ESTEE LAUDER COMPANIES INC Management’s Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)


RESULTS OF OPERATIONS


We manufacture, market and sell beauty products including those in the skin
care, makeup, fragrance and hair care categories, which are distributed in
approximately 150 countries and territories. The following table is a
comparative summary of operating results for the three and nine months ended
March 31, 2022 and 2021, and reflects the basis of presentation described in
Notes to Consolidated Financial Statements, Note 1 - Summary of Significant
Accounting Policies for all periods presented. Products and services that do not
meet our definition of skin care, makeup, fragrance and hair care have been
included in the "other" category.


                                                           Three Months Ended                     Nine Months Ended
                                                                March 31                               March 31
(In millions)                                            2022                2021               2022              2021
NET SALES
By Product Category:
Skin Care                                          $    2,395$  2,259$   8,003$  7,113
Makeup                                                  1,114                1,018              3,674             3,243
Fragrance                                                 579                  454              1,987             1,478
Hair Care                                                 147                  128                475               418
Other                                                      11                   15                 40                37
                                                        4,246                3,874             14,179            12,289
Returns associated with restructuring and
other activities                                           (1)                 (10)                (3)              (10)
Net sales                                          $    4,245$  3,864$  14,176$ 12,279

By Region(1):
The Americas                                       $    1,053$    916$   3,547$  2,837
Europe, the Middle East & Africa                        1,990                1,706              6,201             5,276
Asia/Pacific                                            1,203                1,252              4,431             4,176
                                                        4,246                3,874             14,179            12,289
Returns associated with restructuring and
other activities                                           (1)                 (10)                (3)              (10)
Net sales                                          $    4,245$  3,864$  14,176$ 12,279

OPERATING INCOME (LOSS)
By Product Category:
Skin Care                                          $      667$    804$   2,466$  2,453
Makeup                                                      7                  (72)               228              (115)
Fragrance                                                 105                   47                446               248
Hair Care                                                 (18)                 (17)                (8)              (10)
Other                                                       -                   (1)                 3                (1)
                                                          761                  761              3,135             2,575
Charges associated with restructuring and
other activities                                          (23)                (145)               (44)             (191)
Operating income                                   $      738$    616$   3,091$  2,384

By Region(1):
The Americas                                       $      408$    155$   1,044$    256
Europe, the Middle East & Africa                          281                  361              1,366             1,429
Asia/Pacific                                               72                  245                725               890
                                                          761                  761              3,135             2,575
Charges associated with restructuring and
other activities                                          (23)                (145)               (44)             (191)
Operating income                                   $      738$    616$   3,091$  2,384


(1) The net sales from our travel retail business are included in the Europe,
the Middle East & Africa region, with the exception of net sales of Dr.Jart+ in
the travel retail channel that are reflected in Korea in the Asia/Pacific
region.

Operating income attributable to the travel retail sales included in Europe, the
Middle East & Africa is included in that region and in The Americas.

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The following table presents certain consolidated earnings data as a percentage
of net sales:

                                                                   Three Months Ended                             Nine Months Ended
                                                                        March 31                                      March 31
                                                               2022                   2021                   2022                   2021
Net sales                                                        100.0  %               100.0  %               100.0  %               100.0  %
Cost of sales                                                     23.4                   24.3                   23.1                   23.2
Gross profit                                                      76.6                   75.7                   76.9                   76.8

Operating expenses:
Selling, general and administrative                               53.6                   55.5                   53.3                   55.1
Restructuring and other charges                                    0.5                    3.4                    0.3                    1.4
Goodwill impairment                                                  -                      -                      -                    0.4
Impairment of other intangible and long-lived
assets                                                             5.1                    0.9                    1.5                    0.5
Total operating expenses                                          59.2                   59.8                   55.1                   57.4

Operating income                                                  17.4                   15.9                   21.8                   19.4
Interest expense                                                   1.0                    1.1                    0.9                    1.1
Interest income and investment income, net                         0.1                    0.2                    0.1                    0.3
Other components of net periodic benefit cost                        -                    0.1                      -                    0.1
Other income                                                         -                      -                      -                      -

Earnings before income taxes                                      16.6                   15.0                   21.1                   18.6
Provision for income taxes                                        (3.1)                  (3.2)                  (4.4)                  (3.4)

Net earnings                                                      13.5                   11.9                   16.6                   15.1
Net earnings attributable to noncontrolling
interests                                                         (0.1)                  (0.1)                  (0.1)                  (0.1)
Net earnings attributable to redeemable
noncontrolling interest                                           (0.3)                     -                   (0.1)                     -

Net earnings attributable to The Estée Lauder
Companies Inc.                                                    13.1  %                11.8  %                16.5  %                15.1  %

Not adjusted for differences caused by rounding


We continually introduce new products, support new and established products
through advertising, merchandising and sampling and phase out existing products
that no longer meet the needs of our consumers or our objectives. The economics
of developing, producing, launching, supporting and discontinuing products
impact our sales and operating performance each period. The introduction of new
products may have some cannibalizing effect on sales of existing products, which
we take into account in our business planning.

Non-GAAP Financial Measures


We use certain non-GAAP financial measures, among other financial measures, to
evaluate our operating performance, which represent the manner in which we
conduct and view our business. Management believes that excluding certain items
that are not comparable from period to period helps investors and others compare
operating performance between periods. While we consider the non-GAAP measures
useful in analyzing our results, they are not intended to replace, or act as a
substitute for, any presentation included in the consolidated financial
statements prepared in conformity with U.S. GAAP. See Reconciliations of
Non-GAAP Financial Measures beginning on page 58 for reconciliations between
non-GAAP financial measures and the most directly comparable U.S. GAAP measures.


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We operate on a global basis, with the majority of our net sales generated
outside the United States. Accordingly, fluctuations in foreign currency
exchange rates can affect our results of operations. Therefore, we present
certain net sales, operating results and diluted net earnings per common share
information excluding the effect of foreign currency rate fluctuations to
provide a framework for assessing the performance of our underlying business
outside the United States. Constant currency information compares results
between periods as if exchange rates had remained constant period-over-period.
We calculate constant currency information by translating current-period results
using prior-year period monthly average foreign currency exchange rates and
adjusting for the period-over-period impact of foreign currency cash flow
hedging activities.

Overview

COVID-19 Business Update

The COVID-19 pandemic continued to disrupt our operating environment globally,
primarily impacting retail traffic, travel, supply chain, inventory levels and
other logistics during the three months ended March 31, 2022. The resurgence of
COVID-19 cases in many Chinese provinces led to restrictions late in the fiscal
2022 third quarter to prevent further spread of the virus. Consequently, retail
traffic, travel, and distribution capabilities were temporarily curtailed. Our
distribution facilities in Shanghai operated with limited capacity to fulfill
brick-and-mortar and online orders beginning in mid-March 2022.

Retail Impact


While most brick-and-mortar retail stores globally that sell our products,
whether operated by us or our customers, were open during much of the third
quarter of fiscal 2022, there were intermittent closures, primarily in mainland
China, which had regional lockdowns. Globally, in areas where stores were open,
consumer traffic has not recovered to the pre-pandemic levels.

International passenger traffic remained soft globally. However, passenger
traffic in Europe, the Middle East & Africa and The Americas improved, although
it remained significantly below pre-pandemic levels. The improvement was due to
the partial lifting of COVID-19-related restrictions. In Asia/Pacific, traffic
in Hainan was negatively impacted by fewer visitors due to intermittent domestic
travel restrictions.

Consumer Preferences

The continuance of COVID-19 pandemic-related closures of offices, retail stores
and other businesses and the significant decline in social gatherings have
influenced consumer preferences and practices. While the demand for makeup has
improved significantly in areas where restrictions have been lifted, it
continues to be the only category that remains below the pre-pandemic period,
given fewer makeup usage occasions and ongoing mask wearing, while skin care,
fragrance and hair care have all grown from pre-pandemic levels.

Supply Chain


The COVID-19 pandemic has contributed to global supply chain disruptions,
including manufacturing and transportation delays, due to closures, employee
absences, port congestion, labor and container shortages, and shipment delays.
As a result, we expect higher costs to negatively impact cost of sales and
operating expenses for the remainder of fiscal 2022. We expect to mitigate some
of the impact to our business and our costs through strategic price increases,
product mix, timing of shipments, inventory levels, use of air freight and less
congested ports, and cost savings in other areas. Toward the end of the third
quarter of fiscal 2022, we began to experience challenges in logistics in China
due to restrictions attributable to the COVID-19 pandemic.











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Business Update

We are a leader in prestige beauty, which combines the repeat purchase and
relative affordability of consumer goods with high quality products and
services. Within prestige beauty, we are well diversified by product category,
geography, brand, product sub-category, channel, consumer segment and price
point. This diversification allows us to leverage consumer analytics and
insights with agility by deploying our brands to fast growing and profitable
opportunities. These analytics and insights, combined with our creativity,
inform our innovation to provide a broad, locally-relevant and inclusive range
of prestige products allowing us to compete effectively for a greater share of a
consumer's beauty routine. Elements of our strategy are described in the
Overview on pages 31-34 of our Annual Report on Form 10-K for the year ended
June 30, 2021, as well as below.

During the third quarter of fiscal 2022, net sales increased 10%, reflecting
early stages of a recovery in The Americas and in Europe, the Middle East &
Africa as compared to a more difficult environment in the prior-year period. The
net sales increase includes incremental net sales attributable to the increase
in our ownership of DECIEM in the fiscal 2021 fourth quarter.

•Our skin care net sales benefited from the recent launch of The Hydrating
Infused Emulsion from La Mer, as well as initial shipments of the brand's The
Treatment Lotion and continued strength in its Crème de la Mer moisturizer.
Incremental net sales attributable to the increase in our ownership of DECIEM in
the fiscal 2021 fourth quarter also contributed to growth.
•The COVID-19 pandemic has generally resulted in more limited social and
business activities and consumers overall wore less makeup. As restrictions lift
and stores reopen in particular locations, we generally see demand for makeup
products increasing. During the third quarter of fiscal 2022, net sales in
makeup grew double digits in part due to this, and was also driven by strong
activations, expanded consumer reach and the launch of MACStack mascara from
M·A·C, increases in Estée Lauder foundation products, as well as a strong
performance from Clinique. Our brands generated interest in makeup through
virtual marketing efforts such as classes, virtual try-on technology and greater
emphasis on social media platforms.
•Our fragrance net sales rose sharply as consumers gravitated to high-end and
artisanal offerings from Jo Malone London, Tom Ford Beauty, and Le Labo.
•Our hair care net sales also grew double digits, reflecting increases from both
Aveda and Bumble and bumble as brick-and-mortar channels recover, online growth
continues and new products launch.

