – Impairment Assessment, Dr.Jart+ Other Intangible Asset – Impairment and Income Taxes.

Our management has discussed the selection of critical accounting policies and the effect of estimates with the Audit Committee of our Board of Directors.

Goodwill and Other Indefinite-lived Intangible Assets – Impairment Assessment

Goodwill is calculated as the excess of the cost of purchased businesses over the fair value of their underlying net assets.

Goodwill and Other Indefinite-lived Intangible Assets – Impairment Assessment and Dr.Jart+ Other Intangible Asset – Impairment

Goodwill is calculated as the excess of the cost of purchased businesses over the estimated fair value of their underlying net assets.

Other indefinite-lived intangible assets principally consist of trademarks.

Goodwill and other indefinite-lived intangible assets are not amortized.

When testing goodwill for impairment, we have the option of first performing a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test.

We use a single quantitative step when determining the subsequent measurement of goodwill by comparing the fair value of a reporting unit with its carrying amount and recording an impairment charge for the amount that the carrying amount exceeds the fair value, up to the total amount of goodwill allocated to that reporting unit.

When testing goodwill for impairment, we have the option of first performing a qualitative assessment to determine whether it is more-likely-than-not that the estimated fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative goodwill impairment test.

The quantitative impairment test for goodwill encompasses calculating the estimated fair value of a reporting unit and comparing the estimated fair value to its carrying value.

If the carrying value exceeds the estimated fair value, an impairment charge is recorded, up to the total amount of goodwill allocated to that reporting unit.

When testing other indefinite-lived intangible assets for impairment, we also have the option of first performing a qualitative assessment to determine whether it is more-likely-than-not that the other indefinite-lived intangible asset is impaired as a basis for determining whether it is necessary to perform a quantitative test.

The quantitative impairment test for other indefinite-lived intangible assets encompasses calculating the fair value of an other indefinite-lived intangible asset and comparing the fair value to its carrying value.

If the carrying value exceeds the fair value, an impairment charge is recorded.

The quantitative impairment test for other indefinite-lived intangible assets encompasses calculating the estimated fair value of an other indefinite-lived intangible asset and comparing the estimated fair value to its carrying value.

If the carrying value exceeds the estimated fair value, an impairment charge is recorded.

When events or changes in circumstances indicate that the carrying amount of long-lived assets may not be recoverable, a recoverability test is performed comparing projected undiscounted cash flows from the use and eventual disposition of an asset or asset group to its carrying value.

If the projected undiscounted cash flows are less than the carrying value, then an impairment charge would be measured and recorded for the excess of the carrying value over the estimated fair value.

For fiscal 2025 and 2024, we elected to perform the qualitative assessment for the goodwill in certain of our reporting units and other indefinite-lived intangible assets.

This qualitative assessment included the review of certain macroeconomic factors and entity-specific qualitative factors to determine if it was more-likely-than-not that the fair values of its reporting units were below carrying value.

We considered macroeconomic factors including the global economic growth, general macroeconomic trends for the markets in which the reporting units operate and the intangible assets are employed, and the growth of the global prestige beauty industry.

In addition to these macroeconomic factors, among other things, we considered the reporting units’ current results and forecasts, any changes in the nature of the business, any significant legal, regulatory, contractual, political or other business climate factors, changes in the industry/competitive environment, changes in the composition or carrying amount of net assets and its intention to sell or dispose of a reporting unit or cease the use of a trademark.

This qualitative assessment included the review of certain macroeconomic factors and entity-specific qualitative factors to determine if it was more-likely-than-not that the estimated fair values of the reporting units and other indefinite-lived intangible assets were below their carrying values.

We considered macroeconomic factors including global economic growth, general macroeconomic trends for the markets in which the reporting units operate and the intangible assets are employed, and the growth of the global prestige beauty industry.

