Release Date: February 04, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- The Estee Lauder Companies Inc (EL, Financial) has launched a bold new strategic vision called 'Beauty Reimagined' to restore sustainable sales growth and achieve a solid double-digit adjusted operating margin over the next few years.
- The company is focusing on accelerating best-in-class consumer coverage by expanding its portfolio presence in high-growth channels, markets, media, and price tiers.
- The Estee Lauder Companies Inc (EL) is committed to transformative innovation, aiming to deliver faster market on-trend innovation and tripling the percentage of innovation launched in less than a year.
- The company is leveraging AI to improve demand forecasting and supply chain efficiencies, which has resulted in significant improvements in inventory management.
- The Estee Lauder Companies Inc (EL) has made significant progress in its Profit Recovery and Growth Plan (PRGP), delivering over 60% of its fiscal 2025 objective in the first half of the fiscal year.
Negative Points
- The Estee Lauder Companies Inc (EL) faced a 6% decline in organic net sales, primarily driven by challenges in Asia Pacific and the Asia travel retail business.
- The company experienced a 20% decrease in operating income, with operating margin contracting by 200 basis points compared to the previous year.
- The Estee Lauder Companies Inc (EL) recorded $861 million of impairment charges related to TOM FORD and Too Faced due to challenges in Asia Pacific and continued underperformance.
- The company is undergoing a significant restructuring program, which includes a net reduction of 5,800 to 7,000 positions globally.
- The Estee Lauder Companies Inc (EL) anticipates a strong double-digit sales decline in its global travel retail business in the second half of the fiscal year due to persistent industry retail softness and changes in selling policies at several Korean retailers.
Q & A Highlights
Q: Can you discuss the prioritization of your brand portfolio and any potential brand sales?
A: Stéphan de La Faverie, CEO, explained that the company regularly reviews its brand portfolio to determine where to invest and accelerate growth. The recent organizational changes aim to make the company leaner and faster, focusing on regions like the Americas, Asia, and emerging markets. The company conducts annual portfolio reviews to ensure brands are positioned for maximum value and growth.
Q: How do you manage the pace of reinvestment to avoid investing ahead of growth?
A: Stéphan de La Faverie, CEO, emphasized shifting investments towards consumer-facing activities, such as advertising and promotions, rather than fixed costs. The focus is on investing in areas that directly impact consumer engagement and sales growth, ensuring a better return on investment.
Q: What are the key performance indicators (KPIs) for the Beauty Reimagined initiative?
A: Stéphan de La Faverie, CEO, outlined five pillars: consumer coverage, transformative innovation, consumer-facing investments, PRGP (efficiency and cost reduction), and simplification of operations. The company is tracking these areas to ensure they deliver on their promises, aiming for strong retail growth and market share gains.
Q: How are you addressing cultural changes within the organization?
A: Stéphan de La Faverie, CEO, highlighted the importance of cultural change, emphasizing agility, consumer focus, and value creation. The company is bringing in external partners to assist with transformation and is committed to building a more agile organization.
Q: What is your outlook on the prestige beauty market and innovation pipeline?
A: Stéphan de La Faverie, CEO, expressed confidence in the long-term fundamentals of the beauty market, driven by a growing middle class and new distribution opportunities. The company plans to triple the number of product launches within a year to better tailor innovation to consumer needs and distribution channels.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
