The Estée Lauder Companies Reports 4% Decline in Net Sales, Net Loss in Q1 2025

The Estée Lauder Companies Inc. reported a challenging first quarter for fiscal year 2025, ending September 30, 2024, with net sales of $3,361 million, a decrease of 4% from $3,518 million in the same period of the previous year. This decline was primarily driven by an 8% drop in sales volume, partially offset by a 3% increase in pricing and a favorable foreign currency translation impact of 1%. The skin care category experienced a notable decline, with sales falling to $1,529 million from $1,640 million, reflecting a 7% decrease attributed to lower sales from key brands like La Mer and Estée Lauder, particularly in Asia.

The company's gross profit for the quarter was $2,433 million, slightly down from $2,448 million in the prior year, resulting in a gross margin of 72.4%, an increase from 69.6% in the previous year. This improvement was attributed to lower obsolescence charges and favorable manufacturing costs, despite a negative impact from a shift in product mix.

Operating expenses rose significantly to $2,554 million from $2,350 million, leading to an operating loss of $121 million, compared to an operating income of $98 million in Q1 2023. The increase in operating expenses was driven by higher selling expenses related to new product launches and expanded consumer reach. The net loss attributable to The Estée Lauder Companies Inc. was $(156) million, a stark contrast to net earnings of $36 million in the same quarter last year, resulting in a diluted loss per share of $(0.43) compared to earnings of $0.09 per share in Q1 2023.

The company has initiated a restructuring program as part of its Profit Recovery and Growth Plan, which includes an estimated reduction of 1,800 to 3,000 positions globally, representing about 3-5% of its workforce. The restructuring is expected to incur charges between $500 million and $700 million, with cumulative charges reaching $357 million as of October 25, 2024.

Cash and cash equivalents decreased to $2,350 million from $3,395 million at the end of June 2024. The company reported net cash flows used for operating activities of $(670) million, compared to $(408) million in the same period last year, reflecting a loss before tax and unfavorable changes in operating assets and liabilities.

Overall, the company faces ongoing challenges, particularly in the Asia/Pacific region, where consumer sentiment has worsened, impacting sales. The Estée Lauder Companies Inc. continues to adapt its strategies to navigate these market conditions while focusing on long-term growth and profitability.