The Estee Lauder Companies Inc (EL, Financial) released its 8-K filing on August 19, 2024, reporting a challenging fiscal year with a 2% decrease in net sales and a significant decline in earnings per share (EPS). The company, a leader in the global prestige beauty market, faced headwinds primarily due to softness in the Chinese market and Asia travel retail.
Company Overview
Estee Lauder is a prominent player in the global prestige beauty market, with a diverse portfolio spanning skin care, makeup, fragrance, and hair care. The company operates in over 150 countries, generating revenue from various regions: 28% from the Americas, 39% from Europe, the Middle East, and Africa, and 33% from Asia-Pacific. Estee Lauder's top-selling brands include Estee Lauder, Clinique, M.A.C, La Mer, Jo Malone London, Aveda, Bobbi Brown, and Origins.
Fiscal 2024 Performance and Challenges
For the fiscal year ended June 30, 2024, The Estee Lauder Companies Inc reported net sales of $15.61 billion, a 2% decrease from the previous year's $15.91 billion. Organic net sales also decreased by 2%, reflecting ongoing challenges in the Chinese market and a decline in Asia travel retail. The company reported net earnings of $0.39 billion, a significant drop from $1.01 billion in the prior year. The reported effective tax rate increased to 47.0% from 27.7%, primarily due to nondeductible goodwill impairment charges and a higher effective tax rate on foreign operations.
Financial Achievements and Metrics
Despite the challenges, The Estee Lauder Companies Inc achieved some notable financial milestones. Adjusted diluted EPS for the fiscal year was $2.59, a 22% decrease in constant currency. The company reported total operating income of $0.97 billion, a 36% decrease from the prior year. In constant currency, adjusted operating income decreased by 10% to $1.64 billion.
| Metric | FY 2024 | FY 2023 | Change |
|---|---|---|---|
| Net Sales | $15.61 billion | $15.91 billion | -2% |
| Net Earnings | $0.39 billion | $1.01 billion | -61% |
| Diluted EPS | $1.08 | $2.79 | -61% |
| Adjusted Diluted EPS | $2.59 | $3.46 | -25% |
Income Statement and Balance Sheet Highlights
The company's income statement revealed a decrease in net sales across most product categories and geographic regions, impacted by a stronger U.S. dollar. Operating income was significantly affected by goodwill and other intangible asset impairments, restructuring charges, and changes in the fair value of acquisition-related stock options.
On the balance sheet, The Estee Lauder Companies Inc ended the year with $3.40 billion in cash and cash equivalents. The company also completed its acquisition of DECIEM Beauty Group Inc., a Canadian-based multi-brand company, for $859 million.
Cash Flow and Capital Expenditures
Net cash flows provided by operating activities were $2.36 billion, compared to $1.73 billion in the prior year. Capital expenditures decreased to $0.92 billion from $1.00 billion, primarily due to the timing of payments related to the completion of a manufacturing facility in Japan.
Analysis and Outlook
The Estee Lauder Companies Inc's fiscal 2024 results reflect the ongoing challenges in the global prestige beauty market, particularly in China and Asia travel retail. Despite these challenges, the company has outlined strategic priorities for fiscal 2025, including reigniting skin care, capitalizing on high-end fragrance growth drivers, and enhancing precision marketing capabilities.
Fabrizio Freda, President and CEO, commented,
“In fiscal 2024’s fourth quarter, we achieved our organic sales outlook and exceeded expectations for profitability, closing a difficult year. Organic sales and adjusted EPS returned to growth in the second half.”
For fiscal 2025, the company expects continued declines in the Chinese market but aims to drive share gains and deliver improved performance across developed and emerging markets. The Profit Recovery and Growth Plan is expected to offset profitability pressures, yielding a more moderate pace of operating margin expansion.
For more detailed insights and the full earnings report, visit the 8-K filing.
Explore the complete 8-K earnings release (here) from The Estee Lauder Companies Inc for further details.
