What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-08-19 compared with 2025-08-20 · 339 added, 312 removed, 472 unchanged (58% of the section changed)

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Restructuring and other charges 813 5.4 481 3.4 122 0.8

Securities class action litigation settlement 84 0.6 — — — —

Goodwill impairment — — 13 0.1 291 1.9

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Total operating expenses 10,582 70.3 11,382 79.4 10,214 65.4

Operating (loss) income

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

Operating income (loss) 780 5.2 (785) (5.5) 970 6.2

Interest expense 334 2.2 357 2.5 378 2.4

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Other components of net periodic benefit cost 19 0.1 12 0.1 (13) (0.1)

(Loss) earnings before income taxes

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

Earnings (loss) before income taxes 517 3.4 (1,040) (7.3) 772 4.9

Provision for income taxes 335 2.2 93 0.6 363 2.3

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 (loss) 182 1.2 (1,133) (7.9) 409 2.6

Net earnings attributable to redeemable noncontrolling interest

— — — — (19) (0.1)

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

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

$ 182 1.2 % $ (1,133) (7.9) % $ 390 2.5 %

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The Americas $ 4,463 $ 4,410 $ 4,579

Europe, the Middle East & Africa 5,375 6,140 6,225

Europe, the United Kingdom and Ireland and Emerging Markets ("EUKEM") 3,794 3,566 3,539

Asia/Pacific 3,746 3,606 4,587

Mainland China 3,058 2,741 2,904

15,061 14,323 15,609

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Net sales $ 15,049 $ 14,326 $ 15,608

OPERATING (LOSS) INCOME

OPERATING INCOME (LOSS)

By Product Category:

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Charges associated with restructuring and other activities (1)

Operating (loss) income

(823) (486) (124)

Operating income (loss) $ 780 $ (785) $ 970

By Geographic Region (2) :

The Americas $ 211 $ (818) $ 168

Europe, the Middle East & Africa 610 836 843

EUKEM 196 145 102

Asia/Pacific 823 180 510

Mainland China 373 194 314

1,603 (299) 1,094

Charges associated with restructuring and other activities (1)

Operating (loss) income

(823) (486) (124)

(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.

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.

Operating income (loss) $ 780 $ (785) $ 970

(1) Returns and 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 discussions of Net sales and Operating results by Product Categories and Geographic Regions below exclude the impacts of returns and charges associated with restructuring and other activities.

(2) The net sales and operating results from our travel retail business are included in the Asia/Pacific region.

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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The economics of developing, producing, launching, supporting and discontinuing products impact our sales and operating performance each period.

The introduction of new products often has some cannibalizing effect on sales of existing products, which we take into account in our business planning.

The introduction of new products often has some cannibalizing effect on sales of existing products, inclusive of potential sales returns, which we take into account in our business planning.

The impact of new product introductions, including timing compared to introductions in prior periods, also affects our results.

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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, 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.

Therefore, we present certain net sales, operating results, provision for income taxes and diluted net earnings (loss) 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.

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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.

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 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.

While we have seen improvements within our business, we are mindful of areas of volatility and uncertainty that may impact our results.

We continue to face challenges in key markets in the West, including in some markets in Western Europe and the United States.

Within our Asia travel retail business, we continue to monitor the impacts of the change in duty-free retailers servicing the Beijing and Shanghai airports, including the related online businesses.

We are also monitoring the conflict in the Middle East as it relates to our business in the domestic markets and travel retail locations in the region.

Net sales from locations impacted by the conflict in the Middle East accounted for approximately 2% of consolidated net sales in fiscal 2025.

We continue to monitor and assess the impact that these areas of volatility and uncertainty may have on net sales and profitability, including impacts to our effective tax rate from changes to our geographical mix of earnings.

We are continuing to monitor and assess the potential effects of changing tariff conditions 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.

Our strategy remains optimizing our global supply chain network, by sourcing and manufacturing in the geography of sale where feasible.

We also continue to leverage trade programs where available and monitor for additional opportunities as countries continue to update their trade programs.

We anticipate tariffs to have an adverse effect on fiscal 2027 profitability and cash flows, and depending on actual rates and countries imposing tariffs such adverse impacts could be material.

On February 20, 2026, the U.S.

Supreme Court ruled that the U.S.

tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) on goods imported into the U.S.

were unauthorized.

The ruling did not address potential refunds, however on March 4, 2026, the U.S.

Court of International Trade ordered U.S.

Customs and Border Protection to begin refunding all tariffs imposed under IEEPA.

During the fiscal 2026 fourth quarter, we submitted claims for a portion of our eligible IEEPA tariffs paid, and have begun to receive refunds.

For refunds received during the period, we have recorded these as an offset to cost of sales.

As of June 30, 2026, the remaining amount of potential IEEPA tariff refunds not yet submitted or for which refunds have not been received are not considered material to the consolidated financial statements.

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.

Following the transition of leadership in the second and third quarters of fiscal 2025, we are executing against "Beauty Reimagined," our previously announced 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") during the fiscal 2025 third quarter, as discussed below.

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

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and global security issues.

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.

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 actual and potential impact of changes that have been made and are expected to be made as part of the PRGP on suppliers, retailers and others, and challenges relating to successfully outsourcing select services.

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.