In September 2021, we announced that we are not renewing our existing license
agreements for Donna Karan New York, DKNY, Michael Kors, Tommy Hilfiger and
Ermenegildo Zegna when they expire in June 2023. We expect to continue to sell
products under these licenses through June 30, 2022.

Our global distribution capability and operations allow us to focus on targeted
expanded consumer reach wherever consumer demographics and trends are the most
attractive. Our regional organizations, and the expertise of our people there,
enable our brands to be more locally and culturally relevant in both product
assortment and communications. We are evolving the way we connect with our
consumers in stores, online and where they travel, including by expanding our
digital and social media presence and the engagement of global and local
influencers to amplify brand or product stories. We tailor implementation of our
strategy by market to drive consumer engagement and embrace cultural diversity.
We continuously strive to strengthen our presence in large, image-building core
markets, while broadening our presence in emerging markets.

•The increase in net sales during the fiscal 2022 third quarter was led by
Europe, the Middle East & Africa, which benefited from ongoing increases in our
travel retail business, partly relating to the increase in traffic as a result
of the easing of travel restrictions, which varied by location. In addition,
brick-and-mortar retail reopened across the region, driving growth in department
stores and freestanding retail stores.
•Net sales rose in The Americas, primarily reflecting the recovery of
brick-and-mortar stores, targeted expanded consumer reach and incremental net
sales attributable to the increase in our ownership of DECIEM in the fiscal 2021
fourth quarter.
•Net sales decreased in Asia/Pacific, reflecting tighter COVID-19 restrictions
in Greater China, partially offset by a progression towards recovery across
other markets in the region.

As a result of the invasion of Ukraine, we suspended all our business
investments and initiatives and commercial activity in Russia and Ukraine in
early March 2022. This included the temporary closure of our owned and
authorized freestanding stores and our own brand sites, as well as the
suspension of shipments to our retailers in Russia and Ukraine.

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As the safety of our employees remains a top priority, we continue to take
significant steps to support our employees in Ukraine, including the continuance
of compensation, maintenance of regular communication and offering relocation
assistance, and continue to provide compensation and support to our employees in
Russia. We are monitoring the effects of this conflict, including risks that may
affect our business, and expect that we will adjust our plans accordingly as the
situation progresses.

For the three and nine months ended March 31, 2022, the results of operations
related to Russia and Ukraine were not material to our consolidated financial
statements.

Outlook

The COVID-19 pandemic continues to disrupt business for us, retailers and other
companies with which we do business. There have been, and are likely to continue
to be, intermittent store closures and supply chain disruptions. We are mindful
that these trends may continue to impact the pace of recovery. The continued
curtailment in international travel is also affecting our travel retail business
in most of the world, which had been historically one of our fastest growth
areas. We expect to invest in areas to support the recovery, including
advertising, online, research and development and supply chain, to drive growth
in areas of opportunity and help nurture emerging trends in the rest of the
business. In addition to impacting net sales and profitability, these and other
challenges may adversely impact the goodwill and other intangible assets
associated with our brands, as well as long-lived assets (i.e. potentially
resulting in impairments).

We believe that the best way to increase long-term stockholder value is to
continue providing superior products and services in the most efficient and
effective manner while recognizing shifts in consumers' behaviors and shopping
practices. Accordingly, our long-term strategy has numerous initiatives across
geographic regions, product categories, brands, channels of distribution and
functions designed to grow our sales, provide cost efficiencies, leverage our
strengths and make us more productive and profitable. We plan to build upon and
leverage our history of outstanding creativity and innovation, high quality
products and services, and engaging communications while investing for long-term
sustainable growth.

We continue to monitor the effects of the global macroeconomic environment,
including increasing inflationary pressures; supply chain disruptions; social
and political issues; regulatory matters, including the imposition of tariffs;
geopolitical tensions; and global security issues. For example, we continue to
monitor the geopolitical tensions between the United States and China, which
could have a material adverse effect on our business. We are also mindful of
inflationary pressures on our cost base and are monitoring the impact on
consumer preferences.

The invasion of Ukraine has negatively impacted our operations in both Russia
and Ukraine. In fiscal 2021, our operations in Ukraine and Russia accounted for
approximately 1% of consolidated net sales. In March 2022, we announced a
suspension of all our business investments and initiatives and commercial
activity in Russia. Future impacts on our business, including sanctions and
counter-sanctions, are difficult to predict due to the high level of uncertainty
as to how these developments will evolve. On a broader perspective, there could
be additional negative impacts to our net sales, earnings, assets and cash flows
should these matters continue or escalate; such impacts could include economic
challenges in other countries because of inflationary pressures or other
consequences. Please refer to Risk Factors in Part I, Item 1A of the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 2021, for a more
complete discussion of the risks we encounter in our business and industry.

The uncertainty around the timing, speed and duration of the recovery from the
adverse impacts of the COVID-19 pandemic, including the impacts on our business
of the ongoing restrictions in China, will continue to affect our ability to
grow sales profitably. We believe we can, to some extent, offset the impact of
more ordinary challenges by continually developing and pursuing a diversified
strategy with multiple engines of growth and by accelerating initiatives focused
on areas of strength, discipline and agility, and by executing upon our
Post-COVID Business Acceleration Program. As the current situation continues to
progress, if economic and social conditions or the degree of uncertainty or
volatility worsen, or the adverse conditions previously described are further
prolonged, there could be a further negative effect on consumer confidence,
demand, spending and willingness or ability to travel and, as a result, on our
business. We are continuing to monitor these and other risks that may affect our
business.

Post-COVID Business Acceleration Program


Information about our restructuring initiative, the Post-COVID Business
Acceleration Program, is described in Notes to Consolidated Financial
Statements, Note 4 - Charges Associated with Restructuring and Other Activities
herein, as well as, in Notes to Consolidated Financial Statements, Note 8 -
Charges Associated with Restructuring and Other Activities and in
the Overview on page 33 of our Annual Report on Form 10-K for the year ended
June 30, 2021.

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Goodwill and Other Intangible Asset Impairments


During the fiscal 2022 third quarter, given the lower-than-expected results from
international expansion to areas that continue to be impacted by COVID-19, we
made revisions to the internal forecasts relating to our GLAMGLOW reporting
unit. We concluded that the changes in circumstances in the reporting unit
triggered the need for an interim impairment review of its trademark intangible
asset. As of March 31, 2022, the remaining carrying value of the trademark
intangible asset was not recoverable and we recorded an impairment charge of $11
million reducing the carrying value to zero.

During the fiscal 2022 third quarter, given the lower-than-expected growth
within key geographic regions and channels for Dr.Jart+ that continue to be
impacted by the spread of COVID-19 variants and resurgence in cases and the
potential future impacts relating to the uncertainty of the duration and
severity of COVID-19 impacting the financial performance of the brand, the lower
than expected growth in key retail channels for DECIEM, and the lower than
expected results from international expansion to areas that continue to be
impacted by COVID-19 for Too Faced, we made revisions to the internal forecasts
relating to its Dr. Jart+, DECIEM and Too Faced reporting units.

We concluded that the changes in circumstances in the reporting units triggered
the need for interim impairment reviews of their trademarks and goodwill. These
changes in circumstances were also an indicator that the carrying amounts of
Dr.Jart+'s, DECIEM's and Too Faced's long-lived assets, including customer
lists, may not be recoverable. Accordingly, we performed interim impairment
tests for the trademarks and a recoverability test for the long-lived assets as
of February 28, 2022. We concluded that the carrying amounts of the long-lived
assets were recoverable. For the Dr.Jart+ reporting unit, we also concluded that
the carrying value of the trademark intangible asset exceeded its estimated fair
value, which was determined utilizing the relief-from-royalty method to
determine discounted projected future cash flows, and recorded an impairment
charge. For the Too Faced and DECIEM reporting units, as the carrying values of
the trademarks did not exceed their estimated fair values, which were determined
utilizing the relief-from-royalty method to determine discounted projected
future cash flows, we did not record impairment charges. As of March 31, 2022,
the estimated fair values of Too Faced's and DECIEM's trademarks exceeded their
carrying values by 13% and 3%, respectively. For the Too Faced and DECIEM
trademark intangible assets, if all other assumptions are held constant, an
increase of 100 basis points and 50 basis points, respectively, in the weighted
average cost of capital would result in an impairment charge. After adjusting
the carrying values of the trademarks, we completed interim quantitative
impairment tests for goodwill. As the estimated fair value of the Dr.Jart+,
DECIEM and Too Faced reporting units were in excess of their carrying values, we
concluded that the carrying amounts of the goodwill were recoverable and did not
record a goodwill impairment charge related to these reporting units. The fair
value of these reporting units were based upon an equal weighting of the income
and market approaches, utilizing estimated cash flows and a terminal value,
discounted at a rate of return that reflects the relative risk of the cash
flows, as well as valuation multiples derived from comparable publicly traded
companies that are applied to operating performance of the reporting units. The
significant assumptions used in these approaches include revenue growth rates
and profit margins, terminal values, weighted average cost of capital used to
discount future cash flows and royalty rates for trademarks. The most
significant unobservable input used to estimate the fair value of the Dr. Jart+
trademark intangible asset was the weighted-average cost of capital, which was
10.5%.

A summary of the impairment charges for the three and nine months ended March
31, 2022 and the remaining trademark and goodwill carrying values as of March
31, 2022, for each reporting unit, are as follows:

(In millions)                                                             Impairment Charge                            Carrying Value
Reporting Unit:               Geographic Region                    Trademarks             Goodwill             Trademarks            Goodwill
GLAMGLOW                      The Americas                       $         11          $         -          $        -             $        -
Dr. Jart+                     Asia/Pacific                                205                    -                 486                    332

Total                                                            $        216          $         -          $      486$      332



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The impairment charges for the three and nine months ended March 31, 2022 were
reflected in the skin care product category.


