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Press Release: The Estée Lauder Companies Reports -2-

· 02/05/2021 06:45
-- In several markets, particularly in continental Europe and the United Kingdom, the resurgence of the COVID-19 outbreak led to increased government restrictions and store closures during the quarter. As a result, net sales declined in virtually every market, primarily driven by the United Kingdom and France, due to lower retail traffic from COVID-19. -- Online sales nearly doubled, reflecting the Company's and many retailers' increased focus on reaching consumers digitally and a very strong Cyber Week for the holidays. -- Net sales from the Company's global travel retail business, which excludes travel retail sales from Dr. Jart+, increased single digits year-over-year. The adverse impacts from COVID-19 on international passenger traffic were more than offset by strong growth in Hainan and other Asia/Pacific destinations, partly reflecting increased duty-free purchase limits and the opening of some key travel corridors in Asia. Net sales grew from several brands including Estée Lauder, La Mer, Origins and, to a lesser extent, Le Labo and Kilian Paris. The increases were due to the continued success of certain hero franchises. -- Operating income increased, primarily driven by the growth in travel retail.-- Net sales declined in the region, but improved sequentially from the fiscal first quarter. -- Most retail locations throughout the region were open during the quarter although traffic continued to be soft, causing significant net sales declines in brick-and-mortar doors. In response, the Company and many retailers continued to migrate consumers online utilizing new and existing digital capabilities, which partially offset the brick-and-mortar declines. -- Online sales comprised more than half of total sales in The Americas, with strong double-digit growth. In North America, the Company's online sales on Black Friday set a record high for that event. -- In North America, prestige beauty continued to be challenged by soft makeup sales, which impacted the Company's makeup category results. -- As stores reopened, consumers have re-engaged with the sensorial experience in fragrance. That, coupled with increased demand for home fragrance led to double-digit growth in the fragrance category. -- Operating income in The Americas increased, primarily reflecting the year-over-year reduction of goodwill and other intangible asset impairments.-- Hair care net sales declined, primarily reflecting a decrease at Bumble and bumble driven by some temporary retail and salon closures due to COVID-19. -- Hair care operating income declined, primarily reflecting lower net sales. Results by Geographic Region (Unaudited) Three Months Ended December 31 --------------------------------------------------------------------- Operating Percentage Net Sales Percentage Change Income (Loss) Change -------------- ---------------------- --------------- ------------ Reported Constant Reported ($ in millions) 2020 2019 Basis Currency 2020 2019 Basis ---------------- ------ ------ ---------- ---------- ------- ------ ------------ The Americas $1,048 $1,226 (15)% (13)% $ 36 $(529) 100 +% Europe, the Middle East & Africa 2,030 2,079 (2) (3) 657 505 30 Asia/Pacific 1,775 1,319 35 27 407 298 37 ---------------- ------ ------ ---- ---- ---- ---- ------ ----- ---- ------ Subtotal 4,853 4,624 5 3 1,100 274 100 +% ---------------- ------ ------ ---- ---- ---- ---- ------ ----- ---- ------ Charges associated with restructuring and other activities -- -- (37) (13) ---------------- ------ ------ ---------- ---------- ------ ----- ---- ------ Total $4,853 $4,624 5% 3% $1,063 $ 261 100 +% ---------------- ----- ----- ---- --- ---- --- ----- ---- ---- -------- Net sales grew, primarily due to increases from Tom Ford Beauty, Jo Malone London, Clinique and Le Labo. Kilian Paris and Editions de Parfums Frédéric Malle also contributed to growth. -- Tom Ford Beauty delivered double-digit growth, reflecting the success of hero products, including Oud Wood and Ombre Leather, as well as the extension of the Black Orchid hero franchise with the Black Orchid Perfume launch. The launch of Bitter Peach and Rose Prick Private Blend fragrances also contributed to growth. -- Jo Malone London's net sales increase primarily reflected strong holiday activations, key events, the success of certain hero product franchises and new product launches, including Scents for the Season. Strong online sales more than offset the decline in brick-and-mortar stores. -- Net sales from Le Labo rose double digits with growth in all regions. Net sales more than doubled in Asia/Pacific and online. Targeted expanded consumer reach also contributed to growth. -- Fragrance operating income increased, driven by higher net sales and disciplined expense management in response to COVID-19.-- Net sales in makeup declined at all brands. The effects of COVID-19 continued to disproportionately impact makeup usage in most markets, particularly foundation and lip. -- Makeup operating income increased, primarily reflecting impairments of several brands in the prior-year period.-- Skin care net sales grew strongly, led by Estée Lauder, La Mer and Clinique. -- Net sales of Dr. Jart+, which the Company acquired in December 2019, contributed approximately 7% to skin care net sales growth. -- Estée Lauder delivered strong double-digit growth, led by mainland China and travel retail. In mainland China, Estée Lauder was the top selling beauty brand on Tmall's 11.11 Global Shopping Festival. The net sales growth was driven by the launch of the new Advanced Night Repair Synchronized Multi-Recovery Complex as well as consumer demand for other high-loyalty hero products. -- La Mer delivered double-digit growth in every region, led by Asia/Pacific, with significant strength in mainland China. Net sales in travel retail also grew strong double digits. La Mer's growth was primarily driven by strong demand for its hero products, including Crème de la Mer, The Concentrate and The Treatment Lotion. La Mer was the top selling luxury beauty brand on Tmall's 11.11 Global Shopping Festival. Targeted expanded consumer reach also contributed to growth. -- Clinique's unique solution-based products had positive results, including Even Better Clinical Radical Dark Spot Corrector + Interrupter, the Acne Solutions line and its iconic 3-Step skin care system. -- Skin care operating income increased, primarily from higher net sales at Estée Lauder and La Mer, as well as cost containment in response to COVID-19.Other 15 16 (6) (19) (1) 4 (100 +) ---------------- ----- ----- ---- ---- ---- ---- ----- ---- ----- ----- Subtotal 4,853 4,624 5 3 1,100 274 100 +% ---------------- ----- ----- ---- ----- ---- ----- ----- ---- ----- ----- Charges associated with restructuring and other activities -- -- (37) (13) ---------------- ----- ----- ----------- ----------- ----- ---- ----- ----- Total $4,853 $4,624 5% 3% $1,063 $ 261 100 +% ---------------- ----- ----- ---- ---- ---- ---- ----- ---- ----- -----

Total reported operating income was $1.06 billion, an increase from $261 million in the prior-year period. Operating income increased 10% excluding (i) goodwill and other intangible asset impairments of $81 million related to GLAMGLOW compared with $777 million related to Too Faced, BECCA and Smashbox recorded in the prior-year period, (ii) restructuring and other charges and adjustments of $35 million compared with restructuring and other charges and adjustments of $6 million recorded in the prior-year period and (iii) the favorable impact of currency translation of $29 million. This increase largely reflected higher net sales as well as disciplined expense management throughout the business from cost containment actions taken in response to COVID-19.

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February 05, 2021 06:45 ET (11:45 GMT)