The Estée Lauder Companies Reports Fiscal 2025 Third Quarter Results

Press Release, May 1, 2025

NEW YORK--(BUSINESS WIRE)-- The Estée Lauder Companies Inc. (NYSE: EL) today reported its financial results for the third quarter ended March 31, 2025.

Stéphane de La Faverie, President and Chief Executive Officer, said, “In the third quarter of fiscal 2025, we delivered our organic sales outlook and exceeded profitability expectations. We are moving decisively and building momentum as we bring our “Beauty Reimagined” strategic vision to life across its five key priorities. This is evidenced by our prestige beauty share gains in strategic markets like the U.S., China, and Japan and our mid single-digit organic net sales growth online.

“Our global business organic sales trends, excluding travel retail, showed sequential improvement. With the strategic reset of our travel retail business well underway to better reflect recent industry trends and market conditions, and provided there is meaningful resolution of the recently enacted tariffs to mitigate potential related negative impacts, we are confident in our ability to return to sales growth in fiscal 2026.”

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FISCAL 2025 THIRD QUARTER SELECT FINANCIAL RESULTS (unaudited)^1,2

• Net sales decreased 10% to $3.6 billion. Organic net sales decreased 9%.
• As Reported and Adjusted Gross margin expanded 310 basis points, to 75.0%, despite the decline in net sales, primarily driven by net benefits from the Company’s Profit Recovery and Growth Plan (“PRGP”). This also includes the favorable impact of 240 basis points due to the trigger of an in-period charge for under-absorbed manufacturing overhead costs in the prior-year period, partially offset by the unfavorable impact of 100 basis points due to a similar charge recognized in the fiscal 2025 third quarter.
• Operating margin declined to 8.6% from 13.5% in the prior-year period. Adjusted operating margin contracted 270 basis points, to 11.4% from 14.1%. These reflect the increase in consumer-facing investments, along with sales volume deleverage in the fiscal 2025 third quarter. In addition, the net benefits from the Company’s PRGP helped to reduce non-consumer facing expenses.
• Effective tax rate was 34.0% compared with 31.1% in the prior-year period. Adjusted effective tax rate was 30.8% compared with 30.5%.
• Diluted net earnings per common share decreased to $.44, compared with $.91 in the prior-year period. Adjusted diluted net earnings per common share decreased to $.65, compared with $.97.
• For the nine months ended March 31, 2025:
  • Net cash flows provided by operating activities decreased to $671 million, compared with $1,471 million in the prior-year period, primarily reflecting lower pre-tax earnings, excluding non-cash items, as well as the unfavorable change in operating assets and liabilities. This includes the impact from the significant reduction in inventory in the prior-year period that drove strong net cash flows in fiscal 2024. The decrease also reflects the increase in restructuring payments.
  • Capital expenditures decreased to $395 million from $702 million in the prior-year period primarily due to the prior-year payments relating to the manufacturing facility in Japan as well as the Company’s efforts this year to optimize capital expenditures to improve free cash flow.
  • The Company paid dividends of $492 million.