We are continuing to monitor and evaluate the potential impact of incorporating the global minimum tax in additional countries that have yet to enact the legislation.

On July 4, 2025, 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, and we are continuing to evaluate the potential impact of the provisions that are expected to be effective in future fiscal years.

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.

Restructuring Program Component of the Profit Recovery and Growth Plan

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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.

We committed to this course of action on February 1, 2024 and at that time, planned to substantially complete specific initiatives under the restructuring program through fiscal 2026.

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.

(i) adopt a more competitive approach to procurement, a key pillar of savings, by further consolidating spending and strategically re-evaluating key supplier relationships;

(ii) 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;

and (iii) outsource select services to proven global partners.

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

The focus of the overall expanded restructuring program (collectively the “Restructuring Program”) includes (i) reorganization and rightsizing of certain areas, (ii) simplification and acceleration of processes, (iii) outsourcing of select services and (iv) evolution of go-to-market footprint and selling models, all to help rebuild operating margin and also fuel reinvestment in consumer-facing areas to drive sustainable sales growth.

As of June 30, 2026, approvals under the Restructuring Program concluded, and by the end of fiscal 2027, the cumulative approved initiatives are expected to be substantially completed.

Based on the total approved initiatives under the Restructuring Program, as of June 30, 2026 we estimate a final net reduction of approximately 10,000 positions globally, at the high end of the previously announced range of 9,000 to 10,000.

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 enable a return to a double-digit operating margin over the next few years.

The total approved initiatives under the Restructuring Program are expected to result in restructuring and other charges of $1,748 million, before taxes, slightly above the high end of the previously announced range of $1,500 million to $1,700 million, 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, have been funded from cash provided by operations for initiatives implemented to date, and for the remaining initiatives 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 approximately $1,200 million, at the high end of the previously announced range of between $1,000 million and $1,200 million, before taxes, a portion of which is expected to be reinvested in consumer-facing activities.

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 7 – Charges Associated with Restructuring and Other Activities .

Impairment Analysis

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) Three Months Ended

June 30, 2025

Twelve Months Ended

June 30, 2025

As of June 30, 2025

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 —

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.

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 and long-lived assets.

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

For additional information, see Item 8.

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.

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

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations 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 discussion.

Securities Class Action Litigation Settlement

On December 7, 2023 and January 22, 2024, purported securities class action complaints were filed in the United States District Court for the Southern District of New York against the Company and its then Chief Executive Officer and Chief Financial Officer.

The actions were consolidated on February 20, 2024.

On March 22, 2024, plaintiffs filed a consolidated amended complaint alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on alleged materially false and misleading statements between February 3, 2022 and October 31, 2023.

On March 31, 2025, the Court denied defendants’ motion to dismiss.

On April 2, 2026, the parties reached an agreement in principle to settle the securities class action litigation.

In light of these discussions, during the fiscal 2026 third quarter, we recorded a loss contingency of $84 million, net of the estimated probable insurance recoveries, in the consolidated statements of earnings (loss) relating to a potential settlement of the securities class action.

As of June 30, 2026, the total settlement amount has been funded, including amounts paid by the insurance carriers.

This matter is subject to final approval from the Court.

Annual Impairment Analysis

Aligned with our policy on Goodwill and Other Indefinite-lived Intangible Assets , as described in Item 8.

Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies , we performed our annual impairment assessments as of April 1, 2026.

Goodwill and trademark intangible assets were evaluated using either qualitative or quantitative assessments, as appropriate based on the reporting unit or brand.

Based on the results of these assessments, no impairment charges were recorded, however, certain trademarks have limited excess fair value over carrying value.

Trademark Intangible Assets with Limited Excess Fair Value

The estimated fair value of the Dr.Jart+ trademark exceeded its carrying value of $37 million by 4%.

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 30 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 estimated fair value of the Too Faced trademark exceeded its carrying value of $62 million by 13%.

If all other assumptions are held constant, a decrease of 11% in the estimated future net sales, inclusive of the terminal value, or an increase of 130 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 estimated fair value of the TOM FORD trademark exceeded its carrying value of $1,805 million by 19%.

The excess in the current year is primarily driven by a decrease in the weighted average cost of capital as of April 1, 2026 compared to the fair value calculated in the fiscal 2025 second quarter, the period when impairment charges were taken and the estimated fair value of the trademark was equal to its carrying value.

If all other assumptions are held constant, an increase of 140 basis points in the weighted average cost of capital would have caused the carrying value of the trademark to approximate its estimated fair value.

Factors That Could Impact Future Impairment Assessments

The key assumptions used to determine the estimated fair value of the 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 brands operate, resulting changes in the key assumptions could negatively impact the estimated fair value of the trademarks.

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

Fiscal 2026 as Compared with Fiscal 2025

8 unchanged sentences

GAAP measures.

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 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 2025 and fiscal 2024 impacts of returns/(return adjustments) associated with restructuring and other activities of approximately $(3) million and $1 million, respectively.

Reported net sales increased in fiscal 2026, driven by skin care and fragrance, and to a lesser extent, makeup.

By geographic region, reported net sales increased across all geographic regions in fiscal 2026, led by Mainland China and EUKEM.

The fiscal 2026 reported net sales increase was impacted by approximately $250 million of favorable foreign currency translation.

