Q4 2024 The Estée Lauder Companies Inc. Earnings Call

August 19, 2024

Speaker Change: Good day, everyone, and welcome to the Estee Lauder Company's fiscal 2024 fourth quarter and full year conference call.

Laraine Mancini: Today's call is being recorded and webcast. For opening remarks and introduction, the floor is over to Senior Vice President of the Master Relations, Ms. Rainey Mancini.

Operator: Today's call is being recorded and.., for opening remarks, floor over to Senior Vice President of Investor Relations.

Operator: Ma'am, you may begin.

Fabrizio Freda: Man, you made it again. Hello, on today's call are for Brigadier Freda, President and Chief Executive Officer, and Tracey Travis, Executive Vice President and Chief Financial Officer.

Operator: Hello.

Fabrizio Freda: Since many of her remarks today can seem forward-looking statements, let me refer you to our press release and our report files with the SEC, where you'll find factors that could cause actual results to differ materially from these forward-looking statements. To facilitate the discussion of our underlying business, the commentary on our financial results and expectations is before we're structuring and other charges and adjustments disclosed to our press release. Unless otherwise stated, all organic net sales growth also excludes the non-comparable impacts of acquisitions, divestitures, brand closures, and the impact of foreign currency. You can find recommendations between gap and non-gap measures on our press release and on the investor section of our website.

Speaker Change: Since many of our remarks today contain forward looking statements. Let me refer you to our press release and our reports filed with the SEC, where you'll find factors that could cause actual results to differ materially from these forward looking statements.

Speaker Change: So let's take the discussion of our underlying business the commentary on our financial results and expectations is before restructuring and other charges and adjustments disclosed in our press release.

Speaker Change: Unless otherwise stated all organic net sales growth also excludes the non comparable impact of acquisitions divestitures and branch closures and the impact of foreign currency translation.

Speaker Change: You can find reconciliations between GAAP and non-GAAP measures on our press release and on the investors section of our website.

Fabrizio Freda: As our minor references, online sales include sales we make directly to our consumers through our brand.com sites and do third-party platforms. It also includes estimated sales of our products through our retailers' websites.

Speaker Change: As a reminder, our references online sales include sales, we make directly to our consumers to our brand Dot com site and through third party platforms.

Speaker Change: It also includes the estimated sales of our products are a retailer's website.

Fabrizio Freda: Throughout our discussion, our proper recovery and growth plan will be referred to as our PRGP.

Speaker Change: Throughout our discussion our profit recovery and growth plan will be referred to as our P. R. D P.

Fabrizio Freda: During the Q&A session, we ask that you please limit yourself to one question.

Speaker Change: During the Q&A session. We ask that you. Please limit yourself to one question. So we can respond to all of you within the time scheduled for this call and now I'll turn the call over to Fabrizio.

Fabrizio Freda: We can respond to all of you in the time schedule for this call, and now I'll turn the call over to Fabrizia.

Operator: On today's call are Fabrizio Freda, President and Chief Executive Officer, and Tracey Travis, Executive Vice President and Chief Financial Officer.

Operator: Since many of our remarks today contain forward-looking statements, let me refer you to our press release and our report files with the SEC, where you'll find factors that could cause actual results to differ materially from these forward-looking statements, to facilitate the discussion of our underlying business.

Fabrizio Freda: Thank you, Rain.

Fabrizio: Thank you Ray and Hello to everyone.

Fabrizio Freda: And hello to everyone. Today, we will review our results for fiscal year 2024, which represented a difficult year for the company and discussed the implementation of our strategy reset to drive improving performance in fiscal year 2025 and beyond. After a challenging first house, we return to top line growth in the second house of fiscal year 2024, with organic sales growth accelerating from 6% in the third quarter to 8% in the fourth quarter. And we delivered an adjusted operating margin of 11.6%. This level of profitability was higher than the first house and expanded from the second half of fiscal year 2023.

Operator: The commentary on our financial results and expectations is before restructuring and other charges and adjustments disclosed in our press release. Unless otherwise stated, all organic net sales groups also exclude the non-comparable impacts of acquisitions, divestitures, brand closures, and the impact of foreign currency translation.

Fabrizio: We will review our results for fiscal year, 2024, which represented a difficult year for the company and discuss the implementation of our strategy to drive improving performance in fiscal year 2025 and beyond.

Operator: You can find reconciliations between GAAP and non-GAAP measures on our press release and on the investor section of our website.

Operator: As a reminder, References to Online Sales includes sales we make directly to our consumers through our brand.com site and through third-party platforms. It also includes estimated sales of our products through our retailers website.

Operator: Throughout our discussion, our profit recovery and growth plan will be referred to as our PRGP.

Operator: During the Q&A session, we ask that you please limit yourself to one question so we can respond to all of you within the time scheduled for this call.

Fabrizio: After a challenging first half we return to top line growth in the second house of fiscal year 2024, with organic sales growth accelerated from 6% in the third of course to two 8% in the fourth quarter and we delivered an adjusted operating margin of 11 <unk>.

Fabrizio Freda: And now I'll turn the call over to Fabrizio.

Fabrizio Freda: Thank you, Rainier, and hello to everyone.

Fabrizio Freda: Today, we will review our results for Fiscal Year 2024, which represented a difficult year for the company, and discuss the implementation of our Strategy Reset to drive improving performance in Fiscal Year 2025 and beyond. After a challenging first half, we return to top-line growth in the second half of fiscal year 2024, with organic sales growth accelerating from 6% in the third quarter to 8% in the fourth quarter, and we delivered an adjusted operating margin of 11.6%.

Fabrizio: 6%.

Fabrizio Freda: This level of profitability was higher than the first half and expanded from the second half of this career, 2023.

This level of profitability was higher than the first styles and expanded from the second half of fiscal year 2023.

Fabrizio Freda: All told, for fiscal year 2024, our organic sales declined 2%. We achieved the modest growth margin expansion, and adjusted operating margin contracted when added in 20 basis points to 10.2%. These results were in line with the revised outlook we offered in May for sales and better than expected for operating profitability, despite the further softening of the prestige beauty industry in China and Asia travel retail.

Fabrizio Freda: All told, for fiscal year 2024, our organic sales declined 2%, we achieved a modest gross margin expansion and adjusted operating margin, contracted 120 basis points to 10.2%. These results were in line with the revised outlook we offered in May for sales and better than expected for operating profitability, despite the further softening of the prestige beauty industry in China and Asia travel-related.

For fiscal year 2024, our organic sales declined 2%, we achieved a modest gross margin expansion and adjusted operating margin contracted 120 basis points to 10, 2%.

Fabrizio: These results were in line with our revised outlook, we offered the mi for sales and better than expected.

Speaker Change: Operating profitability. Despite the further softening of the prestige beauty industry in China and Asia tried every day that said we remain unsatisfied with this performance.

Fabrizio Freda: That said, we remain unsatisfied with this performance. Looking ahead, our fiscal year 2025 outlook reflects continued declines in the prestige beauty industry in China and Asia travel retail, while the PRGP, which remains on track relatively to our previously stated goals. Enable us to offset the pressure to profitability from the clients in areas of our business that have high penetration skin care. It yields a lower case of operating margin expansions for fiscal year 2025 that we had previously expected when we expanded the PRGP in February. For planning to deliver improved performance across both developed and emerging markets.

Fabrizio Freda: That said, we remain unsatisfied with this performance.

Fabrizio Freda: Looking ahead, our fiscal year 2025 outlook reflects continued decline, in the prestige beauty industry in China and Asia Travery enable us to offset the pressure to profitability from decline, in areas of our business that have high penetration of skincare.

Speaker Change: Looking ahead, our fiscal year 2025 outlook reflects continued declines in the prestige beauty industry in China and Asia travel retail.

Speaker Change: While the P GP, which remains on track relatively to our previously stated goals enabled us to offset the pressure to profitability from declines in areas of our business that have high penetration skincare.

Fabrizio Freda: It yields a slower pace of operating margin expansions for fiscal year 2025 than we had previously expected when we expanded the PRGP in February.

Speaker Change: Yes is lower piece of operating margin expansions for fiscal year 2025 that we had previously expected when we expanded the RGB in February.

Fabrizio Freda: For Fiscal Year 2025, in the rest of our global business, we are planning to deliver improved performance across both developed and emerging markets.

Speaker Change: For fiscal year 2025 in the rest of our global business, we are planning to deliver improved performance across both developed and emerging markets.

Fabrizio Freda: To fuel this, our strategic priorities are re-nighting skin care, capitalizing on the multiple growth drivers of high-end fragrance, moving faster in leveraging winning channels, launching a creative innovation inclusive on new big opportunities, and enhancing our precision marketing capabilities to increase the effectiveness and efficiency of our consumer-facing investments. The PRGP enables and accelerates the strategic priorities and is the foundation to restore sustainable long-term organic sales growth and to rebuild our operating profitability. We are also creating a faster and linear organization that will more quickly adapt to market dynamics and be better able to leverage future growth.

Fabrizio Freda: To fuel this, our strategic priorities are, Reigniting Skincare, capitalizing on the multiple growth drivers of high-end fragrance.

With fewer of these our strategic priorities are right.

Speaker Change: Great 19th skincare.

Speaker Change: Capitalizing on the multiple growth drivers to our high end fragrance movie.

Fabrizio Freda: Moving Faster in Leveraging Winning Channels, launching a creative innovation inclusive on new big opportunities, and enhancing our precision marketing capabilities for increased effectiveness and efficiency of our consumer-facing investment.

Speaker Change: Moving faster in leveraging winning channels.

Speaker Change: Launching accretive innovation inclusive of new big opportunities.

Hans Xing: And then Hans Xing, our precision marketing capabilities will increase the effectiveness and efficiency of our consumer facing investments.

Fabrizio Freda: The PRGP enables and accelerates this strategy priority, and is the foundation to restore sustainable, long-term organic sales growth and to rebuild our operating profitability.

The B R E T enables and accelerate these strategic priorities and is the foundation to restore sustainable long term organic sales growth and to rebuild our operating profitability.

Fabrizio Freda: We are also creating a faster and leaner organization, che adattiranno più velocemente alla dinamica del mercato e sarebbero in grado di migliorare la crescita del futuro.

Hans Xing: We are also creating it faster and leaner organization.

Hans Xing: There will more quickly adapt to market dynamics, it'd be better able to leverage future growth.

Fabrizio Freda: While our sales and profit outlook for fiscal year 2025 is disappointing, this year we will make important strides as we implement our strategy reset to continue re-balancing regional growth, deliver improved annual profitability, a strength and go to market and innovation capabilities to elevate our execution in response to a more competitive market.

Fabrizio Freda: While our sales and profit outlook for fiscal year 2025 is disappointing.

Hans Xing: While our sales and profit.

Speaker Change: Fiscal year 2025 is disappointing.

Fabrizio Freda: This year, we will make important strides, as we implement our strategy RESET to continue rebalancing regional growth, deliver improved annual profitability, strengthen go-to-market and innovation capabilities to elevate our execution in response to a more competitive market.

We will make important strides.

Speaker Change: As we implement our strategy reset to continue rebalancing regional growth deliver improved annual profitability try and go to market and innovation capabilities to elevate our execution in response to a more competitive market.

Fabrizio Freda: These efforts will position us to both outperform the prestige beauty industry in fiscal year 2026 and accelerate profitability expansion. Let me now describe the drivers of our fiscal year 2025 outlook before discussing our strategic priorities in greater detail. The prestige beauty industry reported retail sales trends in mainland China further weakened sequentially in the four-quarter, from a decline of mid-single digit in the third quarter to a decrease of low double digits. As consumer confidence remains subdued. Importantly, we gained share in the prestige beauty industry in mainland China in the fourth quarter, driven by Lamar and Estelo, the progress in the market's star-largest category of skincare.

Fabrizio Freda: These efforts will position us to both outperform the prestige beauty industry in fiscal year 2026 and accelerate profitability.

Speaker Change: These efforts will position us to both output for the prestige beauty industry in fiscal year, 2026, and accelerate profitability dysfunction.

Fabrizio Freda: Let me now describe the drivers of our fiscal year 2025 outlook before discussing our strategic priorities in greater detail.

Let me now describe the drivers of our fiscal year 2025 optical before discussing our strategic priorities in greater detail.

Fabrizio Freda: The prestige beauty industry reported retail sales trends in mainland China further weakened sequentially in the fourth quarter, from a decline of mid-single-digit in the third quarter to a decrease of double-digit.

Speaker Change: The prestige beauty industry reported retail sales trends in mainland China further weakening sequentially in the fourth of course.

Speaker Change: From a decline of mid single digit in the third quarter, two a decrease of low double digits.

Fabrizio Freda: As a consumer confidence remains subdued. Importantly, we gained share in the prestige beauty industry in mainland China in the fourth quarter, driven by La Mer and Estee Lauder's progress in the market's far largest category of skincare.

Speaker Change: Consumer confidence remains subdued.

Speaker Change: Importantly, we gained share in the prestige beauty industry in mainland China in the fourth quarter, driven by La Mer Este Lauder progress in the market saw the largest category of skincare.

Fabrizio Freda: Retail sales trend for the prestige beauty industry in Asia further retail also did not improve during the fourth quarter. This was most notable in Hainan, where retail sales in the beauty market declined over 40%. Despite a more favorable comparison to the previous period as the quarter unfolds. For Hiner and Asia's other retail, Oderon, Extrastic Returns, Conversal Levels Remains Abdued, and significantly lower than pre-pandemic levels, owing to weak consumer sentiment reducing basket sizes and to an extent consumer diversity spending to experiences.

Fabrizio Freda: Retail sales trend for the prestige beauty industry in Asia travel retail also did not improve during the fourth quarter. This was most notable in Hainan, where retail sales in the beauty market declined over 40%, in spite of a more favourable comparison to the previous period as the quarter unfolds.

Speaker Change: Retail sales trend for the prestige beauty industry in Asia travel retail also did not improve during the fourth of course. This was most notable in China, where retail sales in the beauty market declined over 40%. Despite a more favorable comparison to the previous period.

Speaker Change: The course that unfold.

Fabrizio Freda: For Heinen and Asia Travel Retail overall, as traffic returns, commercial levels remain subdued and significantly lower than pre-pandemic levels, owing to weak consumer sentiment reducing basket sizes and to an extent, consumer diversity spending to a speed.

Speaker Change: For hanging in Asia travel retail or their own extract seek returns conversion levels remain subdued and significantly lower than pre pandemic levels, owing to weak consumer sentiment, reducing basket sizes and to an extent consumer diversity.

Speaker Change: Pending two experiences.

Fabrizio Freda: The U.S. Prestige beauty industry retail sales growth decelerated each month throughout the four quarters. Albeit, with growth at a still compelling pace of need to high single digit.

Fabrizio Freda: La prestigiosa industria della beauté americana, la crescita di vendetta, l'acceleramento, ogni mese, per tutta la quarta quarta, la compra, con crescita a altissima velocità sia de CDX e de need to high nasciuta appgasa a continuo compellino aratore taglia, Encouragingly, our company retail sales returned to growth.

Speaker Change: The U S prestige beauty industry retail sales growth accelerated each month throughout the fourth of course the alibi.

Speaker Change: <unk> growth at a still compelling phase of mid to high single digits.

Fabrizio Freda: While we continue to see the Prestige Beauty share driven by the extent of our exposure to slower growth channels, our share loss was reduced in the fourth quarter. These reflect gains from gradually increasing our exposure to high growth channels like Amazon and specialty movies.

Fabrizio Freda: Encouragingly, our company retail sales return to growth. Why we continue to see the prestige beauty share driven by the extent of our exposure to lower growth channels, our share loss was reduced in the fourth quarter. This reflects gains from gradually increasing our exposure to high growth channels, like Amazon and specialty mobility. And this trend was further reinforced in July, when our company retail sales growth accelerated to meet single digit, driven by double-digit growth in fragrance and healthcare. Moreover, the company retail sales improved to meet single-digit growth in skincare, and we gained share in the category in July.

Speaker Change: Encouragingly our company retail sales returned to growth, while we continue to see the prestige beauty share driven by the extent of our exposure to slow our growth channels, our share loss was reduced in the fourth quarter.

Speaker Change: This reflects gains from gradually increasing our exposure to high growth channels like Amazon and specialty multi.

Fabrizio Freda: And this trend was further reinforced in July, when our company retail sales growth accelerated to mid-single digits, driven by double-digit growth in fragrance and hair care.

And this trend was further reinforced in July when our company retail sales growth accelerated to mid single digits, driven by double digit growth in fragrance and hair care. Moreover, the company retail sales improved to mid single digit growth in skincare and we gained share in the category.

Fabrizio Freda: Moreover, the company retail sales improved to mid-single-digit growth in skincare, and we gained share in the category in July.

Speaker Change: Hi.

Fabrizio Freda: For fiscal year 2025, we forecast the global prestige beauty industry to grow 2-3%. Reflecting ongoing trends in many developed and emerging markets globally. The market in the West, which collectively exceeded fiscal year 2024, relatively strongly, are trying to drive the industry performance. The markets in the East, in total, are expected to be tempered as trends in Japan and Southeast Asia is offset by ongoing declines in mainland China and Asia travel retail. We expect the global prestige beauty industry to re-accelerate to historical meet single-digit growth in fiscal year 2026, assuming China progressively stabilised and then returned to growth.

Fabrizio Freda: For fiscal year 2025, we forecast the global prestige beauty industry to grow 2-3%, reflecting ongoing strengths in many developed and emerging markets globally. The market in the West, which collectively exited fiscal year 2024 relatively strongly, are primed to drive the industry performance.

Speaker Change: For fiscal year 2025, we forecast the global prestige beauty industry to grow to 2% to 3%, reflecting ongoing strength in many developed and emerging markets globally.

Speaker Change: The market in the west, which collectively exited fiscal year 2024 relatively strongly.

Speaker Change: Primed to drive the industry performance the markets in the east in total are expected to be tempered.

Fabrizio Freda: The markets in the East, in total, are expected to be tempered as trends in Japan and Southeast Asia is offset by ongoing declines in mainland China and Asia travel retailers.

Speaker Change: Trends in Japan, and Southeast Asia is offset by ongoing declines in mainland, China and Asia travel retail.

Fabrizio Freda: We expect the global prestige beauty industry to re-accelerate to historical mid-single-digit growth in fiscal year 2026, assuming China progressively stabilizes and then returns to growth.

Speaker Change: We expect the global prestige beauty industry to re accelerates to historical mid single digit growth in fiscal year 2026, assuming China progressively stabilize and then return to growth.

Fabrizio Freda: With this industry landscape, and given the size of our business in some areas most challenged, our fiscal year 2025 organic sales growth outlook range is in a decline of 1% to an increase of 2%. Our organic sales growth outlook reflects an acceleration in several areas of business, partially offset by declines in mainland China and Asia travel retail.

Fabrizio Freda: With this industry landscape, and given the size of our business in some areas most challenged, Our fiscal year 2025 organic sales growth, range is in a decline of 1% to an increase of 2%. Our organic sales growth outlook reflects an acceleration in several areas of business, partially offset by declines in mainland China and Asia traveling.

Speaker Change: With these industry landscape and given the size of our business in some areas. Most challenged our fiscal year 2025 organic sales growth outlook range is a decline of 1% to an increase of 2%.

Speaker Change: Organic sales growth outlook reflects an acceleration in several areas of businesses, partially offset by declines in mainland China and Asia travel retail.

Fabrizio Freda: For our first quarter, the pressure is more acute, such that our organic sales outlook calls for a decline, which Tracy will describe in further detail. For fiscal year 2025, we are focusing consumer-facing investment on the biggest opportunity, a streamlining our organization to be faster and more agile in order to fuel the organic sales growth momentum we have in many areas of our business across developed and emerging. We also intend to better leverage the strengths of our brands in North America, where we are leaders in prestige makeup, which is the region's biggest category, and where we hold the top two ranked brands.

Fabrizio Freda: For our first quarter, the pressure is more acute, such that our organic sales outlook calls for a decline, which Tracey will describe in further detail.

Speaker Change: So what I was first course that the pressure is more acute such that our organic sales outlook calls for a decline, which tracey will describe in further detail.

Fabrizio Freda: For fiscal year 2025, we are refocusing consumer-facing investment on the biggest opportunity, streamlining our organization to be faster and more agile in order to fuel the organic sales growth momentum we have in many areas of our business across developed and emerging markets.

Tracey: For fiscal year 2025, we are refocusing consumer facing investment on the biggest opportunities streamlining our organization to be faster and more agile in order to fuel the organic sales growth momentum we had in many areas of our business across developed and emerging markets.

Fabrizio Freda: We also intend to better leverage the strengths of our brands in North America, where we are leaders in Prestige Makeup, which is the region's biggest category, and where we hold the top two ranked brands, e, in Prestige Skincare, ad in four of the top five ranked brands.

Tracey: We also intend to better leverage the strengths of our brands in North America.

Tracey: Where we are leaders in prestige makeup, which is the region biggest category and where we hold the top two ranked brands in prestige skin care and in four of the top five ranked brands. Moreover, in North America. We also intend to leverage the market strengths at cost generation as we.

Fabrizio Freda: And in prestige came here, adding four of the top five ranked brands. Moreover, in North America, we also intend to leverage the market strengths across generation, as we forecast a balanced contribution to industrial growth by age.

Fabrizio Freda: Moreover, in North America, we also intend to leverage the market strengths across generations, as we forecast a balanced contribution to industry growth by age.

Tracey: Forecast, a balanced contribution to industry growth by age.

Fabrizio Freda: Looking at our strategic priorities for fiscal year 2025, let me begin with skincare, which represents over 60% of our sales and is our most profitable product category. Our initiative has designed to enable us to even better leverage our top ranked global prestige skincare portfolio to welcome new consumers, and further engage our loyal consumer through elevated precision marketing, a robust, accretive innovation pipeline, and a standard reach in high growth channels. This starts with the ordinary, which entered fiscal year 2025 with momentum, having growth is organized sales by more than 20% in fiscal year 2024. The ordinary is leading the way among our brands in capitalizing on what space is opportunity in products, channels, and geographies.

Fabrizio Freda: Looking at our strategy priorities for fiscal year 2020.

Tracey: Looking at our strategic priorities for fiscal year 2025, let.

Fabrizio Freda: Let me begin with skincare, which represents over 50% of our sales and is our most profitable product. Our initiatives are designed to enable us to even better leverage our top-ranked global prestige skincare portfolio to welcome new consumers and further engage our loyal consumers through elevated precision marketing, a robust, creative innovation pipeline, and expanded reach in high growth channels.

Tracey: Let me begin with skincare, which represents over 50, 60% or our sales and is our most profitable product category.

Tracey: Our initiatives are designed to enable us to even better leverage our top ranked global prestige skincare portfolio to welcome new consumers and further engage our loyal consumers through elevated precision marketing it robust accretive innovation pipeline and expanded reach.

Tracey: In high growth channels. These.

Fabrizio Freda: This starts with The Ordinary, which entered fiscal year 2025 with momentum, having brought its organic sales by more than 20% in fiscal year 2024. The ordinary is leading the way among our brands in capitalizing on wide-spaces opportunities in products, channels, and geographies.

Tracey: This starts with the ordinary which entered its fiscal year 2025, we momentum heading growth is organic sales by more than 20% in fiscal year 2024.

Speaker Change: You already know.

Speaker Change: Is leading the way among our brands in capitalizing on white spaces opportunity and products channels and geographies.

Fabrizio Freda: In the fourth quarter, the ordinary launched its first product in lip care, executed a usually successful TikTok Shop Super Brand Day campaign in the US, and established its footprint in Japan. For fiscal year 2025, the Ordinary has already newly entered the body care subculture and is preparing to expand into more emerging markets, even its proven successful launches in India, the Middle East, and South China Africa over the last two years.

Fabrizio Freda: In the fourth quarter, The Ordinary launched its first product in lip care, executed a hugely successful TikTok Shop Superbrand Day campaign in the US, and established its footprint in Japan.

Speaker Change: In the fourth quarter.

Speaker Change: Ordinary launched its first product in lip care executed a hugely successful diktat shop Super brand day campaign in the U S and established footprint in Japan.

Fabrizio Freda: For fiscal year 2025, the ordinary has already newly entered the body care subcategory and is preparing to expand into more emerging markets, given its proven successful launches in India, the Middle East and South Africa over the last two years.

Speaker Change: For fiscal year 2025, the ordinary is already newly entered the body care subcategory and is preparing to expand into more emerging markets. Even if proven successful launches in India, the middle East and South Africa over the last two years.

Fabrizio Freda: Among the brands we are incubating, a start in fiscal year 2024 was new out in skincare. The brand has a promising future. Clinics is making great strides, executing its strategy to double down on its authentic dermatologist heritage. Clinics become this work in the US and UK, this past spring, and has been expanding its global rollout. This includes its successful launch on the US Amazon Premium Beauty Story in March. Impressively, Clinics has returned to share growth in the US prestige skincare with three consecutive months of gains to July. Clinics' performance in US retail in July was particularly impressive, with the brand skincare brand and makeup outperforming across subcategories, and Clinics retaking the number one rank in overall prestige beauty.

Fabrizio Freda: Among the brands we are incubating, a star in Fiskareer 2024 was Neon in skincare.

Among the brands, we are incubating istar in fiscal year 2024 was neons in skincare that Brian has a promising future.

Fabrizio Freda: The brand has a promising future.

Fabrizio Freda: Clinique is making great strides, executing a strategy to double down on its authentic dermatologist heritage.

Speaker Change: Clinique is making is making great strides executing its strategy to double down we'll need to authentic dermatologist heritage.

Fabrizio Freda: Clinique became this work in the U.S. and U.K. this past spring and has been expanding its global role. These include its successful launch on the U.S. Amazon Primo Beauty Store in March.

Speaker Change: Unique began this work in the U S and UK. This past spring and has been expanding its global rollout. These include its successful launch on the U S. Amazon premium beauty store in March impressively Clinique is the return to share growth in the U S prestige skincare, we treat.

Fabrizio Freda: Impressively, Clinique has returned to share growth in the U.S. prestige skincare with three consecutive months of gains through July. Clinique performance in U.S. retail in July was particularly impressive with the brand Skincare Brand and Makeup outperforming across subcategories and Clinique retaking the number one rank in overall prestige.

Speaker Change: Sacred in months of gains through July.

Speaker Change: Clinique performance in U S. Retail in July was particularly impressive with the brand's skin care brands and make cap outperformed across subcategories and clinique, taking the number one ranked in overall prestige beauty.

Fabrizio Freda: Lamar, along with Esteloda, a renewed franchise, cured our luxury skincare strategy. With both brands poised to build on their successful in of fiscal year 2024, during which Lamar exceptional growth made it our best performing. For Renutri, we plan to build upon its fiscal year 2024 launches of the new moisturizer and serum foundation this year through an expanded protocol for your focus on the science of skin longevity, a visible age reversal. With the ordinary clinic, Estee Lauder and LaMaire, we are bringing to market in fiscal year 2025 a rich innovation pipeline focused on the benefits of nighttime skin care ritual, which is an incremental use education.

Fabrizio Freda: La Mer, along with Estee Lauder and Renaud Franchise, cure our luxury skincare.

Speaker Change: La Mer, along with Este Lauder renewed re franchised Hewitt, our luxury skin care strategy.

Speaker Change: We both brands poised to build on their successful.

Speaker Change: In fiscal year 2024 during weak la Mer exceptional growth made eat our best performing brand.

Fabrizio Freda: For ReNutri, we plan to build upon its fiscal year 2024 launches of a new moisturizer and serum foundation.

