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Press Release: The Estée Lauder Companies Reports -3-

· 02/05/2021 06:45
Reconciliation between GAAP and Non-GAAP (Unaudited) Three Months Ending March 31, 2021 Three Months Ending (F) March 31 ------------------------------------ ---------------------- Diluted Diluted EPS Earnings/(Loss) Per Net Sales Growth Growth Share ----------------- ----------------- ---------------------- %, %, Constant Constant % Currency % Currency 2021 (F) 2020 ------- -------- ------- -------- ------------ -------- Forecast / Actual Results (1) 13%-14% 10%-11% 100+% 100+% $.99-$1.11 $(.02) Non-GAAP -------------- Restructuring and other charges .09-.11 .05 Changes in fair value of contingent consideration -- (.01) Goodwill, other intangible and long-lived asset impairments -- .83 -------------- ------- -------- ------- -------- ----------- ----- Non-GAAP 30%-42% $1.10-$1.20 $ .85 -------------- ------- -------- ------- -------- ----------- ---- Impact of foreign currency on earnings per share (.03) -------------- ------- -------- ------- -------- ----------- -------- Forecasted-- Reported diluted net earnings per common share are projected to be between $.99 and $1.11. Excluding restructuring and other charges and adjustments, diluted net earnings per common share are projected to be between $1.10 and $1.20. -- Adjusted diluted earnings per common share are expected to increase between 26% and 38% on a constant currency basis. -- Currency exchange rates are volatile and difficult to predict. Using December 31, 2020 spot rates for the third quarter of fiscal 2021, the currency benefit equates to about $.03 of diluted earnings per share. -- The Company expects to take charges associated with previously approved restructuring and other activities. -- Leading Beauty Forward programs are nearing completion. Charges are estimated to be between approximately $15 million to $20 million, equal to $.03 to $.04 per diluted common share. -- Under the Post-COVID Business Acceleration Program, the Company estimates charges of approximately $30 million to $35 million, equal to $.06 to $.07 per diluted common share, including the already approved closures of underperforming retail locations and counters in the Company's travel retail network and in Latin America. The Company continues to evaluate further actions under the program.-- Reported net sales are forecasted to increase between 13% and 14% versus the prior-year period. -- Excluding the impact of currency, net sales are forecasted to increase between 10% and 11%.-- For the six months ended December 31, 2020, net cash flows provided by operating activities were $1.98 billion, favorable to the $1.26 billion in the prior-year period, primarily reflecting an improvement in working capital largely due to the timing and level of certain payables items. Share repurchases under the approved plan remained suspended during the second quarter. -- The Company ended the quarter with $5.55 billion in cash and cash equivalents after returning $368 million cash to stockholders through its dividend.-- For the six months ended December 31, 2020, the Company reported net sales of $8.42 billion, a 1% decrease compared with $8.52 billion in the prior-year period. Net sales decreased 3% in constant currency. -- Net earnings were $1.40 billion, and diluted earnings per share was $3.79. In the prior-year six months, the Company reported net earnings of $1.15 billion and diluted earnings per share of $3.13. -- During the six-months ended December 31, 2020, the Company recorded restructuring and other charges, changes in contingent consideration and goodwill and other intangible asset impairments that, combined, totaled $125 million ($94 million after tax), equal to $.25 per diluted share. The prior-year period results include restructuring and other charges, changes in contingent consideration, goodwill and other intangible asset impairments and other income primarily related to a gain on a previously held equity investment in Have&Be Co. Ltd. that totaled $232 million ($238 million after tax), equal to $.65 per diluted share. -- Excluding restructuring and other charges and adjustments, adjusted diluted net earnings per common share for the six months ended December 31, 2020 was $4.04, and rose 5% in constant currency. For the six months ended December 31, 2020, the benefit of foreign currency translation on diluted net earnings per common share was $.06.-- Net sales growth in mainland China, Korea and several smaller markets more than offset declines in the rest of the region. -- The Company continued to focus its investments on digital marketing, which drove strong double-digit online sales growth. -- In mainland China, net sales grew strong double digits, reflecting, in part, an outstanding performance related to the 11.11 Global Shopping Festival. The growth was led by skin care and fragrance, with the luxury brands outperforming. Sales increased double-digit in every channel, including both brick-and-mortar and online, with online representing more than half of total sales. -- Skin care and fragrance net sales grew strong double-digits in the region. Hair care net sales increased as well. -- Operating income increased, driven by higher net sales and disciplined expense management including cost mitigation strategies in response to COVID-19, partially offset by strategic investments in social selling to drive online.

Asia/Pacific

Six-Month Results

Cash Flows

Outlook for Fiscal 2021 Third Quarter and Full Year

For the fiscal year, the Company expects to maintain momentum and continue to deliver sequentially improving sales growth. As the global recovery from the COVID-19 pandemic progresses, the Company plans to accelerate its investment in attractive opportunities, including a recovery of categories that were most affected by the pandemic. The Company plans to return to its long-term growth targets of 6% to 8% sales growth, 50 basis points of operating margin expansion and double-digit adjusted diluted earnings per share growth in constant currency after the recovery period from the pandemic.

In fiscal 2021, the Company is continuing to pursue several long-term strategic initiatives, among them rationalizing unproductive brick-and-mortar stores, increasing manufacturing capabilities, expanding the fulfillment capabilities of its online business, investing in the growth opportunity of Asia/Pacific and making progress on its citizenship, social impact and sustainability initiatives. The COVID-19 pandemic has significantly accelerated certain trends--most notably consumers' adoption of the online channel--and as a result, the Company is quickly reallocating resources from certain unproductive brick-and-mortar stores, primarily in Europe and in North America, to investments in consumer-facing, high-touch online services, consumer data, information technology and other new brand-building distribution opportunities. We expect that this reallocation will also make the remaining brick-and-mortar footprint more productive and sustainable for the long term.

The Company is mindful that some retail locations in certain markets may not re-open, and there are likely to be lingering adverse global economic and social impacts. The Company is also mindful of other risks related to social, economic and political matters, including restructurings and bankruptcies in the retail industry, destocking and tighter working capital management by retailers, challenges for suppliers, geopolitical tensions, regulatory developments, global security issues, currency volatility, general economic challenges and changes in where and how consumers shop that is affecting consumer spending in certain countries, channels and travel corridors.

Third Quarter Fiscal 2021

Sales Outlook

Earnings per Share Outlook

Full Year Fiscal 2021

Given the recent surge of COVID-19 infections globally and the uncertainty around the timing, speed and duration of the recovery from the adverse impacts of COVID-19, the Company is not providing specific sales and EPS guidance for the fiscal 2021 full year. The Company will continue to pursue cost savings, but expects that some expenses will be returning in the coming months including in-store and office costs. These costs will also reflect expenses to protect employees and consumers as they return to the Company's facilities and retail locations. In addition, the Company expects to invest in areas to support the recovery, including advertising, online and supply chain, to both drive growth in areas of opportunity and help nurture emerging trends in the rest of the business. The Company is confident it is well-positioned to facilitate the recovery in fiscal 2021 and fiscal 2022 as the market dynamics support it.

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