Reported net sales increased 5% in fiscal 2026, driven by the increase from volume of 2%, the favorable impact from foreign currency translation of 2% and an increase from pricing of 1%, reflecting the favorable impact from strategic pricing actions and changes in mix.

Product Categories

13 unchanged sentences

GAAP measures.

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 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 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 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.

Reported skin care net sales increased $376 million, or 5%, in fiscal 2026, reflecting higher net sales from La Mer, Estée Lauder and The Ordinary, combined, of approximately $466 million.

Net sales from La Mer increased, reflecting the benefit from new product launches, as well as growth from The Treatment Lotion franchise.

The increase in net sales from Estée Lauder reflected growth attributable to hero product franchises, as well as new product launches, which both drove performance during key shopping moments.

Net sales from The Ordinary increased, primarily reflecting growth from targeted expanded consumer reach, as well as the benefit from key campaigns and the timing of key shopping moments.

Skin care net sales were impacted by approximately $115 million of favorable foreign currency translation.

Reported skin care net sales increased 5% in fiscal 2026, driven by an increase from pricing of 3%, reflecting changes in mix and the favorable impact from strategic pricing actions, and the favorable impact from foreign currency translation of 2%.

The impact from volume was flat period-over-period.

Reported makeup net sales increased $71 million, or 2%, in fiscal 2026, including the favorable impact of foreign currency translation of 2%.

Including the favorable impact of foreign currency translation, the increase in makeup net sales was primarily driven by M·A·C, reflecting higher net sales in the lip subcategory, driven by Powder Kiss Lipstick, Lip Pencil, MACximal Silky Matte Lipstick and MACximal Sleek Satin Lipstick.

Also contributing to the increase in M·A·C net sales was the benefit from targeted expanded consumer reach.

Makeup net sales were impacted by approximately $84 million of favorable foreign currency translation.

Reported makeup net sales increased 2% in fiscal 2026, driven by the increase from volume of 3% and the favorable impact of foreign currency translation of 2%.

Partially offsetting these increases was a decrease from pricing of 4%, reflecting changes in mix, partially offset by the favorable impact from strategic pricing actions.

Reported fragrance net sales increased $288 million, or 12%, in fiscal 2026, reflecting higher net sales from Le Labo, TOM FORD and KILIAN PARIS, combined, of approximately $221 million.

The increase in net sales from Le Labo was led by the Classic Collection, including growth from targeted expanded consumer reach and the benefit from new product launches.

Net sales from TOM FORD increased, reflecting the benefit from new product launches which created halo benefits on existing products, with overall growth in both the Signature and Private Blend franchises.

Net sales from KILIAN PARIS increased, driven by the Angels' Share and Love, don't be shy franchises including growth attributable to new product launches and key campaigns, as well as growth from targeted expanded consumer reach.

Fragrance net sales were impacted by approximately $48 million of favorable foreign currency translation.

Reported fragrance net sales increased 12% in fiscal 2026, driven by the increase from volume of 7%, an increase from pricing of 3%, reflecting the favorable impact from strategic pricing actions and changes in mix, and the favorable impact from foreign currency translation of 2%.

Reported hair care net sales were flat in fiscal 2026, including the favorable impact of foreign currency translation of 1%.

Including the favorable impact of foreign currency translation, hair care net sales results reflected higher net sales from The Ordinary and lower net sales from Aveda.

The increase in net sales from The Ordinary reflected growth of the Multi-Peptide Serum for Hair Density, as well as the benefit from targeted expanded consumer reach.

The decrease in net sales from Aveda reflects the brand’s strategies to improve long-term performance, including (i) planned rebalancing of online promotional activity and (ii) the exit from underperforming doors, including freestanding stores.

These declines were 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.

Hair care net sales were impacted by approximately $3 million of favorable foreign currency translation.

Reported hair care net sales were flat in fiscal 2026, driven by the increase from pricing of 3%, reflecting changes in mix and the favorable impact of strategic pricing actions, and the favorable impact from foreign currency translation of 1%.

These increases were offset by the decrease from volume of 3%.

Geographic Regions

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

Reported net sales for our geographic regions for the years ended June 30, 2026 and 2025 were as follows:

Year Ended June 30,

2 unchanged sentences

The Americas $ 4,463 $ 4,410 $ 53 1 % 1 %

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

EUKEM 3,794 3,566 228 6 1

Asia/Pacific (1)

3,746 3,606 140 4 4

Mainland China 3,058 2,741 317 12 9

15,061 14,323 738 5 3

Returns associated with restructuring and other activities (12) 3 (15) (100+) (100+)

Net sales $ 15,049 $ 14,326 $ 723 5 % 3 %

(1) The net sales from our travel retail business are included in the Asia/Pacific region.

(2) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 44 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

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.

Reported net sales increased in fiscal 2026, primarily driven by higher net sales in Mainland China and our travel retail business, combined, of approximately $531 million.

The increase in net sales in Mainland China reflected growth attributable to key shopping moments, including the benefits from key campaigns to drive sales and new product launches.