Speaker Change: For a new trip, we plan to build upon its fiscal year 2024 launches of the new Moisturizer and serum foundation. This year through an expanded product portfolio focused on the science of scheme of JBT.

Fabrizio Freda: This year, through an expanded product portfolio focused on the science of skin longevity, a visible age reversal.

Speaker Change: Zeeble age reverse.

Fabrizio Freda: Con la clínica di ordine, Estee Lauder e Lamer, We are bringing to market in fiscal year 2025 a rich innovation pipeline focused on the benefits of nighttime skincare ritual, which is an incremental user location.

Speaker Change: We deal with Denali, Clinique, Este Lauder and La Mer, we are bringing to market in fiscal year 2025 day rich innovation pipeline focused on the benefits of night time, skincare ritual, which is an incremental use education.

Fabrizio Freda: Our brand portfolio strategically addresses various skin concerns and types with targeted ingredients and claims designed to appeal to a diverse range of consumer segments because of price and product quality.

Fabrizio Freda: Our brand portfolio strategically addressed these various skin concerns and types with targeted ingredients and claims designed to appeal to a diverse range of consumer segments because of price and product position.

Speaker Change: Our brand portfolio strategically address these various skin concerns and pipes with targeted ingredients and claims designed to appeal to a diverse range of consumer segment because of price and product position.

Fabrizio Freda: Let me now turn to our next strategy priority. Capitalizing on the multiple growth drivers of high-end fragrances, where our luxury and artisanal portfolio of Jomalon Landon, Tom Ford, Lillabo, Kilian Paris, Frederic Mal, and Erin Beauty collectively rose needs single digit organically in fiscal year 2024. The liquidity of the fragrance category, where we are number one ranked, was the best performing tier in retail sales in fiscal year 2024, and we expect this to be the case again in fiscal year 2025. We are focused on further realizing the growth potential of high-end fragrances, even its broad base trends around the world, to drive great scales for the company.

Fabrizio Freda: Let me now turn to our next strategy priority, capitalizing on the multiple growth drivers of high-end fragrance, where our luxury and artisanal portfolio of Jo Malone London, Tom Ford, Le Labo, Cillian Parrish, Frederic Malle, and Erin Beauty collectively rose mid-single digit organically in fiscal year 2024.

Let me now turn to our next strategic priority capitalizing on the multiple growth drivers of our high end fragrances, where our luxury and our seasonal portfolio of Jo Malone, London, Tom for Lilah Bull helium parties, Frederic Malle and air and beauty collectively rose mid single.

Speaker Change: It organically in fiscal year 2020 for the luxury tier of the fragrance category, where we are number one linked ranked it was the best performing Tia in retail sales in fiscal year 2024, and we expect this to be the case again in fiscal year 2025.

Fabrizio Freda: The luxury tier of the fragrance category where we are number one ranked was the best performing tier in retail sales in fiscal year 2024 and we expect this to be the case again in fiscal year 2025. We are focused on further realizing the growth potential of high-end fragrances, given its broad-based strengths around the world, to drive greater scale for, From Le Labo's outstanding performance in fiscal year 2024, led by Asia-Pacific, where its organic sales nearly doubled, to Jo Malone London's disruptive campaign with Tom Hardy to drive its men's business, and we are well positioned to build on our momentum.

Speaker Change: We are focused on further realizing the growth potential of high end fragrances.

Speaker Change: It's broad based strengths around the world to drive greater scale for the company.

Fabrizio Freda: From Lillabo's standing performance in fiscal year 2024, led by Asia Pacific, where its organic sales nearly doubled. To Jomalon Landon's disruptive campaign with Tom Harding, to drive its immense business, and we are well-positioned to build on our momentum. Our brand's exhibition expansion and compelling newness related, not only in the scent, but also in the form and size, to trade consumer into the luxury tier.

Speaker Change: Franck Le Labo are standing performance in fiscal year, 2024, led by Asia Pacific, where eats organic sales nearly doubled to Jo Malone, London. These rapid campaign with Tom Hardy to drive its men's business.

Speaker Change: Well positioned to build on our momentum.

Fabrizio Freda: Our brands have distribution expansion and compelling newness slated not only in the scent but also in the form and size to trade consumers into the luxury tier.

Speaker Change: Our brands and distribution expansion and compelling newness related not only in the sense, but also in the fall and size to trade consumer into the luxury tier and we are thrilled to be expanding our luxury portfolio with a September launch of the ballroom and beauty brand.

Fabrizio Freda: And we are thrilled to be expanding our luxury portfolio with the September launch of the Balmain Beauty brand, which chose the fragrance category to begin its journey.

Fabrizio Freda: And we are thrilled to be expanding our luxury portfolio with a September launch of the Balmond Beauty brand, which shows the fragrance category to begin its journey. We are also focused on driving accelerated sales growth in the prestige tier of the fragrance category. With our Estellotary Clinic brands, we brought rich bottom-market activations related for this and upcoming courses.

Speaker Change: We chose the fragrance category to begin its journey.

Fabrizio Freda: We are also focused on driving accelerated sales growth in the prestige tier or the fragrance category with our Estee Lauder clinic brands.

Speaker Change: We are also focused on driving accelerated sales growth in the prestige tier where the fragrance category with our Este Lauder and Clinique brands with broad reach go to market activation slated for this and the coming quarters.

Fabrizio Freda: We brought rich go-to-market activation slated for this and upcoming course.

Fabrizio Freda: Let me turn our strategy priority of winning in fast-growing channels globally. To do so, our mindset has shifted to more boldly merchandising our brands, where consumer are increasingly discovering a shopping for beauty, while executing with excellence a stain through to our high-touch approach. While these encompasses both brick and mortar and online, today I will share with you examples from online. In the US, our launches of cleaning, two-faced and bamboo and bamboo on the Azon Premium Beauty Store in the second house epitomized this philosophy. Clinique launched with a skin analysis tool in March and by June had expanded to offer life chart with a clinic ambassador, while bamboo and bamboo launched with extensive hair education from the brand's ester stylist.

Fabrizio Freda: Let me turn our strategy priority of winning in fast-growing channels globally.

Speaker Change: Let me turn our strategic priority of winning in fast growing channels globally.

Fabrizio Freda: To do so, our mindset has shifted to more boldly merchandising our brands, where consumers are increasingly discovering a shopping for beauty, while executing with excellence a stain true to our high-touch approach.

Speaker Change: So our mindset shift to more bold the merchandising our brands where consumers are increasingly discovering the shop, the info beauty, while executing with excellence staying true to our high touch approach.

Fabrizio Freda: While this encompasses both brick-and-mortar and online, today I will share with you examples from online, in the U.S.

Speaker Change: While these and compassion, both brick and mortar and online today I will share with you examples from online.

Speaker Change: In the U S.

Fabrizio Freda: Our launches of Clinique, Two-Faced, and Bumble on the hands-on premium beauty store in the second house epitomize this philosophy.

Speaker Change: Our launches of cleaning too faced and bumble and bumble on the Arizona premium beauty store in the second House Epitomise. This philosophy Clinique launched with the skin analyses stood in March and by June had expanded to offer live chat with the Clinique Ambassador.

Fabrizio Freda: Clinique launched with a skin analysis tool in March, and by June had expanded to offer live chat with the Clinique ambassadors, while Bumble and Bumble launched with extensive hair education from the brand ExpertStyle.

Speaker Change: While bumble and bumble launched with extensive here indication from the brands experts stylists.

Fabrizio Freda: All three brands are up to a very strong start on the US Amazon Premium Beauty Store. Clinique and bamboo and bamboo are seeing promising uptake also with male consumers. And for Clinique, where we now have a full-courster of performance, we are encouraged by the extent of consumer-subscladding for future purchases as well as the strong level of repeat purchases in the course.

Fabrizio Freda: All three brands are off to a very strong start on the U.S. Amazon Premium Beauty Store.

Speaker Change: All three brands are off to a very strong start on the U S. Amazon premium beauty store.

Fabrizio Freda: Clinique, and Bumble and Bumble are seeing promising uptake also with male.

Speaker Change: We need and bumble and bumble are seeing promising uptake also with male consumers and for Clinique, where we now have a full quarter of performance. We are encouraged by the extent of consumer subscribing for future purchases as well as the strong level of repeat purchases in the court.

Fabrizio Freda: And for Clinique, where we now have a full quarter of performance, we are encouraged by the extent of consumer subscribing for future purchases as well as the strong level of repeat purchases in the, So far, in fiscal year 2025, Dr. Jart, Smashbox, and Lab Series have already opened storefronts in the U.S., and we have more launches on the horizon.

Fabrizio Freda: So far in fiscal year 2025, Dr. Jard, Smashbox, and Lab Series have already opened storefronts in the US, and we have more launches on the horizon. Around the world, we are building growth momentum with social commerce, driving new consumer acquisition by engaging consumers where they are spending their time, leveraging a content focus approach with live streaming and short form videos, and activating full-final integration of social media and commerce. In China, we have scared and sustained strong growth on the wind with more brand launches related for fiscal year 2025. Looking at Japan and Korea, we have further unlocking platform opportunities for our brand with Line and Racotan and accelerating social commerce on Kakao with focus on gifting.

Speaker Change: So far in fiscal year, 2025, total job smashbox and lapsed used it already opened storefronts in the U S and we have model launches on the horizon.

Fabrizio Freda: Around the world, we are building growth momentum with social commerce, driving new consumer acquisition by engaging consumers where they are spending their time, leveraging a content-focused approach with live streaming and short-form videos, and activating full-funnel integration of social media and commerce.

Speaker Change: Around the World, we are building growth momentum with social commerce, driving new consumer acquisition by engaging consumers, where they are spending their time leverage that content focused approach with live streaming and short form videos and activating full funnel integration of social media and commerce.

Speaker Change: Yeah.

Fabrizio Freda: In China, we have scaled and sustained strong growth on the wind with more brand launches later for fiscal year 2020.

Speaker Change: In China, we are scared and sustained strong growth on the win with more brands and launches later for fiscal year 2025, looking at Japan, and Korea, we have felt that unlocking platform opportunities for our brand with line like with time and accelerating social commerce.

Fabrizio Freda: Looking at Japan and Korea, we are further unlocking platform opportunities for our brand with LINE and Rakuten and accelerating social commerce on Kakao with focus on gifting.

Laraine Mancini: Today's call is being recorded and webcast for opening remarks and introduction and the floor over to Senior Vice President of the Master Relations, Ms. Rainey Mancini.

Laraine Mancini: Today's call is being recorded and webcast for opening remarks and introduction and the floor over to Senior Vice President of the Master Relations, Ms. Rainey Mancini. Man, you made it again.

Cow, which focus on gifting.

Fabrizio Freda: Our final strategic initiative is announcing our precision marking capabilities, enabling us to be more focused on new consumer acquisition. From brand equity to product assortment, distribution, and media, we are better able to target new consumers and also to accelerate the effectiveness of acquisition and efficiency spent. This capability have been designed to leverage data, including over 200 million consumers profiles we have built over the years and exclusive partnerships with AI leaders. Precision marketing is also allowing us to be far more nimble with trend to action. During fiscal year 2024, we began pilot studying in market around the world to merit trends with our rich portfolio of existing products and innovation to articulate against trends with speed.

Fabrizio Freda: Our final strategic initiative is enhancing our precision marketing capabilities, enabling us to be more focused on new consumer acquisitions. From brand equity to product assortment, distribution and media, we are better able to target new consumers and also to accelerate the effectiveness of acquisition and efficiency spending. This capability has been designed to leverage data, including over 200 million consumers' profiles we have built over the years, and exclusive partnerships with AI.

Speaker Change: Our final strategic initiative is enhancing our precision marketing capabilities, enabling us to be more focused on new consumer acquisition.

Unnamed: Man, you made it again.

Unnamed: Hello, on today's call are for Brigadier Freda, President and Chief Executive Officer, and Tracey Travis, Executive Vice President and Chief Financial Officer.

Fabrizio Freda: Hello, on today's call are for Brigadier Freda, President and Chief Executive Officer, and Tracey Travis, Executive Vice President and Chief Financial Officer. Since many of her remarks today can seem forward-looking statement let me refer you to our press release and our report files with the SEC where you'll find factors that could cause actual results to differ materially from these forward-looking statements. To facilitate the discussion of our underlying business, the commentary on our financial results and expectations is before we're structuring and other charges and adjustments disclosed to our press release.

Speaker Change: Brand equity to product assortment distribution and media, we are better able to target new consumers and also to accelerate the effectiveness of acquisition and efficiency spent.

Unnamed: Since many of her remarks today can seem forward-looking statement let me refer you to our press release and our report files with the SEC where you'll find factors that could cause actual results to differ materially from these forward-looking statements.

Speaker Change: This capability has been designed to leverage the doctor, including over two and the hundreds of millions of consumers profiles, we have build over the years.

Unnamed: To facilitate the discussion of our underlying business, the commentary on our financial results and expectations is before we're structuring and other charges and adjustments disclosed to our press release.

Speaker Change: And exclusive partnerships with AI leaders.

Unnamed: Unless otherwise stated, all organic net sales growth also excludes the non-comparable impacts of acquisitions to vestitures, brand closures, and the impact of foreign currency.

Fabrizio Freda: Unless otherwise stated, all organic net sales growth also excludes the non-comparable impacts of acquisitions to vestitures, brand closures, and the impact of foreign currency. You can find recommendations between gap and non-gap measures on our press release and on the investor section of our website. As our minor references online sales include sales we make directly to our consumers through our brand.com sites and do third-party platforms. It also includes estimated sales of our products through our retailers website. Throughout our discussion, our proper recovery and growth plan will be referred to as our PRGP.

Fabrizio Freda: Precision marketing is also allowing us to be far more nimble with time to act.

Speaker Change: <unk> marketing is also allowing us to be far more nimble we trend to action during fiscal year 2024, we began pilot starting in market around the world to metric trends with our rich portfolio of existing products sell innovation plus delayed against trends with speed.

Fabrizio Freda: During Fiscal Year 2024, we began pilot studies in markets around the world to marry trends with our rich portfolio of existing products and innovations to activate against trends with speed. We realized promising results, including successes with the peach makeup and bronzing.

Unnamed: You can find recommendations between gap and non-gap measures on our press release and on the investor section of our website.

Unnamed: As our minor references online sales include sales we make directly to our consumers through our brand.com sites and do third-party platforms. It also includes estimated sales of our products through our retailers website.

Fabrizio Freda: We realize promising results, including successes with the peach makeup and bronzing trends. We have now formalized this process and developed the trend AI tool to enable our brand teams around the world to quickly drive trends to action.

Speaker Change: We realized promising results, including successes with the Peach mid cap bronzing trends, we have now formalized this process and develop the trained AI tools to enable our brand teams around the world to quickly drive trends to us.

Unnamed: Throughout our discussion, our proper recovery and growth plan will be referred to as our PRGP.

Fabrizio Freda: We're now formal, this process and develop the Trend AI tool to enable our brand teams around the world to quickly drive trends to us.

Unnamed: During the Q&A session, we ask that you please limit yourself to one question.

Fabrizio Freda: We can respond all of you in the time schedule for this call and now I'll turn the call over to Fabrizia.

Fabrizio Freda: In closing, we have designed our strategy reset to position the company for a stronger future. We are wholly focused on executive excellence across these strategies and our PRGP to again realize the proven performance of our company. To our employee, I extend my deep gratitude for your commitment.

Fabrizio Freda: In closing, we have designed our strategy RESET to position the company for a stronger future.

Speaker Change: In closing we have designed our strategy reset to position the company for a stronger future.

Unnamed: Thank you, Rain.

Unnamed: And hello to everyone.

Operator: During the Q&A session, we ask that you please limit yourself to one question.

Fabrizio Freda: We are wholly focused on executing with excellence across these strategy initiatives in our PRGP to again realize the proven performance of our system.

Speaker Change: <unk> wholly focused on executing with excellence across these strategic initiatives in our Pea our GP to again realize the proven performance of our company.

Fabrizio Freda: To our employees, I extend my deep gratitude for your commitment.

Speaker Change: Our employee I extend my deep gratitude for your commitment.

Fabrizio Freda: After a challenging first house, we return to top line growth in the second house of fiscal year 2024 with organic sales growth accelerating from 6% in the third quarter to 8% in the fourth quarter. And we delivered an adjusted operating margin of 11.6%.

Fabrizio Freda: We can respond all of you in the time schedule for this call and now I'll turn the call over to Fabrizia. Thank you, Rain.

Fabrizio Freda: I'm in a challenging time for our company.

Fabrizio Freda: I'm in a challenging time, but I will.

Speaker Change: Amid a challenging time for our company.

Fabrizio Freda: And now I will turn the call over.

Tracey Travis: And now I will turn the call over to Tracey. Thank you, Fabrizio, and hello everyone. We navigated through another challenging year across several areas of our business and took specific actions to more sustainably improve our sales and profit results as it became apparent that the recovery that was anticipated to occur throughout the year in some of our markets was impacted by far more volatility. And while we returned to growth in the second half, primarily driven by resumed shipments in Asia travel retail, we are certainly not pleased with our overall full-year results. And on top of global prestige volatility, the execution of our strategy has not met our expectations in some key areas of our business.

Speaker Change: And now I will turn the call over to Tracy.

Tracey Travis: Thank you, Fabrizio, and hello, everyone.

Tracy: Thank you Fabrizio and Hello, everyone.

Tracey Travis: We navigated through another challenging year across several areas of our business and took specific actions to more sustainably improve our sales and profit results as it became apparent that the recovery that was anticipated to occur throughout the year in some of our markets was impacted by far more volatility.

Tracy: We navigated through another challenging year across several areas of our business and took specific actions to more sustainably improve our sales and profit results as it became apparent that the recovery that was anticipated to occur throughout the year and some of our markets was impacted by far more volatility.

Fabrizio Freda: And hello to everyone.

Fabrizio Freda: This level of profitability was higher than the first house and expanded from the second half of fiscal year 2023.

Fabrizio Freda: Today, we will review our results for fiscal year 2024, which represented a difficult year for the company and discussed the implementation of our strategy reset to drive improving performance in fiscal year 2025 and beyond. After a challenging first house, we return to top line growth in the second house of fiscal year 2024 with organic sales growth accelerating from 6% in the third quarter to 8% in the fourth quarter. And we delivered an adjusted operating margin of 11.6%.

Fabrizio Freda: All told for fiscal year 2024, our organic sales declined 2%.

Fabrizio Freda: This level of profitability was higher than the first house and expanded from the second half of fiscal year 2023. All told for fiscal year 2024, our organic sales declined 2%. We achieved the modest growth margin expansion and adjusted operating margin contracted when added in 20 basis points to 10.2%. These results were in line with the revised outlook we offered in May for sales and better than expected for operating profitability despite the further softening of the prestige beauty industry in China and Asia travel retail.

Tracey Travis: And while we return to growth in the second half, primarily driven by resumed shipments in Asia travel retail, we are certainly not pleased with our overall full year results.

Tracy: And while we returned to growth in the second half primarily driven by resumed shipments in Asia travel retail we are certainly not pleased with our overall full year results and on top of global prestige volatility the execution of our strategy has not met our expectations in some key areas of our business.

Fabrizio Freda: We achieved the modest growth margin expansion and adjusted operating margin contracted when added in 20 basis points to 10.2%.

Tracey Travis: And on top of global prestige volatility, the execution of our strategy has not met our expectations in some key areas of our business.

Fabrizio Freda: These results were in line with the revised outlook we offered in May for sales and better than expected for operating profitability despite the further softening of the prestige beauty industry in China and Asia travel retail.

Tracey Travis: During the year, we also largely completed the basic design and began the implementation of our multi-year PRGP to deliver stronger results against our expectation for a more gradual rebuilding of sales growth along with an acceleration in profitability.

Tracy: During the year, we also largely completed the basic design and began the implementation of our multiyear pier G. P to deliver stronger results against our expectation or more gradual rebuilding of sales growth along with an acceleration in profitability.

Fabrizio Freda: That said, we remain unsatisfied with this performance.

Fabrizio Freda: That said, we remain unsatisfied with this performance. Looking ahead, our fiscal year 2025 outlook reflects continued declines in the prestige beauty industry in China and Asia travel retail, while the PRGP which remains on track relatively to our previously stated goals. Enable us to offset the pressure to profitability from the clients in areas of our business that have high penetration skin care. It yields a lower case of operating margin expansions for fiscal year 2025 that we had previously expected when we expanded the PRGP in February.

Tracey Travis: Before I discuss our fiscal 2025 outlook, let me first share with you the fiscal 2024 fourth quarter and full-year results. Our fourth quarter organic net sales increased by 8% compared to last year, meeting our expectations, albeit with a different geographical mix than we anticipated, which reflected lower results in mainland China and North America due notably to further softening and overall prestige beauty in both of these markets. A combination of tentative consumer sentiment in China and consumer inflationary pressures in North America are believed to have contributed to the deceleration in both markets. Deluted EPS rose to 64 cents from seven cents last year, exceeding our expectations largely due to our operating performance and the reduction in our full year effective tax rate.

Tracey Travis: Before I discuss our fiscal 2025 outlook, let me first share with you the fiscal 2024 fourth quarter and full year results. Our fourth-quarter organic net sales increased by 8% compared to last year, meeting our expectations albeit with a different geographical mix than we anticipated, which reflected lower results in mainland China and North America, due notably to further softening in overall prestige beauty in both of these markets. A combination of tentative consumer sentiment in China and consumer inflationary pressures in North America are believed to have contributed to the deceleration in both markets.

Fabrizio Freda: Looking ahead, our fiscal year 2025 outlook reflects continued declines in the prestige beauty industry in China and Asia travel retail, while the PRGP which remains on track relatively to our previously stated goals.

Speaker Change: Before I discuss our fiscal 2025 outlook, let me first share with you the fiscal 2020 for fourth quarter and full year results.

Speaker Change: Our fourth quarter organic net sales increased by 8% compared to last year meeting our expectations, albeit with a different geographical mix than we anticipated, which reflected lower results in mainland China and North America, due notably to further softening in overall prestige beauty in both of these markets.

Fabrizio Freda: Enable us to offset the pressure to profitability from the clients in areas of our business that have high penetration skin care.

Speaker Change: A combination of tentative consumer sentiment in China, and consumer inflationary pressures in North America are believed to have contributed to the deceleration in both markets.

Fabrizio Freda: It yields a lower case of operating margin expansions for fiscal year 2025 that we had previously expected when we expanded the PRGP in February.

Tracey Travis: The looted EPS rose to $0.64 from $0.07 last year, exceeding our expectations largely due to our operating performance and the reduction in our full-year effective tax rate.

Speaker Change: Diluted EPS rose to 64 cents from seven cents last year exceeding our expectations largely due to our operating performance and a reduction in our full year effective tax rate.

Fabrizio Freda: For planning to deliver improved performance across both developed and emerging markets.

Fabrizio Freda: For planning to deliver improved performance across both developed and emerging markets. To fuel this, our strategic priorities are re-nighting skin care, capitalizing on the multiple growth drivers of high-end fragrance, moving faster in leveraging winning channels, launching a creative innovation inclusive on new big opportunities and enhancing our precision marketing capabilities to increase the effectiveness and efficiency of our consumer-facing investments. The PRGP enables and accelerate the strategic priorities and is the foundation to restore sustainable long-term organic sales growth and to rebuild our operating profitability.

Tracey Travis: From a geographic standpoint, organic net sales rose 32% in AMIA, primarily driven by the increase in our Asia travel retail business, given the favorable comparison to the prior year period as shipments increased over last year's extremely low level. In addition, organic net sales increased in both our developed European and priority emerging markets. Organic net sales in Asia Pacific decreased 4%, primarily driven by the ongoing softness and overall prestige beauty in mainland China, as well as lower shipments in Hong Kong as they are as we anniversary the initial surge in sales with the border reopening in the prior year period.

Tracey Travis: From a geographic standpoint, organic net sales rose 32% in EMEA, primarily driven by the increase in our Asia travel retail business, given the favorable comparison to the prior year period as shipments increased over last year's extremely low level.

Speaker Change: From a geographic standpoint organic net sales rose, 32% in EMEA, primarily driven by the increase in our Asia travel retail business given the favorable comparison to the prior year period as shipments increased over last year's extremely low level.

Tracey Travis: In addition, organic net sales increased in both our developed European and priority emerging markets.

Speaker Change: In addition, organic net sales increased in both our developed European and priority emerging markets.

Speaker Change: Organic net sales in Asia Pacific decreased 4%, primarily driven by the ongoing softness in overall prestige beauty in mainland China as well as lower shipments in Hong Kong as they are as we anniversaried. The initial surge in sales with the border reopening in the prior year period.

Fabrizio Freda: The PRGP enables and accelerate the strategic priorities and is the foundation to restore sustainable long-term organic sales growth and to rebuild our operating profitability.

Tracey Travis: Outside of these markets, net sales rose strong double digits in Japan as a favorable currency, coupled with strong in-market activation and expanded consumer reach, attracted both domestic and traveling consumers and bolstered growth across all product categories and nearly all channels of distribution. In the America's organic net sales decreased 5%, driven by the decline in North America, reflecting the ongoing intensely competitive environment as well as an overall slowdown in growth in prestige beauty, especially in brick-and-mortar channels, which particularly impacted our skin care and make up categories. Online sales grew mid-single digits in the region, benefiting from both retailer.com growth and the launch of select brands, especially Clinique, on the US Amazon Premium Beauty Store.

Tracey Travis: Outside of these markets, net sales rose strong double digits in Japan as a favorable currency coupled with strong in-market activation and expanded consumer reach attracted both domestic and traveling consumers and bolstered growth across all product categories in nearly all channels of distribution.

Speaker Change: Outside of these markets net sales rose strong double digits in Japan, as a favorable currency coupled with strong end market activation and expanded consumer reach attracted both domestic and traveling consumers and bolster growth across all product categories and nearly all channels of distribution.

Fabrizio Freda: We are also creating a faster and linear organization that will more quickly adapt to market dynamics and be better able to leverage future growth.

Fabrizio Freda: We are also creating a faster and linear organization that will more quickly adapt to market dynamics and be better able to leverage future growth. While our sales and profit outlook for fiscal year 2025 is disappointing, this year we will make important strides as we implement our strategy reset to continue re-balancing regional growth, deliver improved annual profitability, a strength and go to market and innovation capabilities to elevate our execution in response to a more competitive market.

Tracey Travis: In the Americas, organic net sales decreased 5%, driven by the decline in North America, reflecting the ongoing intensely competitive environment as well as an overall slowdown in growth in prestige beauty, especially in brick and mortar channels, which particularly impacted our skincare and makeup categories. Online sales grew mid-single digits in the region, benefiting from both Retailer.com growth and the launch of select brands, especially Clinique, on the U.S. Amazon Premium Beauty Store.

Speaker Change: In the Americas organic net sales decreased 5% driven by the decline in North America, reflecting the ongoing intensely competitive environment as well as an overall slowdown in growth in prestige beauty, especially in brick and mortar channels, which particularly impacted our skincare and makeup categories.

Speaker Change: Online sales grew mid single digits in the region benefiting from both retailer dot com growth and the launch of select brands, especially clinique on the U S. Amazon premium beauty store.

Fabrizio Freda: These efforts will position us to both outperform the prestige beauty industry in fiscal year 2026 and accelerate profitability expansion.

Tracey Travis: From a product category perspective, skincare organic net sales increased 15%, primarily due to the increased shipments within the Asia travel retail business referenced earlier, which drove net sales growth from both La Mer and Estée Lauder. Organic net sales from the ordinary also increased across all geographic regions. Makeup organic net sales increased 1%. Net sales increased from Estee Lauder, benefiting from the resumption of shipments in Asia travel retail business and the continued global success of the Double Wear product franchise. Clinique net sales rose strong double digits, fueled by the almost lipstick product franchise. Partially offsetting these increases were declines from Mac and Tom Ford.

