In This Article:
Release Date: May 01, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
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The Estee Lauder Companies Inc (NYSE:EL) achieved market share gains in key markets such as the U.S., China, and Japan, marking significant progress in these regions.
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Gross margin expanded by 310 basis points compared to the previous year, reflecting operational efficiencies and strategic pricing actions.
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The company is making significant progress in its restructuring program, reducing over 2,600 net positions and streamlining middle management by 20%.
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Innovations such as Clinique's new Moisture Surge and Estee Lauder's Double Wear concealer have driven consumer acquisition and market share gains.
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The Estee Lauder Companies Inc (NYSE:EL) is leveraging AI-driven marketing and expanding its presence on platforms like Amazon and TikTok, contributing to mid-single-digit growth in online organic sales.
Negative Points
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Organic sales declined by 9% in the third quarter, with travel retail experiencing a significant 28% decline.
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Diluted earnings per share decreased by 33%, indicating financial pressure despite some operational improvements.
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Operating margin contracted by 270 basis points to 11.4%, driven by increased consumer-facing investments and sales deleverage.
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The company faces ongoing challenges with weakened consumer sentiment in the U.S. and parts of Europe, as well as prolonged weak sentiment in China.
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The geopolitical landscape, including evolving trade policies and tariffs, adds uncertainty and potential material impact on future profitability.
Q & A Highlights
Q: Can you discuss your expectations for trade inventories exiting fiscal 2025 and any associated risks? A: Akio, CFO: We have made significant progress, especially in travel retail, where inventory levels have been reduced significantly. Retailers globally are tightening inventory, and we are adjusting accordingly. We are confident in our guidance, which reflects current market conditions, including the volatility around the June 18 shopping festival.
Q: What are your planning assumptions for FY 2026, particularly regarding retail inventory and market trends? A: Stefano, CEO: We are confident in returning to positive growth in FY 2026, driven by market share gains in key markets like the U.S., China, and Japan. We are seeing sequential improvements and are de-risking travel retail. However, we are monitoring external factors like consumer sentiment in China and the U.S.