The fair value of the Dr. Jart+ trademark was equal to its carrying value
subsequent to the impairment charge taken as of March 31, 2022. The key
assumptions used to determine the estimated fair value of the reporting unit are
primarily predicated on the estimated future impacts of COVID-19, the success of
future new product launches, the achievement of distribution expansion plans,
and the realization of cost reduction and other efficiency efforts. If such
plans do not materialize, or if there are further challenges in the business
environments in which the reporting unit operates, resulting changes in the key
assumptions could have negative impacts on the estimated fair value of the
reporting unit and it is possible we could recognize additional impairment
charges in the future.

NET SALES
                                                       Three Months Ended              Nine Months Ended
                                                            March 31                        March 31
($ in millions)                                                   2022               2021              2022              2021
As Reported:
Net sales                                                      $  4,245

$ 3,864$ 14,176$ 12,279
$ Change from prior-year period

                                     381                                1,897
% Change from prior-year period                                      10  %                                15  %

Non-GAAP Financial Measure(1):
% Change from prior-year period in constant
currency                                                             11  %                                15  %


(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.



Reported net sales increased for the three and nine months ended March 31, 2022,
driven by higher net sales from every major product category and in Europe, the
Middle East & Africa and The Americas primarily reflecting (i) the continued
progression towards brick-and-mortar and travel recovery compared to the
prior-year challenges, which included widespread store closures, lower retail
traffic, travel restrictions and quarantines, stemming from the COVID-19
pandemic; (ii) the continued success of hero product franchises; (iii)
successful performance for holiday and key shopping moments (iv) new product
launches; and (v) targeted expanded consumer reach.

Reported net sales in Asia/Pacific decreased and increased for the three and
nine months ended March 31, 2022, respectively. For the three months ended March
31, 2022, net sales decreased due to a resurgence of COVID-19 cases across many
Chinese provinces which led to restrictions to further prevent the spread of the
virus. For the nine months ended March 31, 2022, net sales increased, led by
mainland China and Korea.

For the three and nine months ended March 31, 2022, reported net sales increased
from every major product category. Skin care net sales increased in both
periods, led by La Mer and benefited from incremental net sales attributable to
the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter.
Fragrance net sales grew double-digits, led by Jo Malone London, Tom Ford Beauty
and Le Labo. The net sales increases from Estée Lauder and M·A·C drove the
increases in the makeup net sales. Hair care net sales increased in both
periods, due to higher net sales from Aveda and Bumble and bumble.

For the three and nine months ended March 31, 2022, reported net sales grew
double-digits in Europe, the Middle East & Africa and The Americas and benefited
from incremental net sales attributable to the increase in our ownership of
DECIEM in the fiscal 2021 fourth quarter. Net sales increased in Europe, the
Middle East & Africa, reflecting recovery across the region, led by our travel
retail business and the United Kingdom. The increases in net sales in The
Americas reflected higher net sales throughout the region.

The total net sales increases were impacted by approximately $53 million of
unfavorable and $31 million of favorable foreign currency translation for the
three and nine months ended March 31, 2022, respectively.

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Returns associated with restructuring and other activities are not allocated to
our product categories or geographic regions because they result from activities
that are deemed a Company-wide initiative to redesign, resize and reorganize
select corporate functions and go-to-market structures. Accordingly, the
following discussions of Net sales by Product Categories and Geographic Regions
exclude the impact of returns associated with restructuring and other activities
for the three and nine months ended March 31, 2022 of $1 million and $3 million,
respectively.

Product Categories

Skin Care
                                                         Three Months Ended                    Nine Months Ended
                                                              March 31                              March 31
($ in millions)                                        2022               2021               2022              2021
As Reported:
Net sales                                          $    2,395$  2,259$   8,003$  7,113
$ Change from prior-year period                           136                                  890
% Change from prior-year period                             6  %                                13  %

Non-GAAP Financial Measure(1):
% Change from prior-year period in constant
currency                                                    7  %                                12  %


(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.



Reported skin care net sales increased for the three months ended March 31,
2022, reflecting higher net sales from La Mer and incremental net sales
attributable to the increase in our ownership of DECIEM in the fiscal 2021
fourth quarter of approximately $269 million, combined. Net sales from La Mer
increased, led by our travel retail business and mainland China, primarily
reflecting continued success of hero products, such as Crème de la Mer and the
Genaissance de la Mer line of products, the current-year launch of The Hydrating
Infused Emulsion, the fiscal 2022 third-quarter launch of the new upgraded The
Treatment Lotion and targeted expanded consumer reach.

Partially offsetting the increase in skin care net sales for the three months
ended March 31, 2022, were lower net sales from Estée Lauder and Origins of
approximately $157 million, combined. The decreases in net sales from Estée
Lauder and Origins reflected lower traffic in Asia due to the resurgence of
COVID-19 cases in many Chinese provinces, which led to restrictions to prevent
further spread of the virus. Net sales from Estée Lauder also declined due to
lower net sales from the Advanced Night Repair product franchise primarily due
to the prior-period launch of Advanced Night Repair Synchronized Multi-Recovery
Complex.

Reported skin care net sales increased for the nine months ended March 31, 2022,
reflecting higher net sales from La Mer and Clinique, as well as incremental net
sales attributable to the increase in our ownership of DECIEM in the fiscal 2021
fourth quarter of approximately $869 million, combined. Net sales from La Mer
increased, as discussed above. Clinique net sales increased, primarily driven by
our travel retail business and North America, reflecting the continued success
of existing products, such as the Take The Day Off line of products and Even
Better Clinical Radical Dark Spot Corrector + Interrupter.

Partially offsetting the increase in skin care net sales for the nine months
ended March 31, 2022, were lower net sales from Estée Lauder and Origins of
approximately $197 million, combined, as discussed above.

The skin care net sales increases were impacted by approximately $16 million of
unfavorable and $57 million of favorable foreign currency translation for the
three and nine months ended March 31, 2022, respectively.
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Makeup
                                                            Three Months Ended                    Nine Months Ended
                                                                 March 31                              March 31
($ in millions)                                           2022               2021               2022              2021
As Reported:
Net sales                                             $    1,114$  1,018$   3,674$  3,243
$ Change from prior-year period                               96                                  431
% Change from prior-year period                                9  %                                13  %

Non-GAAP Financial Measure(1):
% Change from prior-year period in constant
currency                                                      11  %                                14  %


(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.


Reported makeup net sales increased for the three months ended March 31, 2022,
led by higher net sales from M·A·C, Estée Lauder and Clinique, of approximately
$109 million, combined. The continued progression towards recovery in makeup,
including increased usage occasions compared to the prior-year period, led to
the increase in makeup net sales in The Americas and Europe, the Middle East &
Africa. The increase in net sales from M·A·C was primarily driven by the
continued success of hero products, such as Studio Fix, the fiscal 2022 third
quarter launch of MACStack mascara and successful social media campaigns during
key shopping moments. Net sales from Estée Lauder increased, primarily due to
the continued success of existing products, such as the Double Wear and Futurist
product franchises and new product launches, such as the current-year launches
of Double Wear Sheer Long-Wear Makeup. Net sales for Clinique increased,
primarily reflecting continued success from Even Better Makeup and successful
performance in the lip, concealer and eye subcategories.

Reported makeup net sales increased for the nine months ended March 31, 2022,
led by higher net sales from Estée Lauder and M·A·C of approximately $303
million, combined, as noted above. The net sales increase from M·A·C also
benefited from the continued success of existing products, such as Ruby's Crew
and Re-Think Pink in the lip subcategory and Magic Extension in the mascara
subcategory, as well as the success of the fiscal 2022 third quarter launch of
MACStack mascara.

The makeup net sales increases were impacted by approximately $19 million and
$14 million of unfavorable foreign currency translation for the three and nine
months ended March 31, 2022, respectively.

Fragrance
                                                         Three Months Ended                    Nine Months Ended
                                                              March 31                              March 31
($ in millions)                                        2022               2021               2022              2021
As Reported:
Net sales                                          $     579$    454$   1,987$  1,478
$ Change from prior-year period                          125                                   509
% Change from prior-year period                           28   %                                34  %

Non-GAAP Financial Measure(1):
% Change from prior-year period in constant
currency                                                  31   %                                35  %


(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.





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Reported fragrance net sales increased for the three months ended March 31,
2022, primarily driven by Jo Malone London, Tom Ford Beauty, Le Labo and Estée
Lauder of approximately $107 million, combined. Fragrance net sales grew in
every geographic region, reflecting continued growth in luxury fragrances, the
brick-and-mortar and travel recovery in various parts of the world due to more
store openings, increased retail traffic, successful performance during holiday
and key shopping moments, and the easing of travel restrictions compared to the
prior-year period. The increase in net sales from Jo Malone London reflected the
fiscal 2022 third quarter launches of House of Roses and Mediterranean Blossoms
and continued growth of the home and bath & body subcategories. Net sales
increased from Tom Ford Beauty, also benefiting from the continued success of
Private Blend and Signature fragrances and the fiscal 2022 third quarter product
launches of Costa Azzurra parfum, Rose de Chine and Rose d'Amalfi. Net sales
from Le Labo increased, also reflecting the continued success of hero product
franchises, current-year product launches and targeted expanded consumer reach.
The increase in net sales from Estée Lauder was primarily due to the continued
success of the Beautiful Magnolia line of products.

Reported fragrance net sales increased for the nine months ended March 31, 2022,
primarily driven by Jo Malone London, Tom Ford Beauty and Le Labo of
approximately $378 million, combined, and grew double digits in every geographic
region, as discussed above. The increases in net sales from Jo Malone London
reflected the continued success of our hero products, current-year launches and
continued growth of the home and bath & body subcategories. Net sales increased
from Tom Ford Beauty, reflecting the continued success of Private Blend and
Signature fragrances, current-year product launches and the diversification of
product offerings by region. Net sales from Le Labo increased, as discussed
above.

The fragrance net sales increases were impacted by approximately $14 million and
$8 million of unfavorable foreign currency translation for the three and nine
months ended March 31, 2022, respectively.

Hair Care
                                                         Three Months Ended                       Nine Months Ended
                                                              March 31                                 March 31
($ in millions)                                        2022               2021               2022                    2021
As Reported:
Net sales                                          $     147$    128$     475$    418
$ Change from prior-year period                           19                                    57
% Change from prior-year period                           15   %                                14   %

Non-GAAP Financial Measure(1):
% Change from prior-year period in constant
currency                                                  17   %                                14   %


(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.