Tracey Travis: From a product category perspective, skincare organic net sales increased 15% primarily due to the increased shipments within the Asia travel retail business referenced earlier, which drove net sales growth from both La Mer and Estee Lauder.

Speaker Change: From a product category perspective skin care organic net sales increased 15% primarily due to the increased shipments within the Asia travel retail business referenced earlier, which drove net sales growth from both la Mer Este Lauder organic net sales from the ordinary also increased across all geographic regions.

Fabrizio Freda: Let me now describe the drivers of our fiscal year 2025 outlook before discussing our strategic priorities in greater detail.

Fabrizio Freda: The prestige beauty industry reported retail sales trends in mainland China further weakened sequentially in the four-quarter, from a decline of mid-single digit in the third quarter to a decrease of low double digits.

Speaker Change: Yeah.

Speaker Change: Makeup organic net sales increased 1%.

Tracey Travis: Organic net sales from the ordinary also increased across all geographic regions, makeup organic net sales increased 1% Net sales increased from Estee Lauder, benefiting from the resumption of shipments in our Asia travel retail business and the continued global success of the DoubleWear product franchise.

Speaker Change: Net sales increased from Este Lauder benefiting from the resumption of shipments in our Asia travel retail business and the continued global success of the double wear product franchise.

Tracey Travis: Clinique Net Sales rose strong double digits fueled by the Almost Lipstick product franchise.

Fabrizio Freda: As a consumer confidence remains subdued.

Speaker Change: Clinique net sales rose strong double digits fueled by the almost lipstick product franchise.

Fabrizio Freda: Importantly, we gained share in the prestige beauty industry in mainland China in the fourth quarter, driven by Lamar and Estelo the progress in the market's star-largest category of skincare. Retail sales trend for the prestige beauty industry in Asia further retail also did not improve during the fourth quarter. This was most notable in Hainan, where retail sales in the beauty market declined over 40%. Despite a more favorable comparison to the previous period as the quarter unfolds. For Hiner and Asia's other retail, Oderon, Extrastic Returns, Conversal Levels Remains Abdued, and significantly lower than pre-pandemic levels, owing to weak consumer sentiment reducing basket sizes and to an extent consumer diversity spending to experiences.

Tracey Travis: Partially offsetting these increases were declines from Mac and Tom Ford. Organic net sales increased 2% in haircare and 1% in fragrance. Regarding fragrance, net sales growth was driven by the ongoing consumer appeal of Lalabeau's unique product offerings and targeted expanded consumer reach and Joe Malone, partially offset by declines in Estee Lauder and Clinique.

Speaker Change: Partially offsetting these increases were declines from Mac and Tom Ford.

Tracey Travis: Organic net sales increased 2% in hair care and 1% in fragrance. Regarding fragrance, net sales growth was driven by the ongoing consumer appeal of all of those unique product offerings and targeted expanded consumer reach and Joe Malone, partially offset by declines in Estée Lauder and Clinique. Our growth margin expanded 380 basis points to 71.8% compared to last year. This increased primarily reflected lower obsolescence and overhead charges, as well as higher skincare sales. Operating expenses decreased 340 basis points as a percentage of sales to 62.7%, driven largely by the increase in net sales, improved growth margins, and lower general and administrative expenses.

Speaker Change: Organic net sales increased 2% in hair care and 1% in fragrance regarding fragrance net sales growth was driven by the ongoing consumer appeal of all of those unique product offerings and targeted expanded consumer reach and Jo Malone, partially offset by declines in Este Lauder and Clinique.

Tracey Travis: Our gross margin expanded 380 basis points to 71.8% compared to last year. This increase primarily reflected lower obsolescence and overhead charges, as well as higher skin care sales.

Our gross margin expanded 380 basis points to 71, 8% compared to last year. This.

Fabrizio Freda: Despite a more favorable comparison to the previous period as the quarter unfolds. For Hiner and Asia's other retail, Oderon, Extrastic Returns, Conversal Levels Remains Abdued, and significantly lower than pre-pandemic levels, owing to weak consumer sentiment reducing basket sizes and to an extent consumer diversity spending to experiences.

Speaker Change: This increase primarily reflected lower obsolescence and overhead charges as well as higher skincare sales.

Tracey Travis: Operating expenses decreased 340 basis points as a percent of sales to 62.7 percent, driven largely by the increase in net sales, improved gross margin, and lower general and administrative expenses.

Speaker Change: Operating expenses decreased 340 basis points as a percentage of sales to 62, 7% driven largely by the increase in net sales improved gross margin and lower general and administrative expenses.

Tracey Travis: During the quarter, we recorded $471 million of impairment charges related to Dr. Jart, given the continued lower-than-expected growth and profitability of the brand. We made the decision to exit the brand from its heavily discounted travel retail channel and prioritize direct investments in other more profitable areas of the business, including in mainland China and western markets where a broader assortment of the brand has been resonating well with consumers. Operating income increased to $349 million and are operating margin expanded 700 basis points to 9% in the quarter. Our effective tax rate for the quarter was 22.8% compared to a negative 17.9% last year.

Speaker Change: During the quarter, we recorded $471 million of impairment charges related to the Doctor chart, given the continued lower than expected growth and profitability of the brand. We made the decision to exit the brand from its heavily discounted travel retail channel and prioritize direct investments in other more profitable areas of the.

Unnamed: The U.S.

Fabrizio Freda: Prestige Beauty Industry retail sales growth dexcelerated each month throughout the four quarter. Albeit, with growth at a still compelling pace of need to high single digit.

Fabrizio Freda: The U.S. Prestige Beauty Industry retail sales growth dexcelerated each month throughout the four quarter. Albeit, with growth at a still compelling pace of need to high single digit.

Speaker Change: Including in mainland, China, and western markets, where a broader assortment of the brand has been resonating well with consumers.

Fabrizio Freda: Encouragingly, our company retail sales return to growth.

Fabrizio Freda: Why we continue to see the prestige beauty share driven by the extent of our exposure to lower growth channels, our share loss was reduced in the fourth quarter.

Tracey Travis: Operating income increased to $349 million, and our operating margin expanded 700 basis points to 9% in the quarter. Our effective tax rate for the quarter was 22.8% compared to a negative 17.9% last year, the latter having had a larger year in true up to reflect our final effective tax rate for the fiscal year of 2023.

Speaker Change: Operating income increased to $349 million and our operating margin expanded 700 basis points to 9% in the quarter.

Fabrizio Freda: This reflects gains from gradually increasing our exposure to high growth channels, like Amazon and specialty mobility.

Speaker Change: Our effective tax rate for the quarter was 22, 8% compared to a negative 17, 9% last year. The latter having had a larger year end true up to reflect our final effective tax rate for the fiscal year of 2023.

Tracey Travis: The latter having had a larger year and true up to reflect our final effective tax rate for the fiscal year of 2023. Our rate was better than anticipated this year, primarily due to the shift in our geographical mix of earnings. Deluted EPS increased to 64 cents from 7 cents last year, due largely to the improvement in our operating results, partially offset by an unfavorable impact from the increase in our effective tax rate. Foreign currency translation was 3 cents diluted to EPS in the quarter, and the impact from the business disruptions in Israel and other parts of the Middle East was 2 cents diluted.

Fabrizio Freda: And this trend was further reinforced in July, when our company retail sales growth accelerated to meet single digit, driven by double-digit growth in fragrance and healthcare.

Tracey Travis: Our rate was better than anticipated this year, primarily due to the shift in our geographical mix of earnings. Diluted EPS increased to $0.64 from $0.07 last year, due largely to the improvement in our operating results, partially offset by an unfavorable impact from the increase in our effective tax, Foreign currency translation was $0.03 diluted to EPS in the quarter and the impact from the business disruptions in Israel and other parts of the Middle East was $0.02 diluted.

Speaker Change: Our rate was better than anticipated this year, primarily due to the shift in our geographical mix of earnings.

Fabrizio Freda: Moreover, the company retail sales improved to meet single-digit growth in skincare and we gained share in the category in July.

Diluted EPS increased to 64 cents from seven <unk> last year due largely to the improvement in our operating results, partially offset by an unfavorable impact from the increase in our effective tax rate.

Fabrizio Freda: For fiscal year 2025, we forecast the global prestige beauty industry to grow 2-3%. Reflecting ongoing trends in many developed and emerging markets globally.

Fabrizio Freda: For fiscal year 2025, we forecast the global prestige beauty industry to grow 2-3%. Reflecting ongoing trends in many developed and emerging markets globally. The market in the West, which collectively exceeded fiscal year 2024, relatively strongly, are trying to drive the industry performance. The markets in the East, in total, are expected to be tempered as trends in Japan and Southeast Asia, is offset by ongoing declines in mainland China and Asia travel retail. We expect the global prestige beauty industry to re-accelerate to historical meet single-digit growth in fiscal year 2026, assuming China progressively stabilised and then returned to growth.

Speaker Change: Foreign currency translation was <unk> <unk> dilutive to EPS in the quarter and the impact from the business disruptions in Israel and other parts of the middle East with two cents dilutive.

Fabrizio Freda: The market in the West, which collectively exceeded fiscal year 2024, relatively strongly, are trying to drive the industry performance.

Tracey Travis: Turning now to our full year results. Although we saw growth in the second half, our full-year results highlight both volatility and the impact of our own challenges in some key areas of our business. Collectively, the pressure in mainland China from the ongoing softness and overall prestige beauty, the necessary actions we took in Asia travel retail during the first half of the year to reduce high trade inventory levels in a prolonged soft retail environment, and continued pressure from the competitive environment, particularly in North America, outweighed the solid growth we saw during the year in our Amia and Latin markets.

Speaker Change: Turning now to our full year results.

Speaker Change: Although we saw growth in the second half our full year results highlight the volatility and the impact of our own challenges in some key areas of our business.

Fabrizio Freda: The markets in the East, in total, are expected to be tempered as trends in Japan and Southeast Asia, is offset by ongoing declines in mainland China and Asia travel retail.

Tracey Travis: Collectively, the pressure in mainland China from the ongoing softness and overall prestige beauty, the necessary actions we took in Asia travel retail during the first half of the year to reduce high trade inventory levels in a prolonged soft retail environment, and continued pressure from the competitive environment, particularly in North America, outweighed the solid growth we saw during the year in our EMEA and LATAM market. Organic net sales decreased 2% primarily due to the ongoing softness and overall prestige beauty in mainland China, leading to a 3% decline in Asia Pacific.

Speaker Change: Collectively the pressure in mainland China from the ongoing softness in overall prestige beauty and necessary actions, we took in Asia travel retail during the first half of the year to reduce high trade inventory levels and a prolonged soft retail environment and continued pressure from the competitive environment, particularly in North America.

Fabrizio Freda: We expect the global prestige beauty industry to re-accelerate to historical meet single-digit growth in fiscal year 2026, assuming China progressively stabilised and then returned to growth.

Speaker Change: Outweighed the solid growth we saw during the year in our EMEA and Latam markets.

Tracey Travis: Organic net sales decreased 2% primarily due to the ongoing softness and overall prestige beauty in mainland China, leading to a 3% decline in Asia Pacific. The challenges in Asia travel retail also pressured sales, resulting in a 2% decline in Amia. Our return to growth in Asia travel retail in the second half was not enough to offset the first half decline, doing parts of retail trends decelerating throughout the second half in China. Net sales in the Americas was overall flat compared to last year. From a category perspective, skin care net sales declined 3%, largely due to the declines in mainland China and Asia travel retail, and make up decreased 1%, also reflecting these challenges as well as a prior year benefit from changes made to net take back loyalty program.

Speaker Change: Organic net sales decreased 2%, primarily due to the ongoing softness in overall Christie's beauty in mainland China, leading to a 3% decline in Asia Pacific.

Fabrizio Freda: With this industry landscape, and given the size of our business in some areas most challenged, our fiscal year 2025 organic sales growth outlook range is in a decline of 1% to an increase of 2%. Our organic sales growth outlook reflects an acceleration in several areas of business partially offset by declines in mainland China and Asia travel retail.

Tracey Travis: With this industry landscape, and given the size of our business in some areas most challenged, our fiscal year 2025 organic sales growth outlook range is in a decline of 1% to an increase of 2%. Our organic sales growth outlook reflects an acceleration in several areas of business partially offset by declines in mainland China and Asia travel retail. For our first quarter, the pressure is more acute, such that our organic sales outlook calls for decline, which Tracy will describe in further detail.

Tracey Travis: The challenges in Asia travel retail also pressured sales, resulting in a 2% decline in EMEA as our return to growth in Asia travel retail in the second half was not enough to offset the first half decline, due in part to retail trends decelerating throughout the second half in China.

Speaker Change: The challenges in Asia travel retail also pressured sales, resulting in a 2% decline in EMEA as a return to growth in Asia travel retail in the second half was not enough to offset the first half decline due in part to retail trends decelerating throughout the second half in China.

Tracey Travis: Net sales in the Americas was overall flat compared to last year.

Speaker Change: Net sales in the Americas was overall flat compared to last year.

Fabrizio Freda: For our first quarter, the pressure is more acute, such that our organic sales outlook calls for decline, which Tracy will describe in further detail.

Tracey Travis: From a category perspective, skincare net sales declined 3% largely due to the declines in mainland China and Asia travel retail, and makeup decreased 1%, also reflecting these challenges as well as a prior year benefit from changes made to MAC's Take Back Loyalty program.

Speaker Change: From a category perspective skin care net sales declined 3% largely due to the declines in mainland China and Asia travel retail and makeup decreased 1% also reflecting these challenges as well as a prior year benefit from changes made to Max take that loyalty program.

Fabrizio Freda: For fiscal year 2025, we are focusing consumer-facing investment on the biggest opportunity, a streamlining our organization to be faster and more agile in order to fuel the organic sales growth momentum we have in many areas of our business across developed and emerging. We also intend to better leverage the strengths of our brands in North America, where we are leaders in prestige make up, which is the region's biggest category, and where we hold the top two ranked brands.

Tracey Travis: Net sales fell 4% in hair care and rose 2% in, confronted with the volatility throughout the year, just discussed.

Tracey Travis: Net sales fell 4% in hair care and rose 2% in fragrance. Enfronted with the volatility throughout the year just discussed, our teams attempted to balance cost efficiency actions with consumer-facing investments to support growth. Net sales with our specialty multi retailers and in our freestanding stores each grew double digits. Global travel retail represented 19% of our reported sales in fiscal 2024, and online net sales represented 28%. Our growth margin improved 30 basis points to 71.7% compared to 71.4% last year, reflecting the initiatives we took throughout the year to reduce excess and obsolete inventory as well as changes and brand mix.

Speaker Change: Net sales fell 4% in hair care and rose 2% in fragrance.

Speaker Change: And fronted with the volatility throughout the year just discussed our teams attempted to balanced cost efficiency actions with consumer facing investments to support growth.

Tracey Travis: Our teams attempted to balance cost efficiency actions with consumer facing investments to support growth.

Fabrizio Freda: We also intend to better leverage the strengths of our brands in North America, where we are leaders in prestige make up, which is the region's biggest category, and where we hold the top two ranked brands.

Tracey Travis: Net sales with our specialty multi retailers and in our freestanding stores each grew double digit.

Speaker Change: Net sales with our specialty multi retailers and in our freestanding stores each grew double digits.

Tracey Travis: Global Tribal Retail represented 19% of our reported sales in fiscal 2024, and online net sales represented 28, Our gross margin improved 30 basis points to 71.7%. Compared to 71.4% last year, reflecting the initiatives we took throughout the year to reduce excess and obsolete inventory, as well as changes in brand met.

Speaker Change: Global travel retail represented 19% of our reported sales in fiscal 2024.

Fabrizio Freda: And in prestige came here, adding four of the top five ranked brands.

Fabrizio Freda: And in prestige came here, adding four of the top five ranked brands. Moreover in North America, we also intend to leverage the market strengths across generation, as we forecast a balanced contribution to industrial growth by age.

Speaker Change: And online net sales represented 28%.

Fabrizio Freda: Moreover in North America, we also intend to leverage the market strengths across generation, as we forecast a balanced contribution to industrial growth by age.

Speaker Change: Our gross margin improved 30 basis points to 71, 7%.

Speaker Change: Compared to 71, 4% last year, reflecting the initiatives, we took throughout the year to reduce excess and obsolete inventory as well as changes in brand mix.

Fabrizio Freda: Looking at our strategic priorities for fiscal year 2025, let me begin with skincare, which represents over 60% of our sales, and is our most profitable product category.

Fabrizio Freda: Looking at our strategic priorities for fiscal year 2025, let me begin with skincare, which represents over 60% of our sales, and is our most profitable product category. Our initiative has designed to enable us to even better leverage our top ranked global prestige skincare portfolio to welcome new consumers, and further engage our loyal consumer through elevated precision marketing, a robust, accretive innovation pipeline, and a standard reach in high growth channels. This starts with the ordinary, which entered fiscal year 2025 with momentum, having growth is organized sales by more than 20% in fiscal year 2024.

Tracey Travis: Partially offsetting this progress was an unfavorable impact from foreign currency and the impact from the under absorption of overhead and our plants due to the necessary pull down of production earlier in the year. Operating expenses increased 160 basis points to 61.5% of sales, reflecting delivered from the sales decline, including our investments to support targeted expanded consumer reach globally into support growth where we had momentum. Operating income declined 13% to $1.6 billion from $1.8 billion last year, and our operating margin contracted 120 basis points to 10.2% for the full year. Our effective tax rate for the year was 31% compared to 26.5% last year, reflecting a higher effective tax rate on our foreign operations due to the geographical mix of our earnings and the unfavorable impact associated with previously issued stock-based compensation.

Tracey Travis: Partially offsetting this progress with an unfavorable impact from foreign currency and the impact from the underabsorption of overhead in our plants due to the necessary pull-down of production earlier in the year.

Speaker Change: Partially offsetting this progress with an unfavorable impact from foreign currency and the impact from the under absorption of overhead in our plants due to the necessary pull down of production earlier in the year.

Fabrizio Freda: Our initiative has designed to enable us to even better leverage our top ranked global prestige skincare portfolio to welcome new consumers, and further engage our loyal consumer through elevated precision marketing, a robust, accretive innovation pipeline, and a standard reach in high growth channels.

Tracey Travis: Operating expenses increased 160 basis points to 61.5% of sales, reflecting de-leverage from the sales decline, including our investments to support targeted expanded consumer reach globally and to support growth where we had momentum.

Speaker Change: Operating expenses increased 160 basis points to 61, 5% of sales, reflecting deleverage from the sales decline, including our investments to support targeted expanded consumer reach globally and to support growth, where we had momentum.

Tracey Travis: Operating income declined 13% to $1.6 billion from $1.8 billion last year and our operating margin contracted 120 basis points to 10.2% for the full year. Our effective tax rate for the year was 31% compared to 26.5% last year, reflecting a higher effective tax rate on our foreign operations due to the geographical mix of our earnings and the unfavorable impact associated with previously issued stock-based compensation.

Operating income declined 13% to $1 $6 billion from $1 $8 billion last year, and our operating margin contracted 120 basis points to 10, 2% for the full year.

Fabrizio Freda: This starts with the ordinary, which entered fiscal year 2025 with momentum, having growth is organized sales by more than 20% in fiscal year 2024. The ordinary is leading the way among our brands in capitalizing on what space is opportunity in products, channels and geographies.

Speaker Change: Our effective tax rate for the year was 31% compared to 26, 5% last year, reflecting a higher effective tax rate on our foreign operations due to the geographical mix of our earnings and the unfavorable impact associated with previously issued stock based compensation.

Fabrizio Freda: The ordinary is leading the way among our brands in capitalizing on what space is opportunity in products, channels and geographies. In the fourth quarter, the ordinary launched its first product in lip care, executed a usually successful TikTok shop super brand day campaign in the US, and established its footprint in Japan. For fiscal year 2025, the ordinary has already newly entered the body care subculture, and is preparing to expand into more emerging markets, even its proven successful launches in India, the Middle East and South China Africa over the last two years.

Fabrizio Freda: In the fourth quarter, the ordinary launched its first product in lip care, executed a usually successful TikTok shop super brand day campaign in the US, and established its footprint in Japan.

Tracey Travis: Net earnings was $935 million and diluted EPS was $2.59, both declining 25% compared to last year. Foreign currency translation was 10 cents diluted to EPS, and the impact from the business disruptions in Israel and other parts of the Middle East was 6 cents diluted. We generated $2.4 billion in that cash flows from operating activities compared to $1.7 billion last year. The increase reflects improvements in working capital, which was largely due to the actions we took to reduce in-house inventory levels. We utilized $919 million for capital investments and returned $947 million in cash to stockholders through dividends.

Tracey Travis: Net earnings was $935 million and diluted EPS was $2.59, both declining 25% compared to last year. Foreign currency translation with 10 cents diluted to EPS. And the impact from the business disruptions in Israel and other parts of the Middle East was six cents diluted.

Speaker Change: Net earnings was $935 million and diluted EPS was $2 59, both declining 25% compared to last year.

Speaker Change: Foreign currency translation was 10 cents dilutive to EPS.

Fabrizio Freda: For fiscal year 2025, the ordinary has already newly entered the body care subculture, and is preparing to expand into more emerging markets, even its proven successful launches in India, the Middle East and South China Africa over the last two years.

Speaker Change: And the impact from the business disruptions in Israel and other parts of the Middle East was six cents diluted.

Tracey Travis: We generated $2.4 billion in net cash flows from operating activities compared to $1.7 billion last year. The increase reflects improvements in working capital, which was largely due to the actions we took to reduce in-house inventory levels.

Speaker Change: We generated $2 $4 billion in net cash flows from operating activities compared to $1 $7 billion last year. The increase reflects improvements in working capital, which was largely due to the actions we took to reduce in house inventory levels, we utilized $919 million for capital investments and returned 947 million.

Fabrizio Freda: Among the brands we are incubating, a start in fiscal year 2024 was new out in skincare. The brand has a promising future.

Fabrizio Freda: Among the brands we are incubating, a start in fiscal year 2024 was new out in skincare. The brand has a promising future. Clinics is making great strides, executing its strategy to double down on its authentic dermatologist heritage. Clinics become this work in the US and UK, this past spring, and has been expanding its global rollout. This includes its successful launch on the US Amazon Premium Beauty Story March. Impressively, Clinics has returned to share growth in the US prestige skincare with three consecutive months of gains to July.

Tracey Travis: We utilize $919 million for capital investments and return $947 million in cash to stockholders through dividends. After our initial minority investment in Deciem in 2017 and then increasing our investment to become majority owner in 2021, we are pleased to have completed, subject to finalization of the purchase price, our acquisition of the remaining equity interest in Deciem this past May for $859 million, of which $829 million was paid as of June 30, 2024.

Fabrizio Freda: Clinics is making great strides, executing its strategy to double down on its authentic dermatologist heritage.

Fabrizio Freda: Clinics performance in US retail in July was particularly impressive, with the brand skincare brand and makeup outperforming across subcategories, and Clinics retaking the number one rank in overall prestige beauty. Lamar, along with Esteloda, a renewed franchise, cured our luxury skincare strategy. With both brands poised to build on their successful in of fiscal year 2024, during which Lamar exceptional growth made it our best performing. For Renutri, we plan to build upon its fiscal year 2024 launches of the new moisturizer and serum foundation this year through an expanded protocol for your focus on the science of skin longevity, a visible age reversal.

Speaker Change: And cash to stockholders through dividends.

Tracey Travis: After our initial minority investment in Destiny in 2017 and then increasing our investment to become a majority owner in 2021, we are pleased to have completed, subject to finalization of the purchase price, our acquisition of the remaining equity interest in Destiny in this past May for $859 million, of which $829 million was paid as of June 30 of 2024. Looking ahead now to our outlook for fiscal 2025, while acknowledging some initial bright spots related to pivots in our strategy, we are cognizant that overall global prestige beauty growth has tempered in recent months as reflected in the current declines in mainland China and Asia travel retail, particularly high-nan.

After our initial minority investment in <unk> in 2017, and then increasing our investment to become a majority owner in 2021. We are pleased to have completed subject to finalization of the purchase price or acquisition of the remaining equity interest in Daphne him. This past may for $859 million of which $829 million.

Fabrizio Freda: Clinics become this work in the US and UK, this past spring, and has been expanding its global rollout.

Fabrizio Freda: This includes its successful launch on the US Amazon Premium Beauty Story March.

Fabrizio Freda: Impressively, Clinics has returned to share growth in the US prestige skincare with three consecutive months of gains to July. Clinics performance in US retail in July was particularly impressive, with the brand skincare brand and makeup outperforming across subcategories, and Clinics retaking the number one rank in overall prestige beauty.

Speaker Change: Was paid as of June 32024.

Tracey Travis: Looking ahead now to our outlook for fiscal 2025. While acknowledging some initial bright spots related to pivots in our strategy, we are cognizant that overall global prestige beauty growth has tempered in recent months as reflected in the current declines in mainland China and Asia travel retail, particularly high-end.

Speaker Change: Looking ahead now to our outlook for fiscal 2025.

Speaker Change: While acknowledging some initial bright spots related to pivots in our strategy. We are cognizant that overall global prestige beauty growth has tempered in recent months as reflected in the current declines in mainland, China and Asia travel retail, particularly Hainan.

Tracey Travis: Prestige beauty has also moderated in some of our major markets, like North America. And while we believe we have the right priorities for growth, we are also mindful of the level of our ability that continues to exist in many of our markets. Reportingly, we are reflecting a more subdued recovery of growth in fiscal 2025, which you have seen in this morning's press release. The PRGP remains a critical element in our ability to deliver margin expansion and ultimately is designed to put in place the cost structure necessary for the company to drive stronger leverage in its business on lower than our normal growth expectations this year.

Tracey Travis: Prestige Beauty has also moderated in some of our major markets like North America.

Speaker Change: Prestige beauty has also moderated in some of our major markets like North America.

Fabrizio Freda: Lamar, along with Esteloda, a renewed franchise, cured our luxury skincare strategy.

Tracey Travis: And while we believe we have the right priorities for growth, we are also mindful of the level of variability that continues to exist in many of our markets.

Speaker Change: And while we believe we have the right priorities for growth. We are also mindful of the level of variability that continues to exist in many of our markets.

Fabrizio Freda: With both brands poised to build on their successful in of fiscal year 2024, during which Lamar exceptional growth made it our best performing.

Tracey Travis: Accordingly, we are reflecting a more subdued recovery of growth in fiscal 2025, which you have seen in this morning's press release.

Accordingly, we are reflecting a more subdued recovery of growth in fiscal 2025, which you have seen in this morning's press release.

Fabrizio Freda: For Renutri, we plan to build upon its fiscal year 2024 launches of the new moisturizer and serum foundation this year through an expanded protocol for your focus on the science of skin longevity, a visible age reversal.

Tracey Travis: The PRGP remains a critical element in our ability to deliver margin expansion and ultimately is designed to put in place the cost structure necessary for the company to drive stronger leverage in its business on lower than our normal growth expectations this year. This should also yield even greater flow-through of benefits to profit as net sales progressively return to higher growth in future years.

Speaker Change: The P. R. G. P remains a critical element in our ability to deliver margin expansion and ultimately is designed to put in place the cost structure necessary for the company to drive stronger leverage in its business on lower than our normal growth expectations. This year.

