ESTEE LAUDER 
We manufacture, market and sell beauty products including those in the skin care, makeup, fragrance and hair care categories, which are distributed in approximately 150 countries and territories. The following table is a comparative summary of operating results for the three and nine months endedMarch 31, 2021 and 2020, and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 - Summary of Significant Accounting Policies for all periods presented. Products and services that do not meet our definition of skin care, makeup, fragrance and hair care have been included in the "other" category. Three Months Ended Nine Months Ended March 31 March 31 (In millions) 2021 2020 2021 2020NET SALES By Product Category: Skin Care$ 2,259 $ 1,723 $ 7,113 $ 5,770 Makeup 1,018 1,146 3,243 4,249 Fragrance 454 349 1,478 1,392 Hair Care 128 119 418 417 Other 15 8 37 36 3,874 3,345 12,289 11,864 Returns associated with restructuring and other activities (10) - (10) - Net sales$ 3,864 $ 3,345 $ 12,279 $ 11,864 By Region(1): The Americas$ 916 $ 892 $ 2,837 $ 3,278 Europe, the Middle East & Africa 1,706 1,525 5,276 5,281 Asia/Pacific 1,252 928 4,176 3,305 3,874 3,345 12,289 11,864 Returns associated with restructuring and other activities (10) - (10) - Net sales$ 3,864 $ 3,345 $ 12,279 $ 11,864 OPERATING INCOME (LOSS) By Product Category: Skin Care$ 804 $ 418 $ 2,453 $ 1,822 Makeup (72) (283) (115) (790) Fragrance 47 - 248 163 Hair Care (17) (2) (10) 10 Other (1) 1 (1) 7 761 134 2,575 1,212 Charges associated with restructuring and other activities (145) (25) (191) (63) Operating income$ 616 $ 109 $ 2,384 $ 1,149 By Region(1): The Americas$ 155 $ (217) $ 256 $ (571) Europe, the Middle East & Africa 361 202 1,429 1,084 Asia/Pacific 245 149 890 699 761 134 2,575 1,212 Charges associated with restructuring and other activities (145) (25) (191) (63) Operating income$ 616 $ 109 $ 2,384 $ 1,149 (1) The net sales from our travel retail business are included in theEurope , theMiddle East &Africa region, with the exception of the net sales of Dr. Jart+ in the travel retail channel that are reflected inKorea in theAsia/Pacific region. Operating income attributable to the travel retail sales included inEurope , theMiddle East &Africa is included in that region and in TheAmericas . 43
--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
The following table presents certain consolidated earnings data as a percentage
of net sales:
Three Months Ended Nine Months Ended
March 31 March 31
2021 2020 2021 2020
Net sales 100.0 % 100.0 % 100.0 % 100.0 %
Cost of sales 24.3 25.0 23.2 23.5
Gross profit 75.7 75.0 76.8 76.5
Operating expenses:
Selling, general and administrative 55.5 60.7 55.1 56.9
Restructuring and other charges 3.4 0.7 1.4 0.5
Goodwill impairment - 8.2 0.4 6.6
Impairment of other intangible and long-lived
assets 0.9 2.1 0.5 2.8
Total operating expenses 59.8 71.7 57.4 66.8
Operating income 15.9 3.3 19.4 9.7
Interest expense 1.1 1.3 1.1 1.0
Interest income and investment income, net 0.2 0.4 0.3 0.3
Other components of net periodic benefit cost 0.1 - 0.1 -
Other income - - - 4.9
Earnings before income taxes 15.0 2.4 18.6 13.9
Provision for income taxes (3.2) (2.5) (3.4) (4.2)
Net earnings (loss) 11.9 (0.1) 15.1 9.7
Net earnings attributable to noncontrolling
interests (0.1) (0.1) (0.1) -
Net earnings (loss) attributable to The Estée
Lauder Companies Inc. 11.8 % (0.2) % 15.1 % 9.7 %
Not adjusted for differences caused by rounding
We continually introduce new products, support new and established products
through advertising, merchandising and sampling and phase out existing products
that no longer meet the needs of our consumers or our objectives. The economics
of developing, producing, launching, supporting and discontinuing products
impact our sales and operating performance each period. The introduction of new
products may have some cannibalizing effect on sales of existing products, which
we take into account in our business planning.
Non-GAAP Financial Measures
We use certain non-GAAP financial measures, among other financial measures, to
evaluate our operating performance, which represent the manner in which we
conduct and view our business. Management believes that excluding certain items
that are not comparable from period to period helps investors and others compare
operating performance between periods. 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. GAAP. See Reconciliations of
Non-GAAP Financial Measures beginning on page 61 for reconciliations between
non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
44--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
We operate on a global basis, with the majority of our net sales generated
outside the United States . Accordingly, fluctuations in foreign currency
exchange rates can affect our results of operations. Therefore, we present
certain net sales, operating results and diluted net earnings per common share
information excluding the effect of foreign currency rate fluctuations to
provide a framework for assessing the performance of our underlying business
outside the United States . Constant currency information compares results
between periods as if exchange rates had remained constant period-over-period.
We calculate constant currency information by translating current-period results
using prior-year period weighted-average foreign currency exchange rates and
adjusting for the period-over-period impact of foreign currency cash flow
hedging activities.
Overview
COVID-19 Business Update
The COVID-19 pandemic continues to disrupt our operating environment,
temporarily impacting retail traffic and certain consumer preferences. During
the three months ended March 31, 2021 , the resurgence of COVID-19 cases in
several countries, particularly in Western Europe and Latin America , led to
government restrictions to prevent further spread of the virus. These
restrictions included temporary business closures, curtailment of travel, social
distancing and quarantines.
Retail impact
While most brick-and-mortar retail stores globally that sell our products,
whether operated by us or our customers, were open during the third quarter of
fiscal 2021, most notably in China and the United States , there were
intermittent closures throughout the rest of the world. In the United Kingdom ,
Japan , Canada , Italy , Spain , France , Mexico and Brazil , in particular, many
retail stores were temporarily closed for some period during the third quarter
of fiscal 2021 due to the resurgence of COVID-19 cases. Globally, in areas where
stores were open, consumer traffic was significantly reduced as compared to the
pre-COVID-19 pandemic period. In addition, while domestic travel in China ,
especially in Hainan , and some other travel corridors in Asia/Pacific , most
notably Korea , were open, international travel has remained largely curtailed
globally due to both government restrictions and consumer health concerns that
continue to adversely impact consumer traffic in most travel retail locations.
Somewhat offsetting the significant declines in brick-and-mortar channels, net
sales growth of our products online (through our own websites, third-party
platforms and websites of our retailers) has remained strong in every region
during the third quarter of fiscal 2021.
Consumer Preferences
The COVID-19 pandemic-related closures of offices, retail stores and other businesses and the significant decline in social gatherings have influenced consumer preferences and practices. Specifically, the demand for makeup continues to be weak given fewer makeup usage occasions while other categories have been more resilient.
Cost Controls In response to the ongoing impacts from the COVID-19 pandemic, we continue to implement cost control actions in certain areas of the business to effectively manage the changing business environment.
Business Update
We are a leader in prestige beauty, which combines the repeat purchase and relative affordability of consumer goods with the high quality products and services of luxury goods. Within prestige beauty, we are well diversified by brand, product category, product sub-category, geography, channel, consumer segment and price point. This diversity allows us to leverage consumer analytics and insights with agility by deploying our brands to fast growing and profitable opportunities. These analytics and insights, combined with our creativity, inform our innovation to provide a broad, locally-relevant and inclusive range of prestige products allowing us to compete effectively for a greater share of a consumer's beauty routine. Elements of our strategy are described in the Overview on pages 28-31 of our Annual Report on Form 10-K for the fiscal year endedJune 30, 2020 , as well as below. 45
--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
During the third quarter of fiscal 2021, net sales increased approximately 16%
from the prior-year period, reflecting an easier comparison against the outbreak
of COVID-19 in early calendar 2020. We saw increases across most product
categories and all regions, as well as strong growth online.
•Our skin care net sales benefited from the launch of the new Estée Lauder
Advanced Night Repair Synchronized Multi-Recovery Complex , the launch of the new
The Concentrate from La Mer and strength in basic skin care from Clinique. Dr.
Jart+ and Origins also contributed to skin care growth. These new products
support high-loyalty hero franchises.
•The COVID-19 pandemic limited social and business activities and consumers wore
less makeup. Demand for lipstick and foundation were most acutely impacted,
contributing to lower makeup net sales across the portfolio. Our brands
continued to generate interest in makeup through virtual marketing efforts such
as classes, virtual try on technology and greater emphasis on social media
platforms, as well as a focus on sub-categories that continue to resonate with
consumers.
•Our fragrance net sales increased in the third quarter of fiscal 2021,
reflecting strength in luxury and artisanal scents. Fragrance net sales growth
was led by Jo Malone London , Tom Ford Beauty , Kilian Paris and Le Labo . The
category also benefited from the launch of Beautiful Magnolia from Estée Lauder .
•Our hair care net sales increased, reflecting Aveda's launch of Botanical
Repair in the first quarter of fiscal 2021.
Our net sales growth by geographic region in the third quarter of fiscal 2021
reflects, in part, the cadence of COVID-19 recovery and resurgence around the
world.