In addition to these macroeconomic factors, among other things, we considered the reporting units’ current results and forecasts, any changes in the nature of the business, any significant legal, regulatory, contractual, political or other business climate factors, changes in the industry/competitive environment, changes in the composition or carrying amount of net assets and the Company's intention to sell or dispose of a reporting unit or cease the use of a trademark.

For fiscal 2025 and 2024, a quantitative assessment was performed for the goodwill in certain of our reporting units and other indefinite-lived intangible assets.

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To determine the estimated fair value of the reporting units, we used an equal weighting of the income and market approaches.

Under the income approach, we determined fair value using a discounted cash flow method, projecting future cash flows of each reporting unit, as well as a terminal value, and discounting such cash flows at a rate of return that reflected the relative risk of the cash flows.

Under the income approach, we determined the estimated fair value using a discounted cash flow method, projecting future cash flows of each reporting unit, as well as a terminal value, and discounting such cash flows at a rate of return that reflected the relative risk of the cash flows.

Under the market approach, we utilized market multiples from publicly traded companies with similar operating and investment characteristics as the reporting unit.

The significant assumptions used in these two approaches include revenue growth rates and profit margins, terminal value, the weighted average cost of capital used to discount future cash flows and comparable market multiples.

The significant assumptions used in these two approaches include revenue growth rates and profit margins, terminal value, weighted average cost of capital used to discount future cash flows and comparable market multiples for the reporting unit.

To determine the estimated fair value of other indefinite-lived intangible assets, we used an income approach, specifically the relief-from-royalty method.

This method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset.

The significant assumptions used in this approach include revenue growth rates, terminal value, the weighted average cost of capital used to discount future cash flows and royalty rate.

For further discussion of the methods used and factors considered in our estimates as part of the impairment testing for Goodwill and Other Indefinite-lived Intangible Assets, see Item 8.

Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies , Note 6 – Goodwill and Other Intangible Assets .

The significant assumptions used in this approach include revenue growth rates and profit margins, terminal value, weighted average cost of capital used to discount future cash flows and a royalty rate.

For fiscal 2025, changes in circumstances at the Dr.Jart+ reporting unit indicated that the carrying amounts of its long-lived assets, including the customer list, were not recoverable.

The Company first determines the asset group which is defined as the lowest level for which identifiable cash flows are largely independent of the cash flows of other groups of assets and liabilities.

The asset group was determined to be at the reporting unit level.

Based on the estimated undiscounted cash flows of the asset group, the carrying amount of the long-lived assets for Dr.Jart+ were not recoverable.

To calculate the impairment, the estimated fair value of the asset group was determined in the same manner as the quantitative assessment performed for goodwill described above, using an equal weighting of the income and market approaches.

Estimated fair values for each of the assets within the asset group were also determined.

The calculated impairment loss for the asset group only reduces the carrying amounts of the long-lived assets of the group and is allocated on a pro rata basis using the relative carrying amounts of those assets, however, the allocated impairment loss cannot reduce the carrying amount of a long-lived asset below its estimated fair value.

As a result of the estimated fair values, the impairment charge was allocated entirely to the Dr.Jart+ customer list intangible asset.

For further discussion of the methods used and factors considered in our estimates as part of the impairment testing for goodwill and other indefinite-lived intangible assets and impairment of the Dr.Jart+ customer list intangible asset, see Item 8.

Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies and Note 6 – Goodwill and Other Intangible Assets .

We calculate and provide for income taxes in each tax jurisdiction in which we operate.

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(5) the success, or changes in timing or scope, of new product launches and the success, or changes in timing or scope, of advertising, sampling and merchandising programs;

(6) shifts in the preferences of consumers as to where and how they shop;

(6) shifts in the preferences of consumers as to how they perceive value and where and how they shop;

(7) social, political and economic risks to our foreign or domestic manufacturing, distribution and retail operations, including changes in foreign investment and trade policies and regulations of the host countries and of the United States;

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(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;

(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;

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

What changed 10-K

Item 7. Management’s Discussion and Analysis