The increase in net sales in our travel retail business was driven by Asia travel retail, including (i) the increase in net sales in Korea travel retail and Hong Kong SAR travel retail, benefiting from retailer shifts toward more profitable duty-free business models, which helped reduce discounting, as well as the increase in traveling consumers, (ii) net sales growth in Hainan travel retail, reflecting the improvement in retail sales, benefiting from higher traffic and key campaigns to drive growth, and (iii) the net sales decline in the rest of mainland China travel retail, primarily driven by the transitory pressure from the change of duty-free retailers servicing the Beijing and Shanghai airports, including the related online businesses.

Reported net sales in The Americas increased 1% in fiscal 2026, driven by the increase from volume of 4%.

Partially offsetting this increase was a decrease from pricing of 3%, reflecting changes in mix, partially offset by the favorable impact from strategic pricing actions.

Reported net sales in EUKEM increased 6% in fiscal 2026, driven by the favorable impact of foreign currency translation of 5% and the increase from volume of 4%.

These increases were partially offset by a decrease from pricing of 3%, reflecting changes in mix, partially offset by the favorable impact from strategic pricing actions.

Reported net sales in Asia/Pacific increased 4% in fiscal 2026, driven by an increase from pricing of 4%, reflecting changes in mix and the favorable impact from strategic pricing actions, partially offset by the unfavorable impact from foreign currency translation of 1%.

The impact from volume was flat period-over-period.

Reported net sales in Mainland China increased 12% in fiscal 2026, driven by an increase from pricing of 10%, reflecting changes in mix and the favorable impact from strategic pricing actions, and the favorable impact from foreign currency translation of 3%.

Partially offsetting these increases was the decrease from volume of 1%.

Gross margin in fiscal 2026 increased to 75.5% as compared with 74.0% in fiscal 2025.

10 unchanged sentences

Non-GAAP Gross Margin Basis Point Variance

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.

The increase in gross margin in fiscal 2026 is driven by net benefits from the PRGP, partially offset by unfavorable impacts within manufacturing costs and other, reflecting the impact of inflation on our costs, as well as tariffs.

The PRGP benefits were driven by the favorable impact of cost efficiencies within our global supply chain network and reductions in excess inventory.

OPERATING EXPENSES

Operating expenses as a percentage of net sales in fiscal 2025 increased to 79.4% as compared with 65.4% in fiscal 2024.

Operating expenses as a percentage of net sales in fiscal 2026 decreased to 70.3% as compared with 79.4% in fiscal 2025.

Fiscal 2026 vs.

Favorable (Unfavorable) Basis Points

General and administrative expenses (90)

Advertising, marketing, promotion and product development (1)

Selling (140)

Advertising 10

Promotional 10

Store operating costs (10)

Consumer-facing operating expenses (1)

General and administrative 40

Product development 40

Stock-based compensation —

Foreign exchange transactions (10)

Non-consumer-facing operating expenses 130

Charges associated with restructuring and other activities (200)

Goodwill and other intangible asset impairments

Securities class action litigation settlement (60)

Impairment of goodwill and other intangible assets 900

Talcum litigation settlement agreements

Changes in fair value of DECIEM acquisition-related stock options

As Reported Operating Expense Margin Basis Point Variance

1 unchanged sentence

Impact of restructuring and other activities

Goodwill and other intangible asset impairments

Securities class action litigation settlement 60

Impairment of goodwill and other intangible assets (900)

Talcum litigation settlement agreements (2)

Changes in fair value of DECIEM acquisition-related stock options

Non-GAAP Operating Expense Margin Basis Point Variance

(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.

(1) Consumer-facing operating expenses in this table and within the operating expense margin discussion below do not include the impact of co-operative advertising expenses, however, our references to consumer-facing investments throughout the remainder of Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations include the consumer-facing operating expenses noted above as well as the impact of co-operative advertising expenses that are recorded as a reduction of revenue.

(2) From the end of August 2024 through October 2024, we entered into agreements with certain plaintiff law firms to resolve over 200 pending cosmetic talcum powder matters, which was a portion of the pending matters that existed at that time, and establish a framework for resolving potential future claims brought by these plaintiff firms from January 1, 2025 through December 31, 2029 (mitigating a portion of our future exposure), subject to annual caps (the “Talcum litigation settlement agreements”).

In connection with the Talcum litigation settlement agreements, we recorded a charge of $159 million in the fiscal 2025 first quarter, representing our best estimate of probable losses for current and potential future claims under these agreements.

The favorability in our operating expense margin in fiscal 2026 reflected the impact of the increase in net sales, which offset the overall increase in investments in consumer-facing areas of the business to drive sales, including through key campaigns, new product launches and targeted expanded consumer reach.

Non-consumer facing expenses were virtually flat year-over-year, with overall lower expenses within general and administrative, marketing, product development, and shipping, collectively, including lower employee-related costs realized through initiatives as part of the PRGP, with these benefits largely offset by higher employee incentive costs.

OPERATING RESULTS

1 unchanged sentence

($ in millions) 2026 2025

Operating (loss) income

Operating income (loss)

$ 780 $ (785)

3 unchanged sentences

Non-GAAP Financial Measure (1) :

% 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) %

% Change in operating income (loss) from the prior year adjusting for the impact of charges associated with restructuring and other activities, the securities class action litigation settlement, impairment of goodwill and other intangible assets and talcum litigation settlement agreements

(1) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 44 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

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 (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.