•Net sales increased in The Americas , reflecting some recovery in North America
compared to the prior year where brick-and-mortar retail locations were shut
down toward the end of the fiscal 2020 third quarter as COVID-19 spread
globally. This was partially offset by declines in Latin America where many
retail locations closed as the resurgence of COVID-19 led to increased
government restrictions and store closures during the third quarter of fiscal
2021.
•The Europe, the Middle East & Africa region net sales returned to growth, led
by our travel retail business, direct-to-consumer online and retailer restocking
in advance of further recovery.
•The Asia/Pacific region grew, reflecting increases in mainland China ,
Australia , Korea , and several smaller markets.
Outlook
The COVID-19 pandemic has disrupted business both for our Company and for the retailers who sell our products. There have been restructurings and bankruptcies in the retail industry, including among our customers and an acceleration in the shifts in preferences as to where and how consumers shop, as well as changes in their preferences for certain products. We are mindful that these trends may continue to impact the pace of recovery. The continued curtailment in international travel is also affecting our travel retail business in most of the world, which had been historically one of our fastest growth areas. In addition to impacting net sales and profitability, these and other challenges may impact our ability to collect receivables and our operating cash flows generally, and may adversely impact the goodwill and other intangible assets associated with our brands and the long-lived assets in certain of our freestanding stores (i.e. resulting in impairments). We continue to monitor the effects of the global macroeconomic environment; social and political issues; regulatory matters, including the imposition of tariffs; geopolitical tensions; and global security issues. For example, we continue to monitor the geopolitical tensions betweenthe United States andChina and the uncertainties caused by the evolving trade policy dispute, which could increase our cost of sales and negatively impact our overall net sales, or otherwise have a material adverse effect on our business. We also note that theUnited Kingdom reached a trade agreement and completed its transition out of theEuropean Union ("EU") inDecember 2020 (i.e. "Brexit"), and we continue to monitor the potential political and economic uncertainties from Brexit. 46
--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
The uncertainty around the timing, speed and duration of the recovery from the
adverse impacts of the COVID-19 pandemic will continue to affect our ability to
grow sales profitably. We believe we can, to some extent, offset the impact of
more ordinary challenges by continually developing and pursuing a diversified
strategy with multiple engines of growth and by accelerating initiatives focused
on areas of strength, discipline and agility, and by implementing our Post-COVID
Business Acceleration Program. As the current situation progresses, if economic
and social conditions or the degree of uncertainty or volatility worsen, or the
adverse conditions previously described are further prolonged, there could be a
further negative effect on consumer confidence, demand, spending and willingness
or ability to travel and, as a result, on our business. We are continuing to
monitor these and other risks that may affect our business.
Leading Beauty Forward Program and Post-COVID Business Acceleration Program
Information about our restructuring initiatives, the LeadingBeauty Forward Program and the Post-COVID Business Acceleration Program, are described in Notes to Consolidated Financial Statements, Note 4 - Charges Associated with Restructuring and Other Activities herein, as well as, in Notes to Consolidated Financial Statements, Note 10 - Charges Associated with Restructuring and Other Activities and in the Overview on page 30 of our Annual Report on Form 10-K for the fiscal year endedJune 30, 2020 .
DuringNovember 2020 , given the actual and the estimate of the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting us and lower than expected results from geographic expansion, we made further revisions to the internal forecasts relating to our GLAMGLOW reporting unit. We concluded that the changes in circumstances in this reporting unit triggered the need for an interim impairment review of its trademark and goodwill. These changes in circumstances were also an indicator that the carrying amounts of GLAMGLOW's long-lived assets, including customer lists, may not be recoverable. Accordingly, we performed an interim impairment test for the trademark and a recoverability test for the long-lived assets as ofNovember 30, 2020 . We concluded that the carrying value of the trademark for GLAMGLOW exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded an impairment charge of$21 million . In addition, we concluded that the carrying value of the GLAMGLOW customer lists intangible asset was fully impaired and recorded an impairment charge of$6 million . The fair value of all other long-lived assets of GLAMGLOW exceeded their carrying values and were not impaired as ofNovember 30, 2020 . After adjusting the carrying values of the trademark and customer lists intangible assets, we completed an interim quantitative impairment test for goodwill and recorded a goodwill impairment charge of$54 million , reducing the carrying value of goodwill for the GLAMGLOW reporting unit to zero. The fair value of the GLAMGLOW reporting unit was based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting unit. The impairment charges for the nine months endedMarch 31, 2021 were reflected in the skin care product category and in theAmericas region. As ofMarch 31, 2021 , the remaining carrying value of the trademark related to the GLAMGLOW reporting unit was$36 million .NET SALES Three Months Ended Nine Months EndedMarch 31 March 31
($ in millions) 2021 2020 2021 2020 As Reported: Net sales$ 3,864 $ 3,345 $ 12,279 $ 11,864 $ Change from prior-year period 519 415 % Change from prior-year period 16 % 3 % Non-GAAP Financial Measure(1): % Change from prior-year period in constant currency 13 % 2 %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 61 for
reconciliations between non-GAAP financial measures and the most directly
comparable
47--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
Reported net sales increased for the three months ended March 31, 2021 ,
primarily reflecting higher net sales in our skin care and fragrance product
categories and in all geographic regions. The net sales growth in our skin care
product category reflected higher net sales from Estée Lauder , La Mer and
Clinique, as well as net sales growth from Dr. Jart+ and Origins. Fragrance net
sales increased, primarily benefiting from higher net sales from Jo Malone
London and Tom Ford Beauty . The net sales growth in the skin care and fragrance
product categories reflected the success of hero product franchises, new product
offerings and successful holiday events. Net sales grew internationally, led by
higher net sales in mainland China and in our travel retail business, as well as
net sales growth in Australia , Korea and and Hong Kong . Direct-to-consumer
online net sales grew double-digits, representing approximately 15% of net sales
for the three months ended March 31, 2021 compared to approximately 12% in the
prior-year period.
Reported net sales increased for the nine months ended March 31, 2021 , primarily
reflecting higher net sales in our skin care and fragrance product categories
and in our Asia/Pacific region. The net sales increase in our skin care product
category was primarily driven by higher net sales from Estée Lauder , La Mer, Dr.
Jart+ and Clinique. Fragrance net sales increased, primarily benefiting from
higher net sales from Jo Malone London and Tom Ford Beauty . Net sales in
Asia/Pacific increased, primarily due to higher net sales in mainland China and
Korea . Despite the net sales growth in our travel retail business (primarily in
Hainan ), net sales in our Europe , the Middle East & Africa region declined due
to the continued challenges of the COVID-19 pandemic, including temporary retail
store closures and reduced consumer foot traffic in brick-and-mortar retail
locations, the continued curtailment of international travel, and continued
social distancing and quarantines. Direct-to-consumer online net sales continued
to have strong growth, representing approximately 18% of net sales for the nine
months ended March 31, 2021 compared to approximately 12% in the prior-year
period.
The total net sales changes were impacted by approximately $95 million and $212
million of favorable foreign currency translation for the three and nine months
ended March 31, 2021 , respectively.
Returns associated with restructuring and other activities are not allocated to
our product categories or geographic regions because they result from activities
that are deemed a Company-wide initiative to redesign, resize and reorganize
select corporate functions and go-to-market structures. Accordingly, the
following discussions of Net sales by Product Categories and Geographic Regions
exclude the fiscal 2021 third quarter impact of returns associated with
restructuring and other activities of approximately $10 million .
Product Categories
Skin Care
Three Months Ended Nine Months Ended
March 31 March 31
($ in millions) 2021 2020 2021 2020
As Reported:
Net sales $ 2,259 $ 1,723 $ 7,113 $ 5,770
$ Change from prior-year period 536 1,343
% Change from prior-year period 31 % 23 %
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant
currency 28 % 21 %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 61 for
reconciliations between non-GAAP financial measures and the most directly
comparable
48--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
Reported skin care net sales increased for the three months ended March 31,
2021 , reflecting higher net sales from Estée Lauder , La Mer and Clinique of
approximately $502 million , combined. Net sales increased from Estée Lauder and
La Mer, led by our travel retail business (primarily in Hainan ) and mainland
China , reflecting strong growth from direct-to-consumer online net sales of
products from these brands primarily due to the successful holiday and
promotional events. Net sales increased from Estée Lauder , reflecting the
continued success of hero product franchises, such as Advanced Night Repair,
Revitalizing Supreme+ and Daywear, as well as fiscal 2021 product launches, such
as Advanced Night Repair Synchronized Multi-Recovery Complex , Revitalizing
Supreme+ Bright, and the relaunch of Perfectionist Pro. The increase in net
sales from La Mer also benefited from the continued success of hero products,
such as Crème de la Mer, The Concentrate, The Treatment Lotion and The Eye
Concentrate, as well as the fiscal 2021 launch of the Genaissance de la Mer The
Concentrated Night Balm and targeted expanded consumer reach. Net sales
increased from Clinique for the three months ended March 31, 2021 , primarily due
to higher net sales in our travel retail business (primarily in Hainan ) and in
North America , reflecting the continued success of existing products, such as
Dramatically Different products and Even Better Clinical Radical Dark Spot
Corrector + Interrupter, and new product launches, such as Moisture Surge 100H
Auto-Replenishing Hydrator.