Tracey Travis: This should also yield even greater flow through a benefits to profit as net sales progressively return to higher growth in future years. In fiscal 2024, we had already approved actions to begin addressing over capacity in parts of our supply chain, inclusive of streamlining, lining manufacturing and distribution costs where we could react more quickly, and to simplify certain areas of our overhead structure. Our PRGP initiatives are focused on three primary benefit areas for the company. First, accelerating margin expansion through both gross margin recovery and additional expense leverage, while also enabling additional cash generation for the company.

Fabrizio Freda: With the ordinary clinic, Estee Lauder and LaMaire, we are bringing to market in fiscal year 2025 a rich innovation pipeline focused on the benefits of nighttime skin care ritual, which is an incremental use education. Our brand portfolio strategically addressed these various skin concerns and types with targeted ingredients and claims designed to appeal to a diverse range of consumer segment because of price and product position.

Speaker Change: This should also yield even greater flow through of benefits to profit as net sales progressively return to higher growth in future years.

Tracey Travis: In fiscal 2024, we had already approved actions to begin addressing overcapacity in parts of our supply chain, inclusive of streamlining manufacturing and distribution costs where we could react more quickly, and to simplify certain areas of our overhead structure.

Speaker Change: In fiscal 2024, we had already approved actions to begin addressing overcapacity in parts of our supply chain inclusive of streamlining lining manufacturing and distribution costs, where we could react more quickly and to simplify certain areas of our overhead structure.

Tracey Travis: Our PRGP initiatives are focused on three primary benefit areas for the company. First, accelerating margin expansion through both gross margin recovery and additional expense leverage while also enabling additional cash generation for the company.

Speaker Change: Our pier G. P initiatives are focused on three primary benefit areas for the company.

Speaker Change: First accelerating margin expansion through both gross margin recovery and additional expense leverage while also enabling additional cash generation for the company.

Fabrizio Freda: Let me now turn to our next strategy priority.

Fabrizio Freda: Let me now turn to our next strategy priority. Capitalizing on the multiple growth drivers of high-end fragrances, where our luxury and artisanal portfolio of Jomalon Landon, Tom Ford, Lillabo, Kilian Paris, Frederic Mal and Erin Beauty collectively rose needs single digit organically in fiscal year 2024. The liquidity of the fragrance category, where we are number one ranked was the best performing tier in retail sales in fiscal year 2024, and we expect this to be the case again in fiscal year 2025.

Fabrizio Freda: Capitalizing on the multiple growth drivers of high-end fragrances, where our luxury and artisanal portfolio of Jomalon Landon, Tom Ford, Lillabo, Kilian Paris, Frederic Mal and Erin Beauty collectively rose needs single digit organically in fiscal year 2024.

Tracey Travis: Second, creating additional fuel for growth with targeted investments in consumer-facing activities. Third, simplifying our processes and creating more agility and speed in execution. We have begun executing against many initiatives within these three areas of benefit for the company. Regarding margin expansion, the significant pull down of production we did at the beginning last year to bring manufacturing levels well below our shipment trends in order to reduce our inventory level has already yielded cash benefits in fiscal 2024. This has also resulted in additional benefits from reduced discounts and obsolescence costs, and lower levels of expenses are expected to continue into fiscal 2025.

Tracey Travis: Second, creating additional fuel for growth with targeted investments in consumer-facing activities.

Speaker Change: Creating additional fuel for growth with targeted investments in consumer facing activities and third simplifying our processes and creating more agility and speed and execution.

Tracey Travis: And third, simplifying our processes and creating more agility and speed in execution.

Tracey Travis: We have begun executing against many initiatives within these three areas of benefit for the company. Regarding margin expansion, the significant pulldown of production we did at the beginning of last year to bring manufacturing levels well below our shipment trends in order to reduce our inventory level has already yielded cash benefits in fiscal 2024. This has also resulted in additional benefits from reduced discounts and obsolescence costs, and lower levels of expenses are expected to continue into fiscal 2025.

Speaker Change: We have begun executing against many initiatives within these three areas of benefit for the company.

Fabrizio Freda: The liquidity of the fragrance category, where we are number one ranked was the best performing tier in retail sales in fiscal year 2024, and we expect this to be the case again in fiscal year 2025.

Speaker Change: Regarding margin expansion this significant pull down of production we did at the beginning of last year to bring manufacturing levels well below our shipment trends in order to reduce our inventory level has already yielded cash benefits in fiscal 2024.

Fabrizio Freda: We are focused on further realizing the growth potential of high-end fragrances, even its broad base trends around the world, to drive great scales for the company.

Fabrizio Freda: We are focused on further realizing the growth potential of high-end fragrances, even its broad base trends around the world, to drive great scales for the company. From Lillabo's standing performance in fiscal year 2024, led by Asia Pacific, where its organic sales nearly doubled. To Jomalon Landon's disruptive campaign with Tom Harding, to drive its immense business, and we are well-positioned to build on our momentum. Our brand's exhibition expansion and compelling newness related, not only in the scent, but also in the form and size, to trade consumer into the luxury tier.

Speaker Change: This has also resulted in additional benefits from reduced discounts and obsolescence costs and lower levels of expenses are expected to continue into fiscal 2025.

Fabrizio Freda: From Lillabo's standing performance in fiscal year 2024, led by Asia Pacific, where its organic sales nearly doubled.

Tracey Travis: Additionally, this year we are planning to realize greater net benefits from our strategic pricing actions through less discounts and promotion, with our enhanced focus on precision marketing. These actions, along with the benefits of more accretive innovation, particularly in skincare, support the gross margin expansion we expect this year. Our existing shared services capabilities to support the simplification and standardization of key processes and scale capabilities faster, as well as rationalizing the breadth of distribution choices across our existing portfolio of brands. We have also negotiated savings across many of our spending areas and are already realizing savings in areas like transportation.

Tracey Travis: Additionally, this year we are planning to realize greater net benefits from our strategic pricing actions through less discounts and promotion with our enhanced focus on precision marketing. These actions, along with the benefits of more accretive innovation, particularly in skin care, support the gross margin expansion we expect this year.

Speaker Change: Additionally, this year, we are planning to realize greater net benefits from our strategic pricing actions through less discounts and promotion with our enhanced focus on precision marketing.

Fabrizio Freda: To Jomalon Landon's disruptive campaign with Tom Harding, to drive its immense business, and we are well-positioned to build on our momentum.

Speaker Change: These actions along with the benefits of more accretive innovation, particularly in skincare support the gross margin expansion, we expect this year.

Fabrizio Freda: Our brand's exhibition expansion and compelling newness related, not only in the scent, but also in the form and size, to trade consumer into the luxury tier.

Tracey Travis: Additionally, regarding expense leverage, with our expectation of a slower return to growth, there is increased leverage pressure from our fixed costs.

Additionally, regarding expense leverage with our expectation of a slower return to growth. There is increased leverage pressure from our fixed costs. We are executing against our restructuring program and have already approved initiatives to reduce spans and layers in certain parts of our business. Furthermore, we are expanding our exist.

Tracey Travis: We are executing against our restructuring program and have already approved initiatives to reduce spans and layers in certain parts of our business. Furthermore, we are expanding our existing shared services capabilities to support the simplification and standardization of key processes and scale capabilities faster, as well as rationalizing the breadth of distribution choices across our existing portfolio of brands.

Fabrizio Freda: And we are thrilled to be expanding our luxury portfolio with a September launch of the Balmond Beauty brand, which shows the fragrance category to begin its journey.

Speaker Change: <unk> shared services capabilities to support the simplification and standardization of key processes and scale capabilities faster as well as rationalizing the breadth of distribution choices across our existing portfolio of brands.

Fabrizio Freda: We are also focused on driving accelerated sales growth in the prestige tier of the fragrance category.

Fabrizio Freda: With our Estellotary Clinic brands, we brought rich bottom-market activations related for this and upcoming courses.

Tracey Travis: We have also negotiated savings across many of our spending areas and are already realizing savings in areas like transportation.

Speaker Change: We have also negotiated savings across many of our spending areas and are already realizing savings in areas like transportation.

Fabrizio Freda: Let me turn our strategy priority of winning in fast-growing channels globally.

Tracey Travis: Lastly, we are taking this opportunity of the PRGP to address some of the ways we work to simplify decision making and enhance our agility and go-to-market execution to be faster in this ever-changing, dynamic global prestige beauty environment. More to come on this in a future earnings call. Also, we anticipate at this point that approximately 80% of the net benefits realized from the PRGP in fiscal 2025 are targeted to improve gross profit, with the remaining 20% targeted to reduce certain operating expenses. This mix is likely to shift in fiscal 2026 as more of our expense actions contribute favorably to our overall expense structure, given the expected cadence of initiatives.

Speaker Change: Lastly, we are taking this opportunity of the PR G. P to address some of the ways, we work to simplify decision, making and enhance our agility and go to market execution to be faster in this ever changing dynamic global prestige beauty environment more to come on this in a future earnings call.

Fabrizio Freda: To do so, our mindset has shifted to more boldly merchandising our brands, where consumer are increasingly discovering a shopping for beauty, while executing with excellence a stain through to our high-touch approach.

Tracey Travis: More to come on this in a future earnings call.

Tracey Travis: Also...

Fabrizio Freda: While these encompasses both brick and mortar and online, today I will share with you examples from online.

Speaker Change: All told we anticipate at this point that approximately 80% of the net benefits realized from the PR GP in fiscal 2025 are targeted to improve gross profit with the remaining 20% targeted to reduce certain operating expenses.

Tracey Travis: We anticipate at this point that approximately 80% of the net benefits realized from the PRGP in fiscal 2025 are targeted to improve gross profit, with the remaining 20% targeted to reduce certain operating expenses.

Fabrizio Freda: In the US, our launches of cleaning, two-faced and bamboo and bamboo on the Azon Premium Beauty Store in the second house epitomized this philosophy.

Tracey Travis: This mix is likely to shift in fiscal 2026 as more of our expense actions contribute favorably to our overall expense structure given the expected cadence of initiatives.

Speaker Change: This mix is likely to shift in fiscal 2026th as more of our expense actions contribute favorably to our overall expense structure, given the expected cadence of initiatives.

Fabrizio Freda: Clinique launched with a skin analysis tool in March and by June had expanded to offer life chart with a clinic ambassador while bamboo and bamboo launched with extensive hair education from the brand's ester stylist. All three brands are up to a very strong start on the US Amazon Premium Beauty Store. Clinique and bamboo and bamboo are seeing promising uptake also with male consumers. And for Clinique, where we now have a full-courster of performance, we are encouraged by the extent of consumer-subscladding for future purchases as well as the strong level of repeat purchases in the course.

Tracey Travis: We also expect to take restructuring and other charges of at least approximately $120 million in fiscal 2025 from approved initiatives, with additional charges expected during the course of the year as more initiatives are finalized and approved. However, with modest sales growth expected in fiscal 2025, as I indicated before, we will unfortunately also experience a greater amount of fixed expense due to leverage, in addition to the unfavorable mix pressure from softer sales performance in some of our higher margin categories and regions. And as we communicated, we are protecting a portion of the savings we generate from the PRGP to reinvest selectively in advertising and store activation to fuel growth with the brands and regions where we have momentum and support the growth we are currently experiencing with active Durham luxury fragrance and distribution expansion and faster growth channels.

Tracey Travis: We also expect to take restructuring and other charges of at least approximately $100 to $120 million in fiscal 2025 from approved initiatives, with additional charges expected during the course of the year as more initiatives are finalized and approved.

Speaker Change: We also expect to take restructuring and other charges of at least approximately $100 million to $120 million in fiscal 2025 from approved initiatives with additional charges expected during the course of the year as more initiatives are finalized and approved.

Fabrizio Freda: All three brands are up to a very strong start on the US Amazon Premium Beauty Store.

Fabrizio Freda: Clinique and bamboo and bamboo are seeing promising uptake also with male consumers.

Tracey Travis: However.

Speaker Change: 11th.

Tracey Travis: With modest sales growth expected in fiscal 2025, as I indicated before, we will unfortunately also experience a greater amount of fixed expense deleverage in addition to the unfavorable mixed pressure from softer sales performance in some of our higher margin categories and regions.

Speaker Change: With modest sales growth expected in fiscal 2025 as I indicated before we will unfortunately also experienced a greater amount of fixed expense deleverage. In addition to the unfavorable mix pressure from softer sales performance in some of our higher margin categories and regions and as we communicated we are protecting a porsche.

Fabrizio Freda: And for Clinique, where we now have a full-courster of performance, we are encouraged by the extent of consumer-subscladding for future purchases as well as the strong level of repeat purchases in the course.

Tracey Travis: And as we communicated, we are protecting a portion of the savings we generate from the PRGP to reinvest selectively in advertising and store activation to fuel growth with the brands and regions where we have momentum and support the growth we are currently experiencing with Active Derm, Luxury Fragrance, and Distribution Expansion and Faster Growth Channels.

Fabrizio Freda: So far in fiscal year 2025, Dr. Jard, Smashbox and Lab Series have already opened storefronts in the US and we have more launches on the horizon.

Fabrizio Freda: So far in fiscal year 2025, Dr. Jard, Smashbox and Lab Series have already opened storefronts in the US and we have more launches on the horizon. Around the world, we are building growth momentum with social commerce, driving new consumer acquisition by engaging consumers where they are spending their time, leveraging a content focus approach with live streaming and short form videos and activating full-final integration of social media and commerce. In China, we have scared and sustained strong growth on the wind with more brand launches related for fiscal year 2025. Looking at Japan and Korea, we have further unlocking platform opportunities for our brand with line and racotan and accelerating social commerce on Kakao with focus on gifting.

Speaker Change: One of the savings we generate from the PR G P to reinvest selectively in advertising in store activation to fuel growth with the brands and regions, where we have momentum and support the growth. We are currently experiencing with active derm luxury fragrance and distribution expansion and faster growth channels.

Fabrizio Freda: Around the world, we are building growth momentum with social commerce, driving new consumer acquisition by engaging consumers where they are spending their time, leveraging a content focus approach with live streaming and short form videos and activating full-final integration of social media and commerce.

Tracey Travis: We begin this fiscal year with our team fully immersed and committed to executing initiatives across all pillars of the PRGP now that we are post the completion of our design phase. We continue to expect to deliver approximately $1.1 to $1.4 billion of incremental operating profit from the full PRGP. And while we are focused on realizing slightly more than half of the net benefits in 2025, additional savings initiatives may be required as lower sales volumes are realized. Overall, we expected to progress margin expansion at an accelerated pace as a result of the plan by delivering annual margin expansion greater than our pre-pandemic historical average, inclusive of creating additional fuel to accelerate sales growth at a faster pace.

Speaker Change: We began this fiscal year with our team fully immersed and committed to executing initiatives across all pillars of the PR G. P. Now that we're post the completion of our design phase we continue to expect to deliver approximately $1 one to $1 $4 billion of incremental operating profit from the.

Fabrizio Freda: In China, we have scared and sustained strong growth on the wind with more brand launches related for fiscal year 2025.

Speaker Change: <unk> P. R. G P and while we are focused on realizing slightly more than half of the net benefits in 2025 additional savings initiatives may be required as lower sales volumes are realized.

Fabrizio Freda: Looking at Japan and Korea, we have further unlocking platform opportunities for our brand with line and racotan and accelerating social commerce on Kakao with focus on gifting.

Tracey Travis: Overall, we expect to progress margin expansion at an accelerated pace as a result of the plan by delivering annual margin expansion greater than our pre-pandemic historical average, inclusive of creating additional fuel to accelerate sales growth at a faster pace as well.

Speaker Change: Overall, we expect to progress margin expansion at an accelerated pace as a result of the plan by delivering annual margin expansion greater than our pre pandemic historical average inclusive of creating additional fuel to accelerate sales growth at a faster pace as well.

Fabrizio Freda: Our final strategic initiative is announcing our precision marking capabilities, enabling us to be more focused on new consumer acquisition. From brand equity to product assortment, distribution and media, we are better able to target new consumers and also to accelerate the effectiveness of acquisition and efficiency spent. This capability have been designed to leverage data, including over 200 million consumers profiles we have built over the years and exclusive partnerships with AI leaders. Precision marketing is also allowing us to be far more nimble with trend to action.

Tracey Travis: Accordingly, fiscal 2025 is projected to be a year of transition for the company. Navigating continued macroeconomic softness and challenges in a few key areas of our business while accelerating growth where we have momentum and executing against our real and realizing anticipated benefits from the PRGP. Our strategic comparatives for the year, as mentioned by Fabrizio, are focused on leveraging the inherent strengths we have across our brands, categories, regions, and talented employees. Over the next few years, Western markets, along with Asia Pacific markets, outside of China, are expected to drive a greater portion of our long-term profitable growth, as we deepen our focus on fast growing channels in these markets.

Tracey Travis: Accordingly, fiscal 2025 is projected to be a year of transition for the company, navigating continued macro economic softness and challenges in a few key areas of our business, while accelerating growth where we have momentum and executing against our real and realizing anticipated benefits from the PRGP.

Speaker Change: Accordingly fiscal 2025 is projected to be a year of transition for the company navigating continued macroeconomic softness and challenges in a few key areas of our business, while accelerating growth, where we have momentum and executing against our real and realizing the anticipated benefits from the PR G. P.

Tracey Travis: Our strategic imperatives for the year, as mentioned by Fabrizio, are focused on leveraging the inherent strengths we have across our brands, categories, regions, and talented employees.

Fabrizio Freda: Precision marketing is also allowing us to be far more nimble with trend to action.

Speaker Change: Our strategic imperatives for the year as mentioned by Fabrizio are focused on leveraging the inherent strengths, we have across our brands categories regions and talented employees over the next few years Western markets, along with Asia Pacific markets outside of China are expected to drive a greater portion of our law.

Fabrizio Freda: During fiscal year 2024, we began pilot studying in market around the world to merit trends with our rich portfolio of existing products and innovation to articulate against trends with speed. We realize promising results, including successes with the peach makeup and bronzing trends. We have now formalized this process and developed the trend AI tool to enable our brand teams around the world to quickly drive trends to action.

Tracey Travis: Over the next few years, Western markets along with Asia-Pacific markets outside of China are expected to drive a greater portion of our long-term profitable growth as we deepen our focus on fast-growing channels in these markets. We have the opportunity to leverage our skincare brands with strong luxe and active derm appeal, expand the consumer reach of our luxury fragrance portfolio, capture more relevant trends with our makeup brands, and re-energize our haircare brands, all with an eye towards capturing additional consumers while retaining loyal ones.

Fabrizio: Long term profitable growth as we deepen our focus on fast growing channels in these markets.

Tracey Travis: We have the opportunity to leverage our skincare brands with strong lux and active Durham appeals, expand the consumer reach of our luxury fragrance portfolio, capture more relevant trends with our makeup brands, and re-energize our haircare brands, all with an eye towards capturing additional consumers while retaining loyal ones. We also plan to begin leveraging our region-lined manufacturing and distribution network in Asia to create greater inventory agility as demand dictates. With that backdrop in mind, in using August 12, spot rates of 1.092 for the euro, 1.276 for the pound, 7.167 for the Chinese one, and 1364 for the Korean one, and full fiscal year organic net sales are forecasted to range between a decrease of 1% and an increase of 2%.

Speaker Change: We have the opportunity to leverage our skincare brands with strong luxton active derm appeal expand the consumer reach of our luxury fragrance portfolio capture more relevant trends with our makeup brands and re energize our hair care brands, all with an eye towards capturing additional consumers, while retaining loyal ones. We also plan to begin the <unk>.

Fabrizio Freda: In closing, we have designed our strategy reset to position the company for a stronger future.

Tracey Travis: We also plan to begin leveraging our regionalized manufacturing and distribution network in Asia to create greater inventory agility as demand dictates.

Speaker Change: Bridging our regional lines manufacturing and distribution network in Asia to create greater inventory agility as demand dictates.

Fabrizio Freda: We are wholly focused on executive excellence across these strategies and our PRGP to again realize the proven performance of our company.

Tracey Travis: With that backdrop in mind and using August 12 spot rates of 1.092 for the euro, 1.276 for the pound, 7.167 for the Chinese Yuan, and 1364 for the Korean Yuan, and full fiscal year organic net sales are forecasted to range between a decrease of 1% and an increase of 2%.

Speaker Change: With that backdrop in mind and using August 12 spot rates of 1.0 92 for the Euro 1.2 dollars 76 for the pound seven $1 67 for the Chinese one and $13 64 for the Korean won and full fiscal year organic net sales are forecasted to range.

Fabrizio Freda: To our employee, I extend my deep gratitude for your commitment.

Fabrizio Freda: I'm in a challenging time for our company.

Tracey Travis: And now I will turn the call over to Tracey.

Tracey Travis: And now I will turn the call over to Tracey. Thank you Fabrizio and hello everyone. We navigated through another challenging year across several areas of our business and took specific actions to more sustainably improve our sales and profit results as it became apparent that the recovery that was anticipated to occur throughout the year in some of our markets was impacted by far more volatility. And while we returned to growth in the second half, primarily driven by resumed shipments in Asia travel retail, we are certainly not pleased with our overall full year results.

Tracey Travis: Thank you Fabrizio and hello everyone.

Speaker Change: A decrease of 1% and an increase of 2%.

Tracey Travis: Throughout this past fiscal year, to mitigate the expected pressures to our business, we accelerated the implementation of initiatives under our PRGDP, as I previously mentioned, which we expect, combined with our sales growth range, to result in most of our margin expansion for the full year to be realized in gross margin. We expect our full year effective tax rate to be approximately 32%. Deluted EPS is expected to range between $2.75 and $2.95 before restructuring and other charges. This includes approximately three cents of dilution from currency translation. In constant currency, we expect EPS to grow by approximately seven to 15%.

Tracey Travis: Throughout this past fiscal year, to mitigate the expected pressures to our business, we accelerated the implementation of initiatives under our PRGP, as I previously mentioned, which we expect, combined with our sales growth range, to result in most of our margin expansion for the full year to be realized in gross margin.

Speaker Change: Throughout this past fiscal year to mitigate the expected pressures to our business, we accelerated the implementation of initiatives under our <unk> as I previously mentioned, which we expect combined with our sales growth range.

Tracey Travis: And while we returned to growth in the second half, primarily driven by resumed shipments in Asia travel retail, we are certainly not pleased with our overall full year results.

Speaker Change: Salt and most of our margin expansion for the full year to be realized in gross margin.

Tracey Travis: We expect our full-year effective tax rate to be approximately 32%.

We expect our full year effective tax rate to be approximately 32%.

Tracey Travis: And on top of global prestige volatility, the execution of our strategy has not met our expectations in some key areas of our business.

Tracey Travis: And on top of global prestige volatility, the execution of our strategy has not met our expectations in some key areas of our business. During the year, we also largely completed the basic design and began the implementation of our multi-year PRGP to deliver stronger results against our expectation for a more gradual rebuilding of sales growth along with an acceleration in profitability.

Tracey Travis: Diluted EPS is expected to range between $2.75 and $2.95 before restructuring and other charges. This includes approximately 3 cents of dilution from currency translation.

Speaker Change: Diluted EPS is expected to range between $2 75, and $2 95 before restructuring and other charges. This includes approximately <unk> <unk> of dilution from currency translation in constant currency, we expect EPS to grow by approximately 7% to 15%.

Tracey Travis: In constant currency, we expect EPS to grow by approximately 7 to 15 percent.

Tracey Travis: Net cash flows from operating activities are forecasted between $1.82 billion. Capital expenditures are planned at approximately five to five and a half percent of forecasted net sales. We expect our first quarter results to be pressured by the ongoing challenges in mainland China and Asia travel retail. We experienced as we exited fiscal 2024 mainly as subdued consumer sentiment, more experiential spending, and more conversion rates continued. We are, however, seeing some early signs of progress, particularly in North America, as Fabrizio mentioned, with our strategic pivots and assuming the progressive return of prestige, beauty sales growth in mainland China and Asia travel retail. We anticipate overall improvement over the course of the year.

Tracey Travis: Net cash flows from operating activities are forecasted between $1.8 and $2 billion.

Speaker Change: Net cash flows from operating activities are forecasted between one eight and $2 billion capital expenditures are planned at approximately five to five 5% of forecasted net sales.

Tracey Travis: Capital expenditures are planned at approximately 5 to 5.5% of forecasted net sales.

Tracey Travis: Before I discuss our fiscal 2025 outlook, let me first share with you the fiscal 2024 fourth quarter and full year results. Our fourth quarter organic net sales increased by 8% compared to last year, meeting our expectations albeit with a different geographical mix than we anticipated, which reflected lower results in mainland China and North America due notably to further softening and overall prestige beauty in both of these markets. A combination of tentative consumer sentiment in China and consumer inflationary pressures in North America are believed to have contributed to the deceleration in both markets.

Tracey Travis: We expect our first quarter results to be pressured by the ongoing challenges in mainland China and Asia travel retail we experienced as we exited fiscal 2024, mainly as subdued consumer sentiment, more experiential spending, and lower conversion rates continued.

Speaker Change: We expect our first quarter results to be pressured by the ongoing challenges in mainland China and Asia travel retail we experienced as we exited fiscal 2024, mainly a subdued consumer sentiment more experiential spending and lower conversion rates continue.

Tracey Travis: We are, however, seeing some early signs of progress, particularly in North America, as Fabrizio mentioned.

We are however, seeing some early signs of progress, particularly in North America, as Fabrizio mentioned with our strategic pivots and assuming the progressive return of prestige beauty sales growth in mainland, China and Asia travel retail, we anticipate overall improvement over the course of the year.

Tracey Travis: With our strategic pivots and assuming the progressive return of Prestige Beauty sales growth in mainland China and Asia travel retail, we anticipate overall improvement over the course of the year.

Tracey Travis: Deluted EPS rose to 64 cents from seven cents last year, exceeding our expectations largely due to our operating performance and the reduction in our full year effective tax rate.

Tracey Travis: Deluted EPS rose to 64 cents from seven cents last year, exceeding our expectations largely due to our operating performance and the reduction in our full year effective tax rate. From a geographic standpoint, organic net sales rose 32% in Amia, primarily driven by the increase in our Asia travel retail business, given the favorable comparison to the prior year period as shipments increased over last year's extremely low level. In addition, organic net sales increased in both our developed European and priority emerging markets.

Tracey Travis: With that backdrop for our first quarter, we currently expect organic net sales to fall three to five percent. At this time, we expect first quarter diluted EPS of two cents to ten cents before restructuring and other charges. This includes approximately one cent of accretion from currency translation. Intounced in currency, we expect EPS of one to. Assuming a full-year global prestige beauty performance in fiscal year 2025 of two to three percent, our remaining three quarters are anticipated to meet or slightly exceed this growth, which is in line with our previous sales performance objective of exceeding the overall average of global prestige beauty growth by at least one point.

Tracey Travis: With that backdrop for our first quarter, we currently expect organic net sales to fall three to five percent.

Speaker Change: With that backdrop for our first quarter. We currently expect organic net sales to fall 3% to 5%.

Tracey Travis: At this time, we expect first quarter diluted EPS of $0.02 to $0.10 before restructuring and other charges. This includes approximately one cent of accretion from currency translation. In constant currency, we expect EPS of one to nine cents.

Speaker Change: At this time, we expect first quarter diluted EPS of <unk> 10 cents before restructuring and other charges.

Tracey Travis: From a geographic standpoint, organic net sales rose 32% in Amia, primarily driven by the increase in our Asia travel retail business, given the favorable comparison to the prior year period as shipments increased over last year's extremely low level.

Speaker Change: This includes approximately <unk> <unk> of accretion from currency translation in constant currency, we expect EPS of $1 nine.