Reported hair care net sales increased for the three and nine months ended March
31, 2022, reflecting higher net sales from Aveda and Bumble and bumble,
combined, of approximately $18 million and $49 million, respectively, primarily
due to the continued progression towards salon and retail store recovery in
North America. Net sales from Aveda increased in both periods, reflecting the
continued success of existing product franchises and the fiscal 2022 third
quarter relaunch of Full Spectrum Semi-Permanent Treatment Hair Color. The
increases in net sales from Bumble and bumble also reflected the success of hero
products, the fiscal 2022 third quarter product launches of Bb. Thickening
Plumping Mask and Bb. Thickening Go Big Plumping Treatment, and targeted
expanded consumer reach.

Geographic Regions

We strategically time our new product launches by geographic market, which may
account for differences in regional sales growth.

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The Americas
                                                          Three Months Ended                     Nine Months Ended
                                                               March 31                               March 31
($ in millions)                                         2022                2021               2022              2021
As Reported:
Net sales                                          $     1,053$    916$   3,547$  2,837
$ Change from prior-year period                            137                                   710
% Change from prior-year period                             15   %                                25  %

Non-GAAP Financial Measure(1):
% Change from prior-year period in constant
currency                                                    14   %                                25  %


(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.


Reported net sales in The Americas increased for the three and nine months ended
March 31, 2022 in every country and product category, reflecting the
brick-and-mortar and makeup recovery from the prior-year challenges that
included store closures, lower retail traffic, fewer makeup usage occasions and
quarantines, stemming from the COVID-19 pandemic. The net sales increases were
led by higher net sales in North America of approximately $125 million and $658
million, respectively, also benefiting from incremental net sales attributable
to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter,
higher net sales from many of our brands, led by M·A·C and Clinique, and
targeted expanded consumer reach.

Net sales in The Americas were impacted by approximately $6 million and $13
million
of favorable foreign currency translation for the three and nine months
ended March 31, 2022, respectively.

Europe, the Middle East & Africa

                                                         Three Months Ended                    Nine Months Ended
                                                              March 31                              March 31
($ in millions)                                        2022               2021               2022              2021
As Reported:
Net sales                                          $    1,990$  1,706$   6,201$  5,276
$ Change from prior-year period                           284                                  925
% Change from prior-year period                            17  %                                18  %

Non-GAAP Financial Measure(1):
% Change from prior-year period in constant
currency                                                   19  %                                18  %


(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.


Reported net sales for the three and nine months ended March 31, 2022 increased
in Europe, the Middle East & Africa, reflecting continued recovery across the
region, primarily due to store openings, increased retail traffic, and the
easing of travel restrictions compared to the prior year, led by our travel
retail business and the United Kingdom, combined, of approximately $271 million
and $712 million, respectively. Despite the fiscal 2022 third quarter resurgence
in COVID-19 cases in many Chinese provinces, which led to restrictions to
prevent further spread of the virus and the curtailment of travel, net sales
increased in our travel retail business, reflecting continued strength of our
brands with the Chinese consumer, the easing of travel restrictions in Europe,
the Middle East & Africa and The Americas, and continued success of hero product
franchises from La Mer and Jo Malone London. These benefits were partially
offset by lower net sales from Estée Lauder products, primarily reflecting lower
net sales from the Advanced Night Repair product franchise primarily due to the
prior-period launch of Advanced Night Repair Synchronized Multi-Recovery
Complex. Net sales in the United Kingdom increased, primarily reflecting
brick-and-mortar recovery, as noted above, and benefiting from the growth in
makeup and fragrance. The increases in net sales in the United Kingdom also
reflected incremental net sales attributable to the increase in our ownership of
DECIEM in the fiscal 2021 fourth quarter.
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Net sales in Europe, the Middle East & Africa were impacted by approximately $47
million
and $45 million of unfavorable foreign currency translation for the
three and nine months ended March 31, 2022, respectively.

Asia/Pacific
                                                         Three Months Ended                    Nine Months Ended
                                                              March 31                              March 31
($ in millions)                                        2022               2021               2022              2021
As Reported:
Net sales                                          $    1,203$  1,252$   4,431$  4,176
$ Change from prior-year period                           (49)                                 255
% Change from prior-year period                            (4) %                                 6  %

Non-GAAP Financial Measure(1):
% Change from prior-year period in constant
currency                                                   (3) %                                 5  %


(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.



Reported net sales decreased in Asia/Pacific for the three months ended March
31, 2022, primarily driven by lower results in mainland China and Hong Kong of
approximately $54 million, combined, due to the resurgence of COVID-19 cases
toward the end of the fiscal 2022 third quarter that led to restrictions to
prevent further spread of the virus. These restrictions resulted in limited
capacity in our Shanghai distribution facilities and the temporary curtailment
of retail traffic, travel and other distribution capabilities.

Reported net sales increased in Asia/Pacific for the nine months ended March 31,
2022, reflecting higher net sales in mainland China, despite the resurgence in
COVID-19 cases in many Chinese provinces toward the end of the fiscal 2022 third
quarter, and Korea of approximately $257 million, combined. Net sales in
mainland China increased, primarily due to the continued success of hero
products franchises from Estée Lauder, La Mer and Jo Malone London, reflecting
continued growth in skin care and strong momentum in fragrance, successful
performance during holiday and key shopping moments, new product launches, and
the current-year launch on a new third-party online platform. Net sales
increased in Korea, despite the challenging brick-and-mortar retail environment,
primarily reflecting the continued success of hero product franchises from Jo
Malone London and strong momentum in fragrance.

Net sales in Asia/Pacific were impacted by approximately $11 million of
unfavorable and $64 million of favorable foreign currency translation for the
three and nine months ended March 31, 2022, respectively.

GROSS MARGIN


Gross margin increased to 76.6% and 76.9% for the three and nine months ended
March 31, 2022, respectively, as compared with 75.7% and 76.8% in the prior-year
periods.
                                                                            

Favorable (Unfavorable) Basis Points

                                                                                        March 31, 2022
                                                                 Three Months Ended                          Nine Months Ended
Mix of business                                                              (30)                                       (35)
Obsolescence charges                                                          65                                         (5)
Manufacturing costs and other                                                (25)                                       (10)
Foreign exchange transactions                                                 60                                         50
Subtotal                                                                      70                                          -
Charges associated with restructuring and other
activities                                                                    20                                         10
Total                                                                         90                                         10




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The increase in gross margin for the three months ended March 31, 2022 reflected
favorable obsolescence charges due to a higher level of destruction in the
prior-year period, the favorable impact from transactional foreign exchange due
to the strengthening of the U.S. Dollar and the favorable impact from
under-absorption of manufacturing overhead costs in the prior-year period,
partially offset by higher inbound transportation costs driven by global supply
chain disruptions as discussed above and an unfavorable impact from our mix of
business. The unfavorable impact from our mix of business was primarily driven
by the change in category mix, primarily due to the increase in makeup and
fragrance net sales, and higher costs from new skin care products, partially
offset by strategic price increases.

The increase in gross margin for the nine months ended March 31, 2022 reflected
a favorable transactional foreign exchange impact due to the strengthening of
the U.S. Dollar, partially offset by an unfavorable impact from our mix of
business. The unfavorable impact from our mix of business was primarily due to
lower gross margins on DECIEM products, change in category mix primarily due to
the increase in makeup and fragrance net sales and higher costs from new
products and product sets, partially offset by strategic price increases.

OPERATING EXPENSES

Operating expenses as a percentage of net sales was 59.2% and 55.1% for the
three and nine months ended March 31, 2022, respectively, as compared with 59.8%
and 57.4% in the prior-year periods.

                                                                                Favorable (Unfavorable) Basis Points
                                                                                           March 31, 2022
                                                                    Three Months Ended                          Nine Months Ended
General and administrative expenses                                              90                                         70
Advertising, merchandising, sampling and product
development                                                                      10                                         30
Selling                                                                          20                                         70
Stock-based compensation                                                          -                                         10
Store operating costs                                                            10                                         10
Shipping                                                                        (80)                                       (50)
Foreign exchange transactions                                                   (10)                                       (10)
Subtotal                                                                         40                                        130
Charges associated with restructuring and other
activities                                                                      290                                        110
Goodwill, other intangible and long-lived asset
impairments                                                                    (420)                                       (60)
Acquisition-related stock compensation income                                   150                                         50

Total                                                                            60                                        230



The favorable change in operating expense margin for the three months ended
March 31, 2022, was driven by income related to the change in fair value of
acquisition-related stock options of $60 million relating to the increase in our
investment in DECIEM during the fiscal 2021 fourth quarter, disciplined general
and administrative expense management and the increase in net sales. Partially
offsetting these favorable changes were the year-over-year impact of other
intangible and long-lived asset impairments of $183 million, as well as higher
shipping costs due to the increase in net sales volume and increased shipping
rates.

The favorable change in operating expense margin for the nine months ended March
31, 2022, was driven by the increase in net sales, disciplined general and
administrative expense management, the favorable impact from selling expenses,
primarily due to the shift in channel mix to online, travel retail and
specialty-multi, and income related to the change in fair value of
acquisition-related stock options of $58 million relating to the increase in our
investment in DECIEM during the fiscal 2021 fourth quarter. Partially offsetting
these favorable changes in operating expense margin were the year-over-year
impact of goodwill, other intangible and long-lived asset impairments of $102
million and higher shipping costs as discussed above.


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OPERATING RESULTS
                                                                   Three Months Ended                      Nine Months Ended
                                                                        March 31                                March 31
($ in millions)                                               2022                    2021               2022              2021
As Reported:
Operating income                                          $     738

$ 616$ 3,091$ 2,384
$ Change from prior-year period

                                 122                                        707
% Change from prior-year period                                  20   %                                     30  %

Operating margin                                               17.4   %                15.9  %            21.8  %           19.4  %

Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year
period adjusting for the impact of charges
associated with restructuring and other activities,
goodwill, other intangible and long-lived asset
impairments, the change in fair value of
acquisition-related stock options and changes in
fair value of contingent consideration                           15   %                                     23  %


(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.


