Fiscal Year 2024 Q2 Results Unveiled by The Estée Lauder Companies

The Estée Lauder Companies Inc. (NYSE: EL) released its fiscal second-quarter results, disclosing net sales of $4.28 billion for the period ending December 31, 2023. This marks a 7% decline from the previous year’s $4.62 billion. The decrease in organic net sales by 8% is attributed to anticipated challenges in Asia travel retail and sustained softness in overall prestige beauty in mainland China. A 1% headwind resulted from business disruptions in Israel and other parts of the Middle East.

Despite these challenges, organic net sales experienced growth in various markets in Asia/Pacific, Europe, the Middle East & Africa, as well as in nearly every market in Latin America, partially mitigating the overall impact.

Net earnings for the quarter totaled $313 million, down from $394 million in the same period of the prior year. The reported effective tax rate increased to 37.6% from 25.4%, reflecting a higher rate on the company’s foreign operations due to a change in geographical earnings mix and the adverse effects of previously issued share-based compensation.

Diluted net earnings per common share were reported at $0.87, compared to $1.09 in the prior year. Adjusted diluted net earnings per common share, excluding restructuring and other charges, declined to $0.88.

Fabrizio Freda, President and CEO, stated that despite challenges, the company met organic sales expectations and exceeded profitability expectations for the second quarter. Certain product lines, such as The Ordinary and La Mer in Skin Care, Clinique in Makeup, and Le Labo and Jo Malone London in Fragrance, performed well.

Freda expressed optimism, stating that the company is at an inflection point and anticipates returning to strong organic sales growth and improved profitability in the second half of fiscal 2024. Additionally, The Estée Lauder Companies announced an expansion of its Profit Recovery Plan, now including a restructuring program, aiming to enhance long-term profitability and support sales growth acceleration.

Total reported operating income increased by 3% to $574 million from $556 million in the prior-year period. Adjusted operating income, in constant currency, decreased by 24%, primarily due to lower net sales.

The company also identified and corrected misclassifications of net sales and operating income between certain product categories in the fiscal 2024 second quarter. While this adjustment does not impact current or prior-period consolidated financial statements, it will be reflected in future filings for comparability purposes. More information on these adjustments can be found on the company’s website.

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