Tracey Travis: Assuming a full-year global prestige beauty performance in fiscal year 2025 of 2 to 3 percent, our remaining three quarters are anticipated to meet or slightly exceed this growth, which is in line with our previous sales performance objective of exceeding the overall average of global prestige beauty growth by at least 1.3.

Speaker Change: Assuming a full year global prestige beauty performance in fiscal year 2025.

Tracey Travis: In addition, organic net sales increased in both our developed European and priority emerging markets.

Speaker Change: 2% to 3% our remaining three quarters are anticipated to meet or slightly exceed this growth, which is in line with our previous sales performance objective of exceeding the overall average of global prestige beauty growth by at least one point.

Tracey Travis: Organic net sales in Asia Pacific decreased 4%, primarily driven by the ongoing softness and overall prestige beauty in mainland China, as well as lower shipments in Hong Kong as they are as we anniversary the initial surge in sales with the border reopening in the prior year period. Outside of these markets, net sales rose strong double digits in Japan as a favorable currency coupled with strong in-market activation and expanded consumer reach attracted both domestic and traveling consumers and bolster growth across all product categories and nearly all channels of distribution.

Tracey Travis: With the implementation of our fiscal 2026, the combination of additional sales momentum and margin accretion leverage from our PRGP should provide further progress toward returning to a more sustainable sales and profit growth algorithm. In closing, while our fiscal 2024 performance was disappointing, we remain focused on navigating the current volatile global prestige beauty dynamics, while leveraging the long-term strengths of our brands, and we maintain confidence in our strategic pivots and the execution of our PRGP to drive profitable growth in fiscal 2025 and beyond.

Tracey Travis: With the implementation of our PRGP initiatives, and if Global Prestige Beauty accelerates further in fiscal 2026, the combination of additional sales momentum and margin accretion leverage from our PRGP should provide further progress toward returning to a more sustainable sales and profit growth algorithm, and Cloding.

Speaker Change: With the implementation of our <unk> initiatives and if global prestige beauty accelerates further in fiscal 2026, the combination of additional sales momentum and margin accretion leverage from our P. R. G. P should provide further progress toward returning to a more sustainable sales and profit growth.

Tracey Travis: Outside of these markets, net sales rose strong double digits in Japan as a favorable currency coupled with strong in-market activation and expanded consumer reach attracted both domestic and traveling consumers and bolster growth across all product categories and nearly all channels of distribution.

Speaker Change: Algorithms.

Speaker Change: Yeah.

Speaker Change: In closing.

Tracey Travis: While our fiscal 2024 performance was disappointing, we remain focused on navigating the current volatile global prestige beauty dynamics while leveraging the long-term strengths of our brands, and we maintain confidence in our strategic pivots and the execution of our PRGP to drive profitable growth in fiscal 2025 and beyond.

Speaker Change: While our fiscal 2024 performance was disappointing we remain focused on navigating the current volatile global prestige beauty dynamics, while leveraging the long term strength of our brands and we maintain confidence in our strategic pivots in the execution of our pier G P to drive profitable growth in fiscal 'twenty.

Tracey Travis: In the America's organic net sales decreased 5%, driven by the decline in North America, reflecting the ongoing intensely competitive environment as well as an overall slowdown in growth in prestige beauty, especially in brick and mortar channels which particularly impacted our skin care and make up categories. Online sales grew mid-single digits in the region, benefiting from both retailer.com growth and the launch of select brands, especially Clinique, on the US Amazon premium beauty store.

Speaker Change: 25 and beyond.

Tracey Travis: Online sales grew mid-single digits in the region, benefiting from both retailer.com growth and the launch of select brands, especially Clinique, on the US Amazon premium beauty store.

Fabrizio Freda: I want to personally thank our team globally for their resilience, commitment, and dedication to the company through another difficult year. Before I turn the call back over to Fabrizio for a few final comments, as most of you know, I announced my planned retirement at the end of the fiscal year. Accordingly, I want to congratulate Achille Srivastava on his appointment as CFO effective November 1st. I look forward to working with him over this transition period and appreciate his commitment to the company and his ongoing success.

Tracey Travis: I want to personally thank our teams globally for their resilience, commitment and dedication to the company through another difficult year.

Speaker Change: I want to personally thank our teams globally for their resilience commitment and dedication to the company through another difficult year.

Tracey Travis: Before I turn the call back over to Fabrizio for a few final comments, as most of you know, I announced my planned retirement at the end of this fiscal year.

Speaker Change: Before I turn the call back over to <unk> for a few final comments as most of you know I announced my planned retirement at the end of this fiscal year Accordingly, I want to congratulate our keel srivastava on his appointment as CFO effective November one I look forward to working with him over this transition period and appreciate.

Tracey Travis: From a product category perspective, skincare organic net sales increased 15%, primarily due to the increased shipments within the Asia travel retail business referenced earlier, which drove net sales growth from both LaMaire and Estee Lauder. Organic net sales from the ordinary also increased across all geographic regions. Makeup organic net sales increased 1%. Net sales increased from Estee Lauder, benefiting from the resumption of shipments in Asia travel retail business and the continued global success of the double wear product franchise.

Tracey Travis: Accordingly, I want to congratulate Akhil Srivastava on his appointment as CFO effective November 1st. I look forward to working with him over this transition period and appreciate his commitment to the company and its ongoing success.

Tracey Travis: Organic net sales from the ordinary also increased across all geographic regions. Makeup organic net sales increased 1%.

Speaker Change: His commitment to the company and its ongoing success and now I'll turn it back to Fabrizio.

Fabrizio Freda: And now I'll turn it back to Fabrizio.

Fabrizio Freda: And now I'll turn it back to Fabrizio. Thank you very much.

Fabrizio Freda: Thank you, Tracey.

Fabrizio: Thank you Tracy.

Fabrizio Freda: I want to make a final comment before we turn to Q&A. Today, I announced my intention to retire from Astro, the company. It has been a privilege, a great honor to lead the company for 16 years. I have been deeply enriched by exceptional colleagues around the world, and I take this decision to retire with gratitude for all we have accomplished. I have two primary objectives ahead on my retirement. First, I intend to execute with excellent strategy reset, the Tracy and I described today, inclusive of our project recovery and broad plan. It is important to me that our next leader inherits its business with momentum.

Fabrizio Freda: I want to make a final comment.

Tracey Travis: Net sales increased from Estee Lauder, benefiting from the resumption of shipments in Asia travel retail business and the continued global success of the double wear product franchise.

Fabrizio: And I want to make it final comments before we turn to Q&A.

Fabrizio Freda: Please return to Q&A.

Fabrizio Freda: Today I announce my intention to retire from Estrode. It has been a privilege, a great honor to lead a company for 16 years. I have been deeply enriched by exceptional colleagues around the world, and I take this decision to retire with gratitude for all we have accomplished.

Tracy: Good day announced my intention to retire from Este Lauder companies.

Tracy: It has been a privilege and a great honor to lead the company for 16 years.

Tracey Travis: Clinique net sales rose strong double digits, fueled by the almost lipstick product franchise.

Tracey Travis: Clinique net sales rose strong double digits, fueled by the almost lipstick product franchise. Partially offsetting these increases were declines from Mac and Tom Ford. Organic net sales increased 2% in hair care and 1% in fragrance. Regarding fragrance, net sales growth was driven by the ongoing consumer appeal of all of those unique product offerings and targeted expanded consumer reach and Joe Malone, partially offset by declines in Estee Lauder and Clinique. Our growth margin expanded 380 basis points to 71.8% compared to last year.

Fabrizio: I have been deeply enriched by exception our colleagues around the world and I take this decision to retire we'd get attitude to for all we have accomplished.

Tracey Travis: Partially offsetting these increases were declines from Mac and Tom Ford.

Tracey Travis: Organic net sales increased 2% in hair care and 1% in fragrance.

Fabrizio Freda: I have two primary objectives ahead of my retirement.

Fabrizio: I have two primary objectives ahead of my retirement.

Tracey Travis: Regarding fragrance, net sales growth was driven by the ongoing consumer appeal of all of those unique product offerings and targeted expanded consumer reach and Joe Malone, partially offset by declines in Estee Lauder and Clinique.

Fabrizio Freda: First, I intend to execute with excellence the strategy we said Tracey and I described today, inclusive of our profit recovery and growth.

Fabrizio: I intend to execute with excellence strategic reset that trades at and I described today inclusive of our profit recovery and growth plan.

Fabrizio Freda: It is important to me that our next leader inherits the business with momentum.

Fabrizio: It is important to me that our next leader in heritage business with momentum.

Tracey Travis: Our growth margin expanded 380 basis points to 71.8% compared to last year. This increased primarily reflected lower obsolescence and overhead charges as well as higher skincare sales. Operating expenses decreased 340 basis points as a percentage of sales to 62.7% driven largely by the increase in net sales, improved growth margins, and lower general and administrative expenses.

Fabrizio Freda: Second, I plan to work closely with our board of directors and my successor once named to ensure a smooth transition. My passion for our beautiful company is as strong as ever, and I'm confident in its bright future. Throughout the years, I've deeply enjoyed representing the company with analysts and investors. I look forward to our continued engagement until I retire. And that concludes our prepared remarks.

Fabrizio Freda: Second, I plan to work closely with our board of directors and my successor, once named, to ensure a smooth transition.

Fabrizio: Second I plan to work closely with our board of directors and my successor once named to ensure a smooth transition.

Tracey Travis: This increased primarily reflected lower obsolescence and overhead charges as well as higher skincare sales. Operating expenses decreased 340 basis points as a percentage of sales to 62.7% driven largely by the increase in net sales, improved growth margins, and lower general and administrative expenses. During the quarter, we recorded $471 million of impairment charges related to Dr. Jart, given the continued lower than expected growth and profitability of the brand. We made the decision to exit the brand from its heavily discounted travel retail channel and prioritize direct investments in other more profitable areas of the business, including in mainland China and western markets where a broader assortment of the brand has been resonating well with consumers.

Fabrizio Freda: My passion for our beautiful company is as strong as ever, and I'm confident in its price.

Fabrizio: My passion for our beautiful company is as strong as ever and I'm confident in its bright future.

Fabrizio Freda: Throughout the years, I've deeply enjoyed representing the company with analysts and investors.

Fabrizio: Throughout the years I have deeply enjoyed represented the company with analyst and investors I look forward to our continued engagement until I retire.

Fabrizio Freda: I look forward to our continued engagement until I retire.

Tracey Travis: During the quarter, we recorded $471 million of impairment charges related to Dr. Jart, given the continued lower than expected growth and profitability of the brand. We made the decision to exit the brand from its heavily discounted travel retail channel and prioritize direct investments in other more profitable areas of the business, including in mainland China and western markets where a broader assortment of the brand has been resonating well with consumers.

Fabrizio Freda: And that concludes our prepared remarks.

Speaker Change: And that concludes our prepared remarks, we'd be happy to take your questions at this time.

Operator: We'll be happy to take your questions at this time. Ladies and gentlemen, the floor is now open for questions. If you have a question, you simply press star followed by one on your touch-tone telephones. To ensure everyone can ask the question of a living, each person to one person. Question, time permitting, we will return to you for additional questions. They just queue up again by pressing star and then one.

Operator: We'd be happy to take your questions at this time.

Operator: Ladies and gentlemen, the floor is now open for questions.

Speaker Change: Ladies and gentlemen, the floor is now open for questions. If you have a question you simply press star followed by one on your Touchtone telephone.

Operator: If you have a question, you simply press star followed by 1 on your touch-tone telephone.

Operator: To ensure everyone can ask their questions, we will limit each person to one minute. Time permitting, we will return to you for additional questions.

Speaker Change: To ensure everyone can ask the question, we will limit each person to one question.

Speaker Change: Time, permitting we will return to you for additional questions.

Tracey Travis: Operating income increased to $349 million and are operating margin expanded 700 basis points to 9% in the quarter. Our effective tax rate for the quarter was 22.8% compared to a negative 17.9% last year. The latter having had a larger year and true up to reflect our final effective tax rate for the fiscal year of 2023. Our rate was better than anticipated this year, primarily due to the shift in our geographical mix of earnings.

Operator: They just queue up again by pressing star and then one.

Speaker Change: They just queue up again by pressing Star then one.

Stephen Powers: Our first question today comes from Steve Powers from Deutsche Bank. Please go ahead with your question. Great, thank you so much. Thank you very much for your time for the company. As you personally look ahead at the priorities facing Estee Lauder, how are you thinking about or how would you frame the most important attributes that you'd look for in your successor, and how closely will you be involved over the coming months and quarters in finding that successor? Sure, as I said in the prepare remark, I will be very involved in we the board in working on the succession and obviously, as you know, is the board responsibility to decide the successor and about we are working all together to get the best output out of the work done for some time.

Operator: Our first question today comes from Steve Powers from Deutsche...

Speaker Change: Our first question today comes from Steve Powers from Deutsche Bank. Please go ahead with your question.

Tracey Travis: The latter having had a larger year and true up to reflect our final effective tax rate for the fiscal year of 2023.

Operator: Please go ahead with your questions.

Operator: Great.

Steve Powers: Great. Thank you so much.

Steve Powers: There's a lot to cover but Fabrizio maybe we can.

Operator: Thank you so much.

Speaker Change: Pick up where you left off as you as you both you Tracy both outlined.

Tracey Travis: Our rate was better than anticipated this year, primarily due to the shift in our geographical mix of earnings.

Operator: There's a lot to cover, but Fabrizio, maybe we can...

Speaker Change: A very challenging a transformational time for the company as you personally look ahead at the priorities facing Este Lauder, how are you thinking about or how would you frame. The most important attributes that you'd look for in your successor.

Operator: You know, pick up where you left off.

Tracey Travis: Deluted EPS increased to 64 cents from 7 cents last year due largely to the improvement in our operating results partially offset by an unfavorable impact from the increase in our effective tax rate. Foreign currency translation was 3 cents diluted to EPS in the quarter and the impact from the business disruptions in Israel and other parts of the Middle East was 2 cents diluted.

Operator: As you, as you both, you and Tracey, both outlined, you know, a very challenging and transformational time for the company.

Operator: As you personally look ahead at the priorities facing Estee Lauder, how are you thinking about, or how would you frame the most important attributes that you'd look for in your successor?

Operator: And, and how closely will you, will you be involved over the coming months and quarters in finding that successor?

Speaker Change: And how closely you will you will you be involved over the coming months and quarters and finding that successor.

Tracey Travis: Foreign currency translation was 3 cents diluted to EPS in the quarter and the impact from the business disruptions in Israel and other parts of the Middle East was 2 cents diluted.

Operator: Sure, as I said in the previous remark, I will be very involved in, with the board, in working on the succession and obviously, as you know, it's the board's responsibility to decide the successor, but we are working all together to get the best output out of the work done for some time.

Speaker Change: Sure as I said in the prepared remarks, I will be very involved in that we the board and working.

Tracey Travis: Turning now to our full year results.

Tracey Travis: Turning now to our full year results. Although we saw growth in the second half, our full year results highlight both volatility and the impact of our own challenges in some key areas of our business. Collectively, the pressure in mainland China from the ongoing softness and overall prestige beauty, the necessary actions we took in Asia travel retail during the first half of the year to reduce high trade inventory levels in a prolonged soft retail environment and continue pressure from the competitive environment, particularly in North America, outweighed the solid growth we saw during the year in our Amia and Latin markets.

Tracey Travis: Although we saw growth in the second half, our full year results highlight both volatility and the impact of our own challenges in some key areas of our business. Collectively, the pressure in mainland China from the ongoing softness and overall prestige beauty, the necessary actions we took in Asia travel retail during the first half of the year to reduce high trade inventory levels in a prolonged soft retail environment and continue pressure from the competitive environment, particularly in North America, outweighed the solid growth we saw during the year in our Amia and Latin markets. Organic net sales decreased 2% primarily due to the ongoing softness and overall prestige beauty in mainland China, leading to a 3% decline in Asia Pacific.

Speaker Change: On the succession and obviously as you know is the board's responsibility to decide the successor and.

But we are working all together to get the best out of the work done for some time. This is a long term process is not something that we are just starting working now obviously.

Operator: This is a long-term process, it's not something that we have just started working on now, obviously.

Fabrizio Freda: This is a long term process; it is not something that we have just started working on now, obviously. And in terms of the characteristic of the successor, I think the successor has to be obviously a great leader and understand the key elements of our company. And one of the key elements is being brand builders and people that can develop growth. We are a growth company, and we are a global company. And so obviously, being able to drive growth globally and being able to continue reshaping the cost structure of the company in the proper way that will become even more leverageable with future growth are going to be essential characteristics.

Operator: And in terms of the, um characteristic of the successor um I think the successor has to be obviously a great leader and understand the key element, of our company and one of the key elements is being brand builders and people that can develop growth.

Speaker Change: In term of deep.

Speaker Change: Characteristic.

Speaker Change: The successor.

Speaker Change: I think the successor has to be obviously, a great leader and understand the key elements.

Speaker Change: Our company and one of the key elements is that is being brand builders and people that can develop growth. We added good old company and we added global company and so obviously being able to drive growth globally.

Operator: We are a growth company and we are a global company and so obviously being able to drive growth globally and being able to continue reshaping the core structure of the company in the proper way that will become even more leverageable with future growth, are going to be essential characteristics.

Tracey Travis: The challenges in Asia travel retail also pressured sales resulting in a 2% decline in Amia is our return to growth in Asia travel retail in the second half was not enough to offset the first half decline, doing parts of retail trends decelerating throughout the second half in China.

Speaker Change: And being able to continue reshaping the cost structure of the company in the proper way that will become even more leverage with future growth.

Tracey Travis: Net sales in the Americas was overall flat compared to last year.

Tracey Travis: Net sales in the Americas was overall flat compared to last year. From a category perspective, skin care net sales declined 3%, largely due to the declines in mainland China and Asia travel retail and make up decreased 1%, also reflecting these challenges as well as a prior year benefit from changes made to net take back loyalty program. Net sales fell 4% in hair care and rose 2% in fragrance. Enfronted with the volatility throughout the year just discussed, our teams attempted to balance cost efficiency actions with consumer facing investments to support growth.

Speaker Change: Are going to be essential characteristics.

Tracey Travis: From a category perspective, skin care net sales declined 3%, largely due to the declines in mainland China and Asia travel retail and make up decreased 1%, also reflecting these challenges as well as a prior year benefit from changes made to net take back loyalty program.

Fabrizio Freda: But I just want to reassure you that the options that the board has developed, they all have these characteristics. So, as I said, the board is pretty well advanced in the work needed to determine the future.

Operator: But I just want to reassure you that the options that the board has developed, they all have these characteristics.

Speaker Change: But I just want to reassure you that the options that the board has developed.

Speaker Change: They all have these characteristics. So as I said the board is pretty wind events.

Operator: So as I said, the board is pretty well advanced in the work needed to determine the.

Speaker Change: The work needed to determine the suit.

Tracey Travis: Net sales fell 4% in hair care and rose 2% in fragrance.

Ryan Solane: Our next question comes from Ryan Solane from Bank of America. Please go ahead with your question. Hi, thanks, operator, and good morning, everyone. So maybe, you know, just to kind of try to put this year fiscal 25 into a little bit of a perspective, maybe Tracy, can you give us a sense of if China hadn't decelerated like it has since you last reported, you know, what would what would what would earnings power have been this year or maybe to put it a different way? How much in terms of your forecast this year in the change in trend in China, like how much do you think that actually affected earnings power in fiscal 25?

Operator: Our next question comes from Bryan Spillane from Bank of America.

Speaker Change: Our next question comes from Bryan Spillane from Bank of America. Please go ahead with your question.

Tracey Travis: Enfronted with the volatility throughout the year just discussed, our teams attempted to balance cost efficiency actions with consumer facing investments to support growth.

Operator: Please go ahead with your question.

Operator: Hi, thanks, thanks, operator.

Bryan Spillane: Hi, Thanks, Thanks, operator.

Good morning, everyone. So so maybe.

Tracey Travis: Net sales with our specialty multi retailers and in our freestanding stores each grew double digits.

Tracey Travis: Net sales with our specialty multi retailers and in our freestanding stores each grew double digits. Global travel retail represented 19% of our reported sales in fiscal 2024 and online net sales represented 28%. Our growth margin improved 30 basis points to 71.7% compared to 71.4% last year reflecting the initiatives we took throughout the year to reduce excess and obsolete inventory as well as changes and brand mix. Partially offsetting this progress was an unfavorable impact from foreign currency and the impact from the under absorption of overhead and our plants due to the necessary pull down of production earlier in the year.

Speaker Change: Just just to kind of try to put this year fiscal 'twenty five in to a little bit of a perspective.

Maybe Tracey can you give us a sense of.

Tracey Travis: Global travel retail represented 19% of our reported sales in fiscal 2024 and online net sales represented 28%.

Tracey: If China hadn't decelerated like it has since you last reported.

Speaker Change: You know.

Tracey Travis: Our growth margin improved 30 basis points to 71.7% compared to 71.4% last year reflecting the initiatives we took throughout the year to reduce excess and obsolete inventory as well as changes and brand mix.

Speaker Change: What would what are what would earnings power have been this year or maybe to put it a different way how much in terms of your your forecast this year and the change in trend in China like how much do you do you think that actually affected.

<unk> earnings power in fiscal 'twenty five.

Tracey Travis: Yeah, now thanks, Brian, for the question. So clearly, China and travel retail are important growth drivers for the company, have been historically, and they're also high-margin areas of the company as well. So when we see pressure in those areas as we saw in fiscal 2024, you can see what the impact on the company is. So if you know, right now in our guidance, mainland China is expected to be anywhere between flat to down high single digit, and travel retail Asia is expected to be down double digit. That puts you know, quite a bit of pressure on our earnings results in our EPS.

Speaker Change: Yeah no. Thanks, Brian for the question, So clearly, China and and travel retail are important growth drivers for the company had been historically and they're also high margin.

Tracey Travis: Operating expenses increased 160 basis points to 61.5% of sales reflecting delivered from the sales decline including our investments to support targeted expanded consumer reach globally into support growth where we had momentum. Operating income declined 13% to $1.6 billion from $1.8 billion last year and our operating margin contracted 120 basis points to 10.2% for the full year. Our effective tax rate for the year was 31% compared to 26.5% last year reflecting a higher effective tax rate on our foreign operations due to the geographical mix of our earnings and the unfavorable impact associated with previously issued stock based compensation.

Speaker Change: Areas of the company as well so when we see pressure in those areas as we saw in fiscal 2024.

Speaker Change: You can see what the impact on the company is so.

Tracey Travis: Operating income declined 13% to $1.6 billion from $1.8 billion last year and our operating margin contracted 120 basis points to 10.2% for the full year. Our effective tax rate for the year was 31% compared to 26.5% last year reflecting a higher effective tax rate on our foreign operations due to the geographical mix of our earnings and the unfavorable impact associated with previously issued stock based compensation.

Speaker Change: If you know right now in our guidance mainland China is expected to be anywhere between flat to down high single digit.

Speaker Change: And travel retail Asia is expected to be down double digit that puts quite a bit of pressure on our you know.

Speaker Change: Our earnings our earnings results and our EPS. The fact that this year with those two pressures, we actually will have EPS up is.

Tracey Travis: The fact that this year, with those two pressures, we actually will have EPS up is really because of the contribution of the profit and recovery growth plan, the PRGP, which we will refer to it from now on as we said in the prepared remarks. So, you know, that is delivering, you know, if you think about delivering around 51% at the low end of the range. Given the fact that we're relatively flat, if you take the midpoint of our range in terms of our growth this year, what we're expecting. So that means other markets like, you know, the Americas, EPAC outside of China and the MIA outside of travel retail are expected to grow.

Speaker Change: Is really because of the contribution of the profit and recovery growth plan.

Tracey Travis: Net earnings was $935 million and diluted EPS was $2.59 both declining 25% compared to last year. Foreign currency translation was 10 cents diluted to EPS and the impact from the business disruptions in Israel and other parts of the Middle East was 6 cents diluted. We generated $2.4 billion in that cash flows from operating activities compared to $1.7 billion last year. The increase reflects improvements in working capital, which was largely due to the actions we took to reduce in-house inventory levels.

Speaker Change: <unk>, which we will refer to it from now on as the as we said in the prepared remarks so.

Speaker Change: So you know that that is delivering.

Speaker Change: If you think about delivering.

Speaker Change: Delivering around 51% at the low end of the range given the fact that were relatively flat. If you take the midpoint of our range in terms of our growth. This year, what we're expecting so that means other markets like the.

Tracey Travis: We generated $2.4 billion in that cash flows from operating activities compared to $1.7 billion last year. The increase reflects improvements in working capital, which was largely due to the actions we took to reduce in-house inventory levels.

Speaker Change: The Americas.

Speaker Change: APAC outside of China, and EMEA outside of travel retail are expected to grow.

Tracey Travis: We utilized $919 million for capital investments and returned $947 million in cash to stockholders through dividends.

Tracey Travis: We utilized $919 million for capital investments and returned $947 million in cash to stockholders through dividends. After our initial minority investment in Destiny in 2017 and then increasing our investment to become a majority owner in 2021, we are pleased to have completed subject to finalization of the purchase price, our acquisition of the remaining equity interest in Destiny in this past May for $859 million of which $829 million was paid as of June 30 of 2024.

Tracey Travis: But, but if you take, you know, that contribution, it is being offset by some expense; delivery, it's also in looking at your models. You know, you need to add back some of the interest expense from our debt that we took out for the acquisition of Tom Ford and Desium and in bonus as well, back at target levels. So those are some of the differences, and then obviously you heard our estimates for currency, which will be slightly diluted for the year. So all of that puts pressure on, you know, our overall EPS. But still on a year that is, you know, close to what it was last year from a sales form performance perspective, we are demonstrating improved margin and improved DPS.

Speaker Change: But but if you take.

Speaker Change: That contribution is being offset by some expense deleverage. It's also and looking at your models.

Speaker Change: You need to add back some of the interest expense from our debt that.

Speaker Change: We took out for the acquisition of Tom Ford and death him.

Speaker Change: And and bonus as well back at target levels. So those are some of the differences and then obviously you heard our estimates for currency.

Speaker Change: Which are which will be slightly.

Tracey Travis: Looking ahead now to our outlook for fiscal 2025, while acknowledging some initial bright spots related to pivots in our strategy, we are cognizant that overall global prestige beauty growth has tempered in recent months as reflected in the current declines in mainland China and Asia travel retail particularly high-nan. Prestige beauty has also moderated in some of our major markets like North America. And while we believe we have the right priorities for growth, we are also mindful of the level of our ability that continues to exist in many of our markets.

Speaker Change: Dilutive for for the year, so all of that puts pressure on our overall EPS.

Speaker Change: But still on a year that is key.

Speaker Change: Close to what it was last year from a sales performance perspective, we are demonstrating improved margin and improved EPS and <unk>.

Tracey Travis: Prestige beauty has also moderated in some of our major markets like North America.

Tracey Travis: And that is because of, and with a negative mixing past related to travel retail in China. And that is because of both a PRP, a PRGP, as well as other actions the company has taken to really halt a lot of activities that we would normally do in the course of a year. We are also importantly, as I said in our prepared remarks, protecting some investment for the momentum that we spoke about in the prepared remarks. In categories like fragrance, the active-derm category, and where we're seeing momentum, that will be important for us when we think forward to fiscal 26 and beyond.

Speaker Change: That is because of and with a negative mix impact related to travel retail and China and that is because of both the PRP.

Tracey Travis: And while we believe we have the right priorities for growth, we are also mindful of the level of our ability that continues to exist in many of our markets.