BEAUTY GAINS AND OPERATIONAL HIGHLIGHTS³

• Achieved prestige beauty share gains for the fiscal 2025 third quarter in some key markets:
  • U.S.⁴, driven by Clinique, The Ordinary and Bumble and bumble
  • Mainland China, driven by La Mer, Estée Lauder and Tom Ford
  • Japan, driven by Le Labo, La Mer and Estée Lauder
• Launched breakthrough, on-trend and commercial innovations, including:
  • M·A·C Nudes Collection in January 2025, featured new as well as reintroduced fan-favorite nude shades across the lip and eye subcategories
  • La Mer Night Recovery Concentrate in January 2025, positioned to speed recovery from signs of sensitivity, including visible post-derm treatment irritation
  • Estée Lauder Double Wear Stay-in-Place 24-hour Concealer in February 2025, introduced as a multi-use skin perfecting concealer with a matte finish and a companion to Double Wear Stay-in-Place foundation
  • Jo Malone London Hand Creams in February 2025, relaunched with new packaging and scent extensions, driving new recruitment at entry prestige pricing, along with one scent launched exclusively on Kakao
  • Le Labo Eucalyptus 20 in February 2025, extended the brand’s Classic Collection with a genderless blend of eucalyptus, woods and resin
  • The Ordinary Multi-Active Delivery Essence in February 2025, formulated to target multiple signs of aging simultaneously
  • Clinique Moisture Surge Active Glow Serum in March 2025, expanded the beloved Moisture Surge product franchise with a serum offered at entry prestige pricing
• Expanded consumer coverage:
  • Broadened Fragrance distribution with approximately 10 net new freestanding stores opened globally in the fiscal 2025 third quarter, led by Le Labo and KILIAN PARIS
  • Launched seven additional stores on Shopee in Southeast Asia in January and February 2025
  • Launched Estée Lauder (January 2025) and The Ordinary (April 2025) on TikTok Shop in Thailand
  • Launched The Ordinary in Amazon’s U.S. Premium Beauty (January 2025) and in Turkey (April 2025)
• Recognized for investments and expanded strategic partnerships in AI to drive operational efficiencies:
  • Featured on Microsoft’s AI @ Work list as an “Agent of Change” in March 2025, highlighting the Company’s dedication and leadership in AI integration across business functions
  • Announced a strategic partnership with Adobe in March 2025 to integrate Firefly generative AI into the Company’s existing Creative Cloud workflows, designed to drive efficiency, accelerate execution and empower creative teams to recapture time and focus on ideating and creating new artistic concepts

FISCAL 2025 THIRD QUARTER RESULTS BY PRODUCT CATEGORY AND BY REGION

The product category net sales commentary below reflects organic net sales, excluding the negative impacts from foreign currency translation that are reflected in the preceding table. In addition to the Operational Highlights above, below are the drivers of the Company’s performance.

Skin Care

• Skin Care net sales decreased 11%, primarily due to the decrease in the Company’s Asia travel retail business, which drove declines from Estée Lauder and La Mer, including:
  • Ongoing subdued sentiment and lower conversion from Chinese consumers;
  • The difficult comparison to the prior-year period due to the Company’s resumption of replenishment orders in the fiscal 2024 third quarter and the Company’s strategic decision to reduce its exposure to reseller activity; and
  • Retailer shifts in strategies toward more profitable duty-free business models in both Korea and mainland China, which led to lower replenishment orders.
• Skin Care operating income decreased, primarily due to the decline in net sales and increase in consumer-facing investments⁵, partially offset by lower cost of sales.

Makeup

• Makeup net sales decreased 7%, primarily driven by declines from:
  • M·A·C, reflecting an unfavorable impact from the timing and lower level of shipments for new product launches compared to the prior-year period—which more than offset the benefit from fiscal 2025 innovation, including the M·A·C Nudes Collection and MACximal Sleek Satin Lipstick—as well as retailer destocking primarily driven by elevated inventory levels stemming from retail softness; and
  • Estée Lauder, primarily driven by the decline in the face subcategory, due in part to the timing of shipments for new product launches in the prior-year period, which more than offset the benefit from the fiscal 2025 launch of Double Wear Stay-in-Place 24-Hour Concealer.
• Makeup operating income decreased, primarily due to the decline in net sales, partially offset by lower cost of sales.

Fragrance

• Fragrance net sales decreased 1%, primarily driven by:
  • Declines from Clinique, mainly attributable to the Clinique Happy product franchise, and Estée Lauder, primarily reflecting retail softness in Asia/Pacific.
  • These declines were partially offset by the low-single-digit increase from the Company’s Luxury Brands⁶, led by strong double-digit growth from Le Labo. The brand’s performance was driven by hero products such as its Classic Collection, innovation with Osmanthus 19 and Eucalyptus 20, and targeted expanded consumer reach. This growth was partially offset by declines in the cologne and home subcategories from Jo Malone London, driven in part by the timing of shipments.
• Fragrance operating income increased, primarily due to lower cost of sales, partially offset by the increase in consumer-facing investments.

