ESTEE LAUDER COMPANIES INC

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, operating as a steward of over 20 luxury and prestige brands globally. The company's products are distributed in approximately 150 countries and territories through brick-and-mortar locations and various e-commerce platforms, including those operated by department stores, duty-free retailers, specialty-multi retailers, online pure players, upscale perfumeries and pharmacies, and top-tier salons and spas. Additionally, the company operates a direct-to-consumer business across freestanding stores, its brands' websites and third-party online platforms.

The company faces significant competition within each market where its products are sold, with competitors including L'Oreal S.A.; Unilever; Procter & Gamble; LVMH Moët Hennessey Louis Vuitton; Chanel S.A.; Beiersdorf; Shiseido Company, Ltd.; Coty Inc.; and Puig. The company also faces competition from a number of independent brands (Indie Brands), some of which are backed by private-equity investors, as well as some retailers that have their own beauty brands. The company's competitive advantages are rooted in its well-diversified portfolio of distinctive brands, its 'High-Touch' consumer engagement philosophy, and its global distribution capability. Members of the Lauder family beneficially own, directly or indirectly, shares of the company's Class A Common Stock and Class B Common Stock having approximately 84% ¹ of the outstanding voting power of the Common Stock.

The company generates revenue primarily through the wholesale distribution of its products, with sales occurring in brick-and-mortar locations and on various e-commerce platforms. The company also operates a direct-to-consumer business across freestanding stores, its brands' websites and third-party online platforms. The company's revenue is transactional in nature, derived from the sale of skin care, makeup, fragrance, and hair care products, as well as royalty revenue from licensing of the TOM FORD trademark to third parties. The company's primary customer segments are consumers reached through department stores, duty-free retailers, specialty-multi retailers, online pure players, upscale perfumeries and pharmacies, and top-tier salons and spas.

The company's product portfolio is organized into four major categories: Skin Care, Makeup, Fragrance, and Hair Care. Skin Care products include moisturizers, serums, cleansers, toners, eye care, body care, exfoliators, acne and oil correctors, facial masks and sun care products. Makeup products include foundations, powders, concealers and setting sprays, lipsticks, lip liners and lip glosses, and mascaras, eyeshadows and eyeliners, as well as related items such as compacts, brushes and other makeup tools. Fragrance products are sold in various forms, including parfum, eau de parfum, eau de toilette, eau de cologne, and body spray, as well as lotions, creams, powders, candles and soaps. Hair care products include shampoos, conditioners, styling products, treatment, finishing sprays and hair color products. The 'other' category includes royalty revenue from the licensing of the TOM FORD trademark to third parties since the fiscal 2023 acquisition of the TOM FORD brand, as well as sales from ancillary products and services. For fiscal 2025, Skin Care net sales were $6,962 million ², Makeup net sales were $4,205 million ³, Fragrance net sales were $2,491 million ⁴, Hair Care net sales were $565 million ⁵, and Other net sales were $100 million ⁶.

The company's 'Large Brands' are Estée Lauder, La Mer, Clinique and M·A·C. Its 'Scaling Brands' are Jo Malone London, TOM FORD, The Ordinary, Aveda, and Bobbi Brown Cosmetics. Its 'Developing Brands' are Le Labo, Too Faced, Dr.Jart+, Origins, KILIAN PARIS, Bumble and bumble, Editions de Parfums Frédéric Malle, Smashbox, Darphin Paris, Lab Series, AERIN Beauty, NIOD, Aramis, BALMAIN Beauty and GLAMGLOW. The company's 'Luxury Brands' are La Mer, Jo Malone London, TOM FORD, AERIN Beauty, Le Labo, Editions de Parfums Frédéric Malle, KILIAN PARIS and BALMAIN Beauty, and its luxury portfolio also includes Estée Lauder's Re-Nutriv product franchise.