Speaker Change: Pier G P as well as other actions the company has taken to really halt a lot of activities that are that we would normally do in the course of a year. We are also importantly, as I said in our prepared remarks.

Tracey Travis: Reportingly, we are reflecting a more subdued recovery of growth in fiscal 2025 which you have seen in this morning's press release.

Tracey Travis: Reportingly, we are reflecting a more subdued recovery of growth in fiscal 2025 which you have seen in this morning's press release. The PRGP remains a critical element in our ability to deliver margin expansion and ultimately is designed to put in place the cost structure necessary for the company to drive stronger leverage in its business on lower than our normal growth expectations this year. This should also yield even greater flow through a benefits to profit as net sales progressively return to higher growth in future years.

Speaker Change: Protecting some investment for the momentum that we spoke about in the prepared remarks in categories like fragrance.

Speaker Change: The active derm category, and and where we're seeing momentum that will be important for us when we think forward to.

Tracey Travis: This should also yield even greater flow through a benefits to profit as net sales progressively return to higher growth in future years.

Speaker Change: The fiscal 'twenty six and beyond.

Tracey Travis: And have more market growth, hopefully, but also, you know, those brands continuing to become a greater proportion of the business.

Speaker Change: And and have more market growth hopefully, but also you know those those brands continuing to become a greater proportion of the business.

Tracey Travis: In fiscal 2024, we had already approved actions to begin addressing over capacity in parts of our supply chain, inclusive of streamlining, lining manufacturing and distribution costs where we could react more quickly and to simplify certain areas of our overhead structure. Our PRGP initiatives are focused on three primary benefit areas for the company. First, accelerating margin expansion through both gross margin recovery and additional expense leverage while also enabling additional cash generation for the company.

Speaker Change: Okay.

Lauren Lieberman: And our next question comes from Lauren Lieberman from Barclays. Please go ahead with your question. Great. Thanks. Good morning. I'm pausing ahead to frame my seven questions. So I want to just follow on Tracy. Maybe on what you've just shared and the driver, the fact that there will be earnings growth even with still flat to down. And you you called out hoping some activities protecting some investment in noting all the expensive leverage that there will be. How should I why shouldn't I be concerned that there's going to be constraining investment this year because the market doesn't stand still right you mentioned North America more competitive.

Speaker Change: And our next question comes from Lauren Lieberman from Barclays. Please go ahead with your question.

Tracey Travis: Second, creating additional fuel for growth with targeted investments in consumer facing activities. Third, simplifying our processes and creating more agility and speed in execution. We have begun executing against many initiatives within these three areas of benefit for the company. Regarding margin expansion, the significant pull down of production we did at the beginning last year to bring manufacturing levels well below our shipment trends in order to reduce our inventory level has already yielded cash benefits in fiscal 2024.

Operator: And good morning, everyone.

Lauren Lieberman: Great. Thanks, good morning.

Lauren Lieberman: I'm pausing I had to frame my seven question.

Tracey Travis: Second, creating additional fuel for growth with targeted investments in consumer facing activities.

Lauren Lieberman: So I wanted to just follow on Tracy maybe on the what you just shared and the driver is the fact that there will be earnings growth even with sales.

Operator: So maybe, um, you know, just just to kind of try to put this year fiscal 25 into a little bit of a perspective.

Speaker Change: Flat flat to down and you you called out helping some activities protecting some investment, noting all the expense deleverage it there will be.

Tracey Travis: Third, simplifying our processes and creating more agility and speed in execution.

Speaker Change: How should I why shouldn't I be concerned.

That.

Speaker Change: There's going to be constraining investment this year, because the market doesn't stand still right you mentioned North America more competitive I'm going to get.

Tracey Travis: We have begun executing against many initiatives within these three areas of benefit for the company. Regarding margin expansion, the significant pull down of production we did at the beginning last year to bring manufacturing levels well below our shipment trends in order to reduce our inventory level has already yielded cash benefits in fiscal 2024. This has also resulted in additional benefits from reduced discounts and obsolescence costs and lower levels of expenses are expected to continue into fiscal 2025.

Tracey Travis: I'm going to guess you know other companies, whether they are global or local across China, are not going to be pulling back on investment. Everyone's going to want to be gaining share at a market that's down. So how do we know that there isn't too little investment being put it back in 25, you know, in the name of putting up some earnings growth. And then frankly, when we get to this time next year and there's new leadership in place or has been named. And you have the strategic reset that there isn't another strategic reset. So I threw a lot in there, but those are the things that are on my mind, and I'd love to hear both of your comments on.

Speaker Change: Other companies, whether they are global or local across China are not going to be pulling back on investment everyone's going to want to be gaining share in a market that's down.

Speaker Change: So how do we know that there isn't.

Speaker Change: She little investment being put it back in in 'twenty five.

Tracey Travis: This has also resulted in additional benefits from reduced discounts and obsolescence costs and lower levels of expenses are expected to continue into fiscal 2025. Additionally, this year we are planning to realize greater net benefits from our strategic pricing actions through less discounts and promotion with our enhanced focus on precision marketing. These actions, along with the benefits of more accretive innovation, particularly in skincare, support the gross margin expansion we expect this year.

Speaker Change: In the name of putting up some earnings growth and then frankly, when we get to this time next year.

Speaker Change: And there's new leadership in place or has been named and you've had the strategic reset if there isn't another strategic reset.

Tracey Travis: Additionally, this year we are planning to realize greater net benefits from our strategic pricing actions through less discounts and promotion with our enhanced focus on precision marketing. These actions, along with the benefits of more accretive innovation, particularly in skincare, support the gross margin expansion we expect this year.

Speaker Change: So I threw a lot in there, but those are the things that are in my mind. It I'd love to hear your both of your comments on thanks.

Fabrizio Freda: Thanks. No, of course, Lauren. So you know if you think about when we first describe the PRGP, we said we have gross savings and we are investing some of those gross savings in order to, you know, on the program as well as fuel some of a create fuel for some of our consumer facing investments. And so when you think about the cadence of results and savings that we expect from the program, obviously first quarter there are some benefits. But that will progressively improve through the course of the year as our actions materialize. So we are funding some of the consumer-facing investments out of the gross investments in our out of our PRGP.

Lauren Lieberman: No of course Lauren.

Speaker Change: So you know if you think about when we first described the P. R. J P. We said we have gross savings and we are investing some of those gross savings in order to fund the program as well as fuel some of our create fuel for some of our consumer facing investments and <unk>.

Speaker Change: So when you think about the cadence of results in savings that we expect from the program. Obviously first quarter there was some benefit.

Tracey Travis: Our existing shared services capabilities to support the simplification and standardization of key processes and scale capabilities faster, as well as rationalizing the breadth of distribution choices across our existing portfolio of brands. We have also negotiated savings across many of our spending areas and are already realizing savings in areas like transportation. Lastly, we are taking this opportunity of the PRGP to address some of the ways we work to simplify decision making and enhance our agility and go-to-market execution to be faster in this ever-changing, dynamic global prestige beauty environment, more to come on this in a future earnings call.

Speaker Change: But that will progressively improve through the course of the year as our actions materialize and so we are funding some of the consumer facing investments out of the gross investment and are out of our pier G. P.

Tracey Travis: We have also negotiated savings across many of our spending areas and are already realizing savings in areas like transportation.

Tracey Travis: You know I also mentioned that even in fiscal 24 where we had green shoots, you heard I mean many of those strategies were put in place before obviously some of the innovation that that we came out with and some of the plans that we had to expand and faster growing channels. So you know we have tried to, in a very difficult year, even in fiscal 24, protect some of the consumer-facing investments, and as we see growth happening in certain areas, we will certainly fund more of it in the savings generated throughout the course of this year in the PRGP.

Speaker Change: I also mentioned that even in fiscal 'twenty, four where we had green shoot you heard I mean, many of those strategies were put in place before obviously some of the innovation that we came out with in some of the plans that we had to expand in faster growing channels. So we have tried to in a very difficult year even in fiscal.

Speaker Change: 24 protect.

Speaker Change: Some of the consumer facing investments in as we see growth happening in certain areas. We will certainly fund more of this in the in some of the savings generated throughout the course of this year in the P. R. G P.

Tracey Travis: Also, we anticipate at this point that approximately 80% of the net benefits realized from the PRGP in fiscal 2025 are targeted to improve gross profit with the remaining 20% targeted to reduce certain operating expenses. This mix is likely to shift in fiscal 2026 as more of our expense actions contribute favorably to our overall expense structure given the expected cadence of initiatives. We also expect to take restructuring and other charges of at least approximately $120 million in fiscal 2025 from approved initiatives with additional charges expected during the course of the year as more initiatives are finalized and approved.

Speaker Change: Yeah.

Fabrizio Freda: And also Lauren, I wanted to add a constant here, which is my intention also announcing the retirement at the end of the fiscal year is also to work together with the board, together with the team, and when announced together with my successor on making sure that we put in 2025 the company in a condition to leverage growth momentum in general in all the areas where the opportunity will be in the China market, where today we see the clients to continue to grow market share, and that's the focus. And in terms of the PRP to make sure that we have sufficient investment in all the areas of the business where this momentum has to be preserved in the future, those are internally key goals that we are going to pursue.

Speaker Change: And.

Speaker Change: Also Loren I wanted to add to it.

Speaker Change: <unk>, which is.

Tracey Travis: This mix is likely to shift in fiscal 2026 as more of our expense actions contribute favorably to our overall expense structure given the expected cadence of initiatives.

Speaker Change: My intention also announcing the retirement at the end of the fiscal year is also too.

Speaker Change: Works together with the board together with the team and when announced together with my successor.

Tracey Travis: We also expect to take restructuring and other charges of at least approximately $120 million in fiscal 2025 from approved initiatives with additional charges expected during the course of the year as more initiatives are finalized and approved.

Speaker Change: Making sure that we put in 2025 the company in a condition to leverage growth momentum in engender in all year is where the opportunity would be.

Tracey Travis: However, with modest sales growth expected in fiscal 2025, as I indicated before, we will unfortunately also experience a greater amount of fixed expense due leverage in addition to the unfavorable mix pressure from softer sales performance in some of our higher margin categories and regions. And as we communicated, we are protecting a portion of the savings we generate from the PRGP to reinvest selectively in advertising and store activation to fuel growth with the brands and regions where we have momentum and support the growth we are currently experiencing with active Durham luxury fragrance and distribution expansion and faster growth channels.

Speaker Change: In the China market, where today, we see declines to continue to grow market share and that's the focus.

Speaker Change: And in terms of the PSP are to make sure that we have sufficient investments in all the key areas of the business, where these momentum has to be preserved in the future.

Tracey Travis: And as we communicated, we are protecting a portion of the savings we generate from the PRGP to reinvest selectively in advertising and store activation to fuel growth with the brands and regions where we have momentum and support the growth we are currently experiencing with active Durham luxury fragrance and distribution expansion and faster growth channels.

Speaker Change: Those are internally key goals that we are going to pursue and I hope that deep strategic.

Fabrizio Freda: And I hope that the strategic reset that I explained in my prepare remarks somehow indicates also not only the numbers but the content on which we want to invest the numbers because it's clear that we have extraordinary strengths in our brands and brand equity in our portfolio. It is clear that we continue to have great high repeat rates. Because our products are outstanding, a live consumer I hope is clear that our innovation is getting much stronger in many areas and clear that we have two big strategy reset areas. One is the lower in the exposure to the planning market, the planning channels, and substitute this with high growth market, high growth channels the best we can, and the second is actually improving the effectiveness of our marketing plan of our recruitment plans.

Speaker Change: Reset the I explained in my prepared remarks somehow indicates also not only the numbers, but the content and which we want to invest the numbers because it's clear that we.

Speaker Change: Extraordinary strengths in our brands and brand equity in our portfolio is clear that we continue to add great high repeat rates because our product set our spending in light duty consumer I hope is clear that our innovation is getting much stronger in many areas and clearly we had to.

Tracey Travis: And while we are focused on realizing slightly more than half of the net benefits in 2025, additional savings initiatives may be required as lower sales volumes are realized.

Speaker Change: B strategy recited areas one is the lower in the exposure.

Speaker Change: To declining market declining channels and substitute these with high growth markets high growth channels. The best we can and the second is actually improving the effectiveness of our marketing plan of our recruitment plants and so we get better support.

Tracey Travis: Overall, we expected to progress margin expansion at an accelerated pace as a result of the plan by delivering annual margin expansion greater than our pre-pandemic historical average, inclusive of creating additional fuel to accelerate sales growth at a faster pace.

Fabrizio Freda: And so we will get better support to our business not only spending more money, but all what I said about procedural marketing is all about increasing the power of our recruitment, and finally you heard me saying that our recruitment is being going to be focused more than ever on new consumers. And that's, I believe, will make a big difference, and so all what I just said is really the purpose of the transition. And so the transition is going to be tailored to that.

Speaker Change: Two our business not only spending more money, but all what I said about precision marketing is all about increasing the power of our recruitment and finally, you heard me, saying to our acute recruitment is being going to be focusing more than ever on new.

Speaker Change: Consumers.

Tracey Travis: Our strategic comparatives for the year, as mentioned by Fabrizio, are focused on leveraging the inherent strengths we have across our brands, categories, regions, and talented employees.

Speaker Change: And that's I believe will make a big difference and so all what you. Just said is really the purpose of the transition and and so the transition is going to be tailored to that.

Tracey Travis: Over the next few years, Western markets, along with Asia Pacific markets, outside of China, are expected to drive a greater portion of our long-term profitable growth, as we deepen our focus on fast growing channels in these markets.

Filippo Warding: And our next question comes from Filippo Warding from the city. Please go ahead with your question Hi, good morning, everyone. I wanted to ask a few questions on the travel retail business, given we have a bit less visibility on the inventory levels. So can you, it seems like the last two quarters, the industry decelerated in terms of south through a URF double digit, terms of selling. Can you give us a sense of the inventory level exiting the year, and Tracey, you mentioned you expect double-digit decline in fiscal 25. Can you give us any sense of the cadence of that decline?

Operator: Maybe, Tracey, can you give us a sense of...

Speaker Change: And our next question comes from Phil Lebeau warning from Citi. Please go ahead with your question.

Operator: If China hadn't decelerated like it has since you last reported.

Hi, good morning, everyone.

Phil LeBeau: I wanted to ask a few questions on the travel retail business, given we have less visibility on the inventory levels. So can you. It seems like the last two quarters.

Tracy: The industry decelerated in terms of sell through or you were up double digits in terms of sell in can you give us a sense of the inventory level exiting the year and Tracy you mentioned you expect double digit declines in fiscal 'twenty five can you give us any sense of the cadence of the decline.

Tracey Travis: We also plan to begin leveraging our region-lined manufacturing and distribution network in Asia to create greater inventory agility as demand dictates.

Tracey Travis: Is it more concentrated in the first half and improvement the second half? Any color that would be helpful. Thank you. Sure. So you're right. As we said, and certainly as you mentioned, others have said also, there was a decline in Asia's travel retail, particularly in China's travel retail in the last few months of our fiscal 2024. And that certainly did impact us. The reason we were up, we were anniversary very low shipments from the prior year. And so we, you know, had in certain parts of China travel retail, specifically high man, very low shipments in our fourth quarter last year.

Speaker Change: Is it more concentrated in the first half and then a improvement in the second half any color that would be helpful. Thank you.

Tracey Travis: With that backdrop in mind in using August 12, spot rates of 1.092 for the euro, 1.276 for the pound, 7.167 for the Chinese one, and 1364 for the Korean one, and full fiscal year organic net sales are forecasted to range between a decrease of 1% and an increase of 2%. Throughout this past fiscal year, to mitigate the expected pressures to our business, we accelerated the implementation of initiatives under our PRGDP, as I previously mentioned, which we expect combined with our sales growth range to result in most of our margin expansion for the full year to be realized in gross margin.

Operator: What would earnings power have been this year, or maybe to put it a different way, in terms of your forecast this year and the change in trend in China, how much do you think that actually affected earnings power in fiscal terms?

Speaker Change: Or so.

Speaker Change: Youre right as the as we said and certainly as you mentioned others have has set also.

Speaker Change: There there was a decline in Asia travel retail, particularly in China travel retail and in the last few months of our fiscal 2024 and that certainly did impact us. The reason we were up we were anniversarying very low shipments from the prior year and so we had.

Operator: Yeah, no, thanks, Brian, for the question.

Speaker Change: In certain parts of China travel retail specifically Hainan.

Speaker Change: Very low shipments in our fourth quarter last year, and so even with decelerating sales we were replenishing relative to what we had experienced in the prior year.

Fabrizio Freda: And so, even with decelerating sales, you know, we were replenishing relative to what's what we had experienced in the prior year. But because of the acceleration from Q3 to Q4, the deceleration from Q3 to Q4, we did end with inventory levels higher than what we would have liked. And so part of what you see in our first quarter results is making sure that we keep inventory levels at the level that we and our customers want in that region, even managing obviously the volatility from one to month that we and our retailers are experiencing. Yeah, and I just want to add the perspective that this is actually a big priority for us, is really manage much better stock normalization in the future.

Tracey Travis: We expect our full year effective tax rate to be approximately 32%.

Tracey Travis: We expect our full year effective tax rate to be approximately 32%. Deluted EPS is expected to range between $2.75 and $2.95 before restructuring and other charges. This includes approximately three cents of dilution from currency translation. In constant currency, we expect EPS to grow by approximately seven to 15%. Net cash flows from operating activities are forecasted between $1.82 billion. Capital expenditures are planned at approximately five to five and a half percent of forecasted net sales.

Tracey Travis: Deluted EPS is expected to range between $2.75 and $2.95 before restructuring and other charges. This includes approximately three cents of dilution from currency translation. In constant currency, we expect EPS to grow by approximately seven to 15%.

Speaker Change: But because of the acceleration from Q3 to Q4, the deceleration from Q3 to Q4, we did earn with our inventory levels are higher than what we would have liked and so part of what you see in our first quarter.

Speaker Change: <unk> is making sure that we keep inventory levels at the at the level that we and our customers want.

Tracey Travis: Net cash flows from operating activities are forecasted between $1.82 billion.

Tracey Travis: Capital expenditures are planned at approximately five to five and a half percent of forecasted net sales.

Speaker Change: In that region, even managing obviously the volatility from month to month that that we and our retailers are experiencing.

Tracey Travis: We expect our first quarter results to be pressured by the ongoing challenges in mainland China and Asia travel retail.

Tracey Travis: We expect our first quarter results to be pressured by the ongoing challenges in mainland China and Asia travel retail. We experienced as we exited fiscal 2024 mainly as subdued consumer sentiment, more experiential spending, and more conversion rates continued. We are, however, seeing some early signs of progress, particularly in North America, as Fabrizio mentioned, with our strategic pivots and assuming the progressive return of prestige, beauty sales growth in mainland China and Asia travel retail, we anticipate overall improvement over the course of the year.

Speaker Change: Yeah, and I just want to add the perspective it does actually.

Tracey Travis: We experienced as we exited fiscal 2024 mainly as subdued consumer sentiment, more experiential spending, and more conversion rates continued.

Speaker Change: And a big priority for us is really manage much better stock normalization in ti in the future and so the what.

Tracey Travis: We are, however, seeing some early signs of progress, particularly in North America, as Fabrizio mentioned, with our strategic pivots and assuming the progressive return of prestige, beauty sales growth in mainland China and Asia travel retail, we anticipate overall improvement over the course of the year.

Fabrizio Freda: And so the what you what you said, which is obviously the retail in quarter four went down much more than expected. So my definition created higher temporary stocks. We are already reacting in quarter one; we are trusting it. That's that should be seen as a better reactivity and better management of this in the future. And as I said in previous schools, we are also preparing to build a distribution center in nine that will further shorten the time between orders in travel retail and delivery that will make this process better, better over time.

Speaker Change: What you what you said, which is obviously the retail in cost at four went down much more than expected. So by definition created higher temporary stocks that we are ready to react to in quarter. One readjusting. It that's that should be seen as a better activity and better manner.

Tracey Travis: With that backdrop for our first quarter, we currently expect organic net sales to fall three to five percent.

Tracey Travis: With that backdrop for our first quarter, we currently expect organic net sales to fall three to five percent. At this time, we expect first quarter diluted EPS of two cents to ten cents before restructuring and other charges. This includes approximately one cent of accretion from currency translation. Intounced in currency, we expect EPS of one to Assuming a full-year global prestige beauty performance in fiscal year 2025 of two to three percent, our remaining three quarters are anticipated to meet or slightly exceed this growth, which is in line with our previous sales performance objective of exceeding the overall average of global prestige beauty growth by at least one point.

Speaker Change: Mento these in the future and as I said in previous calls we are also preparing to build a distribution center in Ireland that will establish shorten the time between orders in travel retail and delivery that will make this process better and better over time.

Tracey Travis: At this time, we expect first quarter diluted EPS of two cents to ten cents before restructuring and other charges. This includes approximately one cent of accretion from currency translation.

Tracey Travis: Intounced in currency, we expect EPS of one to Assuming a full-year global prestige beauty performance in fiscal year 2025 of two to three percent, our remaining three quarters are anticipated to meet or slightly exceed this growth, which is in line with our previous sales performance objective of exceeding the overall average of global prestige beauty growth by at least one point.

Dana Telsey: Our next question comes from Anna Telsi from Telsi Group. Please go ahead with your question. Hi, good morning, everyone. As you think about the distribution channel shifts and the margin impacts, where they're going on to Amazon specialty multi, what does that mean for the business in terms of how you think in North America in particular department stores and Amazon specialty multi. And then with travel retail being 19% of sales, how do you see that in fiscal 25 and the progression as we move forward. Thank you. So I'll start with the second one, Dana. Travel retail will be lower than it was in fiscal 24 because we're expecting it to be negative all years.

Speaker Change: Our next question comes from Dana Telsey from Telsey Group. Please go ahead with your question.

Hi, Good morning, everyone. As you think about the distribution channel shifts in the margin impacts or theyre going on to Amazon specialty multi what does that mean for the business in terms of how you are seeing in North America in particular department stores, and Amazon specialty multi and then with travel retail.

Operator: So clearly, China and travel retail are important growth drivers for the company have been historically, and they're also high margin areas of the company as well.

Speaker Change: 19% of sales how do you see that in fiscal 'twenty, five and the progression as we move forward. Thank you.

Operator: So when we see pressure in those areas, as we saw in fiscal 2024, you can see what the impact on the company is.

So I'll start with the second one Dana travel retail will be lower than it was in fiscal 'twenty four because we're expecting it to be negative all years.

Tracey Travis: In closing, while our fiscal 2024 performance was disappointing, we remain focused on navigating the current volatile global prestige beauty dynamics, while leveraging the long-term strengths of our brands, and we maintain confidence in our strategic pivots and the execution of our PRGP to drive profitable growth in fiscal 2025 and beyond.

Tracey Travis: So it will be a lower percent of our mix. And as Fabrizio mentioned, you know, part of what obviously is happening is, you know, we're seeing, we're seeing some of the travel retail business go to other regions, whether it's, you know, remaining within mainland China or traveling to, you know, back to international travel in certain parts of, you know, of the world, including obviously markets in addition to within the travel retail channel. So, so we expect that, you know, it will continue to, you know, shrink as a percent of our mix, at least in fiscal 2025 and hopefully see some stabilization after that.

Speaker Change: So it will be a lower percent of our mix and as Fabrizio mentioned.

Speaker Change: Part of what obviously is happening is we're seeing channel shifts we're seeing some of the travel retail business go to other regions, whether it's remaining within mainland China.

Operator: So if, you know, right now, in our guidance, mainland China is expected to be anywhere between flat to down high single digit.

Operator: And travel retail Asia is expected to be down double digit.

Speaker Change: Or traveling to.

Operator: That puts a, you know, quite a bit of pressure on our, you know, our earnings, earnings results in our EPS.

Operator: The fact that this year, with those two pressures, we actually will have EPS up is really because of the contribution of the profit and recovery growth plan, the PRGP, which we will refer to it from now on, as we said in the prepared remarks.

Operator: So, so, you know, that, that is delivering, you know, if you think about delivering around 51%, at the low end of the range, given the fact that we're relatively flat, if you take the midpoint of our range in terms of our growth this year, what we're expecting.

Dana Telsey: Back to international travel in certain parts of.

Tracey Travis: I want to personally thank our team globally for their resilience, commitment and dedication to the company through another difficult year.

Speaker Change: <unk> of the world, including obviously markets. In addition to within the travel retail channel. So.

Operator: So that means other markets like, you know, the Americas, APAC, outside of China, and EMEA outside of travel retail are expected to grow.

Operator: But, but if you take, you know, that contribution, it is being offset by some expense deleverage.

Operator: It's also in looking at your models, you know, you need to add back some of the interest expense from our debt that we took out for the acquisition of Tom Ford and Deciem.

Operator: And bonus as well, back at target levels.

Operator: So those are some of the differences.

Speaker Change: So we expect that it will continue to.

Speaker Change: You know shrink as a percentage of our mix at least in fiscal 2025, and hopefully see some stabilization after that.

Tracey Travis: In terms of the faster growth channels that we are pivoting to, I mean, obviously they represent growth. You know, different channels have different margins, as you know. We don't give specific channel margin information. But to the extent that those channels are allowing us to recruit new consumers, you know, it is certainly, you know, margin accretive for the company overall. You know, when we see the kind of reversal that we saw even in the last few months, you know, launching, you know, on, you know, on Amazon with, with Clinique. And so I think, you know, that's something that we are focused on.

Operator: And then obviously you heard our estimates for currency, which will be slightly diluted for the year.

Speaker Change: In terms of the faster growth channels that we are pivoting to I mean, obviously they represent growth.

Operator: So all of that puts pressure on, you know, our overall EPS.

Operator: But still, on a year that is, you know, close to what it was last year from a sales performance perspective, we are demonstrating improved margin and improved EPS.

Speaker Change: Different channels have different margin and as you know we don't give specific channel.

Speaker Change: And information.

Speaker Change: But to the extent that those channels are allowing us to recruit new consumers.

Fabrizio Freda: Before I turn the call back over to Fabrizio for a few final comments, as most of you know, I announced my planned retirement at the end of fiscal year.

Speaker Change: You know it is certainly you know margin accretive for the company overall.

Fabrizio Freda: Accordingly, I want to congratulate Achille Srivastava on his appointment as CFO effective November 1st.

Fabrizio Freda: Accordingly, I want to congratulate Achille Srivastava on his appointment as CFO effective November 1st. I look forward to working with him over this transition period and appreciate his commitment to the company and his ongoing success.

Speaker Change: When we see the kind of a reversal that we saw even in the last few months.

Fabrizio Freda: I look forward to working with him over this transition period and appreciate his commitment to the company and his ongoing success.

Fabrizio Freda: And now I'll turn it back to Fabrizio. Thank you very much.

Speaker Change: Launching.

Speaker Change: On Amazon with a with Clinique and so I think.

Fabrizio Freda: And now I'll turn it back to Fabrizio.

Fabrizio Freda: I want to make a final comment before we turn to Q&A.

Speaker Change: That's something that we are focused on attributes you spoke about other platforms online being a big focus for us as well from a strategic standpoint platforms in other parts of the world that also represent.

Fabrizio Freda: Fabrizio spoke about other platforms online being a big focus for us as well from a strategic standpoint, platforms in other parts of the world that also represent, you know, growth and improvement of new consumers. So that is a big area of strategic pivot for us that we expect will be margin accretive for the company overall. And I just want to add that, as you have heard from our example today, a lot of these channel rebalancing is also between online and brick and mortar. And the online is very efficient for many reasons. On top of that.

Fabrizio Freda: Thank you very much.