Hair Care

• Hair Care net sales decreased 10%, primarily driven by Aveda, reflecting continued softness in the Company’s salon and freestanding stores channels.
• Hair Care operating results improved, reflecting disciplined expense management and lower cost of sales, partially offset by the decline in net sales.

The geographic region net sales commentary below reflects organic net sales, excluding the negative impacts from foreign currency translation that are reflected in the preceding table. In addition to the Operational Highlights above, below are the drivers of the Company’s performance.

The Americas

• Net sales decreased 5%, driven by the mid-single-digit decline in North America. From a retail sales perspective, the Company’s North America business increased low single-digits. The net sales decline in North America was primarily due to:
  • Ongoing retail softness for some brands and declines in consumer confidence and sentiment, which led to elevated inventory levels and destocking at certain retailers;
  • Operational challenges impacting certain department store retailers and the timing of shipments, which further pressured net sales compared to the prior-year period.
  • These challenges more than offset the benefit from nine brands in Amazon’s U.S. Premium Beauty Store, compared to one in the prior-year period.
• Operating results increased, primarily driven by disciplined expense management as well as net benefits from the PRGP, primarily benefiting cost of sales, partially offset by the unfavorable year-over-year impact of net intercompany activity, including $164 million of lower intercompany royalty income due to the decline in income from the Company’s global travel retail business.

Europe, the Middle East & Africa

• Net sales decreased 16%, driven by:
  • Strong double-digit decline in the Company’s global travel retail business, reflecting:
    • Ongoing subdued sentiment and lower conversion from Chinese consumers;
    • The difficult comparison to the prior-year period due to the Company’s resumption of replenishment orders in the fiscal 2024 third quarter and the Company’s strategic decision to reduce its exposure to reseller activity; and
    • Retailer shifts in strategies toward more profitable duty-free business models in both Korea and mainland China, which led to lower replenishment orders.
  • Mid-single-digit decline in the region’s markets, primarily driven by ongoing challenges in the United Kingdom, including retail softness for the Company’s brands. This led to elevated inventory levels at certain retailers and, coupled with efforts by retailers to manage their working capital, resulted in destocking and lower shipments.
• Operating income decreased, primarily due to the decline in net sales and increase in consumer-facing investments, partially offset by lower cost of sales, including net benefits from the PRGP, and the favorable year-over-year impact of net intercompany activity, including $164 million of lower intercompany royalty expense due to the decline in income from the Company’s global travel retail business.

Asia/Pacific

• Net sales decreased 1%, primarily driven by double-digit declines in Hong Kong SAR and Korea, partially offset by mid-single-digit growth in mainland China.
  • The decline in Hong Kong SAR reflects the Company’s strategic decision to reduce its exposure to reseller activity.
  • The decline in Korea was primarily due to the impact of political and social unrest, which reduced retail traffic and dampened retail sales, as well as the strategic exit of Dr.Jart+ from the travel retail channel in November 2024.
  • These declines were partially offset by growth in mainland China, reflecting:
    • The timing of Lunar New Year in fiscal 2025, which created an additional key shopping moment compared to the prior-year period’s overlap with Valentine’s Day and contributed to prestige beauty stabilization; and
    • The Company’s prestige beauty share gains, attributable to the partial recapture of consumer demand in mainland China from Asia travel retail and Hong Kong SAR, online growth and the success of innovation, such as La Mer’s Night Recovery Concentrate.
    • Partially offset by lower shipments to some retailers due to retail softness, reflecting subdued consumer sentiment, and their efforts to manage working capital.
• Operating income declined, primarily driven by the decrease in net sales and increase in consumer-facing investments, as well as the year-over-year unfavorable impact of the fiscal 2025 second quarter change in policy related to local government subsidies in China.