Reported skin care net sales increased for the nine months ended March 31, 2021 ,
reflecting higher net sales from Estée Lauder , La Mer, and Clinique, as well as
incremental net sales attributable to our acquisition of Dr. Jart+ at the end of
the fiscal 2020 second quarter, of approximately $1,452 million , combined. Net
sales increased from Estée Lauder , La Mer and Clinique, as noted above.
The skin care net sales increases were impacted by approximately $58 million and
$139 million of favorable foreign currency translation for the three and nine
months ended March 31, 2021 , respectively.
Makeup
Three Months Ended Nine Months Ended
March 31 March 31
($ in millions) 2021 2020 2021 2020
As Reported:
Net sales $ 1,018 $ 1,146 $ 3,243 $ 4,249
$ Change from prior-year period (128) (1,006)
% Change from prior-year period (11) % (24) %
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant
currency (13) % (25) %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 61 for
reconciliations between non-GAAP financial measures and the most directly
comparable
Reported makeup net sales decreased for the three and nine months endedMarch 31, 2021 , due to lower net sales from virtually all brands, led by M·A·C,Estée Lauder and Clinique, combined, of approximately$115 million and$766 million , respectively. The makeup product category continues to be more negatively impacted by the effects of the COVID-19 pandemic, especially the challenging environment in brick-and-mortar retail locations, the continued consumer preference for skin care products, and the limited use of makeup. The continued decline in prestige makeup and ongoing competitive activity inNorth America also contributed to the decline in net sales from these brands in both periods. The makeup net sales decreases were impacted by approximately$24 million and$46 million of favorable foreign currency translation for the three and nine months endedMarch 31, 2021 , respectively. 49
--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
Fragrance
Three Months Ended Nine Months Ended
March 31 March 31
($ in millions) 2021 2020 2021 2020
As Reported:
Net sales $ 454 $ 349 $ 1,478 $ 1,392
$ Change from prior-year period 105 86
% Change from prior-year period 30 % 6 %
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant
currency 27 % 5 %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 61 for
reconciliations between non-GAAP financial measures and the most directly
comparable
Reported fragrance net sales increased for the three months endedMarch 31, 2021 , primarily due to higher net sales fromJo Malone London andTom Ford Beauty of approximately$86 million , combined, and net sales of products from these brands increased in all geographic regions.Jo Malone London benefited from successful holiday and promotional events and new product launches, such as the Blossoms Collection and Scarlet Poppy Cologne Intense. The increase in net sales fromTom Ford Beauty was primarily due to the continued success of hero product franchises, such asOud Wood and Black Orchid, the continued success of the fiscal 2021 second quarter launch of Bitter Peach, and new product launches in the third quarter of fiscal 2021, such as Tubereuse Nue and Costa Azzurra. Reported fragrance net sales increased for the nine months endedMarch 31, 2021 , primarily due to higher net sales fromJo Malone London andTom Ford Beauty of approximately$110 million , combined. The increase in net sales fromJo Malone London , led by mainlandChina andNorth America , was primarily due to successful holiday and promotional events, the success of certain hero product franchises and new product launches, such as Scents for the Season, the Blossoms Collection and Scarlet Poppy. Net sales fromTom Ford Beauty increased for the nine months endedMarch 31, 2021 , reflecting growth in all geographic regions, benefiting from the continued success of hero product franchises and new product launches, such as Bitter Peach, Tubereuse Nue and Costa Azzurra. Partially offsetting these increases in net sales for the nine months endedMarch 31, 2021 , were lower net sales from certain of our designer fragrances, led by our travel retail business, primarily due to the continued challenging environment as a result of the COVID-19 pandemic. The fragrance net sales increases were impacted by approximately$10 million and$21 million of favorable foreign currency translation for the three and nine months endedMarch 31, 2021 , respectively. Hair Care Three Months Ended Nine Months Ended March 31 March 31 ($ in millions) 2021 2020 2021 2020 As Reported: Net sales$ 128 $ 119 $ 418 $ 417 $ Change from prior-year period 9 1 % Change from prior-year period 8 % - % Non-GAAP Financial Measure(1): % Change from prior-year period in constant currency 6 % (1) %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 61 for
reconciliations between non-GAAP financial measures and the most directly
comparable
50--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
Reported hair care net sales increased for the three months ended March 31,
2021 , primarily due to higher net sales from Aveda driven by the success of
existing product franchises, such as Nutriplenish, and the continued success of
the fiscal 2021 first quarter launch of Botanical Repair, which led to growth in
all geographic regions.
Reported hair care net sales for the nine months ended March 31, 2021 were
virtually flat, reflecting higher net sales primarily from Aveda, as noted
above, partially offset by lower net sales from Bumble and bumble, reflecting
the net sales decline in North America primarily due to temporary salon and
freestanding store closures as a result of the COVID-19 pandemic.
The increases in net sales for the three and nine months ended March 31, 2021
from Aveda also reflected strong growth from direct-to-consumer online net
sales.
Geographic Regions
The Americas
Three Months Ended Nine Months Ended
March 31 March 31
($ in millions) 2021 2020 2021 2020
As Reported:
Net sales $ 916 $ 892 $ 2,837 $ 3,278
$ Change from prior-year period 24 (441)
% Change from prior-year period 3 % (13) %
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant
currency 4 % (12) %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 61 for
reconciliations between non-GAAP financial measures and the most directly
comparable
Reported net sales in TheAmericas increased for the three months endedMarch 31, 2021 , led bythe United States of approximately$26 million , and in all product categories, except makeup. The increase inthe United States partially reflected a recovery compared to the prior-year challenges stemming from the outbreak of COVID-19. Partially offsetting this increase in net sales for the three months endedMarch 31, 2021 , were lower net sales inLatin America due to the resurgence of COVID-19 cases in certain countries that led to government restrictions, as well as the continued decline inNorth America prestige makeup and the ongoing competitive activity. Reported net sales in TheAmericas decreased in virtually all countries for the nine months endedMarch 31, 2021 , led bythe United States of approximately$387 million , and in all product categories, led by makeup. The net sales decrease in the region was led by M·A·C andEstée Lauder (primarily due to the declines in the makeup category), as a result of the continued challenging environment caused by the COVID-19 pandemic, including the resurgence of COVID-19 cases, reduced consumer traffic in brick-and-mortar retail locations, and continued social distancing. The decline inNorth America prestige beauty, primarily makeup, and the ongoing competitive activity also contributed to the decline in net sales. Direct-to-consumer online net sales in TheAmericas grew double digits for the three and nine months endedMarch 31, 2021 , and represented approximately 19% and 22% of total net sales in the region compared to approximately 15% and 14% in the prior-year periods, respectively.
Net sales in The
51--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
Three Months Ended Nine Months Ended
March 31 March 31
($ in millions) 2021 2020 2021 2020
As Reported:
Net sales $ 1,706 $ 1,525 $ 5,276 $ 5,281
$ Change from prior-year period 181 (5)
% Change from prior-year period 12 % - %
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant
currency 10 % (1) %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 61 for
reconciliations between non-GAAP financial measures and the most directly
comparable
Reported net sales for the three months endedMarch 31, 2021 increased inEurope , theMiddle East &Africa , reflecting higher net sales in our travel retail business andRussia of approximately$221 million , combined. Despite the continued curtailment of international travel as a result of the COVID-19 pandemic, the increase in net sales from our travel retail business was led by the continued success of hero product franchises fromEstée Lauder , La Mer and Origins, reflecting the increase inChina travel retail (primarilyHainan ) due, in part, to increased duty-free purchase limits and the acceleration of new digital selling models. The net sales increase fromRussia primarily reflects the timing of shipments related to retailer restocking and the shift in sales orders from some retailers in the prior-year period related to a system implementation. Partially offsetting these increases in net sales for the three months endedMarch 31, 2021 , were lower net sales from theUnited Kingdom , reflecting the continued challenges from the resurgence of COVID-19 cases that led to government restrictions, such as quarantines and temporary closures of businesses deemed non-essential. Reported net sales for the nine months endedMarch 31, 2021 decreased inEurope , theMiddle East &Africa , reflecting lower net sales in most markets across the region, led by theUnited Kingdom ,France and Iberia of approximately$159 million , combined. The decrease in net sales from these markets reflects the continued challenges from the COVID-19 pandemic, including the resurgence of COVID-19 cases that led to government restrictions, such as temporary store closures and quarantines, and reduced consumer traffic in brick-and-mortar retail. The adverse macroeconomic conditions and the liquidation of a key retailer in the fiscal 2021 second quarter also contributed to the decrease in net sales in theUnited Kingdom . Partially offsetting these decreases for the nine months endedMarch 31, 2021 , were higher net sales from our travel retail business, led by the continued success of hero product franchises fromEstée Lauder and La Mer, primarily driven by the increases in net sales inChina travel retail (primarilyHainan ), as noted above. For the three and nine months endedMarch 31, 2021 , despite the challenges in brick-and-mortar retail locations, direct-to-consumer online net sales inEurope , theMiddle East &Africa more than doubled, representing approximately 4% and 5%, respectively, of total net sales in the region compared to approximately 2% in both prior-year periods. Net sales inEurope , theMiddle East &Africa were impacted by approximately$24 million and$54 million of favorable foreign currency translation for the three and nine months endedMarch 31, 2021 , respectively. 52
--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
Asia/Pacific
Three Months Ended Nine Months Ended
March 31 March 31
($ in millions) 2021 2020 2021 2020
As Reported:
Net sales $ 1,252 $ 928 $ 4,176 $ 3,305
$ Change from prior-year period 324 871
% Change from prior-year period 35 % 26 %
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant
currency 26 % 20 %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 61 for
reconciliations between non-GAAP financial measures and the most directly
comparable
Reported net sales inAsia/Pacific increased for the three months endedMarch 31, 2021 , reflecting higher net sales primarily in mainlandChina ,Australia ,Korea andHong Kong of approximately$334 million , combined, and in all product categories. The increase in net sales in mainlandChina reflected higher net sales in all product categories, led by skin care. The success of holiday and promotional events in mainlandChina contributed to growth in virtually all brands and all channels, led byEstée Lauder and La Mer and department stores and third-party platforms, respectively. Net sales inAustralia increased in all product categories and from all brands, led byEstée Lauder and Clinique, driven by a recovery compared to the prior-year challenges stemming from the outbreak of COVID-19. Net sales increased inKorea , reflecting growth in all product categories, except makeup, and benefited from the increase in net sales from Dr. Jart+ andJo Malone London . Net sales inHong Kong increased for the three months endedMarch 31, 2021 , in all product categories, except makeup, and from most brands, led by La Mer andEstée Lauder , reflecting an easy comparison to the prior-year period as a result of the outbreak of COVID-19. Direct-to-consumer online net sales inAsia/Pacific for the three months endedMarch 31, 2021 grew double digits.
