The following is a summary of the The Estée Lauder Companies Inc. (EL) Q3 2024 Earnings Call Transcript:
Financial Performance:
Estée Lauder reported a Q3 organic sales growth of 6%, exceeding profitability expectations with the improvement of working capital.
Gross margin improved due to a better than expected mix of skincare and strategic pricing.
Operating margin in the second half of 2024 is expected to be higher than in the first half and to expand from the year ago period.
Despite slight macroeconomic volatility which led to a lowered fiscal 2024 organic net sales outlook, the company still sees improvements in both net sales and operating margin.
Estée Lauder generated $1.5 billion in net cash flows from operating activities by lowering inventory levels, invested $702 million in capital expenditures, and returned $710 million in cash to stockholders through dividends.
Q4 organic net sales are expected to increase by 6% to 10%, with an anticipated increase of over 100% in Q4 adjusted EPS.
Full year organic net sales decline is expected to be in the range of 1% to 2% with a full year operating margin outlook of between 9% and 9.5%.
Diluted EPS is expected to range between $2.14 and $2.24 before restructuring and other charges.
Business Progress:
Momentum in organic sales growth is expected to accelerate in the fourth quarter along with the expansion of operating margin through the reduction of trade inventory levels in Asia's travel retail.
Solid progress was noted in North America through a multi-faceted strategic plan which led to organic growth in skincare for the third consecutive quarter.
A partnership with Microsoft was sealed to speed up the company's pace in the market and enhance localized media targeting with Google Cloud.
The completion of the deal to acquire the remaining interest in DECIEM Inc has solidified the relationship between the two companies, with the beloved brand The Ordinary now under Estée Lauder's wings.
A progress-focused profit recovery plan designed to deliver $1.1 billion to $1.4 billion of incremental operating profit in fiscal years 2025 and 2026 is in place.
Clinique has begun selling on Amazon, which fits better with the brand model, and the results have been promising with expectations for this growth to continue and accelerate over time.
As part of the profit recovery plan, a relaunch of Clinique in North America and globally is underway.
Finally, sales and profitability inflection are expected to drive further sales and profitability in fiscal 2025 and beyond.
More details: Estee Lauder IR
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