The Estee Lauder Companies Inc (EL) Q1 2025 Earnings Call Highlights: Navigating Challenges ...

GuruFocus News
4 min read

In This Article:

  • Organic Sales Decline: Decreased by 5% in Q1 fiscal 2025.

  • Adjusted Gross Margin: Expanded by over 300 basis points.

  • Adjusted Operating Margin: Expanded by over 100 basis points.

  • Adjusted EPS: $0.14, up from $0.11 in the prior year.

  • Asia Pacific Organic Sales: Decreased by 11%.

  • EMEA Organic Sales: Decreased by 4%.

  • Americas Organic Sales: Decreased by 1%.

  • Skin Care Organic Sales: Declined by 8%.

  • Makeup Organic Sales: Decreased by 2%.

  • Fragrance Organic Sales: Decreased by 1%.

  • Operating Income: Increased by 33% to $144 million.

  • Operating Margin: Expanded to 4.3% from 3.1% last year.

  • Effective Tax Rate: Increased to 38.8% from 17.9% last year.

  • Net Cash Utilization: $670 million, up from $408 million last year.

  • Capital Expenditures: $141 million.

  • Dividends: Reduced to $0.35 per share from $0.66 per share.

  • Second Quarter Outlook: Organic net sales expected to decrease 6% to 8%.

  • Second Quarter Adjusted EPS: Expected to be $0.20 to $0.35.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • The Estee Lauder Companies Inc (NYSE:EL) reported adjusted gross margin expansion by over 300 basis points, driven by strategic initiatives.

  • The company achieved adjusted EPS of $0.14, exceeding the initial outlook for the quarter.

  • Estee Lauder gained prestige beauty share in Japan, driven by strong performance in the fragrance category.

  • The company saw high single-digit organic sales growth in skin care in EMEA markets, supported by new product launches.

  • Estee Lauder's strategic reset is showing initial positive results, with improvements in operational efficiency and market share gains in key regions.

Negative Points

  • Organic sales decreased by 5%, primarily due to double-digit declines in Mainland China and global travel retail.

  • The company is facing greater macroeconomic headwinds than expected, leading to the withdrawal of its fiscal year 2025 outlook.

  • Prestige beauty industry retail sales in Mainland China weakened further, with a mid-teens percentage decrease.

  • The US prestige beauty industry retail sales growth decelerated from high single-digit to mid-single-digit growth.

  • The Estee Lauder Companies Inc (NYSE:EL) reduced its quarterly dividend from $0.66 to $0.35 per share to create more financial flexibility.

Q & A Highlights

Q: Given the worsening external circumstances in the beauty category, particularly in China and Asia Travel Retail, what internal actions are being taken to address these challenges? A: Tracey Travis, CFO, mentioned that they are evaluating additional actions related to the PRGP and beyond, given the continued pressure on the business. They have identified some additional cost savings to offset volume pressure and are protecting investments in consumer-facing areas like marketing and advertising. Fabrizio Freda, CEO, added that improving the quality and return on investments, particularly in digital and social media marketing, is a focus to enhance productivity.

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