QUARTERLY DIVIDEND
Today, the Company announced a quarterly dividend of $.35 per share on its Class A and Class B Common Stock, payable in cash on June 16, 2025 to stockholders of record at the close of business on May 30, 2025.

PROFIT RECOVERY AND GROWTH PLAN (“PRGP”)
In February 2025, the Company announced the expansion of its PRGP, including the restructuring program. Actions under the plan are expected to be substantially executed in fiscal 2025 and 2026 and completed in fiscal 2027, with nearly all of the full run-rate benefits expected to be realized during fiscal 2027. The plan is designed to further transform the Company’s operating model to fund a return to sales growth and restore a solid double-digit adjusted operating margin over the next few years, and continue to mitigate impacts from external volatility.

The Company has made meaningful progress in the execution of its PRGP, as evident by adjusted gross margin expansion, the advancement of planned initiatives, internally and with external partners, and cumulative actions under its restructuring program. In each of the three quarters of fiscal 2025, the Company has delivered over 300 basis points of adjusted gross margin expansion, despite pressure from its sales volume declines, through initiatives designed to (i) enhance operational efficiencies; (ii) reduce excess inventory; and (iii) improve the realization of net strategic pricing actions by reducing discounts and promotions.

Restructuring Program Component of the PRGP
Relating specifically to the restructuring program component of the PRGP, once fully implemented, the Company expects to take restructuring and other charges of between $1.2 billion and $1.6 billion, before taxes, consisting of employee-related costs, contract terminations, asset write-offs, and other costs associated with implementing these initiatives. The restructuring program is expected to yield annual gross benefits of between $0.8 billion and $1.0 billion, before taxes, to help restore operating margin and also fuel reinvestment in consumer-facing areas to drive sustainable sales growth.

The Company estimates a net reduction in positions of 5,800 to 7,000, including approvals to date. This net reduction takes into account the elimination of positions after retraining and redeployment of certain employees in select areas. Approvals for specific initiatives under this restructuring program, in total, are expected to be completed by the end of fiscal 2026. The restructuring program’s focus includes (i) reorganization and rightsizing of certain areas and (ii) simplification and acceleration of processes, along with the focus on (i) outsourcing of select services and (ii) evolution of go-to-market footprint and selling models.

As of March 31, 2025, the Company has recognized total cumulative charges under the restructuring component of the PRGP of $498 million, consisting primarily of employee-related costs. As of April 24, 2025, the Company has approved initiatives totaling cumulative charges of $623 million and a net reduction of over 2,600 positions.

OUTLOOK FOR FISCAL 2025 FULL YEAR

The Company has reflected the following assumptions in its fiscal 2025 full-year outlook:

• A stronger double-digit net sales decline in the Company’s global travel retail business in the fiscal 2025 fourth quarter compared to the decline in the third quarter, reflecting the impacts from retailer shifts in strategies toward more profitable duty-free business models in both Korea and mainland China as well as weak consumer sentiment and conversion from Chinese consumers. This decline also reflects a difficult comparison to the prior-year period due to the resumption of replenishment orders in the second half of fiscal 2024 as well as the Company’s strategic decision to reduce its exposure to reseller activity.
• High-single digit organic net sales decline in Asia/Pacific for fiscal 2025, primarily driven by ongoing subdued consumer sentiment from Chinese consumers and the impact of the Company’s strategic exit of Dr.Jart+ from the travel retail channel in Korea.
• Adjusted gross margin of approximately 73.5%.
• An effective tax rate of approximately 38%.
• Adjusted EPS decline, primarily due to the challenges in the Company’s global travel retail business and Asia/Pacific geographic region.
• No further material adverse impacts from currently enacted tariffs, including consumer sentiment.