The reported operating margin for fiscal 2026 increased from the prior year, driven by the favorable operating expense margin, which includes the favorable year-over-year impact of goodwill and other intangible asset impairment charges in fiscal 2025 of $1,286 million, as well as the increase in net sales and increase in gross margin, as discussed above.

Product Categories

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

Reported operating income (loss) for our product categories for the years ended June 30, 2026 and 2025 were as follows:

Year Ended June 30,

3 unchanged sentences

Non-GAAP Financial Measure (1)

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.

Skin Care $ 1,416 $ 574 $ 842 100+% 52 % Adjusted for the impact of the securities class action litigation settlement and an other intangible asset impairment

Makeup (70) (441) 371 84 (100) Adjusted for the impact of the securities class action litigation settlement, goodwill and other intangible asset impairments and the Talcum litigation settlement agreements

Fragrance 204 (378) 582 100+ 27 Adjusted for the impact of the securities class action litigation settlement and an other intangible asset impairment

Hair Care (4) (41) 37 90 100 Adjusted for the impact of the securities class action litigation settlement

Other 57 (13) 70 100+ 39 Adjusted for the impact of an other intangible asset impairment

1,603 (299) 1,902 100+ 47 %

1 unchanged sentence

(823) (486) (337) (69)

Operating (loss) income

Operating income (loss)

$ 780 $ (785) $ 1,565 100+%

1 unchanged sentence

GAAP measures.

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.

Reported skin care operating income increased $842 million, or over 100%, in fiscal 2026, reflecting an increase in net sales and the favorable year-over-year impact of the other intangible asset impairment charge in the prior year related to Dr.Jart+ of $375 million.

The increase in operating income was partially offset by an increase in consumer-facing investments, including to support key campaigns, new product launches and targeted expanded consumer reach.

Reported makeup operating loss decreased $371 million, or 84%, in fiscal 2026, reflecting the favorable year-over-year impact of other intangible asset impairment charges in the prior year relating to TOM FORD and Too Faced, combined, of $295 million and a goodwill impairment charge relating to Too Faced of $13 million, as well as the favorable year-over-year impact of the charge in fiscal 2025 associated with the Talcum litigation settlement agreements of $159 million.

Partially offsetting the increase in operating results was an increase in consumer-facing investments, including to support key campaigns, new product launches and targeted expanded consumer reach.

Reported fragrance operating results increased $582 million, or over 100%, in fiscal 2026, reflecting the favorable year-over-year impact of the other intangible asset impairment charge in the prior year of $549 million relating to TOM FORD, as well as an increase in net sales.

Partially offsetting these increases in operating results was an increase in consumer-facing investments, including to support key campaigns, new product launches and targeted expanded consumer reach.

Reported hair care operating loss decreased $37 million, or 90%, in fiscal 2026, reflecting lower cost of sales and lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP which were partially offset by higher employee incentive costs, and lower consumer-facing investments.

These increases to operating results were partially offset by the unfavorable allocated impact of the securities class action litigation settlement.

Geographic Regions

Reported operating income (loss) for our geographic regions for the years ended June 30, 2026 and 2025 were as follows:

Year Ended June 30,

4 unchanged sentences

Non-GAAP Financial Measure (1)

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)

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

The Americas $ 211 $ (818) $ 1,029 100+% 17 % Adjusted for the impact of the securities class action litigation settlement, impairment of goodwill and other intangible assets and the Talcum litigation settlement agreements

EUKEM 196 145 51 35 35

Asia/Pacific 823 180 643 100+ 48 Adjusted for the impact of an other intangible asset impairment

Mainland China 373 194 179 92 92

1,603 (299) 1,902 100+ 47 %

1 unchanged sentence

(823) (486) (337) (69)

Operating (loss) income

Operating income (loss)

$ 780 $ (785) $ 1,565 100+%

1 unchanged sentence

GAAP measures.

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.

Reported operating results in The Americas increased $1,029 million, or over 100%, in fiscal 2026, reflecting the favorable year-over-year impacts of other intangible asset impairment charges in the prior year relating to TOM FORD and Too Faced, combined, of $898 million and a goodwill impairment charge in the prior year relating to Too Faced of $13 million.

Also contributing to the increase was the favorable year-over-year impact of the charge in fiscal 2025 associated with the Talcum litigation settlement agreements of $159 million and higher net sales.

Partially offsetting the increase in operating results is the unfavorable impact of the securities class action litigation settlement charge in the fiscal 2026 third quarter and an increase in consumer-facing investments to help drive sales growth.

Reported operating income in EUKEM increased $51 million, or 35%, in fiscal 2026, reflecting higher net sales, partially offset by an increase in consumer-facing investments, including to support targeted expanded consumer reach, key campaigns and new product launches, and an increase in non-consumer-facing expenses, due in part to higher employee incentive costs.

Reported operating income in Asia/Pacific increased $643 million, or over 100%, in fiscal 2026, reflecting the favorable year-over-year impact of the other intangible asset impairment charge in the prior year relating to Dr.Jart+ of $375 million, higher net sales and a decrease in cost of sales, including net benefits from the PRGP.

Reported operating income in Mainland China increased $179 million, or 92%, in fiscal 2026, reflecting higher net sales, as well as the favorable year-over-year timing of recognition of local government subsidies in fiscal 2026, as well as the related impact of the change in policy in fiscal 2025.