Partially offsetting these increases in net sales for the three months ended
Reported net sales inAsia/Pacific increased for the nine months endedMarch 31, 2021 , reflecting higher net sales primarily in mainlandChina andKorea of approximately$984 million , combined, and in our skin care product category. The increase in net sales in mainlandChina reflected higher net sales primarily in our skin care product category, led byEstée Lauder , La Mer and Dr. Jart+, as well as third-party platforms and department stores. Net sales increased inKorea , primarily benefiting from incremental net sales from our acquisition of Dr. Jart+ at the end of the fiscal 2020 second quarter and higher net sales fromJo Malone London . Direct-to-consumer online net sales inAsia/Pacific for the nine months endedMarch 31, 2021 grew double digits, representing approximately 31% of total net sales in the region compared to approximately 25% in the prior-year period. Partially offsetting these increases for the nine months endedMarch 31, 2021 , were lower net sales inJapan andHong Kong of approximately$122 million , combined, primarily due to the ongoing challenges stemming from the COVID-19 pandemic, including reduced consumer traffic in brick-and-mortar retail locations, the continued curtailment of international travel, social distancing and quarantines, and border closures inHong Kong . Net sales inAsia/Pacific were impacted by approximately$80 million and$196 million of favorable foreign currency translation for the three and nine months endedMarch 31, 2021 , respectively. We strategically stagger our new product launches by geographic market, which may account for differences in regional sales growth. 53
--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
GROSS MARGIN
Gross margin increased to 75.7% and 76.8% for the three and nine months ended
March 31, 2021 , respectively, as compared with 75.0% and 76.5% in the prior-year
periods.
Favorable (Unfavorable) Basis Points
March 31, 2021
Three Months Ended Nine Months Ended
Mix of business 235 100
Obsolescence charges (65) (30)
Manufacturing costs and other (30) -
Foreign exchange transactions (50) (40)
Subtotal 90 30
Charges associated with restructuring and other
activities (20) -
Total 70 30
The favorable impact from our mix of business for the three and nine months
ended March 31, 2021 was primarily due to the favorable change in product
category mix (i.e. a decline in net sales of our lower margin makeup category,
led by North America and Europe , the Middle East & Africa (primarily our travel
retail business)), favorable changes in strategic pricing, lower costs from
product sets, and lower costs of promotional items as a result of reduced
consumer traffic in brick-and-mortar retail locations. For the three months
ended March 31, 2021 , the favorable impact from our mix of business was also
driven by an increase in net sales of our higher margin luxury and artisanal
fragrance brands.
OPERATING EXPENSES
Operating expenses as a percentage of net sales was 59.8% and 57.4% for the
three and nine months ended
Favorable (Unfavorable) Basis Points
March 31, 2021
Three Months Ended Nine Months Ended
General and administrative expenses (230) (180)
Advertising, merchandising, sampling and product
development 200 60
Selling 520 320
Stock-based compensation (20) (40)
Store operating costs 70 30
Shipping - (10)
Foreign exchange transactions (10) 20
Subtotal 530 200
Charges associated with restructuring and other
activities (270) (90)
Goodwill , other intangible and long-lived asset
impairments 940 850
Changes in fair value of contingent consideration (10) (20)
Total 1,190 940
54--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
For the three months ended March 31, 2021 , the decrease in operating expense
margin was driven by higher net sales compared to the prior-year period that
reflected the negative impact of the outbreak of COVID-19; the year-over-year
impact of goodwill, other intangible and long-lived asset impairments of
$313 million ; and a decrease in selling expense, due to the impacts of the
COVID-19 pandemic on brick-and-mortar retail locations, including the decline in
consumer traffic, store closures, and the continued shift in consumer preference
to online. The advertising, merchandising, sampling and product development
favorability was driven by the increase in net sales, partially offset by the
increase in advertising and promotional expense, primarily due to continued
strategic investments and a difficult comparison to the prior-year period that
reflected cost saving actions implemented in response to the impacts of the
COVID-19 pandemic.
For the nine months ended March 31, 2021 , the decrease in operating expense
margin was driven by the year-over-year impact of goodwill, other intangible and
long-lived asset impairments of $1,009 million , as well as favorability from
selling expense and advertising and promotional expense, as noted above.
Partially offsetting these favorable impacts for the three and nine months ended
March 31, 2021 were increases in general and administrative expenses, primarily
due to an increase in employee incentive compensation from the prior-year
period, which reflected lower accrued employee incentive compensation as a
result of the anticipated impacts of the COVID-19 pandemic.
OPERATING RESULTS
Three Months Ended Nine Months Ended
March 31 March 31
($ in millions) 2021 2020 2021 2020
As Reported:
Operating income $ 616 $ 109 $ 2,384 $ 1,149
$ Change from prior-year period 507 1,235
% Change from prior-year period 100+% 100+%
Operating margin 15.9 % 3.3 % 19.4 % 9.7 %
Non-GAAP Financial Measure(1):
% Change in operating income from the
prior-year period adjusting for the impact of
charges associated with restructuring and
other activities, goodwill, other intangible
and long-lived asset impairments and changes
in fair value of contingent consideration 66 % 16 %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 61 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.
The reported operating margin for the three and nine months ended March 31, 2021
increased from the prior-year periods driven by the year-over-year impact of
goodwill, other intangible and long-lived asset impairments of $313 million and
$1,009 million for the three and nine months end March 31, 2021 , respectively,
the decrease in operating expenses as a percentage of net sales and the increase
in gross margin, as previously noted.
Charges associated with restructuring and other activities are not allocated to
our product categories or geographic regions because they are centrally directed
and controlled, are not included in internal measures of product category or
geographic region performance and result from activities that are deemed
Company-wide initiatives to redesign, resize and reorganize select areas of the
business. Accordingly, the following discussions of Operating income by Product
Categories and Geographic Regions exclude the impact of charges associated with
restructuring and other activities of $145 million , or 4% of net sales and $25
million , or 1% of net sales for the three months ended March 31, 2021 and 2020,
respectively, and $191 million , or 2% of net sales and $63 million , or 1% of net
sales for the nine months ended March 31, 2021 and 2020, respectively.