The increase in reported operating margin for the three and nine months ended
March 31, 2022 from the prior-year period was primarily driven by the favorable
changes in operating expense margin and gross margin, discussed above, partially
offset by the year-over-year impact of goodwill, other intangible and long-lived
asset impairments of $183 million and $102 million, respectively.

Charges associated with restructuring and other activities are not allocated to
our product categories or geographic regions because they are centrally directed
and controlled, are not included in internal measures of product category or
geographic region performance and result from activities that are deemed
Company-wide initiatives to redesign, resize and reorganize select areas of the
business. Accordingly, the following discussions of Operating income by Product
Categories and Geographic Regions exclude the impact of charges associated with
restructuring and other activities.

Product Categories

Skin Care

                                                                Three Months Ended                    Nine Months Ended
                                                                     March 31                              March 31
($ in millions)                                               2022               2021               2022              2021
As Reported:
Operating income                                          $     667$    804$   2,466$  2,453
$ Change from prior-year period                                (137)                                   13
% Change from prior-year period                                 (17)  %                                 1  %

Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year
period adjusting for the impact of goodwill, other
intangible and long-lived asset impairments and the
change in fair value of acquisition-related stock
options                                                           3   %                                 4  %


(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.

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Reported skin care operating income decreased for the three months ended March
31, 2022, reflecting the current year impact of other intangible asset
impairments related to Dr.Jart+ and GLAMGLOW of approximately $216 million,
combined, as well as lower results from Estée Lauder. The decrease in operating
income from Estée Lauder was primarily due to the decrease in net sales.

Partially offsetting the decreases in operating income for the three months
ended March 31, 2022 were higher results from La Mer primarily due to the
increase in net sales, as well as $58 million of income related to the change in
fair value of acquisition-related stock options relating to the increase in our
investment in DECIEM during the fiscal 2021 fourth quarter.

Reported skin care operating income increased for the nine months ended March
31, 2022, reflecting higher results from La Mer, Bobbi Brown and Clinique of
approximately $355 million, combined, and $56 million of income related to the
change in fair value of acquisition-related stock options relating to the
increase in our investment in DECIEM during the fiscal 2021 fourth quarter. The
higher results for La Mer reflected the increase in net sales, partially offset
by the increase in cost of sales primarily due to higher costs for promotional
items and higher advertising and promotional activities primarily to support
holiday and key shopping moments and new product launches. Operating income from
Clinique increased, primarily due to higher net sales, partially offset by
higher advertising and promotional activities primarily to support holiday and
key shopping moments and new product launches.

Partially offsetting the increases in operating income for the nine months ended
March 31, 2022 were the unfavorable year-over-year impact of goodwill and other
intangible asset impairments related to Dr.Jart+ and GLAMGLOW of approximately
$135 million, combined, as well as lower results from Estée Lauder. The decrease
in operating income from Estée Lauder was primarily due to the decrease in net
sales, the increase in cost of sales primarily due to higher costs for
promotional items and higher advertising and promotional activities to support
hero products, holiday and key shopping moments and new product launches.


Makeup
                                                                Three Months Ended                       Nine Months Ended
                                                                     March 31                                March 31
($ in millions)                                               2022               2021                 2022                 2021
As Reported:
Operating income (loss)                                   $        7$    (72)$     228$   (115)
$ Change from prior-year period                                   79                                  343
% Change from prior-year period                                   100+%                                     100+%

Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year
period adjusting for the impact of long-lived asset
impairments                                                       100+%                                      100+


(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.


Reported makeup operating income increased for the three months ended March 31,
2022, reflecting higher results from M·A·C, Clinique, Estée Lauder and La Mer of
approximately $69 million, combined, and the favorable year-over-year impact of
long-lived asset impairments of $24 million. Operating income from M·A·C
increased due to the increase in net sales, partially offset by higher
advertising and promotional activities to support new product launches and
higher selling costs due to the brick-and-mortar recovery, including more stores
being open and increased retail traffic compared to the prior year. The higher
results from Clinique were primarily due to the increases in net sales,
partially offset by higher selling costs due to the brick-and-mortar recovery
and higher shipping costs. Operating income for Estée Lauder increased primarily
due to the increase in net sales, partially offset by higher advertising and
promotional activities relating to strategic investments to support the makeup
recovery and digital advertising and social media spending. Operating income
from La Mer increased primarily due to an increase in net sales, partially
offset by higher cost of sales, due, in part to an increase in promotional
items.

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Reported makeup operating income increased for the nine months ended March 31,
2022, primarily driven by higher results from Estée Lauder and M·A·C of
approximately $179 million, combined, reflecting the increases in net sales,
partially offset by higher advertising and promotional activities as discussed
above.

Fragrance
                                                             Three Months Ended                       Nine Months Ended
                                                                  March 31                                 March 31
($ in millions)                                            2022               2021               2022                    2021
As Reported:
Operating income                                      $      105$     47$     446$    248
$ Change from prior-year period                               58                                   198
% Change from prior-year period                                100+%                                80   %

Non-GAAP Financial Measure(1):
% Change in operating income from the
prior-year period adjusting for long-lived
asset impairments and changes in fair value of
contingent consideration                                      88   %                                75   %


(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.


Reported fragrance operating income increased for the three and nine months
ended March 31, 2022, primarily driven by higher results from Jo Malone London,
Tom Ford Beauty and Le Labo, combined, of approximately $46 million and $171
million, respectively, as well as the favorable year-over-year impact of
long-lived asset impairments of $9 million. In both periods, the higher results
from Jo Malone London primarily reflected the increase in net sales, partially
offset by higher cost of sales given the growth of the home subcategory and the
increase in promotional items and the increase in selling costs resulting from
the brick-and-mortar recovery. Also partially offsetting the increase in net
sales from Jo Malone London for the nine months ended March 31, 2022, were
higher advertising and promotional activities primarily to support in-store
promotions given the increase in brick-and-mortar traffic and new product
launches. Operating results from Tom Ford Beauty increased in both periods,
primarily due to higher net sales, partially offset by higher cost of sales due,
in part, to the increase in promotional items and the increase in advertising
and promotional activities to support strategic investments in digital
advertising and social media spending (including costs associated with
influencers), hero product franchises, and new product launches. The increases
in operating income from Le Labo, in both periods, was primarily driven by the
increase in net sales.

Hair Care
                                             Three Months Ended                 Nine Months Ended
                                                  March 31                           March 31
($ in millions)                            2022                 2021          2022                2021
As Reported:
Operating loss                         $     (18)$ (17)$     (8)$ (10)
$ Change from prior-year period               (1)                           

2

% Change from prior-year period               (6)  %                        

20 %




Reported hair care operating income decreased for the three months ended March
31, 2022, primarily driven by increased operating expenses to support the salon
and retail story recovery, partially offset by increases in operating results
from Bumble and bumble and Aveda, primarily due to the increases in net sales.

Reported hair care operating income increased for the nine months ended March
31, 2022, primarily driven by higher results from Bumble and bumble, primarily
due to the increase in net sales.



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Geographic Regions

The Americas
                                                                Three Months Ended                       Nine Months Ended
                                                                     March 31                                 March 31
($ in millions)                                               2022               2021                  2022                 2021
As Reported:
Operating income                                          $      408$    155$     1,044$    256
$ Change from prior-year period                                  253                                    788
% Change from prior-year period                                   100+%                                      100+%

Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year
period adjusting for the impact of goodwill and
other intangible asset impairments and the change
in fair value of acquisition-related stock options                100+%                                      100+%


(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.


Reported operating results increased in The Americas for the three months ended
March 31, 2022, primarily reflecting higher operating results from North America
of approximately $251 million, primarily due to the increase in net sales,
higher intercompany royalty income primarily from growth in our travel retail
business and $60 million of income related to the change in fair value of
acquisition-related stock options relating to the increase in our investment in
DECIEM during the fiscal 2021 fourth quarter, partially offset by an unfavorable
year-over-year impact of other intangible asset impairments relating to GLAMGLOW
of $11 million.

Reported operating results increased in The Americas for the nine months ended
March 31, 2022, primarily reflecting higher operating results from North America
of approximately $776 million, primarily due to the increase in net sales,
higher intercompany royalty income primarily from growth in our travel retail
business, favorable year-over-year impact of goodwill and other intangible asset
impairments relating to GLAMGLOW of $70 million and $58 million of
acquisition-related stock option income relating to the increase in our
investment in DECIEM during the fiscal 2021 fourth quarter. Partially offsetting
these increases in operating income were higher advertising and promotional
activities, primarily to support strategic investments in digital advertising
and social media spending and in-store promotions given the increase in
brick-and-mortar traffic, and increases in selling expense due to the
brick-and-mortar and makeup recovery compared to the prior-year.

Europe, the Middle East & Africa

                                                          Three Months Ended                    Nine Months Ended
                                                               March 31                              March 31
($ in millions)                                         2022               2021               2022              2021
As Reported:
Operating income                                    $     281$    361$   1,366$  1,429
$ Change from prior-year period                           (80)                                  (63)
% Change from prior-year period                           (22)  %                                (4) %

Non-GAAP Financial Measure(1):
% Change in operating income from the
prior-year period adjusting for long-lived
asset impairments and changes in contingent
consideration                                             (29)  %                                (6) %


(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.

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Reported operating income decreased in Europe, the Middle East & Africa for the
three and nine months ended March 31, 2022, primarily driven by lower results
from our travel retail business and the United Kingdom, combined, of
approximately $121 million and $162 million, respectively. In both periods,
operating income decreased in our travel retail business reflecting the (i)
increase in intercompany royalty expense to The Americas primarily due to the
growth of our travel retail business and (ii) higher shipping costs due to the
increase in net sales volume and shipping rates. Also contributing to the
decrease in operating income from our travel retail business was higher
advertising and promotional activity primarily to support strategic investments
in key areas of growth (primarily hero products and the skin care product
category), as well as to capture the current-year increase in airport traffic.
These higher expenses were partially offset by the increase in net sales.
Operating income decreased in the United Kingdom in both periods, led by higher
selling and store operations costs as more brick-and-mortar locations were open
compared to the prior-year, partially offset by an increase in net sales.

Partially offsetting these decreases in operating income for the three and nine
months ended March 31, 2022 were higher results from several affiliates across
the region, reflecting the brick-and-mortar recovery, compared to the prior-year
periods.