Fabrizio Freda: Today, I announced my intention to retire from Astro the company. It has been a privilege, a great honor to lead the company for 16 years. I have been deeply enriched by exceptional colleagues around the world, and I take this decision to retire with gratitude for all we have accomplished.

Fabrizio Freda: I want to make a final comment before we turn to Q&A.

Fabrizio Freda: I have two primary objectives ahead on my retirement. First, I intend to execute with excellent strategy reset, the Tracy and I described today, inclusive of our project recovery and broad plan. It is important to me that our next leader inherits its business with momentum. Second, I plan to work closely with our board of directors and my successor once named to ensure as mood transition.

Speaker Change: Growth and and the recruitment of new consumers. So that is a big area of strategic pivot for us.

Speaker Change: That we expect will be margin accretive for the company overall.

Speaker Change: And then I just want to add to that.

Speaker Change: <unk> heard from our example, two days and lots of these channel rebar.

Fabrizio Freda: I have two primary objectives ahead on my retirement.

Fabrizio Freda: My passion for our beautiful company is as strong as ever, and I'm confident in its bright future. Throughout the years, I've deeply enjoyed represented the company with analysts and investors. I look forward to our continued engagement until I retire.

Speaker Change: Rebalancing.

Speaker Change: Is also between online and brick and mortar and online is very efficient for many reasons on top of that we've used the last few years to develop online platforms that now we are in a condition to scale.

Fabrizio Freda: First, I intend to execute with excellent strategy reset, the Tracy and I described today, inclusive of our project recovery and broad plan.

Fabrizio Freda: We use the last few years to develop online platforms. Then now we are in a condition to scale and to leverage in our activations of the various online channels. And finally, when you invest in a high growth channel where the consumers are particularly active, particularly the young consumer, they return on the investment in advertising and the ability to recruit the right cost of recruitment actually increase, while the cost of for us will be actually positive in the long term. And we are managing this with the profitability mix in mind. One of the key things that we need to achieve.

Operator: And that concludes our prepare remarks. We'll be happy to take your questions at this time. Ladies and gentlemen, the floor is now open for questions. If you have a question, you simply press star followed by one on your touch time telephones. To ensure everyone can ask the question of a living each person to one person, question, time permitting, we will return to you for additional questions. They just queue up again by pressing star and then one.

Speaker Change: And to leverage in our Activations. So the various online online channels and finally when that when you invest in a high growth channel, where the consumers are particularly active particularly the young consumer their return on their investment in advertising and the.

Ability to recruit the right cost of recruitment to actually increase why the cost of recruitment tend to be higher in the in declining in declining channels.

Steve Powers: Our first question today comes from Steve Powers from Deutsche Bank. Please go ahead with your question. Great, thank you so much. Thank you very much for your time for the company.

Speaker Change: So the overall move for us.

Speaker Change: We'll be actually positive in the long term and we are managing these with the profitability mix in mind and one of the key things that we need to achieve.

Peter Graham: Our next question comes from Peter Graham from UBS. Please go ahead with your question. Thanks, operator, and good morning, everyone. Hope you are doing well. I was hoping to ask you a bigger picture question here, just given all the commentary and the release on the path forward and what has been slower progress in China and Asia travel retail. When you speak to category growth returning to mid single digits in fiscal 25, assuming China progressively recovered, what do you think is the real list that category growth expectation in China and maybe Asia travel retail as well as we look out longer term, specifically just trying to understand or be curious how you think about the ability to return to 58% organic sales growth if performance in these regions in China doesn't necessarily return to growth rates we saw prior to the recent challenges.

Speaker Change: Our next question comes from Peter Grom from UBS. Please go ahead with your question.

Fabrizio Freda: It is important to me that our next leader inherits its business with momentum.

Fabrizio Freda: As you personally look ahead at the priorities facing Estee Lauder, how are you thinking about or how would you frame the most important attributes that you'd look for in your successor and how closely will you will you be involved over the coming months and quarters in finding that successor? Sure, as I said in the prepare remark, I will be very involved in we the board in working on the succession and obviously, as you know, is the board responsibility to decide the successor and about we are working all together to get the best output out of the work done for some time.

Thanks, operator, and good morning, everyone Hope you are doing well.

I was hoping to ask maybe a bigger picture question here just given all the commentary in the release.

Operator: And that is because of, and with a negative mixed impact related to travel retail in China.

Peter Grom: On the path forward and what has been slower progress in China, and Asia travel retail when you speak to category growth returning to mid single digits in fiscal 'twenty five assuming China progressively recover what do you think is a realistic category growth expectation in China, and maybe Asia travel retail as well as we look out longer term.

Operator: And that is because of both the PRGP as well as other actions the company has taken to really halt a lot of activities that we would normally do in the course of a year.

Operator: We are also importantly, as I said in our prepared remarks, protecting some investment for the momentum that we spoke about in the prepared remarks in categories like fragrance, the active DERM category, and where we're seeing momentum.

Operator: That will be important for us when we think forward to fiscal 26 and beyond and have more market growth hopefully.

Operator: But also, you know, those brands continuing to become a greater proportion of the business.

Fabrizio Freda: Second, I plan to work closely with our board of directors and my successor once named to ensure as mood transition.

Speaker Change: Separately, just trying to understand or I'd be curious, how you think about the ability to return to 6% to 8% organic sales growth performance in these regions and channels doesn't necessarily necessarily return to growth rates. We saw prior to the recent challenges. Thanks.

Fabrizio Freda: Thanks. Yeah, I'll start, and then Tracey will have to speak. I assume when you say category growth you define the category as the prestige global market in total. That's what I understood for your question. And so the overall category growth of the luxury prestige part of the beauty business historically has been growing in the mid single-digit range. And I think the facts of today with China and the category tail Asia declining double digit in these momentous markets. You see that we are forecasting to 3%, and these forecasting to 3% of the category growth is the reflection that we are not assuming in our guidance for fiscal year 2025 is stabilization of that.

Fabrizio Freda: My passion for our beautiful company is as strong as ever, and I'm confident in its bright future.

Fabrizio Freda: This is a long term process is not something that we have just started working now, obviously. And in terms of the characteristic of the successor, I think the successor has to be obviously a great leader and understand the key elements of our company. And one of the key elements is being brand builders and people that can develop growth. We are a growth company and we are a global company. And so obviously being able to drive growth globally and being able to continue reshaping the cost structure of the company in the proper way that will become even more leverageable with future growth are going to be essential characteristics.

Speaker Change: Yeah, I'll start and then three as we lap perspective is and I assume when you say category growth you defined the category as deep prestige global market in total that's what I understood. Your question and so the overall category growth of the luxury prestige part of the beauty business.

Fabrizio Freda: Throughout the years, I've deeply enjoyed represented the company with analysts and investors.

Fabrizio Freda: But I just want to reassure you that the options that the board has developed, they all have these characteristics. So as I said, the board is pretty well advanced in the work needed to determine the future.

Speaker Change: Historically has been growing in the mid single digit range and.

Fabrizio Freda: I look forward to our continued engagement until I retire.

Speaker Change: The fact, so today, we China.

Speaker Change: Travel retail Asia declining double digit in this moment those markets, you'll see that we are forecasting 2% to 3% and is forecasting 2% to 3% of the category growth is the reflection that we are not assuming in our guidance.

Speaker Change: For fiscal year 2025 is stability on that and basically this is our.

Fabrizio Freda: And basically, this is our attempt to try not to guess the future that, at least in this moment, is very difficult to predict because of the volatility that Tracey spoke about. So with that, with that context, you see immediately the difference between stabilized Chinese consumers of China stabilized and the market is to cross the market with the stable growing China was was was single digit. And so that that's the difference between the 2% of the 5%. Now if in the future we do expect the overall global category, as you define it, to a to a benefit of the stabilization of the China China China TR consumption and market, and that will make the category stronger.

Speaker Change: Try not to get into the future that induced in this moment is very difficult to predict because of the volatility that Tracy spoke about.

Speaker Change: With that context, you'll see immediately that the difference between a stabilized the Chinese consumer so China stabilize and the market is two three times because the market with a stable growing China was.

Ryan Solane: Our next question comes from Ryan Solane from Bank of America. Please go ahead with your question. Hi, thanks operator and good morning everyone.

Tracey Travis: So maybe, you know, just to kind of try to put this year fiscal 25 into a little bit of a perspective, maybe Tracy, can you give us a sense of if China hadn't decelerated like it has since you last reported, you know, what would what would what would earnings power have been this year or maybe to put it a different way? How much in terms of your forecast this year in the change in trend in China, like how much do you do you think that actually affected earnings power in fiscal 25?

Speaker Change: Was single digits I'm, sorry, it was mid single digits and so that's the difference between the 2% of the 5% now if in the future. We do expect the overall global category as you define it too.

Speaker Change: The two of us towards to benefit of established vision of the China, China, China TR.

Speaker Change: Consumption and market and that will make the category stronger.

Fabrizio Freda: So assuming the category will go back to a 5% global growth, also because to be clear, except now the Chinese reset in this period, the demographics fundamentals, the reason of long term development, this category are intact globally. In fact, you see still pretty strong development in Asia, China, in Europe, in America, as we said before. Despite a gradual reduction of the growth, the growth is still in single digit and plus. So the market is strong fundamentals, and in the market we go back as it happened in the past, in the past during I don't know the recession.

Speaker Change: So assuming the category we'd go back to a 5% global growth also because to be clear except in now the Chinese reset in this period the demographic fundamentals. The reason of long term developed in this category are intact globally in fact, youll see steep <unk>.

Tracey Travis: Yeah, now thanks Brian for the question. So clearly China and travel retail are important growth drivers for the company have been historically and they're also high margin areas of the company as well. So when we see pressure in those areas as we saw in fiscal 2024, you can see what the impact on the company is. So if you know, right now in our guidance, mainland China is expected to be anywhere between flat to down high single digit and travel retail Asia is expected to be down double digit.

Speaker Change: <unk> development in Asia ex China in Europe in America, as we said before despite a gradual reduction of the growth the growth is still mid single digit and plus so and.

Speaker Change: The market has strong fundamentals and the market will go back as the Doctor in the past in the past during the recession.

Fabrizio Freda: Of 2008 2009 the market went down in the 2% and then bounce back to the normal the year after so we have seen these many other times in the in the history of the market and we as a company believe that the strategy reset that we are discussing and the ability of our prosperity, we cover the growth plan to put us back on track for leverage ability will put all of us in a condition to grow at least one point ahead of the market. in the long-term and to reestablish the way we think of long-term algorithm as growing ahead of the market.

Speaker Change: 2008, 2009, the market went down in the 2% and then bounced back to the normal the year. After so we have seen these many other times in the in the East story of the market and we need.

Tracey Travis: That puts you know, quite a bit of pressure on our earnings earnings results in our EPS. The fact that this year with those two pressures, we actually will have EPS up is really because of the contribution of the profit and recovery growth plan, the PRGP, which we will refer to it from now on as we said in the prepare remarks. So, you know, that is delivering, you know, if you think about delivering around 51% at the low end of the range given the fact that we're relatively flat, if you take the midpoint of our range in terms of our growth this year, what we're expecting.

Fabrizio Freda: And that concludes our prepare remarks.

Speaker Change: As the company believes that the strategy reset that we are discussing and the ability of our proxy to cover the group plans to put us back on track for leverage ability.

Speaker Change: We put all of us in the condition to grow at least one point.

Unnamed: We'll be happy to take your questions at this time.

Speaker Change: Head of the markets in the long term and to reestablish our the way we think of long term algorithm is growing ahead of the market.

Tracey Travis: So that means other markets like, you know, the Americas, EPAC outside of China and the Mia outside of travel retail are expected to grow. But, but if you take, you know, that contribution, it is being offset by some expense, delivery, it's also in looking at your models. You know, you need to add back some of the interest expense from our debt that we took out for the acquisition of Tom Ford and Desium and in bonus as well, back at target levels.

Operator: And our next question comes from Lauren Lieberman from Barclays.

Speaker Change: And ladies and gentlemen, our final question today comes from <unk> Creek from Oppenheimer. Please go ahead with your question. Good morning, and thanks for taking my question. So just going back to the commentary in North America market, you guys called out a strong competitive environment in the Americas, So just hoping to get more.

Operator: Please go ahead with your question.

Operator: Great.

Operator: Thanks.

Operator: Good morning.

Operator: I'm pausing to frame my seven questions.

Speaker Change: And what you're seeing there and then as you look forward.

Operator: I want to just follow on Tracey, maybe on the, what you've just shared and the driver, the fact that there will be earnings growth, even with sales, you know, flat to down.

Speaker Change: For your planning assumptions are you expecting a further moderation in the U S prestige market.

Fabrizio Freda: So in our guidance we are reflecting the current moderation of the growth because, again, in these guidance we are not guessing the future; we are reflecting what we see currently. And this moderation of the growth, however, brings the market still in the mid-single-digit growth. So it's not a bad market; I mean, US has been weaker than that in the past. So it's still a relatively solid market growth that is happening today. And in this relatively solid market, we are working for dramatic improvements. I think it's important to understand that we have seen progress in culture for our, because we grew retail, even if the net was difficult, but we grew retail.

Operator: And you called out halting some activities, protecting some investment, you know, noting all the expense de-leverage that there will be.

Speaker Change: In that so in our guidance, we are reflecting the Qatar and moderation of the growth.

Operator: How should I, why shouldn't I be concerned?

Speaker Change: Because again in this guidance we are not guests in the future we are reflecting what we see currently and that these moderation that they wrote our Heather brings the market still is the mid single digit growth. So is not is not a bad market I mean U S has been weaker than that in the past. So it's still a relatively solid.

Tracey Travis: So those are some of the differences and then obviously you heard our estimates for currency, which, which will be slightly diluted for for the year. So all of that puts pressure on, you know, our overall EPS. But still on a year that is, you know, close to what it was last year from a sales form performance perspective, we are demonstrating improved margin and improved DPS. And that is because of, and with a negative mixing past related to travel retail in China.

Speaker Change: It market growth that is happening today and.

Speaker Change: In this relatively solid market that we are working for dramatic improvements I think is important to understand that we have seen progress in quarter four our.

Speaker Change: Because we grew retail even if the net was difficult, but we grew retail and the gains and that was reflecting also some issues happening in many of the retailers.

Tracey Travis: And that is because of both a PRP, a PRGP, as well as other actions the company has taken to really halt a lot of activities that we would normally do in the course of a year. We are also importantly, as I said in our prepared remarks, protecting some investment for the momentum that we spoke about in the prepared remarks. In categories like fragrance, the active-derm category and where we're seeing momentum, that will be important for us when we think forward to fiscal 26 and beyond. And have more market growth, hopefully, but also, you know, those brands continuing to become a greater proportion of the business.

Fabrizio Freda: And again, the net was reflecting also some issues happening in many of the retailers in our less fast growing parts of the business. But the retail it was growing in July as we revealed the retail is further accelerated; our retail is further accelerated. Some of our brands, likely Nick, is showing very exciting progress, which is super encouraging. Actually, I would say that all the brands where we have started implemented a new strategy, we see that there is extraordinary interesting progress, which is validating that once we will be able to implement across the portfolio, all the improvements that we are trying to do, we could achieve the stabilization, which is the first goal that we have in mind, the stabilization.

Speaker Change: Our lips less fast growing parts of the business, but the retail it was growing in July as we revealed the retailers further accelerated our retailers has further accelerated some of our brands like Clinique is showing very exciting progress, which is a super encouraging actually I would.

Speaker Change: I would say that all the brands, where we have started implementing the new strategy. We see that there is extraordinarily interesting progress, which is validating that once we will be able to implement across the portfolio. All the improvements that we are trying to do we could achieve the stability.

Unnamed: Ladies and gentlemen, the floor is now open for questions.

Lauren Lieberman: And our next question comes from Lauren Lieberman from Barclays. Please go ahead with your question. Great. Thanks. Good morning.

Speaker Change: <unk>, which is the first goal that we have in mind the stabilization. So stop the decline in market share has stabilized and align with the mask growth in in the U S. So we are in summary, we are cautious.

Unnamed: If you have a question, you simply press star followed by one on your touch time telephones.

Fabrizio Freda: So stop the decline of market share, stabilize and align with the market growth in the US. So we are, in summary, cautious of the overall market in the US at this moment, but we are positive on our progress in executing an improvement strategy in America.

Unnamed: To ensure everyone can ask the question of a living each person to one person, question, time permitting, we will return to you for additional questions.

Unnamed: They just queue up again by pressing star and then one.

Stephen Powers: Our first question today comes from Steve Powers from Deutsche Bank.

Unnamed: Please go ahead with your question.

Tracey Travis: I'm pausing ahead to frame my seven questions. So I want to just follow on Tracy. Maybe on what you've just shared and the driver, the fact that there will be earnings growth even with still flat to down. And you you called out hoping some activities protecting some investment in noting all the expensive leverage that there will be. How should I why shouldn't I be concerned that there's going to be constraining investment this year because the market doesn't stand still right you mentioned North America more competitive.

Unnamed: Great, thank you so much.

Speaker Change: Cautious.

Unnamed: Thank you very much for your time for the company.

Speaker Change: Overall market in the U S. In this moment, but we are positive on our progress in executing an improvement strategy in America.

Operator: And ladies and gentlemen, with that, will conclude today's question-and-answer session. If you are unable to join for the entire call, a playback will be available at 1 p.m. Eastern Time today, 3 September 3rd. To hear a recording of the call, please dial 877-344-7529 using passcode 375-754.

Operator: that there's going to be constraining investment this year because the market doesn't stand still, right?

And ladies and gentlemen, with that we'll conclude today's question and answer session.

Operator: You mentioned North America more competitive.

Operator: I'm gonna guess.

Speaker Change: If you were unable to join for the entire call a playback will be available at one P. M. Eastern time today through September 3rd.

Operator: Other companies, whether they are global or local across China, are not going to be pulling back on investment.

Operator: Everyone's going to want to be gaining share in a market that's down.

Operator: So how do we know that there isn't?

Operator: To little investment being put back in, in 25.

Operator: No, of course, Lauren.

Operator: So, I threw a lot in there, but those are the things that are on my mind that I'd love to hear both of you comment on.

Operator: So if you think about when we first described the PRGP, we said we have gross savings, and we are investing some of those gross savings in order to fund the program, as well as create fuel for some of our consumer-facing investments.

Operator: And so when you think about the cadence of results and savings that we expect from the program, obviously first quarter there are some benefits. But that will progressively improve through the course of the year as our actions materialize.

Operator: So we are funding some of the consumer-facing investments out of the gross investments out of our PRGP.

Operator: Is it more concentrated in the first half and then an improvement in the second half?

Speaker Change: To hear a recording of the call. Please dial 870, 734 475 to nine using pass code.

Operator: You know, I also mentioned that even in fiscal 24 where we had green shoots, you heard, I mean, many of those strategies were put in place before.

Operator: Any color that would be helpful.

Tracey Travis: I'm going to guess you know other companies whether they are global or local across China are not going to be pulling back on investment. Everyone's going to want to be gaining share at a market that's down. So how do we know that there is isn't too little investment being put it back in in 25 you know in the name of putting up some earnings growth. And then frankly when we get to this time next year and there's new leadership in place or has been named.

Operator: Obviously some of the innovation that we came out with and some of the plans that we had to expand and faster growing channels.

Operator: Thank you.

Operator: So, you know, we have tried to, in a very difficult year, even in fiscal 24, protect some of the consumer-facing investments.

Operator: Sure.

Operator: And as we see growth happening in certain areas, we will certainly fund more of it in some of the savings generated throughout the course of this year in the PRGP.

Operator: So you're right. As we said, and certainly as you mentioned, others have said also, you know, there was a decline in Asia's travel retail, particularly in China travel retail, in the last few months of our fiscal 2024, and that certainly did impact us.

Operator: And also, Lauren, I wanted to add a concept here, which is.

Operator: The reason we were up, we were anniversarying very low shipments from the prior year. And so we, you know, had in certain parts of China travel retail, specifically Hainan, very low shipments in our fourth quarter last year.

Operator: My intention also of announcing the retirement at the end of the fiscal year is also to work together with the board, together with the team and when announced together with my successor on making sure that we put in 2025 the company in a condition to leverage growth momentum in general, in all the areas where the opportunity will be, in the China market where today we see declines to continue to grow market share and that's the focus and in terms of the PRP to make sure that we have sufficient investment in all the key areas of the business where this momentum has to be preserved in the future.

Operator: And so even with decelerating sales, you know, we were replenishing relative to what we had experienced in the prior year. But because of the acceleration from Q3 to Q4, the deceleration from Q3 to Q4, we did end with inventory levels higher than what we would have liked.

Operator: Those are internally key goals that we are going to pursue and I hope that the strategic reset that I explained in my prepared remarks somehow indicates also not only the numbers but the content on which we want to invest the numbers because it's clear that we have extraordinary strengths in our brands and brand equity in our portfolio.

Operator: And so part of what you see in our first quarter results is making sure that we keep inventory levels at the level that we and our customers want in, you know, in that region, even managing, obviously, the volatility from month to month that we and our retailers are experiencing. Yeah, and I just want to add the perspective that this is actually a big priority for us, is really manage much better stock normalization in TR in the future.

Operator: It's clear that we continue to have great high repeat rates because our products are standing alive to the consumer.

Operator: And so what you said, which is obviously the retail in quarter four went down much more than expected.

Operator: I hope it's clear that our innovation is getting much stronger in many areas and it's clear that we have two big strategy reset areas.

Operator: So by definition, created higher temporary stocks, we are already reacting in quarter one, readjusting it.

Operator: One is the lowering the exposure to declining markets, declining channels and substitute this with high growth market, high growth channels the best we can and the second is actually improving the effectiveness of our marketing plan, of our recruitment plan.

Operator: That should be seen as a better reactivity and better management of these in the future.

Speaker Change: 3757854.

Operator: And so we will get better support, to our business, not only spending more money, but all what I said about precision marketing is all about increasing the power of our recruitment.

Operator: And as I said in previous calls, we are also preparing to build a distribution center in Nainan that will further shorten the time between orders in travel, retail and delivery that will make this process better and better over time.

Operator: Please go ahead with your question.

Operator: And finally, you heard me saying that our recruitment is going to be focused more than ever on new consumers. And that, I believe, will make a big difference.

Operator: Our next question comes from Dana Telsey from Telsey Group.

Operator: Hi, good morning, everyone.

Operator: And so all what I just said is really the purpose of the transition.

Operator: As you think about the distribution channel shifts and the margin impacts, where they're going on to Amazon Specialty Multi, what does that mean for the business in terms of how you're seeing in North America, in particular department stores and Amazon Specialty Multi?

Operator: That concludes today's essay water conference call. I would like to thank you all for your participation and wish you all a good day.

Operator: And and so the transition is going to be tailored to that.

Operator: And then with travel retail being 19% of sales, how do you see that in fiscal 25 and the progression as we move forward?

Speaker Change: That concludes today's Este Lauder conference call I would like to thank you all for your participation and wish you all a good day you may now disconnect your lines.

Operator: And our next question comes from Filippo Falorni from Citi.

Operator: Thank you.

Operator: Please go ahead with your question.

Operator: So I'll start with the second one, Dana.

Operator: Hi, good morning, everyone.

Operator: I would like to thank you all for your participation and wish you all a good day.

Operator: Travel retail will be lower than it was in fiscal 24 because we're expecting it to be negative all year. So it will be a lower percent of our mix.

Operator: I wanted to ask a few questions on the travel retail business, given we have a bit less visibility on the inventory levels.

Operator: And as Fabrizio mentioned, part of what obviously is happening is, we're seeing channel shifts.

Operator: So can you, it seems like the last two quarters, the industry decelerated in terms of sell through, but you were up double digit in terms of selling.

Operator: We're seeing some of the travel retail business go to other regions, whether it's remaining within mainland China or traveling back to international travel in certain parts of the world, including obviously markets in addition to within the travel retail channel.

Operator: Can you give us a sense of the inventory level exit in the year?

Operator: So we expect that it will continue to shrink as a percent of our mix, at least in fiscal 2025, and hopefully see some stabilization after that.

Operator: We may now disconnect your line.

Operator: And Tracey, you mentioned you expect double digit declines in fiscal 25.

Operator: In terms of the faster growth channels that we are pivoting to, I mean, obviously they represent growth.

Operator: You may now disconnect your lines.

Operator: Can you give us any sense of the cadence of that decline?

Operator: Different channels have different margins.

Operator: As you know, we don't give specific channel margin information, but to the extent that those channels are allowing us to recruit new consumers, it is certainly margin accretive for the company overall when we see the kind of reversal that we saw even in the last few months, launching on Amazon with Clinique.

Operator: And so I think that's something that we are focused on.

Operator: Fabrizio spoke about other platforms, online being a big focus for us as well from a strategic standpoint, platforms in other parts of the world that also represent growth and the recruitment of new consumers.

Operator: So that is a big area of strategic pivot for us that we expect will be margin accretive for the company overall.

Operator: And I just want to add that, as you have heard from our example today, a lot of these channel rebalancing is also between online and brick and mortar.

Tracey Travis: And you have the strategic reset that there isn't another strategic reset. So I threw a lot in there, but those are the things that are my mind and I'd love to hear both of you comments on. Thanks. No, of course Lauren. So you know if you think about when we first describe the PRGP we said we have gross savings and we are investing some of those gross savings in order to you know on the program as well as fuel some of a create fuel for some of our consumer facing investments.

Operator: And the online is very efficient for many reasons.

Operator: On top of that, we've used the last few years to develop online platforms. And now we are in a condition to scale and to leverage in our activations of the various online channels.

Operator: And finally, when you invest in a high growth channel where the consumers are particularly active, particularly the young consumer, the return on the investment in advertising and the ability to recruit the right cost of recruitment actually increase, while the cost of recruitment tend to be higher in declining channels.

Operator: So the overall move for us will be actually positive in the long term.

Operator: And we are managing this with the profitability mix in mind.

Operator: One of the key things that we need to achieve.

Operator: Our next question comes from Peter Grom from UBS, please go ahead with your question.

Operator: Thanks, operator.

Operator: And good morning, everyone.

Operator: Hope you are doing, I was hoping to ask maybe a bigger picture question here, just given all the commentary and the release on the path forward and what has been slower progress in China and Asia travel retail.

Operator: When you speak to category growth returning to mid-single digits in fiscal 25, assuming China progressively recovers, what do you think is a realistic category growth expectation in China and maybe Asia travel retail as well as we look out longer term?

Operator: Specifically, just trying to understand or be curious how you think about the ability to return to 6% to 8% organic sales growth if performance in these regions and channels doesn't necessarily return to growth rates we saw prior to the recent challenges.

Operator: Thanks.

Tracey Travis: And so when you think about the cadence of of results and savings that we expect from the program obviously first quarter there are some benefit. But that will progressively improve through the course of the year as our actions materialize. So we are funding some of the consumer facing investments out of the gross investments in our out of our PRGP. You know I also mentioned that even in fiscal 24 where we had green shoots you heard I mean many of those strategies were put in place before obviously some of the innovation that that we came out with and some of the plans that we had to expand and faster growing channels.

Operator: I'll start and then Tracey will add perspective.

Operator: I assume when you say category growth, you define the category as the prestige global market in total.

Operator: That's what I understood for your question. And so the overall category growth of the luxury prestige part of the beauty business historically has been growing in the mid-single digit range.

Operator: And I think the fact, so today with China and private retail Asia declining double digit in this moment as markets, you see that we are forecasting 2-3%.

Operator: And this forecasting 2-3% of the category growth is the reflection that we are not assuming in our guidance for fiscal year 2025 is stabilization of that.