In February 2025, the company embarked on 'Beauty Reimagined,' a strategic vision focusing on accelerating best-in-class consumer coverage, creating transformative innovation, boosting consumer-facing investments, fueling sustainable growth through bold efficiencies and reimagining the way we work. As a component of the Profit Recovery and Growth Plan (PRGP), on February 5, 2024, the company announced a two-year restructuring program, and on February 3, 2025, committed to an expansion of the PRGP. As of June 30, 2025, the company estimates a net reduction in the range of approximately 5,800 to 7,000 ⁷ positions globally, which is about 9-11% ⁸ of its positions including temporary and part-time employees as of June 30, 2023. The company expects the Restructuring Program to result in restructuring and other charges totaling between $1,200 million and $1,600 million ⁹, before taxes. During fiscal 2025, the company recorded impairment charges of $773 million ¹⁰ for the TOM FORD trademark, $125 million ¹¹ for the Too Faced trademark, $13 million ¹² for Too Faced goodwill, $83 million ¹³ for the Dr.Jart+ trademark, and $292 million ¹⁴ for the Dr.Jart+ customer list intangible asset. The company also reached talcum litigation settlement agreements and recorded a charge of $159 million ¹⁵ during the fiscal 2025 first quarter. The company operated approximately 1,600 ¹⁶ freestanding stores as of June 30, 2025.

For fiscal 2025, reported net sales were $14,326 million ¹⁷, a decrease of 8% ¹⁸ compared to $15,608 million ¹⁹ in fiscal 2024. The company reported an operating loss of $785 million ²⁰ for fiscal 2025, compared to operating income of $970 million ²¹ in fiscal 2024. Net loss attributable to The Estée Lauder Companies Inc. was $1,133 million ²² for fiscal 2025, compared to net earnings of $390 million ²³ in fiscal 2024. Diluted net loss per common share was $3.15 ²⁴ for fiscal 2025, compared to diluted net earnings per common share of $1.08 ²⁵ in fiscal 2024. Gross margin increased to 74.0% ²⁶ in fiscal 2025, compared to 71.7% ²⁷ in fiscal 2024.

The company's long-term strategy includes numerous initiatives across product categories, brands, geographic regions, channels of distribution and functions designed to grow sales, provide cost efficiencies, and leverage strengths such as creativity and innovation. The company is focused on expanding its consumer coverage by entering high-growth, consumer-preferred channels, markets, media and price tiers. The company plans to continue to leverage its core strengths, including the quality of its products, its 'High-Touch' consumer engagement and a diversified portfolio of brands, channels and geographies. The company is also focusing on strengthening its presence in large, image-building core markets, while broadening its presence in emerging markets, which include in The Americas: Argentina, Brazil, Chile, Colombia, Mexico, Panama and Peru, and in the reorganized region of EUKEM: Central Europe, India, Indonesia, Israel, Kazakhstan, Malaysia, the Middle East, the Philippines, Russia, South Africa, Thailand, Turkey and Vietnam.

The company is focusing on expanding its brands' locations in high-growth opportunities to reach new consumers in online, freestanding stores, specialty-multi and travel retail, which it believes will be higher growth channels in the long term. The company is also focusing on brand-building retail activities, technology-driven activations and omnichannel capabilities that enhance the shopping experience for consumers. The company is leveraging artificial intelligence (AI) across the marketing value chain to enhance personalization at scale, increase speed to market and reduce costs. The company continues to innovate to better meet consumer online shopping preferences and support its authorized retailers to strengthen their e-commerce businesses.

The company's Profit Recovery and Growth Plan (PRGP) is focused on rebuilding stronger, more sustainable profitability, supporting sales growth acceleration and increasing speed and agility. The plan is designed to improve gross margin, lower the cost base and reduce overhead expenses, while increasing investments in key consumer-facing activities. Once fully implemented, the company expects the Restructuring Program to yield annual target gross benefits of between $800 million and $1,000 million ²⁸, before taxes, a portion of which is expected to be reinvested in consumer-facing activities. The net benefits of the PRGP are expected to enable a return to a double-digit operating margin over the next few years.