Asia/Pacific
                                                         Three Months Ended                       Nine Months Ended
                                                              March 31                                 March 31
($ in millions)                                        2022               2021               2022                    2021
As Reported:
Operating income                                   $      72$    245$     725$    890
$ Change from prior-year period                         (173)                                 (165)
% Change from prior-year period                          (71)  %                               (19)  %

Non-GAAP Financial Measure(1):
% Change in operating income from the
prior-year period adjusting for other
intangible asset impairments                              13   %                                 4   %


(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 58 for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.



Reported operating income decreased in Asia/Pacific for the three and nine
months ended December 31. 2021, reflecting the current year other intangible
asset impairment relating to Dr. Jart+ of $205 million, partially offset by
increases in operating results from other affiliates across the region due to
the progression towards recovery.

INTEREST AND INVESTMENT INCOME

                                                        Three Months Ended                    Nine Months Ended
                                                             March 31                              March 31
(In millions)                                         2022               2021               2022              2021
Interest expense                                  $       41$     43$     125$    131
Interest income and investment income, net        $        5          $     

9 $ 19$ 40



Interest income and investment income, net decreased primarily due to equity
method investment income recognized in the prior-year period relating to our
previously held equity method investment in DECIEM.






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PROVISION FOR INCOME TAXES


The provision for income taxes represents U.S. federal, foreign, state and local
income taxes. The effective rate differs from the federal statutory rate
primarily due to the effect of state and local income taxes, the tax impact of
share-based compensation, the taxation of foreign income and income tax reserve
adjustments, which represent changes in our net liability for unrecognized tax
benefits including tax settlements and lapses of the applicable statutes of
limitations. Our effective tax rate will change from quarter-to-quarter based on
recurring and non-recurring factors including the geographical mix of earnings,
enacted tax legislation, state and local income taxes, tax reserve adjustments,
the tax impact of share-based compensation, the interaction of various global
tax strategies and the impact from certain acquisitions. In addition, changes in
judgment from the evaluation of new information resulting in the recognition,
derecognition or remeasurement of a tax position taken in a prior annual period
are recognized separately in the quarter of change.
                                                      Three Months Ended                           Nine Months Ended
                                                           March 31                                    March 31
                                                  2022                  2021                  2022                  2021
Effective rate for income taxes                      18.5  %               21.0  %               21.1  %               18.5  %
Basis-point change from the prior-year
period                                               (250)                                        260



The effective tax rate for the three and nine months ended March 31, 2021
included the retroactive impact relating to fiscal 2020 and 2019 of the U.S.
government issuance of final global intangible low-taxed income ("GILTI") tax
regulations in July 2020 under the Tax Cuts and Jobs Act that provide for a
high-tax exception to the GILTI tax. The impact of the final issuance of GILTI
tax regulations with respect to fiscal 2020 and 2019 was recognized as a
discrete item in the provision for income taxes in the second and third quarters
of fiscal 2021 and resulted in reductions of 30 basis points and 220 basis
points to the effective tax rates for the three and nine months ended March 31,
2021, respectively.

For the three months ended March 31, 2022, the decrease in the effective tax
rate was primarily attributable to a lower effective tax rate on the Company's
foreign operations, partially offset by a decrease in excess tax benefits
associated with stock-based compensation arrangements.

For the nine months ended March 31, 2022, the increase in the effective tax rate
was primarily attributable to a higher effective tax rate on the Company's
foreign operations, which includes the retroactive impact of the final GILTI tax
regulations recognized in the prior period. Also contributing to the increase
was a decrease in excess tax benefits associated with stock-based compensation
arrangements.

NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.

                                                                 Three Months Ended                      Nine Months Ended
                                                                      March 31                                March 31
($ in millions, except per share data)                       2022                   2021               2022              2021
As Reported:
Net earnings attributable to The Estée Lauder
Companies Inc.                                           $     558

$ 456$ 2,338$ 1,852
$ Change from prior-year period

                                102                                       486
% Change from prior-year period                                 22   %                                    26  %
Diluted net earnings per common share                    $    1.53

$ 1.24$ 6.39$ 5.03
% Change from prior-year period

                                 24   %                                    27  %

Non-GAAP Financial Measure(1):
% Change in diluted net earnings per common share
from the prior-year period adjusting for the
impact of charges associated with restructuring
and other activities, goodwill, other intangible
and long-lived asset impairments, the change in
fair value of acquisition-related stock options
and changes in fair value of contingent
consideration                                                   17   %                                    20  %


(1)See “Reconciliations of Non-GAAP Financial Measures” below for
reconciliations between non-GAAP financial measures and the most directly
comparable U.S. GAAP measures.

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RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES


We use certain non-GAAP financial measures, among other financial measures, to
evaluate our operating performance, which represent the manner in which we
conduct and view our business. Management believes that excluding certain items
that are not comparable from period to period, or do not reflect the Company's
underlying ongoing business, provides transparency for such items and helps
investors and others compare and analyze our operating performance from period
to period. In the future, we expect to incur charges or adjustments similar in
nature to those presented below; however, the impact to the Company's results in
a given period may be highly variable and difficult to predict. Our non-GAAP
financial measures may not be comparable to similarly titled measures used by,
or determined in a manner consistent with, other companies. While we consider
the non-GAAP measures useful in analyzing our results, they are not intended to
replace, or act as a substitute for, any presentation included in the
consolidated financial statements prepared in conformity with U.S. GAAP. The
following tables present Net sales, Operating income and Diluted net earnings
per common share adjusted to exclude the impact of charges associated with
restructuring and other activities; goodwill, other intangible and long-lived
asset impairments; the changes in fair value of contingent consideration; the
change in fair value of acquisition-related stock options; and the effects of
foreign currency translation.

The following tables provide reconciliations between these non-GAAP financial
measures and the most directly comparable U.S. GAAP measures.



                                                    Three Months Ended                                                              % Change
($ in millions, except per share                         March 31                                                                      in
data)                                             2022                2021             Variance             % Change            constant currency
Net sales, as reported                      $    4,245$  3,864$     381                      10  %                   11  %
Returns associated with restructuring
and other activities                                 1                   10                 (9)
Net sales, as adjusted                      $    4,246$  3,874$     372                      10  %                   11  %

Operating income, as reported               $      738$    616$     122                      20  %                   18  %
Charges associated with restructuring
and other activities                                23                  145               (122)
Other intangible and long-lived asset
impairments                                        216                   33                183

Change in fair value of
acquisition-related stock options                  (60)                   -                (60)
Operating income, as adjusted               $      917$    794$     123                      15  %                   16  %

Diluted net earnings per common
share, as reported                          $     1.53$   1.24$     .29                      24  %                   22  %
Charges associated with restructuring
and other activities                               .05                  .31               (.26)
Other intangible and long-lived asset
impairments                                        .45                  .07                .38

Change in fair value of
acquisition-related stock options
(less portion attributable to
redeemable noncontrolling interest)               (.13)                   -               (.13)
Diluted net earnings per common
share, as adjusted                          $     1.90$   1.62$     .28                      17  %                   18  %



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                                                  Nine Months Ended                                                             % Change
($ in millions, except per share                       March 31                                                                    in
data)                                           2022              2021             Variance             % Change            constant currency
Net sales, as reported                      $  14,176$ 12,279$   1,897                      15  %                   15  %
Returns associated with restructuring
and other activities                                3                10                 (7)
Net sales, as adjusted                      $  14,179$ 12,289$   1,890                      15  %                   15  %

Operating income, as reported               $   3,091$  2,384$     707                      30  %                   28  %
Charges associated with restructuring
and other activities                               44               191     

(147)

Goodwill, other intangible and
long-lived asset impairments                      216               114                102
Changes in fair value of contingent
consideration                                       -                (2)                 2
Change in fair value of
acquisition-related stock options                 (58)                -                (58)
Operating income, as adjusted               $   3,293$  2,687$     606                      23  %                   22  %

Diluted net earnings per common
share, as reported                          $    6.39$   5.03$    1.36                      27  %                   25  %
Charges associated with restructuring
and other activities                              .09               .41     

(.32)

Goodwill, other intangible and
long-lived asset impairments                      .45               .25                .20

Changes in fair value of contingent
consideration                                       -              (.01)               .01
Change in fair value of
acquisition-related stock options
(less portion attributable to
redeemable noncontrolling interest)              (.13)                -     

(.13)

Diluted net earnings per common
share, as adjusted                          $    6.80$   5.68$    1.12                      20  %                   19  %



As diluted net earnings per common share, as adjusted, is used as a measure of
the Company's performance, we consider the impact of current and deferred income
taxes when calculating the per-share impact of each of the reconciling items.
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The following tables reconcile the change in net sales by product category and
geographic region, as reported, to the change in net sales excluding the effects
of foreign currency translation:

                                                         As Reported
                                            Three Months Ended                                  Impact of foreign          Variance,                                       % Change,
                                                 March 31                                           currency              in constant              % Change,              in constant
($ in millions)                            2022                2021            Variance            translation              currency              as reported              currency
By Product Category:
Skin Care                            $    2,395$ 2,259$     136          $           16          $         152                        6  %                  7  %
Makeup                                    1,114               1,018                 96                      19                    115                        9                    11
Fragrance                                   579                 454                125                      14                    139                       28                    31
Hair Care                                   147                 128                 19                       3                     22                       15                    17
Other                                        11                  15                 (4)                      -                     (4)                     (27)                  (27)
                                          4,246               3,874                372                      52                    424                       10                    11
Returns associated with
restructuring and other
activities                                   (1)                (10)                 9                      (1)                     8
Total                                $    4,245$ 3,864$     381          $           51          $         432                       10  %                 11  %

By Region:
The Americas                         $    1,053$   916$     137          $           (6)         $         131                       15  %                 14  %
Europe, the Middle East &
Africa                                    1,990               1,706                284                      47                    331                       17                    19
Asia/Pacific                              1,203               1,252                (49)                     11                    (38)                      (4)                   (3)
                                          4,246               3,874                372                      52                    424                       10                    11
Returns associated with
restructuring and other
activities                                   (1)                (10)                 9                      (1)                     8
Total                                $    4,245$ 3,864$     381          $           51          $         432                       10  %                 11  %