Partially offsetting the increase in operating income was an increase in consumer-facing investments, including to support key campaigns, new product launches and targeted expanded consumer reach.

INTEREST AND INVESTMENT INCOME

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Interest income and investment income, net $ 90 $ 114

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.

Interest expense decreased in fiscal 2026, primarily reflecting a lower average debt balance and lower average interest rates compared to the prior year.

Interest income and investment income, net decreased in fiscal 2026, primarily driven by lower average interest rates earned compared to the prior year, as well as the unfavorable year-over-year impact of impairments of cost method minority investments.

PROVISION FOR INCOME TAXES

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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, as well as changes to valuation allowance based on our assessment of the realizability of deferred tax assets.

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.

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 changes in unrecognized tax benefits, as well as changes to valuation allowances based on our assessment of the realizability of deferred tax assets.

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, unrecognized tax benefits, the tax impact of stock-based compensation, changes to valuation allowances, the interaction of various global tax strategies and the impact from certain acquisitions.

Year Ended June 30,

($ in millions) 2026 2025

(Loss) earnings before income taxes:

Earnings (loss) before income taxes:

$ 517 $ (1,040)

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Effective rate for income taxes 35.7 % 38.8 %

(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.

(1) Excludes the net impact on the effective tax rates of charges associated with restructuring and other activities in both periods, the securities class action litigation settlement in fiscal 2026, and in fiscal 2025 also excludes the impact of the impairment of goodwill and other intangible assets, U.S.

deferred tax asset valuation allowance adjustment and the Talcum litigation settlement agreements.

See “Reconciliations of Non-GAAP Financial Measures” on page 44 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.

The effective tax rate for fiscal 2026 increased approximately 7,370 basis points.

The extent of the year over year change was broadly impacted by the loss before income taxes in fiscal 2025.

The increase was primarily attributable to the higher effective tax rate on income from our foreign operations of approximately 5,630 basis points, due to our geographical mix of earnings, including the establishment of new valuation allowances on certain foreign deferred tax assets.

Further contributing to the increase in the effective tax rate was the unfavorable impact of the One Big Beautiful Bill Act, resulting from an increase in tax deductible interest expense which reduced U.S.

taxable income and increased the excess foreign tax credits generated which require a valuation allowance of approximately 1,010 basis points, changes in unrecognized tax benefits related to transfer pricing matters impacting multiple tax jurisdictions of approximately 820 basis points, as well as the unfavorable impact associated with previously issued U.S.

stock-based compensation of approximately 590 basis points.

The overall increase in the effective tax rate is partially offset by the favorable year-over-year utilization of U.S.

general foreign tax credits net of the prior year establishment of a valuation allowance against U.S.

general foreign tax credits and research and development tax credit carryforwards of approximately 550 basis points.

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

Year Ended June 30,

($ in millions, except per share data) 2026 2025

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

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

$ 182 $ (1,133)

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

Diluted net (loss) earnings per common share

$ (3.15) $ 1.08

Diluted net earnings (loss) per common share $ .50 $ (3.15)

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

Non-GAAP Financial Measure (1) :

% 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) %

% Change in diluted net earnings (loss) per common share from the prior year adjusting for the impact of charges associated with restructuring and other activities, the securities class action litigation settlement, impairment of goodwill and other intangible assets, U.S.

deferred tax asset valuation allowance adjustment and the Talcum litigation settlement agreements.

(1) See “Reconciliations of Non-GAAP Financial Measures” on page 44 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

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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 (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;

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

the securities class action litigation settlement;

impairment of goodwill and other intangible assets;

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;

the Talcum litigation settlement agreements;

and the effects of foreign currency translation.

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Net sales, as adjusted $ 15,061 $ 14,323 $ 738 5 % 3 %

Operating (loss) income, as reported

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

Operating income (loss), as reported $ 780 $ (785) $ 1,565 100+% 100+%

Charges associated with restructuring and other activities 823 486 337

Goodwill impairment

Impairment of other intangible assets

1,273 180 1,093

Securities class action litigation settlement 84 — 84

Impairment of goodwill and other intangible assets — 1,286 (1,286)

Talcum litigation settlement agreements

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

Operating income, as adjusted $ 1,687 $ 1,146 $ 541 47 % 45 %

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Charges associated with restructuring and other activities 156 105 51

Goodwill and other intangible asset impairments

Securities class action litigation settlement 18 — 18

Impairment of goodwill and other intangible assets — 285 (285)

deferred tax asset valuation allowance adjustment

(172) — (172)

Talcum litigation settlement agreements

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35.7 % 38.8 %

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

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

Diluted net earnings (loss) per common share, as reported $ .50 $ (3.15) $ 3.65 100+% 100+%

Charges associated with restructuring and other activities 1.83 1.06 .77

Goodwill and other intangible asset impairments

2.78 1.19 1.59

Securities class action litigation settlement .18 — .18

Impairment of goodwill and other intangible assets — 2.78 (2.78)

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

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foreign currency translation Variance,

in constant currency % Change, as reported % Change, in constant currency

in constant currency % Change,

as reported % Change,

in constant currency

By Product Category:

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The Americas $ 4,463 $ 4,410 $ 53 $ (14) $ 39 1 % 1 %