The Company continues to monitor the effects of the global macro environment, including the risk of recession; currency volatility; inflationary pressures; supply chain challenges; social and political issues; competitive pressures; legal and regulatory matters, including the imposition of tariffs and sanctions; geopolitical tensions; and global security issues. The Company is also mindful of inflationary pressures (including those caused by tariffs) on its cost base and is monitoring the impact on consumer preferences, the impact of changes being made in the organization, including those related to Beauty Reimagined and the PRGP, as well as the potential impact of changes expected to be made as part of the PRGP on suppliers, retailers and others, and challenges relating to successfully outsourcing select services. In the Company’s outlook, it has made assumptions regarding these internal and external factors and challenges. Declines in net sales and profitability have, and may continue to, adversely impact the goodwill and other intangible assets associated with the Company’s brands, as well as long-lived assets, potentially resulting in impairments.

CONFERENCE CALL AND WEBCAST DETAILS
The Estée Lauder Companies will host a conference call at 8:30 a.m. (ET) today, May 1, 2025 to discuss its results for the fiscal 2025 third quarter. The dial-in number for the call is 877-883-0383 in the U.S. or 412-902-6506 internationally (conference ID number: 1142144).

The call and presentation will also be webcast live at http://www.elcompanies.com/investors/events-and-presentations and will be available for replay until May 15, 2025.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements in this press release, in particular those in “Outlook,” as well as remarks by the CEO and other members of management, may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may address the Company’s 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, the Company’s 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 the Company believes that its expectations are based on reasonable assumptions within the bounds of its knowledge of its business and operations, actual results may differ materially from the Company’s expectations.

Factors that could cause actual results to differ from expectations include, without limitation:

The Company assumes no responsibility to update forward-looking statements made herein or otherwise.

The Estée Lauder Companies Inc. is one of the world’s leading manufacturers, marketers and sellers of quality skin care, makeup, fragrance and hair care products, and is a steward of luxury and prestige brands globally. The Company’s products are sold in approximately 150 countries and territories under brand names including: Estée Lauder, Aramis, Clinique, Lab Series, Origins, M·A·C, La Mer, Bobbi Brown Cosmetics, Aveda, Jo Malone London, Bumble and bumble, Darphin Paris, TOM FORD, Smashbox, AERIN Beauty, Le Labo, Editions de Parfums Frédéric Malle, GLAMGLOW, KILIAN PARIS, Too Faced, Dr.Jart+, the DECIEM family of brands, including The Ordinary and NIOD, and BALMAIN Beauty.

ELC-F
ELC-E

This earnings release includes some non-GAAP financial measures relating to charges associated with restructuring and other activities and adjustments, as well as organic net sales. Included herein are reconciliations between the non-GAAP financial measures and the most directly comparable GAAP measures for certain consolidated statements of earnings accounts before and after these items. The Company uses certain non-GAAP financial measures, among other financial measures, to evaluate its operating performance, which represent the manner in which the Company conducts and views its 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 operating performance from period-to-period. In the future, the Company expects to incur charges or adjustments similar in nature to those presented herein; however, the impact to the Company’s results in a given period may be highly variable and difficult to predict. The Company’s non-GAAP financial measures may not be comparable to similarly titled measures used by, or determined in a manner consistent with, other companies. While the Company considers the non-GAAP measures useful in analyzing its 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.

The Company operates on a global basis, with the majority of its net sales generated outside the United States. Accordingly, fluctuations in foreign currency exchange rates can affect the Company’s results of operations. Therefore, the Company presents 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 its underlying business outside the United States. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. The Company calculates constant currency information by translating current-period results using prior-year period monthly average foreign currency exchange rates and adjusting for the period-over-period impact of foreign currency cash flow hedging activities.

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Investors: Rainey Mancini

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Media: Jill Marvin

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Source: The Estée Lauder Companies Inc.