Operator: And basically this is our attempt, try not to guess the future that at least in this moment is very difficult to predict because of the volatility that Tracey spoke.

Operator: So with that contest, you see immediately that the difference between a stabilized Chinese consumer, so China stabilized, and the market is two, three points, because the market with a stable growing China was single digit, sorry, was mid-single digit. And so that's the difference between the 2% and the 5%.

Operator: Now if in the future we do expect the overall global category, as you define it, to benefit of a stabilization of the China TR consumption and market, and that will make the category stronger.

Operator: So assuming the category will go back to a 5% global growth, also because to be clear, except now the Chinese reset in this period, the demographic fundamentals, the reason of long-term development of this category are intact globally.

Operator: In fact, you see still pretty strong development in Asia, ex-China, in Europe, in America, as we said before, despite a gradual reduction of the growth, the growth is still mid-single digit and plus.

Operator: So the market has strong fundamentals, and the market will go back as it happened in the past.

Operator: In the past, during, I don't know, the recession of 2008, 2009, the market went down in the 2% and then bounced back to the normal the year after. So we have seen this many other times in the history of the market. And we, as a company, believe that the strategy reset that we are discussing and the ability of our profit recovery agro plan to put us back on track for leverageability will put all of us in a condition to grow at least one point ahead of the market, in in the long term and to re-establish our the way we think of long-term algorithm as growing ahead of the market.

Operator: And ladies and gentlemen, our final question today comes from Rupesh Parikh from Oppenheimer.

Operator: Please go ahead with your question.

Operator: Good morning, and thanks for taking my question.

Operator: So just going back to the commentary on North America market, you guys called out a strong competitive environment in the Americas.

Operator: So just hoping to get more color in what you're seeing there.

Operator: And as you look forward, you know, for your planning assumptions, are you expecting further moderation in the U.S.?

Operator: In our guidance, we are reflecting the current moderation of the growth.

Operator: Because again, in this guidance, we are not guessing the future, we are reflecting what we see currently.

Operator: And this moderation of the growth, however, brings the market still in the mid single digit growth.

Operator: So it's not a bad market.

Operator: I mean, the US has been weaker than that in the past.

Operator: So it's still a relatively solid market growth that is happening today.

Operator: And in this relatively solid market, we are working for dramatic improvements.

Operator: I think it's important to understand that we have seen progress in quarter four, because we grew retail, even if the net was difficult, but we grew retail.

Operator: And again, the net was reflecting also some issues happening in many of the retailers in our less fast growing part of the business.

Operator: But the retail was growing in July, as we revealed that the retail is further accelerated, our retail is further accelerated.

Operator: Some of our brands, like Clinique, is showing very exciting progress, which is super encouraging.

Operator: Actually, I would say that all the brands where we have started implementing the new strategy, we see that there is extraordinary interesting progress, which is validating that once we'll be able to implement across the portfolio, all the improvements that we are trying to do, we could achieve the stabilization, which is the first goal that we have in mind, the stabilization.

Operator: So stop the decline of market share, stabilize and align with the market growth in the US.

Operator: So we are in summary, we are cautious of the overall market in the US in this moment, but we are positive on our progress in executing an improvement strategy in America.

Operator: And ladies and gentlemen, with that, we'll conclude today's question and answer session.

Operator: If you are unable to join for the entire call, a playback will be available at 1 p.m. Eastern Time today through September 3rd.

Operator: To hear a recording of the call, please dial 877-344-7529 using passcode, 3-7-5, http://TheBusinessProfessor.com, That concludes today's Estee Lauder conference call.

Tracey Travis: So you know we we have tried to in a very difficult year even in fiscal 24 protect some of the consumer facing investments and as we see growth happening in certain areas we will certainly fund more of it in the in some of the savings generated throughout the course of this year in the PRGP. And also Lauren I wanted to add a constant here which is my intention also announcing the retirement at the end of the fiscal year is also to work together with the board together with the team and when announced together with my successor on making sure that we put in in 2025 the company in a condition to leverage growth momentum in general in all the areas where the opportunity will be in the China market where today we see the clients to continue to grow market share and that's the focus.

Fabrizio Freda: Sure, as I said in the prepare remark, I will be very involved in we the board in working on the succession and obviously, as you know, is the board responsibility to decide the successor and about we are working all together to get the best output out of the work done for some time.

Tracey Travis: And in terms of the PRP to make sure that we have sufficient investment in all the areas of the business where this momentum has to be preserved in the future those are internally key goals that we are going to pursue. And I hope that the strategic reset that I explained in my prepare remarks somehow indicates also not only the numbers but the content on which we want to invest the numbers because it's clear that we have extraordinary strengths in our brands and brand equity in our portfolio is clear that we continue to have great high repeat rates.

Fabrizio Freda: This is a long term process is not something that we have just started working now, obviously.

Fabrizio Freda: And in terms of the characteristic of the successor, I think the successor has to be obviously a great leader and understand the key elements of our company. And one of the key elements is being brand builders and people that can develop growth.

Tracey Travis: Because our products are outstanding a live consumer I hope is clear that our innovation is getting much stronger in many areas and clear that we have two big strategy reset areas. One is the lower in the exposure to the planning market the planning channels and substitute this with high growth market high growth channels the best we can and the second is actually improving the effectiveness of our marketing plan of our recruitment plans.

Fabrizio Freda: We are a growth company and we are a global company. And so obviously being able to drive growth globally and being able to continue reshaping the cost structure of the company in the proper way that will become even more leverageable with future growth are going to be essential characteristics.

Fabrizio Freda: But I just want to reassure you that the options that the board has developed, they all have these characteristics.

Tracey Travis: And so we will get better support to our business not only spending more money but all what I said about procedural marketing is all about increasing the power of our recruitment and finally you heard me saying the our recruitment is being going to be focused more than ever on new consumers.

Fabrizio Freda: So as I said, the board is pretty well advanced in the work needed to determine the future.

Fabrizio Freda: And that's I believe will make a big difference and so all what I just said is really the purpose of the transition and and so the transition is going to be tailored to that.

Filippo Warding: And our next question comes from Filippo Warding from the city. Please go ahead with your question Hi, good morning, everyone. I wanted to ask a few questions on the travel retail business given we have a bit less visibility on the inventory levels. So can you, it seems like the last two quarters, the industry decelerated in terms of south through a URF double digit, terms of selling. Can you give us a sense of the inventory level exiting the year and Tracey, you mentioned you expect double digit decline in fiscal 25. Can you give us any sense of the cadence of that decline? Is it more concentrated in the first half and improvement the second half? Any color that would be helpful. Thank you.

Ryan Solane: Our next question comes from Ryan Solane from Bank of America.

Unnamed: Please go ahead with your question.

Unnamed: Hi, thanks operator and good morning everyone.

Tracey Travis: Sure. So you're right. As we said, and certainly as you mentioned, others have said also, there was a decline in Asia's travel retail, particularly in China's travel retail in the last few months of our fiscal 2024. And that certainly did impact us. The reason we were up, we were anniversary very low shipments from the prior year. And so we, you know, had in certain parts of China travel retail, specifically high man, very low shipments in our fourth quarter last year.

Ryan Solane: So maybe, you know, just to kind of try to put this year fiscal 25 into a little bit of a perspective, maybe Tracy, can you give us a sense of if China hadn't decelerated like it has since you last reported, you know, what would what would what would earnings power have been this year or maybe to put it a different way?

Tracey Travis: How much in terms of your forecast this year in the change in trend in China, like how much do you do you think that actually affected earnings power in fiscal 25?

Tracey Travis: Yeah, now thanks Brian for the question.

Tracey Travis: So clearly China and travel retail are important growth drivers for the company have been historically and they're also high margin areas of the company as well.

Tracey Travis: So when we see pressure in those areas as we saw in fiscal 2024, you can see what the impact on the company is.

Tracey Travis: And so even with decelerating sales, you know, we were replenishing relative to what's what we had experienced in the prior year. But because of the acceleration from Q3 to Q4, the deceleration from Q3 to Q4, we did end with inventory levels higher than what we would have liked. And so part of what you see in our first quarter results is making sure that we keep inventory levels at the level that we and our customers want in that region, even managing obviously the volatility from one to month that that we and our retailers are experiencing.

Fabrizio Freda: Yeah, and I just want to add the perspective that this actually a big priority for us is really manage much better stock normalization in the future. And so the what you what you said, which is obviously the retail in quarter four went down much more than expected. So my definition created higher temporary stocks. We are already reacting in quarter one, we are trusting it. That's that should be seen as a better reactivity and better management of this in the future.

Fabrizio Freda: And as I said in previous schools, we are also preparing to build a distribution center in nine that will further shorten the time between orders in travel retail and delivery that will make this process better, better over time.

Anna Telsey: Our next question comes from Anna Telsi from Telsi Group. Please go ahead with your question. Hi, good morning, everyone.

Tracey Travis: As you think about the distribution channel shifts and the margin impacts, where they're going on to Amazon specialty multi, what does that mean for the business in terms of how you think in North America in particular department stores and Amazon specialty multi. And then with travel retail being 19% of sales, how do you see that in fiscal 25 and the progression as we move forward. Thank you.

Fabrizio Freda: So I'll start with the second one, Dana. Travel retail will be lower than it was in fiscal 24 because we're expecting it to be negative all years. So it will be a lower percent of our mix. And as Fabrizio mentioned, you know, part of what obviously is happening is, you know, we're seeing, we're seeing some of the travel retail business go to other regions, whether it's, you know, remaining within mainland China or traveling to, you know, back to international travel in certain parts of, you know, of the world, including obviously markets in addition to within the travel retail channel.

Tracey Travis: So if you know, right now in our guidance, mainland China is expected to be anywhere between flat to down high single digit and travel retail Asia is expected to be down double digit.

Fabrizio Freda: So, so we expect that, you know, it will continue to, you know, shrink as a percent of our mix, at least in fiscal 2025 and hopefully see some stabilization after that. In terms of the faster growth channels that we are pivoting to, I mean, obviously they represent growth. You know, different channels have different margins as you know, we don't give specific channel margin information. But to the extent that those channels are allowing us to recruit new consumers, you know, it is certainly, you know, margin accretive for the company overall, you know, when we see the kind of reversal that we saw even in the last few months, you know, launching, you know, on, you know, on Amazon with, with Clinique.

Fabrizio Freda: And so I think, you know, that's something that we are focused on. Fabrizio spoke about other platforms online being a big focus for us as well from a strategic standpoint, platforms in other parts of the world that also represent, you know, growth and improvement of new consumers. So that is a big area of strategic pivot for us that we expect will be margin accretive for the company overall. And I just want to add that as you have heard from our example today, a lot of these channel rebalancing is also between online and brick and mortar.

Fabrizio Freda: And the online is very efficient for many reasons on top of that. We use the last few years to develop online platforms. Then now we are in a condition to scale and to leverage in our activations of the various online channels. And finally, when you invest in a high growth channel where the consumers are particularly active, particularly the young consumer, they return on the investment in advertising and the ability to recruit the right cost of recruitment actually increase, while the cost of for us will be actually positive in the long term. And we are managing this with the profitability mix in mind, one of the key things that we need to achieve.

Peter Graham: Our next question comes from Peter Graham from UBS. Please go ahead with your question. Thanks operator and good morning everyone.

Tracey Travis: That puts you know, quite a bit of pressure on our earnings earnings results in our EPS.

Fabrizio Freda: Hope you are doing Well, I was hoping to ask you a bigger picture question here, just given all the commentary and the release on the path forward and what has been slower progress in China and Asia travel retail. When you speak to category growth returning to mid single digits in fiscal 25, assuming China progressively recovered, what do you think is the real list that category growth expectation in China and maybe Asia travel retail as well as we look out longer term, specifically just trying to understand or be curious how you think about the ability to return to 58% organic sales growth if performance in these regions in China doesn't necessarily return to growth rates we saw prior to the recent challenges.

Tracey Travis: The fact that this year with those two pressures, we actually will have EPS up is really because of the contribution of the profit and recovery growth plan, the PRGP, which we will refer to it from now on as we said in the prepare remarks.

Tracey Travis: So, you know, that is delivering, you know, if you think about delivering around 51% at the low end of the range given the fact that we're relatively flat, if you take the midpoint of our range in terms of our growth this year, what we're expecting.

Tracey Travis: So that means other markets like, you know, the Americas, EPAC outside of China and the Mia outside of travel retail are expected to grow.

Fabrizio Freda: Thanks. Yeah, I'll start and then Tracey will have to speak. I assume when you say category growth you define the category as the prestige global market in total. That's what I understood for your question. And so the overall category growth of the luxury prestige part of the beauty business historically has been growing in the mid single digit range. And I think the facts of today with China and the category tail Asia declining double digit in these momentous markets.

Tracey Travis: But, but if you take, you know, that contribution, it is being offset by some expense, delivery, it's also in looking at your models.

Tracey Travis: You know, you need to add back some of the interest expense from our debt that we took out for the acquisition of Tom Ford and Desium and in bonus as well, back at target levels.

Tracey Travis: So those are some of the differences and then obviously you heard our estimates for currency, which, which will be slightly diluted for for the year.

Tracey Travis: So all of that puts pressure on, you know, our overall EPS.

Tracey Travis: But still on a year that is, you know, close to what it was last year from a sales form performance perspective, we are demonstrating improved margin and improved DPS.

Fabrizio Freda: You see that we are forecasting to 3% and these forecasting to 3% of the category growth is the reflection that we are not assuming in our guidance for fiscal year 2025 is stabilization of that. And basically this is our attempt to try not to guess the future that at least in this moment is very difficult to predict because of the volatility that Tracey spoke about. So with that with that context, you see immediately the difference between stabilized Chinese consumers of China stabilized and the market is to cross the market with the stable growing China was was was single digit.

Tracey Travis: We are also importantly, as I said in our prepared remarks, protecting some investment for the momentum that we spoke about in the prepared remarks.

Tracey Travis: In categories like fragrance, the active-derm category and where we're seeing momentum, that will be important for us when we think forward to fiscal 26 and beyond.

Fabrizio Freda: And so that that's the difference between the 2% of the 5% now if in the future we do expect the overall global category as you define it to to a to a benefit of the stabilization of the China China China TR consumption and market and that will make the category stronger. So assuming the category will go back to a 5% global growth also because to be clear except now the Chinese reset in this period the demographics fundamentals the reason of long term development this category are intact globally.

Tracey Travis: And have more market growth, hopefully, but also, you know, those brands continuing to become a greater proportion of the business.

Lauren Lieberman: And our next question comes from Lauren Lieberman from Barclays.

Fabrizio Freda: In fact you see still pretty strong development in Asia, China in Europe in America as we said before despite a gradual reduction of the growth the growth is still in single digit and plus. So the market is strong fundamentals and in the market we go back as it happened in the past in the past during I don't know the recession. Of 2008 2009 the market went down in the 2% and then bounce back to the normal the year after so we have seen these many other times in the in the history of the market and we as a company believe that the strategy reset that we are discussing and the ability of our prosperity, we cover the growth plan to put us back on track for leverage ability will put all of us in a condition to grow at least one point ahead of the market, in the long-term and to reestablish the way we think of long-term algorithm as growing ahead of the market.

Unnamed: Please go ahead with your question.

Unnamed: Great.

Unnamed: Thanks.

Unnamed: Good morning.

Fabrizio Freda: So in our guidance we are reflecting the current moderation of the growth because again in these guidance we are not guessing the future, we are reflecting what we see currently. And this moderation of the growth, however, brings the market still in the mid-single-digit growth. So it's not a bad market, I mean US has been weaker than that in the past. So it's still a relatively solid market growth that is happening today.

Unnamed: I'm pausing ahead to frame my seven questions.

Tracey Travis: So I want to just follow on Tracy.

Tracey Travis: Maybe on what you've just shared and the driver, the fact that there will be earnings growth even with still flat to down.

Tracey Travis: And you you called out hoping some activities protecting some investment in noting all the expensive leverage that there will be.

Fabrizio Freda: And in this relatively solid market we are working for dramatic improvements. I think it's important to understand that we have seen progress in culture for our, because we grew retail, even if the net was difficult but we grew retail. And again the net was reflecting also some issues happening in many of the retailers in our less fast growing parts of the business. But the retail it was growing in July as we revealed the retail is further accelerated, our retail is further accelerated.

Tracey Travis: How should I why shouldn't I be concerned that there's going to be constraining investment this year because the market doesn't stand still right you mentioned North America more competitive.

Tracey Travis: I'm going to guess you know other companies whether they are global or local across China are not going to be pulling back on investment.

Fabrizio Freda: Some of our brands, likely Nick, is showing very exciting progress which is super encouraging. Actually I would say that all the brands where we have started implemented a new strategy, we see that there is extraordinary interesting progress, which is validating that once we will be able to implement across the portfolio, all the improvements that we are trying to do, we could achieve the stabilization, which is the first goal that we have in mind, the stabilization.

Tracey Travis: Everyone's going to want to be gaining share at a market that's down.

Tracey Travis: So how do we know that there is isn't too little investment being put it back in in 25 you know in the name of putting up some earnings growth.

Fabrizio Freda: So stop the decline of market share, stabilize and align with the market growth in the US. So we are in summary, we are cautious of the overall market in the US in this moment, but we are positive on our progress in executing an improvement strategy in America.

Tracey Travis: And then frankly when we get to this time next year and there's new leadership in place or has been named.

Tracey Travis: And you have the strategic reset that there isn't another strategic reset.

Operator: And ladies and gentlemen with that will conclude today's question and answer session. If you are unable to join for the entire call, a playback will be available at 1 p.m. Eastern time today, 3 September 3rd. To hear a recording of the call, please dial 877-344-7529 using passcode 375-754.

Tracey Travis: So I threw a lot in there, but those are the things that are my mind and I'd love to hear both of you comments on.

Tracey Travis: Thanks.

Tracey Travis: No, of course Lauren.

Tracey Travis: So you know if you think about when we first describe the PRGP we said we have gross savings and we are investing some of those gross savings in order to you know on the program as well as fuel some of a create fuel for some of our consumer facing investments.

Operator: That concludes today's essay water conference call. I would like to thank you all for your participation and wish you all a good day. We may now disconnect your line.

Tracey Travis: So we are funding some of the consumer facing investments out of the gross investments in our out of our PRGP.

Tracey Travis: You know I also mentioned that even in fiscal 24 where we had green shoots you heard I mean many of those strategies were put in place before obviously some of the innovation that that we came out with and some of the plans that we had to expand and faster growing channels.

Fabrizio Freda: And also Lauren I wanted to add a constant here which is my intention also announcing the retirement at the end of the fiscal year is also to work together with the board together with the team and when announced together with my successor on making sure that we put in in 2025 the company in a condition to leverage growth momentum in general in all the areas where the opportunity will be in the China market where today we see the clients to continue to grow market share and that's the focus.

Fabrizio Freda: And in terms of the PRP to make sure that we have sufficient investment in all the areas of the business where this momentum has to be preserved in the future those are internally key goals that we are going to pursue.

Fabrizio Freda: Because our products are outstanding a live consumer I hope is clear that our innovation is getting much stronger in many areas and clear that we have two big strategy reset areas.

Fabrizio Freda: One is the lower in the exposure to the planning market the planning channels and substitute this with high growth market high growth channels the best we can and the second is actually improving the effectiveness of our marketing plan of our recruitment plans.

Fabrizio Freda: And so we will get better support to our business not only spending more money but all what I said about procedural marketing is all about increasing the power of our recruitment and finally you heard me saying the our recruitment is being going to be focused more than ever on new consumers.

Fabrizio Freda: And that's I believe will make a big difference and so all what I just said is really the purpose of the transition and and so the transition is going to be tailored to that.

Filippo Warding: And our next question comes from Filippo Warding from the city.

Unnamed: Please go ahead with your question Hi, good morning, everyone.

Unnamed: I wanted to ask a few questions on the travel retail business given we have a bit less visibility on the inventory levels.

Tracey Travis: So can you, it seems like the last two quarters, the industry decelerated in terms of south through a URF double digit, terms of selling.

Tracey Travis: Can you give us a sense of the inventory level exiting the year and Tracey, you mentioned you expect double digit decline in fiscal 25.

Tracey Travis: Can you give us any sense of the cadence of that decline?

Tracey Travis: Is it more concentrated in the first half and improvement the second half?

Tracey Travis: Any color that would be helpful.

Tracey Travis: Thank you.

Tracey Travis: Sure.

Tracey Travis: So you're right. As we said, and certainly as you mentioned, others have said also, there was a decline in Asia's travel retail, particularly in China's travel retail in the last few months of our fiscal 2024. And that certainly did impact us.

Tracey Travis: The reason we were up, we were anniversary very low shipments from the prior year. And so we, you know, had in certain parts of China travel retail, specifically high man, very low shipments in our fourth quarter last year.

Tracey Travis: And so part of what you see in our first quarter results is making sure that we keep inventory levels at the level that we and our customers want in that region, even managing obviously the volatility from one to month that that we and our retailers are experiencing.

Fabrizio Freda: Yeah, and I just want to add the perspective that this actually a big priority for us is really manage much better stock normalization in the future.

Fabrizio Freda: And so the what you what you said, which is obviously the retail in quarter four went down much more than expected.

Fabrizio Freda: So my definition created higher temporary stocks.

Fabrizio Freda: We are already reacting in quarter one, we are trusting it.

Fabrizio Freda: That's that should be seen as a better reactivity and better management of this in the future.

Dana Telsey: Our next question comes from Anna Telsi from Telsi Group.

Unnamed: Please go ahead with your question.

Unnamed: Hi, good morning, everyone.

Tracey Travis: And then with travel retail being 19% of sales, how do you see that in fiscal 25 and the progression as we move forward.

Tracey Travis: Thank you.

Tracey Travis: So I'll start with the second one, Dana.

Tracey Travis: Travel retail will be lower than it was in fiscal 24 because we're expecting it to be negative all years. So it will be a lower percent of our mix.

Tracey Travis: And as Fabrizio mentioned, you know, part of what obviously is happening is, you know, we're seeing, we're seeing some of the travel retail business go to other regions, whether it's, you know, remaining within mainland China or traveling to, you know, back to international travel in certain parts of, you know, of the world, including obviously markets in addition to within the travel retail channel.

Tracey Travis: So, so we expect that, you know, it will continue to, you know, shrink as a percent of our mix, at least in fiscal 2025 and hopefully see some stabilization after that.

Tracey Travis: In terms of the faster growth channels that we are pivoting to, I mean, obviously they represent growth.

Tracey Travis: You know, different channels have different margins as you know, we don't give specific channel margin information.

Tracey Travis: But to the extent that those channels are allowing us to recruit new consumers, you know, it is certainly, you know, margin accretive for the company overall, you know, when we see the kind of reversal that we saw even in the last few months, you know, launching, you know, on, you know, on Amazon with, with Clinique.

Tracey Travis: And so I think, you know, that's something that we are focused on.

Tracey Travis: Fabrizio spoke about other platforms online being a big focus for us as well from a strategic standpoint, platforms in other parts of the world that also represent, you know, growth and improvement of new consumers.

Tracey Travis: So that is a big area of strategic pivot for us that we expect will be margin accretive for the company overall.

Tracey Travis: And I just want to add that as you have heard from our example today, a lot of these channel rebalancing is also between online and brick and mortar.

Tracey Travis: And the online is very efficient for many reasons on top of that.

Tracey Travis: We use the last few years to develop online platforms. Then now we are in a condition to scale and to leverage in our activations of the various online channels.

Tracey Travis: And finally, when you invest in a high growth channel where the consumers are particularly active, particularly the young consumer, they return on the investment in advertising and the ability to recruit the right cost of recruitment actually increase, while the cost of for us will be actually positive in the long term.

Tracey Travis: And we are managing this with the profitability mix in mind, one of the key things that we need to achieve.

Peter Graham: Our next question comes from Peter Graham from UBS.

Unnamed: Please go ahead with your question.

Unnamed: Thanks operator and good morning everyone.

Fabrizio Freda: When you speak to category growth returning to mid single digits in fiscal 25, assuming China progressively recovered, what do you think is the real list that category growth expectation in China and maybe Asia travel retail as well as we look out longer term, specifically just trying to understand or be curious how you think about the ability to return to 58% organic sales growth if performance in these regions in China doesn't necessarily return to growth rates we saw prior to the recent challenges.

Fabrizio Freda: Thanks.

Fabrizio Freda: Yeah, I'll start and then Tracey will have to speak.

Fabrizio Freda: I assume when you say category growth you define the category as the prestige global market in total.

Fabrizio Freda: That's what I understood for your question.

Fabrizio Freda: And so the overall category growth of the luxury prestige part of the beauty business historically has been growing in the mid single digit range.

Fabrizio Freda: And I think the facts of today with China and the category tail Asia declining double digit in these momentous markets.

Fabrizio Freda: And basically this is our attempt to try not to guess the future that at least in this moment is very difficult to predict because of the volatility that Tracey spoke about.

Fabrizio Freda: So with that with that context, you see immediately the difference between stabilized Chinese consumers of China stabilized and the market is to cross the market with the stable growing China was was was single digit.

Fabrizio Freda: So assuming the category will go back to a 5% global growth also because to be clear except now the Chinese reset in this period the demographics fundamentals the reason of long term development this category are intact globally.

Fabrizio Freda: So the market is strong fundamentals and in the market we go back as it happened in the past in the past during I don't know the recession.

Fabrizio Freda: Of 2008 2009 the market went down in the 2% and then bounce back to the normal the year after so we have seen these many other times in the in the history of the market and we as a company believe that the strategy reset that we are discussing and the ability of our prosperity, we cover the growth plan to put us back on track for leverage ability will put all of us in a condition to grow at least one point ahead of the market, in the long-term and to reestablish the way we think of long-term algorithm as growing ahead of the market.

Fabrizio Freda: So in our guidance we are reflecting the current moderation of the growth because again in these guidance we are not guessing the future, we are reflecting what we see currently.

Fabrizio Freda: And this moderation of the growth, however, brings the market still in the mid-single-digit growth.

Fabrizio Freda: So it's not a bad market, I mean US has been weaker than that in the past. So it's still a relatively solid market growth that is happening today.

Fabrizio Freda: And in this relatively solid market we are working for dramatic improvements.

Fabrizio Freda: I think it's important to understand that we have seen progress in culture for our, because we grew retail, even if the net was difficult but we grew retail.

Fabrizio Freda: And again the net was reflecting also some issues happening in many of the retailers in our less fast growing parts of the business.

Fabrizio Freda: But the retail it was growing in July as we revealed the retail is further accelerated, our retail is further accelerated.

Fabrizio Freda: Some of our brands, likely Nick, is showing very exciting progress which is super encouraging.

Fabrizio Freda: Actually I would say that all the brands where we have started implemented a new strategy, we see that there is extraordinary interesting progress, which is validating that once we will be able to implement across the portfolio, all the improvements that we are trying to do, we could achieve the stabilization, which is the first goal that we have in mind, the stabilization.

Fabrizio Freda: So stop the decline of market share, stabilize and align with the market growth in the US.

Fabrizio Freda: So we are in summary, we are cautious of the overall market in the US in this moment, but we are positive on our progress in executing an improvement strategy in America.

Unnamed: And ladies and gentlemen with that will conclude today's question and answer session.

Unnamed: If you are unable to join for the entire call, a playback will be available at 1 p.m.

Unnamed: Eastern time today, 3 September 3rd.

Unnamed: To hear a recording of the call, please dial 877-344-7529 using passcode 375-754.

Unnamed: That concludes today's essay water conference call.

Unnamed: I would like to thank you all for your participation and wish you all a good day.

Unnamed: We may now disconnect your line.

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