The company continues to evaluate its manufacturing facilities and processes and identify sourcing opportunities to improve innovation, increase efficiencies, minimize its impact on the environment, ensure supply sufficiency, reduce costs and adjust its operations to respond to external challenges. The company is continuously evaluating and adjusting its physical distribution network, particularly as it works to anticipate and respond to shifts in channel and consumer preferences, external challenges, as well as identifying opportunities to increase efficiencies and reduce costs. The company is focused on optimizing adoption of its information technology investments to maximize return on investment and realized value, with the modernization and simplification of its technology ecosystem remaining a key focus as it increasingly leverages the benefits of the cloud.

Research and development costs totaled $316 million ²⁹ in fiscal 2025. The company continues to make strategic investments to align with its long-term strategy and to maintain and enhance its information technology and cybersecurity infrastructure. The company is authorized by the Board of Directors to repurchase shares of its Class A Common Stock, with the current repurchase program authorized for up to 256.0 million ³⁰ shares, though beginning in December 2022, the company suspended the repurchase of shares under its publicly announced program. The company historically has paid dividends on its common stock, and on August 19, 2025, a dividend was declared in the amount of $.35 ³¹ per share on its Class A and Class B Common Stock.

The company has experienced challenges within its business and expects volatility and uncertainty to continue. Although there are early signs of stabilization in mainland China, travel retail continues to be weak and challenges persist in the West, including subdued sentiment in the U.S. and Western Europe. These challenges are collectively expected to impact net sales and profitability, including impacts to the effective tax rate from changes to the geographical mix of earnings. The company is continuing to monitor and assess the potential effects of new and existing tariffs in the United States as well as in other markets in which it operates, which have led to significant volatility and uncertainty in global markets and difficulty in forecasting demand. The company anticipates higher tariff rates to have an adverse effect on fiscal 2026 profitability and cash flows, and depending on actual rates and countries imposing tariffs such adverse impacts could be material.

The company is 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. The company is also monitoring certain provisions in global tax regulations that may expire during fiscal 2026, which, if not extended, could increase its effective tax rate. Declines in net sales and profitability have, and may continue to, adversely impact the goodwill and other intangible assets associated with its brands, as well as long-lived assets, potentially resulting in impairments.

The beauty business is highly competitive, and the company faces vigorous competition from multinational companies such as L'Oreal S.A., Unilever, Procter & Gamble, LVMH, Chanel S.A., Beiersdorf, Shiseido Company, Ltd., Coty Inc., and Puig, as well as from independent brands (Indie Brands) and retailers with their own beauty brands. The company's inability to anticipate and respond to rapid changes in consumer preferences, which can be driven by digital and social media, could adversely affect its business. A general economic downturn or disruption in business conditions may adversely affect consumer purchases of discretionary items, and the company's inability to collect receivables from its largest customers or from a group of customers could have a material adverse effect on its business. The company is subject to risks related to the global scope of its operations, including fluctuations in foreign currency exchange rates, foreign or U.S. laws, regulations and policies such as tariffs and sanctions, and social, economic and geopolitical conditions. The company's success depends in part on the quality, efficacy and safety of its products, and if products are found to be defective or unsafe, or if counterfeit versions are sold by third parties, the company could lose sales and become subject to liability or claims.

Management's message in the filing conveys a tone of cautious realism and strategic resolve, acknowledging significant challenges while outlining a comprehensive plan to rebuild profitability and drive long-term growth. The key themes emphasized are the 'Beauty Reimagined' strategic vision, which focuses on accelerating consumer coverage, creating transformative innovation, boosting consumer-facing investments, fueling sustainable growth through bold efficiencies, and reimagining the way the company works. The two or three strategic priorities emphasized for the period ahead are the expansion of the Profit Recovery and Growth Plan (PRGP) to rebuild profit margins, the continued focus on navigating a volatile and uncertain macroeconomic environment including the impact of tariffs, and the ongoing monitoring of 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, geopolitical tensions, and global security issues.