The Estée Lauder Companies Inc. has released its fiscal 2025 third-quarter results, marking a period of significant financial adjustment amidst a challenging economic environment. The company reported a 10% decline in net sales, totaling $3.6 billion, signaling a 9% drop in organic sales. Despite the downturn in sales, the Estée Lauder Companies managed to expand its gross margin by 310 basis points to 75.0%, thanks to the Profit Recovery and Growth Plan (PRGP).
Operating income saw a decrease of 42% to $306 million, with the operating margin dropping from 13.5% to 8.6%. In terms of adjusted figures, operating income reduced by 27% to $403 million. There was a considerable impact on diluted net earnings per share, which fell by 52% to $0.44, while adjusted diluted net earnings per share decreased by 33% to $0.65.
Despite these financial challenges, the company registered growth in prestige beauty share across key markets including the U.S., China, and Japan, driven by successful product lines from brands like Clinique, The Ordinary, and La Mer. M·A·C Nudes Collection and La Mer Night Recovery Concentrate were notably strong product launches during this quarter.
Regional Data
Regional sales reflected varied challenges; sales in The Americas decreased by 5%, Europe, the Middle East & Africa saw a 16% decline, while the Asia/Pacific region experienced a marginal drop of 1%. Factors such as low consumer confidence in Asia and strategic shifts in travel retail were cited as reasons for these declines.
Looking forward, Estée Lauder projects a continued decline in its global travel retail business for the fourth quarter of fiscal 2025. The company reportedly claimed that it's ongoing commitment to its PRGP is expected to restore sales growth and enhance operating margins.
In the broader fiscal context, Estée Lauder reports a net earnings loss of $587 million for the nine months ending March 31, 2025, a downturn from a $695 million profit in the prior year. This loss is largely due to goodwill and other intangible assets impairment totaling $861 million.
Operational cash flows reportedly dropped to $671 million from $1,471 million the previous year, influenced by a $619 million adjustment for depreciation and amortization and a $334 million reduction in deferred income taxes.
Capital expenditures amounted to $395 million, and dividends paid were $492 million during this period. The company notably did not issue any new long-term debt compared to $649 million issued the previous year, though it repaid $503 million in long-term debt, a stark contrast to $7 million in repayments in the prior year.
The financial data in this report highlights the strategic recalibrations Estée Lauder is undertaking to navigate the complexities of the current market landscape.
"In the third quarter of fiscal 2025, we delivered our organic sales outlook and exceeded profitability expectations. We are moving decisively and building momentum as we bring our 'Beauty Reimagined' strategic vision to life across its five key priorities," said Stéphane de La Faverie, president and CEO of The Estée Lauder Companies Inc.