55--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
Product Categories
Skin Care
Three Months Ended Nine Months Ended
March 31 March 31
($ in millions) 2021 2020 2021 2020
As Reported:
Operating income $ 804 $ 418 $ 2,453 $ 1,822
$ Change from prior-year period 386 631
% Change from prior-year period 92 % 35 %
Non-GAAP Financial Measure(1):
% Change in operating income from the
prior-year period adjusting for the impact of
goodwill, other intangible and long-lived
asset impairments and changes in fair value
of contingent consideration 70 % 35 %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 61 for
reconciliations between non-GAAP financial measures and the most directly
comparable
Reported skin care operating income increased for the three months endedMarch 31, 2021 , primarily driven by higher results fromEstée Lauder , La Mer, GLAMGLOW and Clinique of approximately$454 million , combined. The increases in operating income fromEstée Lauder , La Mer and Clinique were primarily driven by the increases in net sales. The higher results from La Mer were partially offset by the increase in advertising and promotional expense, primarily due to investments to support holiday and promotional events and a difficult comparison to the prior-year period that reflected cost saving actions implemented in response to the impacts of the COVID-19 pandemic. Operating income from GLAMGLOW increased for the three months endedMarch 31, 2021 , driven by the favorable year-over-year impact of goodwill and other intangible asset impairments of$53 million . Partially offsetting the increase in operating income for the three months endedMarch 31, 2021 , were higher general and administrative expenses, primarily due to increased employee incentive compensation from the prior-year period, which reflected lower accrued employee incentive compensation as a result of the anticipated impacts of the COVID-19 pandemic. Reported skin care operating income increased for the nine months endedMarch 31, 2021 , primarily driven by higher results fromEstée Lauder , La Mer and Clinique of approximately$888 million , combined. The increases in operating income from these brands primarily reflected higher net sales, as well as lower selling expenses due to the impacts of the COVID-19 pandemic on brick-and-mortar retail locations, including the decline in consumer traffic, store closures, and the continued shift in consumer preference to online. These increases were partially offset by increased advertising and promotional activities primarily to support holiday and promotional events and new product launches. Partially offsetting the increase in operating income for the nine months endedMarch 31, 2021 , were higher general and administrative expenses, primarily due to increased employee incentive compensation and lower results from GLAMGLOW driven by the unfavorable year-over-year impact of goodwill and other intangible asset impairments of$28 million . 56
--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
Makeup
Three Months Ended Nine Months Ended
March 31 March 31
($ in millions) 2021 2020 2021 2020
As Reported:
Operating loss $ (72) $ (283) $ (115) $ (790)
$ Change from prior-year period 211 675
% Change from prior-year period 75 % 85 %
Non-GAAP Financial Measure(1):
% Change in operating loss from the
prior-year period adjusting for the impact
of goodwill, other intangible and long-lived
asset impairments (100+)% (100+)%
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 61 for
reconciliations between non-GAAP financial measures and the most directly
comparable
Reported makeup operating results increased for the three and nine months endedMarch 31, 2021 , driven by the favorable year-over-year impact of goodwill and other intangible asset impairments related to Too Faced, BECCA and Smashbox, combined, of approximately$280 million and$1,057 million for the three and nine months, respectively. Partially offsetting the decreases in operating loss for the three and nine months endedMarch 31, 2021 , were lower results from M·A·C primarily due to the decrease in net sales, offset by lower selling expense and store operating costs, due to the impacts of the COVID-19 pandemic on brick-and-mortar retail locations, including the decline in consumer traffic, store closures, and the continued shift in consumer preference to online, as well as disciplined expense management. Also offsetting the decreases in operating loss for the three and nine months endedMarch 31, 2021 were higher general and administrative expenses, primarily due to increased employee incentive compensation from the prior-year period, which reflected lower accrued employee incentive compensation as a result of the anticipated impacts of the COVID-19 pandemic, as well as the unfavorable year-over-year impact of long-lived asset impairments in certain of our freestanding stores relating to COVID-19 of$14 million . Fragrance Three Months Ended Nine Months Ended March 31 March 31 ($ in millions) 2021 2020 2021 2020 As Reported: Operating income$ 47 $ -$ 248 $ 163 $ Change from prior-year period 47 85 % Change from prior-year period - % 52 % Non-GAAP Financial Measure(1): % Change in operating income from the prior-year period adjusting for the impact of long-lived asset impairments and changes in fair value of contingent consideration - % 60 % (1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 61 for reconciliations between non-GAAP financial measures and the most directly comparableU.S. GAAP measures. Reported fragrance operating income increased for the three and nine months endedMarch 31, 2021 , primarily reflecting higher results fromTom Ford Beauty andJo Malone London , combined, of approximately$62 million and$110 million , respectively. In both periods, the increases in operating income from these brands reflected higher net sales and lower selling expenses due to the impacts of the COVID-19 pandemic on brick-and-mortar retail locations, including the decline in consumer traffic, store closures, and the continued shift in consumer preference to online. 57
--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
Partially offsetting the increases in operating income for the three and nine
months ended March 31, 2021 , were increases from Jo Malone London in advertising
and promotional activities primarily driven by increased spend for digital
advertising and to support new product launches and a difficult comparison to
the prior-year period that reflected cost saving actions implemented in response
to the impacts of the COVID-19 pandemic.
Also offsetting the increases in fragrance operating income for the three and
nine months ended March 31, 2021 were higher general and administrative
expenses, primarily due to increased employee incentive compensation from the
prior-year period, which reflected lower accrued employee incentive compensation
as a result of the anticipated impacts of the COVID-19 pandemic, as well as the
unfavorable year-over-year impact of long-lived asset impairments in certain of
our freestanding stores relating to COVID-19 of $8 million .
Hair Care
Three Months Ended Nine Months Ended
March 31 March 31
($ in millions) 2021 2020 2021 2020
As Reported:
Operating income (loss) $ (17) $ (2) $ (10) $ 10
$ Change from prior-year period (15) (20)
% Change from prior-year period (100+)% (100+)% Reported hair care operating results decreased for the three and nine months endedMarch 31, 2021 , primarily driven by higher general and administrative expenses, primarily due to increased employee incentive compensation from the prior-year period, which reflected lower accrued employee incentive compensation as a result of the anticipated impacts of the COVID-19 pandemic. Partially offsetting the decrease in operating results for the nine months endedMarch 31, 2021 , were higher results from Aveda driven by the successes of existing product franchises, a new launch and holiday events, as discussed above. Geographic Regions The Americas Three Months Ended Nine Months Ended March 31 March 31 ($ in millions) 2021 2020 2021 2020 As Reported: Operating income (loss)$ 155 $ (217) $ 256 $ (571) $ Change from prior-year period 372 827 % Change from prior-year period 100+% 100+% Non-GAAP Financial Measure(1): % Change in operating income (loss) from the prior-year period adjusting for the impact of goodwill, other intangible and long-lived asset impairments and changes in fair value of contingent consideration 20 % (39) %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 61 for
reconciliations between non-GAAP financial measures and the most directly
comparable
Reported operating results increased in TheAmericas for the three and nine months endedMarch 31, 2021 , driven by the favorable year-over-year impact of goodwill, other intangible and long-lived asset impairments of approximately$346 million and$1,042 million , for the three and nine months, respectively, and lower selling expenses due to the impacts of the COVID-19 pandemic on brick-and-mortar retail locations, discussed above. 58
--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
Partially offsetting the increases in operating results for the three and nine
months ended March 31, 2021 were higher general and administrative expenses,
primarily due to increased employee incentive compensation from the prior-year
period, which reflected lower accrued employee incentive compensation as a
result of the anticipated impacts of the COVID-19 pandemic.
Europe , the Middle East & Africa
Three Months Ended Nine Months Ended
March 31 March 31
($ in millions) 2021 2020 2021 2020
As Reported:
Operating income $ 361 $ 202 $ 1,429 $ 1,084
$ Change from prior-year period 159 345
% Change from prior-year period 79 % 32 %
Non-GAAP Financial Measure(1):
% Change in operating income from the
prior-year period adjusting for the impact of
long-lived asset impairments and changes in
fair value of contingent consideration 97 % 35 %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 61 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.
Reported operating income increased in Europe , the Middle East & Africa for the
three and nine months ended March 31, 2021 , primarily driven by higher results
from our travel retail business and Russia , combined, of approximately
$194 million and $458 million , respectively, reflecting the increase in net
sales and disciplined expense management.
Partially offsetting the increases in operating income for the three and nine
months ended March 31, 2021 is the impact of long-lived asset impairments in
certain of our freestanding stores relating to COVID-19 of $33 million . Also
offsetting the increase in operating results for the nine months ended March 31,
2021 were lower results from most markets across the region, primarily driven by
the declines in net sales.
Asia/Pacific
Three Months Ended Nine Months Ended
March 31 March 31
($ in millions) 2021 2020 2021 2020
As Reported:
Operating income $ 245 $ 149 $ 890 $ 699
$ Change from prior-year period 96 191
% Change from prior-year period 64 %
27 %
Reported operating income increased inAsia/Pacific for the three and nine months endedMarch 31, 2021 , primarily reflecting higher results from mainlandChina . In both periods, the increase in operating income from mainlandChina was driven by the increase in net sales, partially offset by the increase in advertising and promotional expense, primarily due to investments to support holiday events and campaigns and new product launches and a difficult comparison to the prior-year period that reflected cost saving actions implemented in response to the impacts of the COVID-19 pandemic. Partially offsetting the increases in operating income for the three and nine months endedMarch 31, 2021 were lower results fromJapan , reflecting the decrease in net sales. 59
--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.INTEREST AND INVESTMENT INCOME
Three Months Ended Nine Months Ended
March 31 March 31
(In millions) 2021 2020 2021 2020
Interest expense $ 43 $
42
Interest expense increased for the nine months endedMarch 31, 2021 , primarily due to the issuance of additional long-term debt inNovember 2019 andApril 2020 . Interest income and investment income, net decreased for the three and nine months endedMarch 31, 2021 , reflecting decreases in investment income due to lower interest rates, partially offset by higher equity method investment income from our minority investments. OTHER INCOME OnDecember 18, 2019 , we acquired the remaining equity interest inHave&Be Co. Ltd. ("Have & Be"), the global skin care company behind Dr. Jart+ and men's grooming brand Do The Right Thing, for$1,268 million in cash. Based on the final purchase price and working capital adjustments, we estimated a refund receivable of$32 million that was outstanding as ofJune 30, 2020 and was received in the first quarter of fiscal 2021. We originally acquired a minority interest in Have & Be inDecember 2015 , which included a formula-based call option for the remaining equity interest. The original minority interest was accounted for as an equity method investment, which had a carrying value of$133 million at the acquisition date. The acquisition of the remaining equity interest in Have & Be was considered a step acquisition, whereby we remeasured the previously held equity method investment to its fair value of$682 million , resulting in the recognition of a gain of$549 million . The acquisition of the remaining equity interest also resulted in the recognition of a previously unrealized foreign currency gain of$4 million , which was reclassified from accumulated other comprehensive income. The total gain on our previously held equity method investment of$553 million is included in Other income in the accompanying consolidated statements of earnings for the nine months endedMarch 31, 2020 . The amount paid at closing was funded by cash on hand including the proceeds from the issuance of debt. In anticipation of the closing, we transferred cash to a foreign subsidiary for purposes of making the closing payment. As a result, we recognized a foreign currency gain of$23 million , which is also included in Other income in the accompanying consolidated statements of earnings for the nine months endedMarch 31, 2020 . See Notes to Consolidated Financial Statements, Note 2 - Acquisition of Business for additional information. PROVISION FOR INCOME TAXES The provision for income taxes representsU.S. federal, foreign, state and local income taxes. The effective rate differs from the federal statutory rate primarily due to the effect of state and local income taxes, the tax impact of share-based compensation, the taxation of foreign income and income tax reserve adjustments, which represent changes in our net liability for unrecognized tax benefits including tax settlements and lapses of the applicable statutes of limitations. Our effective tax rate will change from quarter to quarter based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes, tax reserve adjustments, the tax impact of share-based compensation and the interaction of various global tax strategies. In addition, changes in judgment from the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of change. Three Months Ended Nine Months Ended March 31 March 31 2021 2020 2021 2020 Effective rate for income taxes 21.0 % 105.0 % 18.5 % 30.0 % Basis-point change from the prior-year period (8,400) (1,150) 60
--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
For the three and nine months ended March 31, 2021 , the decrease in the
effective tax rate was primarily attributable to the impact of nondeductible
goodwill charges recognized in the three and nine months ended March 31, 2020
and a lower effective tax rate on our foreign operations. The lower amount of
earnings before income taxes for the three and nine months ended March 31, 2020
increased the impact of the nondeductible charges.