Europe, the Middle East & Africa 5,375 6,140 (765) (27) (792) (12) (13)

EUKEM 3,794 3,566 228 (179) 49 6 1

Asia/Pacific 3,746 3,606 140 22 162 4 4

Mainland China 3,058 2,741 317 (79) 238 12 9

15,061 14,323 738 (250) 488 5 3

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Total $ 15,049 $ 14,326 $ 723 $ (250) $ 473 5 % 3 %

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:

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 the securities class action litigation settlement, impairment of goodwill and other intangible assets and the Talcum litigation settlement agreements:

As Reported Add:

goodwill and other intangible asset impairments

impairment of goodwill and other intangible assets Add:

Securities class action litigation settlement Add:

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

as adjusted % Change,

as reported % Change,

Year Ended June 30,

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The Americas $ 211 $ (818) $ 1,029 $ (911) $ 84 $ (159) $ 43 100 +% 17 %

Europe, the Middle East & Africa 610 836 (226) — (9) (235) (27) (28)

EUKEM 196 145 51 — — 51 35 35

Asia/Pacific 823 180 643 (375) — — 268 100 + 48

Mainland China 373 194 179 — — — 179 92 92

1,603 (299) $ 1,902 $ (1,286) $ 84 $ (159) $ 541 100 +% 47 %

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Total $ 780 $ (785)

Fiscal 2025 as Compared with Fiscal 2024

Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025 for the fiscal 2025 to fiscal 2024 comparative discussion for our net sales and operating results on a consolidated basis and by product category.

Refer below for the fiscal 2025 to fiscal 2024 net sales and operating results by geographic region comparative discussion under the revised geographic region structure, effective July 1, 2025, as recast for comparability purposes.

Geographic Regions

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

Year Ended June 30,

($ in millions) 2025 2024 $ Change

% Change in Constant Currency (2)

The Americas $ 4,410 $ 4,579 $ (169) (4) % (3) %

3,566 3,539 27 1 (1)

Asia/Pacific (1)

3,606 4,587 (981) (21) (21)

Mainland China

2,741 2,904 (163) (6) (6)

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) %

(1) The net sales from our travel retail business are included in the Asia/Pacific region.

(2) See “ Reconciliations of Non-GAAP Financial Measures” beginning on page 50 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported net sales decreased in fiscal 2025, 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 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.

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.

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%, reflecting the favorable impact from strategic pricing actions and changes in mix.

Reported net sales in EUKEM increased 1% in fiscal 2025, driven by the increase from pricing of 4%, reflecting the favorable impact from strategic pricing actions, partially offset by changes in mix, and the favorable impact from foreign currency translation of 1%.

Partially offsetting these increases was the decrease from volume of 4%.

Reported net sales in Asia/Pacific decreased 21% in fiscal 2025, driven by the decrease from volume of 20%.

Also contributing to the decrease was a decrease from pricing of 1%, reflecting changes in mix partially offset by the favorable impact from strategic pricing actions, and the unfavorable impact from foreign currency translation of 1%.

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

Partially offsetting this decrease was an increase from pricing of 4%, reflecting the favorable impact from strategic pricing actions and changes in mix.

OPERATING RESULTS

Geographic Regions

Reported operating (loss) income for our geographic regions for the years ended June 30, 2025 and 2024 were as follows:

Year Ended June 30,

($ in millions)

2025 2024 $ Change

(As Reported)

(Non-GAAP) (1)

Non-GAAP Financial Measure (1)

The Americas $ (818) $ 168 $ (986) (100+)% 38 % Adjusted for the impact of the impairment of goodwill and other intangible assets, the Talcum litigation settlement agreements and the change in fair value of DECIEM acquisition-related stock options

145 102 43 42 31 Adjusted for the impact of the change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax

Asia/Pacific 180 510 (330) (65) (43) Adjusted for the impact of the impairment of goodwill and other intangible assets

Mainland China

194 314 (120) (38) (38)

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

Charges associated with restructuring and other activities

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

Operating (loss) income $ (785) $ 970 $ (1,755) (100+)%

(1) See “Reconciliations of Non-GAAP Financial Measures” beginning on page 50 for reconciliations between non-GAAP financial measures and the most directly comparable U.S.

GAAP measures.

Reported operating results in The Americas decreased $986 million, or over 100%, in fiscal 2025, reflecting the unfavorable year-over-year impacts of other intangible asset impairment charges relating to TOM FORD and Too Faced, combined, of $898 million and a goodwill impairment charge relating to Too Faced of $13 million.

Also contributing to the decrease in operating results were lower net sales and the unfavorable year-over-year impact of the charge in fiscal 2025 associated with the Talcum litigation settlement agreements of $159 million.

Partially offsetting the decrease in operating results in The Americas was lower cost of sales and a decrease in non-consumer-facing expenses, which included net benefits of the PRGP.

Reported operating income in EUKEM increased $43 million, or 42%, in fiscal 2025, reflecting lower cost of sales, including net benefits from the PRGP, and higher net sales, partially offset by an increase in consumer-facing investments to drive sales.

Reported operating income in Asia/Pacific decreased $330 million, or 65%, in fiscal 2025, reflecting a decrease in net sales, partially offset by lower cost of sales and a decrease in non-consumer-facing expenses, which included net benefits of the PRGP as well as lower shipping expenses due to a decrease in net sales and the favorable year-over-year impact of $96 million in goodwill and other intangible asset impairment charges relating to Dr.Jart+.