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                                                       As Reported                             Impact of
                                           Nine Months Ended                                    foreign               Variance,                                       % Change,
                                                March 31                                        currency             in constant              % Change,              in constant
($ in millions)                          2022              2021            Variance           translation              currency              as reported              currency
By Product Category:
Skin Care                            $   8,003$  7,113$    890          $         (57)         $         833                       13  %                 12  %
Makeup                                   3,674             3,243               431                     14                    445                       13                    14
Fragrance                                1,987             1,478               509                      8                    517                       34                    35
Hair Care                                  475               418                57                      3                     60                       14                    14
Other                                       40                37                 3                      -                      3                        8                     8
                                        14,179            12,289             1,890                    (32)                 1,858                       15                    15
Returns associated with
restructuring and other
activities                                  (3)              (10)                7                     (1)                     6
Total                                $  14,176$ 12,279$  1,897          $         (33)         $       1,864                       15  %                 15  %

By Region:
The Americas                         $   3,547$  2,837$    710          $         (13)         $         697                       25  %                 25  %
Europe, the Middle East &
Africa                                   6,201             5,276               925                     45                    970                       18                    18
Asia/Pacific                             4,431             4,176               255                    (64)                   191                        6                     5
                                        14,179            12,289             1,890                    (32)                 1,858                       15                    15
Returns associated with
restructuring and other
activities                                  (3)              (10)                7                     (1)                     6
Total                                $  14,176$ 12,279$  1,897          $         (33)         $       1,864                       15  %                 15  %














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The following tables reconcile the change in operating results by product
category and geographic region, as reported, to the change in operating income
excluding the impact of goodwill, other intangible and long-lived asset
impairments and changes in fair value of contingent consideration:


                                                    As Reported                               Add:
                                                                                           Changes in
                                                                                              Other                  Add:
                                       Three Months Ended                                intangible and         Changes in fair                 Add:
                                            March 31                                       long-lived              value of            Change in fair value of
                                                                                              asset               contingent             acquisition-related           Variance, as           % Change, as            % Change, as
($ in millions)                       2022              2021            Variance           impairments           consideration              stock options                adjusted               reported                adjusted
By Product Category:
Skin Care$      667$  804$    (137)$        216          $            -          $                (58)         $          21                     (17) %                    3  %
Makeup                                     7             (72)                79                   (24)                      -                            (2)                    53                       100+                    100+
Fragrance                                105              47                 58                    (9)                      -                             -                     49                       100+                   88
Hair Care                                (18)            (17)                (1)                    -                       -                             -                     (1)                     (6)                     (6)
Other                                      -              (1)                 1                     -                       -                             -                      1                       100+                  100
                                         761             761                  -          $        183          $            -          $                (60)         $         123                       -  %                   15  %
Charges associated with
restructuring and other
activities                               (23)           (145)               122
Total                             $      738$  616$     122

By Region:
The Americas$      408$  155$     253          $         11                       -          $                (60)         $         204                      100+%                   100+%
Europe, the Middle East &
Africa                                   281             361                (80)                  (33)                      -                             -                   (113)                    (22)                    (29)
Asia/Pacific                              72             245               (173)                  205                       -                             -                     32                     (71)                     13
                                         761             761                  -          $        183          $            -          $                (60)         $         123                       -  %                   15  %
Charges associated
with restructuring and
other activities                         (23)           (145)               122
Total                             $      738$  616$     122


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                                                 As Reported
                                                                                           Add:
                                                                                        Changes in
                                                                                         Goodwill,
                                    Nine Months Ended                                      other                  Add:
                                         March 31                                     intangible and           Changes in                    Add:
                                                                                        long-lived            fair value of         Change in fair value of
                                                                                           asset               contingent             acquisition-related           Variance, as           % Change, as            % Change, as
($ in millions)                   2022               2021            Variance           impairments           consideration              stock options                adjusted               reported                adjusted
By Product Category:
Skin Care$    2,466$ 2,453$      13$        135                                  $                (56)         $          92                       1  %                    4  %
Makeup                               228             (115)               343                   (24)                      -                            (2)                   317                       100+                    100+
Fragrance                            446              248                198                    (9)                      2                             -                    191                      80                      75
Hair Care                             (8)             (10)                 2                     -                       -                             -                      2                      20                         20
Other                                  3               (1)                 4                     -                       -                             -                      4                       100+                    100+
                                   3,135            2,575                560          $        102          $            2          $                (58)         $         606                      22  %                   23  %
Charges associated with
restructuring and other
activities                           (44)            (191)               147
Total                         $    3,091$ 2,384$     707

By Region:
The Americas$    1,044$   256$     788$        (70)         $            -          $                (58)         $         660                      100+%                   100+%
Europe, the Middle East
& Africa                           1,366            1,429                (63)                  (33)                      2                             -                    (94)                     (4)                     (6)
Asia/Pacific                         725              890               (165)                  205                       -                             -                     40                     (19)                      4
                                   3,135            2,575                560          $        102          $            2          $                (58)         $         606                      22  %                   23  %
Charges associated with
restructuring and other
activities                           (44)            (191)               147
Total                         $    3,091$ 2,384$     707



FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our principal sources of funds historically have been cash flows from
operations, borrowings pursuant to our commercial paper program, borrowings from
the issuance of long-term debt and committed and uncommitted credit lines
provided by banks and other lenders in the United States and abroad. At
March 31, 2022, we had cash and cash equivalents of $3,836 million compared with
$4,958 million at June 30, 2021. Our cash and cash equivalents are maintained at
a number of financial institutions. To mitigate the risk of uninsured balances,
we select financial institutions based on their credit ratings and financial
strength, and we perform ongoing evaluations of these institutions to limit our
concentration risk exposure.

Based on past performance and current expectations, we believe that cash on
hand, cash generated from operations, available credit lines and access to
credit markets will be adequate to support seasonal working capital needs,
currently planned business operations, information technology enhancements,
capital expenditures, acquisitions, dividends, stock repurchases, restructuring
initiatives, commitments and other contractual obligations on both a near-term
and long-term basis.

The Tax Cuts and Jobs Act ("TCJA") resulted in the Transition Tax on
unrepatriated earnings of our foreign subsidiaries and changed the tax law in
ways that present opportunities to repatriate cash without additional U.S.
federal income tax. As a result, we changed our indefinite reinvestment
assertion related to certain foreign earnings, and we continue to analyze the
indefinite reinvestment assertion on our remaining applicable foreign earnings.
We do not believe that continuing to reinvest our foreign earnings impairs our
ability to meet our domestic debt or working capital obligations. If these
reinvested earnings were repatriated into the United States as dividends, we
would be subject to state income taxes and applicable foreign taxes in certain
jurisdictions.

The effects of inflation have not been significant to our overall operating
results in recent years, however we are mindful of increasing inflationary
pressures. Generally, we have been able to introduce new products at higher
prices, increase prices and implement other operating efficiencies to
sufficiently offset cost increases.

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Credit Ratings
Changes in our credit ratings will likely result in changes in our borrowing
costs. Our credit ratings also impact the cost of our revolving credit facility.
Downgrades in our credit ratings may reduce our ability to issue commercial
paper and/or long-term debt and would likely increase the relative costs of
borrowing. A credit rating is not a recommendation to buy, sell, or hold
securities, is subject to revision or withdrawal at any time by the assigning
rating organization, and should be evaluated independently of any other rating.
As of April 26, 2022, our long-term debt is rated A+ with a stable outlook by
Standard & Poor's and A1 with a stable outlook by Moody's.

Debt

At March 31, 2022, our outstanding borrowings were as follows:

                                                                Long-term   

Current

($ in millions)                                                   Debt                Debt             Total Debt

3.125% Senior Notes, due December 1, 2049 (“2049 Senior
Notes”) (1), (13)

                                             $      636

$ – $ 636
4.15% Senior Notes, due March 15, 2047 (“2047 Senior
Notes”) (2), (13)

                                                    494                  -                  494

4.375% Senior Notes, due June 15, 2045 (“2045 Senior
Notes”) (3), (13)

                                                    455                  -                  455

3.70% Senior Notes, due August 15, 2042 (“2042 Senior
Notes”) (4), (13)

                                                    247                  -                  247

6.00% Senior Notes, due May 15, 2037 (“2037 Senior
Notes”) (5), (13)

                                                    294                  -                  294

5.75% Senior Notes, due October 15, 2033 (“2033 Senior
Notes”) (6)

                                                          197                  -                  197

1.950% Senior Notes, due March 15, 2031 (“2031 Senior
Notes”) (7), (13)

                                                    574                  -                  574

2.600% Senior Notes, due April 15, 2030 (“2030 Senior
Notes”) (8), (13)

                                                    643                  -                  643

2.375% Senior Notes, due December 1, 2029 (“2029 Senior
Notes”) (9), (13)

                                                    642                  -                  642

3.15% Senior Notes, due March 15, 2027 (“2027 Senior
Notes”) (10), (13)

                                                   498                  -                  498

2.00% Senior Notes, due December 1, 2024 (“2024 Senior
Notes”) (11), (13)

                                                   497                  -                  497
2.35% Senior Notes, due August 15, 2022 ("2022 Senior
Notes") (12), (13)                                                     -                251                  251

Other long-term borrowings                                            11                  -                   11
Other current borrowings                                               -                 18                   18

                                                              $    5,188$     269$     5,457


(1)Consists of $650 million principal, unamortized debt discount of $7 million
and debt issuance costs of $7 million.
(2)Consists of $500 million principal, unamortized debt discount of $1 million
and debt issuance costs of $5 million.
(3)Consists of $450 million principal, net unamortized debt premium of $9
million and debt issuance costs of $4 million.
(4)Consists of $250 million principal, unamortized debt discount of $1 million
and debt issuance costs of $2 million.
(5)Consists of $300 million principal, unamortized debt discount of $3 million
and debt issuance costs of $3 million.
(6)Consists of $200 million principal, unamortized debt discount of $2 million
and debt issuance costs of $1 million.
(7)Consists of $600 million, principal, unamortized debt discount of $4 million,
debt issuance costs of $4 million and a $18 million loss to reflect the fair
value of interest rate swaps.
(8)Consists of $700 million principal, unamortized debt discount of $1 million,
debt issuance costs of $3 million and a $53 million loss to reflect the fair
value of interest rate swaps.
(9)Consists of $650 million principal, unamortized debt discount of $5 million
and debt issuance costs of $3 million.
(10)Consists of $500 million principal and debt issuance costs of $2 million.
(11)Consists of $500 million principal, unamortized debt discount of $2 million
and debt issuance costs of $1 million.
(12)Consists of $250 million principal and a $1 million gain to reflect the fair
value of interest rate swaps.
(13)The Senior Notes contain certain customary incurrence-based covenants,
including limitations on indebtedness secured by liens.