The effective tax rate for the three and nine months ended March 31, 2021
included the impact of the U.S. government issuance of final global intangible
low-taxed income ("GILTI") tax regulations in July 2020 under the Tax Cuts and
Jobs Act (the "TCJA") that provide for a high-tax exception to the GILTI tax.
These regulations are retroactive to the original enactment of the GILTI tax
provision, which includes our 2019 and 2020 fiscal years. We have elected to
apply the GILTI high-tax exception to fiscal 2021, 2020 and 2019. The election
for fiscal 2021 resulted in reductions of 100 basis points and 110 basis points
to the effective tax rates for the three and nine months ended March 31, 2021 ,
respectively. The impact of the elections with respect to fiscal 2020 and 2019
was recognized as a discrete item in the provision for income taxes in the
second and third quarters of fiscal 2021 and resulted in reductions of 30 basis
points and 220 basis points to the effective tax rates for the three and nine
months ended March 31, 2021 , respectively.
NET EARNINGS (LOSS) ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.
Three Months Ended Nine Months Ended
March 31 March 31
($ in millions, except per share data) 2021 2020 2021 2020
As Reported:
Net earnings (loss) attributable to The Estée
Lauder Companies Inc. $ 456 $ (6) $ 1,852 $ 1,146
$ Change from prior-year period 462 706
% Change from prior-year period 100+% 62 %
Diluted net earnings (loss) per common share $ 1.24 $ (.02) $ 5.03 $ 3.12
% Change from prior-year period 100+% 61 %
Non-GAAP Financial Measure(1):
% Change in diluted net earnings (loss) per
common share from the prior-year period
adjusting for the impact of charges
associated with restructuring and other
activities, goodwill, other intangible and
long-lived asset impairments, other income
and changes in fair value of contingent
consideration 92 % 23 %
(1)See "Reconciliations of Non-GAAP Financial Measures" below for
reconciliations between non-GAAP financial measures and the most directly
comparable
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period, or do not reflect the Company's underlying ongoing business, provides transparency for such items and helps investors and others compare and analyze our operating performance from period to period. In the future, we expect to incur charges or adjustments similar in nature to those presented below; however, the impact to the Company's results in a given period may be highly variable and difficult to predict. Our non-GAAP financial measures may not be comparable to similarly titled measures used by, or determined in a manner consistent with, other companies. 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 withU.S. GAAP. The following tables present Net sales, Operating income and Diluted net earnings (loss) per common share adjusted to exclude the impact of charges associated with restructuring and other activities; goodwill, other intangible and long-lived asset impairments relating to COVID-19; other income; the changes in the fair value of contingent consideration. 61
--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
The following tables provide reconciliations between these non-GAAP financial
measures and the most directly comparable
Three Months Ended % Change
March 31 % in Constant
($ in millions, except per share data) 2021 2020 Variance Change Currency
Net sales, as reported $ 3,864 $ 3,345 $ 519 16 % 13 %
Returns associated with restructuring
and other activities 10 - 10
Net sales, as adjusted $ 3,874 $ 3,345 $ 529 16 % 13 %
Operating income, as reported $ 616 $ 109 $ 507 100+% 100+%
Charges associated with restructuring
and other activities 145 25 120
Goodwill , other intangible and
long-lived asset impairments 33 346 (313)
Changes in fair value of contingent
consideration - (2) 2
Operating income, as adjusted $ 794 $ 478 $ 316 66 % 64 %
Diluted net earnings (loss) per common
share, as reported $ 1.24 $ (.02) $ 1.26 100+% 100+%
Charges associated with restructuring
and other activities .31 .05 .26
Goodwill and other intangible asset
impairments .07 .83 (.76)
Changes in fair value of contingent
consideration - (.01) .01
Diluted net earnings (loss) per common
share, as adjusted $ 1.62 $ 0.85 $ .77 92 % 88 %
62--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
Nine Months Ended % Change
($ in millions, except per share March 31 in
data) 2021 2020 Variance % Change constant currency
Net sales, as reported $ 12,279 $ 11,864 $ 415 3 % 2 %
Returns associated with
restructuring and other activities 10 - 10
Net sales, as adjusted $ 12,289 $ 11,864 $ 425 4 % 2 %
Operating income, as reported $ 2,384 $ 1,149 $ 1,235 100+% 100+%
Charges associated with
restructuring and other activities 191 63 128
Goodwill , other intangible and long-lived asset impairments 114 1,123
(1,009)
Changes in fair value of contingent consideration (2) (9) 7 Operating income, as adjusted$ 2,687 $ 2,326 $ 361 16 % 14 % Diluted net earnings (loss) per common share, as reported$ 5.03 $ 3.12 $ 1.91 61 % 59 % Charges associated with restructuring and other activities .41 .14
.27
Goodwill , other intangible and long-lived asset impairments .25 2.62
(2.37)
Other income - (1.23)
1.23
Changes in fair value of contingent consideration (.01) (.02)
.01
Diluted net earnings (loss) per common share, as adjusted$ 5.68 $ 4.63 $ 1.05 23 % 20 %
As diluted net earnings (loss) per common share, as adjusted, is used as a measure of the Company's performance, we consider the impact of current and deferred income taxes when calculating the per-share impact of each of the reconciling items.