Reported operating income in Mainland China decreased $120 million, or 38%, in fiscal 2025, reflecting lower net sales and the unfavorable year-over-year impact of a change in policy related to local government subsidies in China, partially offset by lower cost of sales.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

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

Year Ended June 30,

($ in millions)

2025 2024 Variance Impact of

foreign currency translation Variance,

in constant currency % Change,

as reported % Change,

in constant currency

By Geographic Region:

The Americas $ 4,410 $ 4,579 $ (169) $ 53 $ (116) (4) % (3) %

EUKEM 3,566 3,539 27 (49) (22) 1 (1)

Asia/Pacific 3,606 4,587 (981) 29 (952) (21) (21)

Mainland China 2,741 2,904 (163) (5) (168) (6) (6)

14,323 15,609 (1,286) 28 (1,258) (8) % (8) %

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

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

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

As Reported Add:

Changes in impairments of

goodwill and other intangible assets Add:

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,

Year Ended June 30,

($ in millions) 2025 2024 Variance

By Geographic Region:

The Americas $ (818) $ 168 $ (986) $ 911 $ 159 $ (14) $ 70 (100+)% 38 %

EUKEM 145 102 43 — — (9) 34 42 31

Asia/Pacific 180 510 (330) (96) — — (426) (65) (43)

Mainland China 194 314 (120) — — — (120) (38) (38)

(299) 1,094 $ (1,393) $ 815 $ 159 $ (23) $ (442) (100+)% (28) %

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

Total $ (785) $ 970

FINANCIAL CONDITION

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federal income tax.

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

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

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

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

Inflation impacted our operating results during fiscal 2025 and we expect it to continue.

Generally, we have plans to introduce new products at higher prices, increase prices and implement other operating efficiencies which we expect to offset some of these cost increases.

Tariffs negatively impacted our operating results during fiscal 2026 and we are continuing to monitor and assess the potential effects of changing tariff conditions globally.

Credit Ratings

14 unchanged sentences

$ (712) $ (1,144)

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.

The change in net cash flows provided by operating activities was primarily driven by higher net earnings, excluding non-cash items, and the favorable change in operating assets and liabilities variances.

The change in net cash flows used for investing activities was primarily driven by a favorable year-over-year impact from lower capital expenditures compared to the prior year.

The change in net cash flows used for financing activities primarily reflected a decrease in repayments of long-term debt due to the repayment of the outstanding principal balance of our $500 million, 2.000% Senior Notes that matured during the fiscal 2025 second quarter, a decrease in dividends paid to stockholders in the current year, and the favorable year-over-year impact of settlements of cross-currency swap contracts.

These decreases were partially offset by payments of the remaining deferred consideration in the fiscal 2026 first and third quarters associated with the fiscal 2023 acquisition of TOM FORD.

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, 2025 for the fiscal 2025 to fiscal 2024 comparative discussions.

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Financial Statements and Supplementary Data – Note 12 – 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, anticipated transactions and receivables and payables and the net investment in certain foreign operations.

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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Refer to Item 8.

Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies for discussion regarding the impact of accounting standards that were recently issued but not yet effective, on our consolidated financial statements.

Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies for discussion regarding the potential impact of accounting standards that were recently issued but not yet effective, on our consolidated financial statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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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, Dr.Jart+ Other Intangible Asset – Impairment and Income Taxes.

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

Goodwill and Other Indefinite-lived Intangible Assets – Impairment Assessment

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.

Other indefinite-lived intangible assets consist of trademarks.

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

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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.

We elected to perform the qualitative assessment for the goodwill in certain of our reporting units and for certain of our 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 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.

In addition to these macroeconomic factors, among other things, we considered current results and forecasts for the respective reporting units and brands, 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.

A quantitative assessment was performed for the goodwill in certain of our reporting units and for certain of our other indefinite-lived intangible assets.

We engaged third-party valuation specialists and used industry accepted valuation models and criteria that were reviewed and approved by various levels of management.

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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, weighted average cost of capital used to discount future cash flows and comparable market multiples for the reporting unit.

The significant assumptions used in each quantitative assessment using these two approaches include revenue growth rates and profit margins, a terminal value, a 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 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.

The significant assumptions used in each quantitative assessment using this approach include revenue growth rates and profit margins, a terminal value, a weighted average cost of capital used to discount future cash flows and a 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 and Note 5 – Goodwill and Other Intangible Assets .

6 unchanged sentences

If our assessment of the realizability of a deferred tax asset changes, an increase to a valuation allowance will result in a reduction of net earnings at that time, while the reduction of a valuation allowance will result in an increase of net earnings at that time.

We provide tax reserves for U.S.

We provide uncertain tax position reserves for U.S.

federal, state, local and foreign tax exposures relating to periods subject to audit.

The development of reserves for these exposures requires judgments about tax issues, potential outcomes and timing, and is a subjective critical estimate.

The development of these reserves requires judgments about tax issues, potential outcomes and timing, and is a subjective critical estimate.

We assess our tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting dates.

39 unchanged sentences

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

What changed 10-K

Item 7. Management’s Discussion and Analysis