The Estée Lauder Companies (EL) Q4 2024 earnings summary

Executive summary

• Fiscal 2024 was challenging, with organic sales and net sales both declining 2% year-over-year, mainly due to softness in China and Asia travel retail, but the second half saw a return to top-line growth, with Q4 organic sales up 8% and adjusted operating margin at 11.6%.

• Net earnings fell to $0.39B from $1.01B, with diluted EPS down 61% to $1.08; adjusted diluted EPS declined 25% to $2.59.

• The company is implementing a strategy reset and the Profit Recovery and Growth Plan (PRGP) to drive improved performance in fiscal 2025 and beyond, focusing on reigniting skincare, expanding high-end fragrance, leveraging fast-growing channels, and enhancing precision marketing.

• Leadership transitions were announced: the CEO and CFO both plan to retire in fiscal 2025, with succession planning underway.

Financial highlights

• Q4 organic net sales increased 8% year-over-year, driven by EMEA (up 32%) and strong performance in Asia travel retail, while Asia Pacific declined 4% and Americas declined 5%.

• Full-year organic net sales declined 2%, with net earnings of $935 million and diluted EPS of $2.59, both down 25% year-over-year.

• Gross margin expanded 380 basis points in Q4 to 71.8% and improved 30 basis points for the year to 71.7%.

• Operating income for the year declined 13% to $1.6 billion, with operating margin contracting 120 basis points to 10.2%.

• Net cash flows from operating activities rose to $2.4 billion, with $947 million returned to shareholders via dividends.

Outlook and guidance

• Fiscal 2025 organic net sales are forecasted to range from a 1% decline to a 2% increase, reflecting continued weakness in China and Asia Travel Retail but growth in other regions.

• Diluted EPS is expected between $2.75 and $2.95 before restructuring and other charges, with constant currency EPS growth of 7%-15%.

• Q1 2025 organic net sales are expected to decline 3%-5%, with diluted EPS of $0.02-$0.10.

• Most margin expansion in 2025 is expected to come from gross margin improvements, with a full-year effective tax rate of approximately 32%.

• PRGP expected to deliver $1.1B–$1.4B in operating profit net savings through FY25–26, with more than half realized in FY25.