63--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
The following tables reconcile the change in net sales by product category and
geographic region, as reported, to the change in net sales excluding the effects
of foreign currency translation:
As Reported
Three Months Three Months Impact of % Change,
Ended Ended foreign Variance, in
March 31, March 31, currency in constant % Change, constant
($ in millions) 2021 2020 Variance translation currency as reported currency
By Product Category:
Skin Care $ 2,259 $ 1,723 $ 536 $ (58) $ 478 31 % 28 %
Makeup 1,018 1,146 (128) (24) (152) (11) (13)
Fragrance 454 349 105 (10) 95 30 27
Hair Care 128 119 9 (2) 7 8 6
Other 15 8 7 - 7 88 88
3,874 3,345 529 (94) 435 16 13
Returns associated
with restructuring
and other activities (10) - (10) (1) (11)
Total $ 3,864 $ 3,345 $ 519 $ (95) $ 424 16 % 13 %
By Region:
The Americas $ 916 $ 892 $ 24 $ 10 $ 34 3 % 4 %
Europe, the Middle
East & Africa 1,706 1,525 181 (24) 157 12 10
Asia/Pacific 1,252 928 324 (80) 244 35 26
3,874 3,345 529 (94) 435 16 13
Returns associated
with restructuring
and other activities (10) - (10) (1) (11)
Total $ 3,864 $ 3,345 $ 519 $ (95) $ 424 16 % 13 %
64--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
As Reported %
Nine Months Nine Months Change,
Ended Ended Variance, % in
March 31, March 31, Impact of foreign in constant Change, constant
($ in millions) 2021 2020 Variance currency translation currency as reported currency
By Product Category:
Skin Care $ 7,113 $ 5,770 $ 1,343 $ (139) $ 1,204 23 % 21 %
Makeup 3,243 4,249 (1,006) (46) (1,052) (24) (25)
Fragrance 1,478 1,392 86 (21) 65 6 5
Hair Care 418 417 1 (4) (3) - (1)
Other 37 36 1 (1) - 3 -
12,289 11,864 425 (211) 214 4 2
Returns associated
with restructuring
and other activities (10) - (10) (1) (11)
Total $ 12,279 $ 11,864 $ 415 $ (212) $ 203 3 % 2 %
By Region:
The Americas $ 2,837 $ 3,278 $ (441) $ 39 $ (402) (13) % (12) %
Europe, the Middle
East & Africa 5,276 5,281 (5) (54) (59) - (1)
Asia/Pacific 4,176 3,305 871 (196) 675 26 20
12,289 11,864 425 (211) 214 4 2
Returns associated with
restructuring and other
activities (10) - (10) (1) (11)
Total $ 12,279 $ 11,864 $ 415 $ (212) $ 203 3 % 2 %
65--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.The following table reconciles the change in operating results by product category and geographic region, as reported, to the change in operating income excluding the impact of goodwill, other intangible and long-lived asset impairments and changes in fair value of contingent consideration:
As Reported
Add:
Changes in
Goodwill, other Add:
Three Months Three Months intangible and Changes in fair
Ended Ended long-lived value of
March 31, March 31, asset contingent Variance, as % Change, as % Change, as
($ in millions) 2021 2020 Variance impairments consideration adjusted reported adjusted
By Product Category:
Skin Care $ 804 $ 418 $ 386 $ (54) $ - $ 332 92 % 70 %
Makeup (72) (283) 211 (265) - (54) 75 (100+)
Fragrance 47 - 47 7 2 56 - -
Hair Care (17) (2) (15) (1) - (16) (100+) (100+)
Other (1) 1 (2) - - (2) (100+) (100+)
761 134 627 $ (313) $ 2 $ 316 100+% 66 %
Charges associated with
restructuring and other
activities (145) (25) (120)
Total $ 616 $ 109 $ 507
By Region:
The Americas $ 155 $ (217) $ 372 $ (346) $ - $ 26 100+% 20 %
Europe , the Middle East &
Africa 361 202 159 33 2 194 79 97
Asia/Pacific 245 149 96 - - 96 64 64
761 134 627 $ (313) $ 2 $ 316 100+% 66 %
Charges associated
with restructuring and
other activities (145) (25) (120)
Total $ 616 $ 109 $ 507
66--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
Add:
As Reported Changes in Add:
Nine Months Nine Months Goodwill, Changes in
Ended Ended other intangible and fair value of
March 31, March 31, long-lived asset contingent Variance, as % Change, as % Change, as
($ in millions) 2021 2020 Variance impairments consideration adjusted reported adjusted
By Product Category:
Skin Care $ 2,453 $ 1,822 $ 631 $ 27 $ 3 $ 661 35 % 35 %
Makeup (115) (790) 675 (1,042) - (367) 85 (100+)
Fragrance 248 163 85 7 4 96 52 60
Hair Care (10) 10 (20) (1) - (21) (100+) (100+)
Other (1) 7 (8) - - (8) (100+) (100+)
2,575 1,212 1,363 $ (1,009) $ 7 $ 361 100+% 16 %
Charges associated
with restructuring
and other activities (191) (63) (128)
Total $ 2,384 $ 1,149 $ 1,235
By Region:
The Americas $ 256 $ (571) $ 827 $ (1,042) $ 3 $ (212) 100+% (39) %
Europe, the Middle
East & Africa 1,429 1,084 345 33 4 382 32 35
Asia/Pacific 890 699 191 - - 191 27 27
2,575 1,212 1,363 $ (1,009) $ 7 $ 361 100+% 16 %
Charges associated
with restructuring
and other activities (191) (63) (128)
Total $ 2,384 $ 1,149 $ 1,235
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our principal sources of funds historically have been cash flows from
operations, borrowings pursuant to our commercial paper program, borrowings from
the issuance of long-term debt and committed and uncommitted credit lines
provided by banks and other lenders in the United States and abroad. At
March 31, 2021 , we had cash and cash equivalents of $6,399 million compared with
$5,022 million at June 30, 2020 . Our cash and cash equivalents are maintained at
a number of financial institutions. To mitigate the risk of uninsured balances,
we select financial institutions based on their credit ratings and financial
strength, and we perform ongoing evaluations of these institutions to limit our
concentration risk exposure.
Based on past performance and current expectations, we believe that cash on
hand, cash generated from operations, available credit lines and access to
credit markets will be adequate to support seasonal working capital needs,
currently planned business operations, information technology enhancements,
capital expenditures, acquisitions, dividends, stock repurchases, restructuring
initiatives, commitments and other contractual obligations on both a near-term
and long-term basis.
The TCJA resulted in the Transition Tax on unrepatriated earnings of our foreign
subsidiaries and changed the tax law in ways that present opportunities to
repatriate cash without additional U.S. federal income tax. As a result, we
changed our indefinite reinvestment assertion related to certain foreign
earnings, and we continue to analyze the indefinite reinvestment assertion on
our remaining applicable foreign earnings. The issuance of guidance subsequent
to the enactment of the TCJA has enabled us to access a substantial portion of
the cash in offshore jurisdictions associated with our permanently reinvested
earnings without significant cost. We do not believe that continuing to reinvest
our 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.
67--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
The effects of inflation have not been significant to our overall operating
results in recent years. Generally, we have been able to introduce new products
at higher prices, increase prices and implement other operating efficiencies to
sufficiently offset cost increases, which have been moderate.
Credit Ratings
Changes in our credit ratings will likely result in changes in our borrowing
costs. Our credit ratings also impact the cost of our revolving credit facility.
Downgrades in our credit ratings may reduce our ability to issue commercial
paper and/or long-term debt and would likely increase the relative costs of
borrowing. A credit rating is not a recommendation to buy, sell, or hold
securities, is subject to revision or withdrawal at any time by the assigning
rating organization, and should be evaluated independently of any other rating.
As of April 26, 2021 , our long-term debt is rated A+ with a stable outlook by
Standard & Poor's and A1 with a stable outlook by Moody's.
68--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.Debt
At
Long-term Current
($ in millions) Debt Debt Total Debt
3.125% Senior Notes, due
$ 635
$ -
494 - 494
4.375% Senior Notes, due
455 - 455
3.70% Senior Notes, due
247 - 247
6.00% Senior Notes, due
294 - 294
5.75% Senior Notes, due
197 - 197
1.950% Senior Notes, due
592 - 592
2.600% Senior Notes, due
680 - 680
2.375% Senior Notes, due
641 - 641
3.15% Senior Notes, due
498 - 498
2.00% Senior Notes, due
496 - 496
2.35% Senior Notes, due
256 - 256
1.70% Senior Notes, due May 10, 2021 ("2021 Senior
Notes") (13), (14), (15) - 451 451
Other long-term borrowings 2 - 2
Other current borrowings - 20 20
$ 5,487 $ 471 $ 5,958
(1)Consists of $650 million principal, unamortized debt discount of $8 million
and debt issuance costs of $7 million .
(2)Consists of $500 million principal, unamortized debt discount of $1 million
and debt issuance costs of $5 million .
(3)Consists of $450 million principal, net unamortized debt premium of $9
million and debt issuance costs of $4 million .
(4)Consists of $250 million principal, unamortized debt discount of $1 million
and debt issuance costs of $2 million .
(5)Consists of $300 million principal, unamortized debt discount of $3 million
and debt issuance costs of $3 million .
(6)Consists of $200 million principal, unamortized debt discount of $2 million
and debt issuance costs of $1 million .
(7)Consists of $600 million principal, unamortized debt discount of $4 million
and debt issuance costs of $4 million .
(8)Consists of $700 million principal, unamortized debt discount of $1 million ,
debt issuance costs of $4 million and a $15 million adjustment to reflect the
fair value of interest rate swaps.
(9)Consists of $650 million principal, unamortized debt discount of $5 million
and debt issuance costs of $4 million .
(10)Consists of $500 million principal and debt issuance costs of $2 million .
(11)Consists of $500 million principal, unamortized debt discount of $2 million
and debt issuance costs of $2 million .
(12)Consists of $250 million principal and a $6 million adjustment to reflect
the fair value of interest rate swaps.
(13)Consists of $450 million principal and a $1 million adjustment to reflect
the fair value of interest rate swaps.
(14)The Senior Notes contain certain customary covenants, including limitations
on indebtedness secured by liens.
(15)See Note 16 - Subsequent Events for further information relating to the
repayment of the $450 million principal amount made and the interest rate swap
agreement relating to the 2031 Senior Notes entered into subsequent to March 31,
2021 .
In August 2020 , we repaid the remaining $750 million borrowed under our
$1,500 million revolving credit facility that was outstanding as of June 30,
2020 .
Total debt as a percent of total capitalization (excluding noncontrolling
interests) was 52% and 61% at March 31, 2021 and June 30, 2020 , respectively.