Total debt as a percent of total capitalization (excluding noncontrolling
interests) was 47% and 48% at March 31, 2022 and June 30, 2021, respectively.

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Cash Flows
                                                          Nine Months Ended
                                                              March 31
(In millions)                                             2022          2021
Net cash flows provided by operating activities       $    1,969$ 2,777
Net cash flows used for investing activities          $     (563)$  (577)
Net cash flows used for financing activities          $   (2,516)$  (862)




The change in net cash flows from operating activities primarily reflected
higher working capital needs to support growth compared to the prior-year period
and actions taken to mitigate global supply chain challenges, as well as higher
cash paid for taxes. These changes were partially offset by higher earnings
before taxes, excluding non-cash items.


The change in net cash flows used for investing activities primarily reflected
an increase in capital expenditures, primarily driven by increased investments
for a new manufacturing facility in Japan, online capabilities and information
technology enhancements, as well as investments to support the reopening of our
offices located around the world where COVID-19 cases subsided. Partially
offsetting this increase is a favorable impact from the settlement of net
investment hedges, which has a corresponding unfavorable impact that is
reflected in the change in working capital noted above.


The change in net cash flows used for financing activities primarily reflected
an increase relating to higher treasury stock repurchases and proceeds from the
issuance of long-term debt, net in the prior-year period, partially offset by
the repayment of short-term debt made in the prior-year period.


Dividends

For a summary of quarterly cash dividends declared per share on our Class A and
Class B Common Stock during the nine months ended March 31, 2022, see Notes to
Consolidated Financial Statements, Note 12 - Equity and Redeemable
Noncontrolling Interest.


Pension and Post-retirement Plan Funding
There have been no significant changes to our pension and post-retirement
funding as discussed in our Annual Report on Form 10-K for the fiscal year ended
June 30, 2021.


Commitments, Contractual Obligations and Contingencies
There have been no significant changes to our commitments and contractual
obligations as discussed in our Annual Report on Form 10-K for the fiscal year
ended June 30, 2021. For a discussion of contingencies, see Notes to
Consolidated Financial Statements, Note 9 – Contingencies.



Derivative Financial Instruments and Hedging Activities
For a discussion of our derivative financial instruments and hedging activities,
see Notes to Consolidated Financial Statements, Note 5 - Derivative Financial
Instruments.

Foreign Exchange Risk Management
For a discussion of foreign exchange risk management, see Notes to Consolidated
Financial Statements, Note 5 - Derivative Financial Instruments (Cash
Flow Hedges, Net Investment Hedges).


Credit Risk
For a discussion of credit risk, see Notes to Consolidated Financial Statements,
Note 5 - Derivative Financial Instruments (Credit Risk).
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Market Risk
We address certain financial exposures through a controlled program of market
risk management that includes the use of foreign currency forward contracts to
reduce the effects of fluctuating foreign currency exchange rates and to
mitigate the change in fair value of specific assets and liabilities on the
balance sheet. To perform a sensitivity analysis of our foreign currency forward
contracts, we assess the change in fair values from the impact of hypothetical
changes in foreign currency exchange rates. A hypothetical 10% weakening of the
U.S. dollar against the foreign exchange rates for the currencies in our
portfolio would have resulted in a net decrease in the fair value of our
portfolio of approximately $258 million and $218 million as of March 31, 2022
and June 30, 2021, respectively. This potential change does not consider our
underlying foreign currency exposures.
In addition, we enter into interest rate derivatives to manage the effects of
interest rate movements on our aggregate liability portfolio, including future
debt issuances. Based on a hypothetical 100 basis point increase in interest
rates, the estimated fair value of our interest rate derivatives would decrease
by approximately $41 million and $83 million as of March 31, 2022 and June 30,
2021, respectively.

Our sensitivity analysis represents an estimate of reasonably possible net
losses that would be recognized on our portfolio of derivative financial
instruments assuming hypothetical movements in future market rates and is not
necessarily indicative of actual results, which may or may not occur. It does
not represent the maximum possible loss or any expected loss that may occur,
since actual future gains and losses will differ from those estimated, based
upon actual fluctuations in market rates, operating exposures, and the timing
thereof, and changes in our portfolio of derivative financial instruments during
the year. We believe, however, that any such loss incurred would be offset by
the effects of market rate movements on the respective underlying transactions
for which the derivative financial instrument was intended.

OFF-BALANCE SHEET ARRANGEMENTS


We do not maintain any off-balance sheet arrangements, transactions, obligations
or other relationships with unconsolidated entities that would be expected to
have a material current or future effect upon our financial condition or results
of operations.

CRITICAL ACCOUNTING POLICIES

As disclosed in our Annual Report on Form 10-K for the fiscal year ended
June 30, 2021, the discussion and analysis of our financial condition and
results of operations are based upon our consolidated financial statements,
which have been prepared in conformity with U.S. generally accepted accounting
principles. The preparation of these financial statements requires us to make
estimates and assumptions that affect the amounts of assets, liabilities,
revenues and expenses reported in those financial statements. These estimates
and assumptions can be subjective and complex, and consequently, actual results
could differ from those estimates. Our most critical accounting policies relate
to goodwill, other intangible assets and long-lived assets, income taxes and
business combinations. Since June 30, 2021, there have been no significant
changes to the assumptions and estimates related to our critical accounting
policies.

RECENTLY ISSUED ACCOUNTING STANDARDS


For a discussion regarding the impact of accounting standards that were recently
issued but not yet effective, on the Company's consolidated financial
statements, see Notes to Consolidated Financial Statements, Note 1 - Summary of
Significant Accounting Policies.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION


We and our representatives from time to time make written or oral
forward-looking statements, including in this and other filings with the
Securities and Exchange Commission, in our press releases and in our reports to
stockholders, which may constitute "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. Such statements
may address our expectations regarding sales, earnings or other future financial
performance and liquidity, other performance measures, product introductions,
entry into new geographic regions, information technology initiatives, new
methods of sale, our long-term strategy, restructuring and other charges and
resulting cost savings, and future operations or operating results. These
statements may contain words like "expect," "will," "will likely result,"
"would," "believe," "estimate," "planned," "plans," "intends," "may," "should,"
"could," "anticipate," "estimate," "project," "projected," "forecast," and
"forecasted" or similar expressions. Although we believe that our expectations
are based on reasonable assumptions within the bounds of our knowledge of our
business and operations, actual results may differ materially from our
expectations. Factors that could cause actual results to differ from
expectations include, without limitation:
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(1)increased competitive activity from companies in the skin care, makeup,
fragrance and hair care businesses;

(2)our ability to develop, produce and market new products on which future
operating results may depend and to successfully address challenges in our
business;


(3)consolidations, restructurings, bankruptcies and reorganizations in the
retail industry causing a decrease in the number of stores that sell our
products, an increase in the ownership concentration within the retail industry,
ownership of retailers by our competitors or ownership of competitors by our
customers that are retailers and our inability to collect receivables;

(4)destocking and tighter working capital management by retailers;

(5)the success, or changes in timing or scope, of new product launches and the
success, or changes in timing or scope, of advertising, sampling and
merchandising programs;

(6)shifts in the preferences of consumers as to where and how they shop;


(7)social, political and economic risks to our foreign or domestic
manufacturing, distribution and retail operations, including changes in foreign
investment and trade policies and regulations of the host countries and of the
United States;

(8)changes in the laws, regulations and policies (including the interpretations
and enforcement thereof) that affect, or will affect, our business, including
those relating to our products or distribution networks, changes in accounting
standards, tax laws and regulations, environmental or climate change laws,
regulations or accords, trade rules and customs regulations, and the outcome and
expense of legal or regulatory proceedings, and any action we may take as a
result;

(9)foreign currency fluctuations affecting our results of operations and the
value of our foreign assets, the relative prices at which we and our foreign
competitors sell products in the same markets and our operating and
manufacturing costs outside of the United States;

(10)changes in global or local conditions, including those due to volatility in
the global credit and equity markets, natural or man-made disasters, real or
perceived epidemics, supply chain challenges, inflation, or increased energy
costs, that could affect consumer purchasing, the willingness or ability of
consumers to travel and/or purchase our products while traveling, the financial
strength of our customers, suppliers or other contract counterparties, our
operations, the cost and availability of capital which we may need for new
equipment, facilities or acquisitions, the returns that we are able to generate
on our pension assets and the resulting impact on funding obligations, the cost
and availability of raw materials and the assumptions underlying our critical
accounting estimates;

(11)impacts attributable to the COVID-19 pandemic, including disruptions to our
global business;


(12)shipment delays, commodity pricing, depletion of inventory and increased
production costs resulting from disruptions of operations at any of the
facilities that manufacture our products or at our distribution or inventory
centers, including disruptions that may be caused by the implementation of
information technology initiatives, or by restructurings;

(13)real estate rates and availability, which may affect our ability to increase
or maintain the number of retail locations at which we sell our products and the
costs associated with our other facilities;

(14)changes in product mix to products which are less profitable;


(15)our ability to acquire, develop or implement new information and
distribution technologies and initiatives on a timely basis and within our cost
estimates and our ability to maintain continuous operations of such systems and
the security of data and other information that may be stored in such systems or
other systems or media;

(16)our ability to capitalize on opportunities for improved efficiency, such as
publicly-announced strategies and restructuring and cost-savings initiatives,
and to integrate acquired businesses and realize value therefrom;
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(17)consequences attributable to local or international conflicts around the
world, as well as from any terrorist action, retaliation and the threat of
further action or retaliation;

(18)the timing and impact of acquisitions, investments and divestitures; and

(19)additional factors as described in our filings with the Securities and
Exchange Commission
, including the Annual Report on Form 10-K for the fiscal
year ended June 30, 2021.

We assume no responsibility to update forward-looking statements made herein or
otherwise.

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