69--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
Cash Flows
Nine Months Ended
March 31
(In millions) 2021 2020
Net cash provided by operating activities $ 2,777 $ 1,945
Net cash used for investing activities $ (577) The change in net cash flows from operations reflected the improvement in working capital, primarily due to other accrued liabilities, driven by an increase in accrued employee incentive compensation, as previously discussed, and accounts payable, partially offset by the unfavorable change in accounts receivable due to the increase in net sales. The change in net cash flows from operations also reflects higher earnings before taxes, excluding non-cash items. The change in net cash flows used for investing activities primarily reflected cash paid in fiscal 2020 relating to the second quarter acquisition ofHave&Be Co. Ltd. , partially offset by the settlement of net investment hedges. The change in net cash flows from financing activities primarily reflected lower proceeds relating to the issuance of long-term debt (theNovember 2019 andApril 2020 issuances in fiscal 2020, compared to theMarch 2021 issuance in fiscal 2021), the fiscal 2021 repayment of borrowings under our revolving credit facility, partially offset by lower treasury stock repurchases. Dividends For a summary of quarterly cash dividends declared per share on our Class A and Class B Common Stock during the nine months endedMarch 31, 2021 , see Notes to Consolidated Financial Statements, Note 13 - Equity. Pension and Post-retirement Plan Funding There have been no significant changes to our pension and post-retirement funding as discussed in our Annual Report on Form 10-K for the fiscal year endedJune 30, 2020 . Commitments, Contractual Obligations and Contingencies InFebruary 2021 , we agreed to acquire additional shares inDECIEM Beauty Group Inc. ("DECIEM") that will increase our existing equity interest from approximately 29% to approximately 76%. Upon closing, which is expected to occur inMay 2021 , we will pay approximately$1,000 million and will also have the right to purchase, and will grant the remaining investors a right to sell to us, the remaining interests after a three-year period, with a purchase price based on the future performance of DECIEM. There have been no other significant changes to our commitments and contractual obligations as discussed in our Annual Report on Form 10-K for the fiscal year endedJune 30, 2020 . For a discussion of contingencies, see Notes to Consolidated Financial Statements, Note 10 - Contingencies. Derivative Financial Instruments and Hedging Activities For a discussion of our derivative financial instruments and hedging activities, see Notes to Consolidated Financial Statements, Note 6 - Derivative Financial Instruments. Foreign Exchange Risk Management For a discussion of foreign exchange risk management, see Notes to Consolidated Financial Statements, Note 6 - Derivative Financial Instruments (Cash Flow Hedges, Net Investment Hedges). Credit Risk For a discussion of credit risk, see Notes to Consolidated Financial Statements, Note 6 - Derivative Financial Instruments (Credit Risk). 70
--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
Market Risk
We address certain financial exposures through a controlled program of market
risk management that includes the use of foreign currency forward contracts to
reduce the effects of fluctuating foreign currency exchange rates and to
mitigate the change in fair value of specific assets and liabilities on the
balance sheet. To perform a sensitivity analysis of our foreign currency forward
contracts, we assess the change in fair values from the impact of hypothetical
changes in foreign currency exchange rates. A hypothetical 10% weakening of the
U.S. dollar against the foreign exchange rates for the currencies in our
portfolio would have resulted in a net decrease in the fair value of our
portfolio of approximately $198 million and $222 million as of March 31, 2021
and June 30, 2020 , respectively. This potential change does not consider our
underlying foreign currency exposures.
In addition, we enter into interest rate derivatives to manage the effects of
interest rate movements on our aggregate liability portfolio, including future
debt issuances. Based on a hypothetical 100 basis point increase in interest
rates, the estimated fair value of our interest rate derivatives would increase
(decrease) by approximately $(58) million and $9 million as of March 31, 2021
and June 30, 2020 , respectively.
Our sensitivity analysis represents an estimate of reasonably possible net
losses that would be recognized on our portfolio of derivative financial
instruments assuming hypothetical movements in future market rates and is not
necessarily indicative of actual results, which may or may not occur. It does
not represent the maximum possible loss or any expected loss that may occur,
since actual future gains and losses will differ from those estimated, based
upon actual fluctuations in market rates, operating exposures, and the timing
thereof, and changes in our portfolio of derivative financial instruments during
the year. We believe, however, that any such loss incurred would be offset by
the effects of market rate movements on the respective underlying transactions
for which the derivative financial instrument was intended.
OFF-BALANCE SHEET ARRANGEMENTS
We do not maintain any off-balance sheet arrangements, transactions, obligations
or other relationships with unconsolidated entities that would be expected to
have a material current or future effect upon our financial condition or results
of operations.
CRITICAL ACCOUNTING POLICIES
As disclosed in our Annual Report on Form 10-K for the fiscal year ended
June 30, 2020 , the discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in conformity with U.S. generally accepted accounting
principles. The preparation of these financial statements requires us to make
estimates and assumptions that affect the amounts of assets, liabilities,
revenues and expenses reported in those financial statements. These estimates
and assumptions can be subjective and complex, and consequently, actual results
could differ from those estimates. Our most critical accounting policies relate
to goodwill, other intangible assets and long-lived assets, income taxes and
business combinations. Since June 30, 2020 , there have been no significant
changes to the assumptions and estimates related to our critical accounting
policies.
RECENTLY ISSUED ACCOUNTING STANDARDS
For a discussion regarding the impact of accounting standards that were recently
issued but not yet effective, on the Company's consolidated financial
statements, see Notes to Consolidated Financial Statements, Note 1 - Summary of
Significant Accounting Policies.
71--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
We and our representatives from time to time make written or oral
forward-looking statements, including in this and other filings with the
Securities and Exchange Commission , in our press releases and in our reports to
stockholders, which may constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
may address our expectations regarding sales, earnings or other future financial
performance and liquidity, other performance measures, product introductions,
entry into new geographic regions, information technology initiatives, new
methods of sale, our long-term strategy, restructuring and other charges and
resulting cost savings, and future operations or operating results. These
statements may contain words like "expect," "will," "will likely result,"
"would," "believe," "estimate," "planned," "plans," "intends," "may," "should,"
"could," "anticipate," "estimate," "project," "projected," "forecast," and
"forecasted" or similar expressions. Although we believe that our expectations
are based on reasonable assumptions within the bounds of our knowledge of our
business and operations, actual results may differ materially from our
expectations. Factors that could cause actual results to differ from
expectations include, without limitation:
(1)increased competitive activity from companies in the skin care, makeup,
fragrance and hair care businesses;
(2)our ability to develop, produce and market new products on which future
operating results may depend and to successfully address challenges in our
business;
(3)consolidations, restructurings, bankruptcies and reorganizations in the
retail industry causing a decrease in the number of stores that sell our
products, an increase in the ownership concentration within the retail industry,
ownership of retailers by our competitors or ownership of competitors by our
customers that are retailers and our inability to collect receivables;
(4)destocking and tighter working capital management by retailers;
(5)the success, or changes in timing or scope, of new product launches and the
success, or changes in timing or scope, of advertising, sampling and
merchandising programs;
(6)shifts in the preferences of consumers as to where and how they shop;
(7)social, political and economic risks to our foreign or domestic
manufacturing, distribution and retail operations, including changes in foreign
investment and trade policies and regulations of the host countries and of the
United States ;
(8)changes in the laws, regulations and policies (including the interpretations
and enforcement thereof) that affect, or will affect, our business, including
those relating to our products or distribution networks, changes in accounting
standards, tax laws and regulations, environmental or climate change laws,
regulations or accords, trade rules and customs regulations, and the outcome and
expense of legal or regulatory proceedings, and any action we may take as a
result;
(9)foreign currency fluctuations affecting our results of operations and the
value of our foreign assets, the relative prices at which we and our foreign
competitors sell products in the same markets and our operating and
manufacturing costs outside of the United States ;
(10)changes in global or local conditions, including those due to the volatility
in the global credit and equity markets, natural or man-made disasters, real or
perceived epidemics, or energy costs, that could affect consumer purchasing, the
willingness or ability of consumers to travel and/or purchase our products while
traveling, the financial strength of our customers, suppliers or other contract
counterparties, our operations, the cost and availability of capital which we
may need for new equipment, facilities or acquisitions, the returns that we are
able to generate on our pension assets and the resulting impact on funding
obligations, the cost and availability of raw materials and the assumptions
underlying our critical accounting estimates;
(11)impacts attributable to the COVID-19 pandemic, including disruptions to our
global business;
(12)shipment delays, commodity pricing, depletion of inventory and increased
production costs resulting from disruptions of operations at any of the
facilities that manufacture our products or at our distribution or inventory
centers, including disruptions that may be caused by the implementation of
information technology initiatives, or by restructurings;
72--------------------------------------------------------------------------------
Table of Contents
THE ESTÉE LAUDER COMPANIES INC.
(13)real estate rates and availability, which may affect our ability to increase
or maintain the number of retail locations at which we sell our products and the
costs associated with our other facilities;
(14)changes in product mix to products which are less profitable;
(15)our ability to acquire, develop or implement new information and
distribution technologies and initiatives on a timely basis and within our cost
estimates and our ability to maintain continuous operations of such systems and
the security of data and other information that may be stored in such systems or
other systems or media;
(16)our ability to capitalize on opportunities for improved efficiency, such as
publicly-announced strategies and restructuring and cost-savings initiatives,
and to integrate acquired businesses and realize value therefrom;
(17)consequences attributable to local or international conflicts around the
world, as well as from any terrorist action, retaliation and the threat of
further action or retaliation;
(18)the timing and impact of acquisitions, investments and divestitures; and
(19)additional factors as described in our filings with the Securities and
Exchange Commission , including the Annual Report on Form 10-K for the fiscal
year ended June 30, 2020 .
We assume no responsibility to update forward-looking statements made herein or
otherwise.
© Edgar Online, source
