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Thursday, August 20, 2020

Estee Lauder (EL) reported earnings on Thur 20 Aug 20 (b/o)

** charts after earnings **


 Estee Lauder will pay quarterly dividend of $0.48 per share on Class A and Class B Common Stock on September 15, 2020 to stockholders of record at the close of business on August 31, 2020 (previously suspended dividend)

Estee Lauder misses by $0.36, reports revs in-line; guides Q1 EPS below consensus, revs below consensus; initiates Post-COVID Business Acceleration Program 

  • Reports Q4 (Jun) loss of $0.53 per share, $0.36 worse than the S&P Capital IQ Consensus of ($0.17); revenues fell 32.3% year/year to $2.43 bln vs the $2.45 bln S&P Capital IQ Consensus.
  • Co issues downside guidance for Q1, sees EPS of $0.80-0.85 vs. $1.21 S&P Capital IQ Consensus; sees Q1 revs of decline of 12-13% to ~$3.39-3.43 bln vs. $3.46 bln S&P Capital IQ Consensus.
  • FY21 Outlook
    • Given the uncertainty around the timing, speed and duration of the recovery from the adverse impacts of COVID-19, the Company is not providing specific sales and EPS guidance for the fiscal 2021 full year. The Company is confident it is well-positioned to facilitate the recovery in fiscal 2021 as the market dynamics support it. The Company continues to implement strict cost control actions to manage the business in response to COVID-19. These include the reduction of travel, meeting, and consulting expenses as well as a reduction of employee costs, including a hiring freeze and temporary salary reductions for senior executives and other management employees, and a temporary elimination of cash retainers for the Board of Directors. The Company's actions to control costs during this very volatile moment, while maintaining the flexibility to make strategic investments in the areas of greatest opportunity, are expected to help it emerge strongly as the global recovery begins.
  • Post-COVID Business Acceleration Program - The pandemic has rapidly accelerated macro trends in global prestige beauty that were expected over a longer time horizon. These trends include shifts in where consumers shop, what they value, why they purchase the Company's products, and how they engage with the Company's brands in an increasingly digital and omnichannel world.
    • As a result, the Company today announced a two-year initiative to rebalance investments to address the dramatic shifts in the distribution landscape and consumer behavior post-COVID-19. This will include reducing the Company's retail footprint, primarily in Europe, the Middle East & Africa and in North America, and increasing digital investments to reflect a dramatic shift in consumer shopping to online and omnichannel capabilities in the more productive brick-and-mortar footprint. This program is expected to position the Company to better execute its long-term strategy while strengthening its financial flexibility.
    • Post-COVID Business Acceleration Program will begin during the Company's fiscal 2021 first quarter. Specific initiatives are expected to be approved through the end of fiscal 2022 and completed through fiscal 2023. Key actions include:
      • Realignment of the Company's distribution network, reflecting certain department store closures and freestanding store rationalization while accelerating the shift to online.
      • Further investment in digital capabilities, omnichannel, talent, and advertising and promotional activities to support continued share improvement and business acceleration.
      • Implementing increased confident beauty practices at retail and adoption of new ways of working, in light of the ongoing pandemic.
    • In connection with the Post-COVID Business Acceleration Program, at this time the Company estimates a net reduction in the range of approximately 1,500 to 2,000 positions globally, primarily point of sale employees and related support staff in the areas that were the most disrupted, which is about 3% of its current workforce including temporary and part-time employees. This reduction takes into account the elimination of some positions, retraining and redeployment of certain employees, and investment in new positions in key areas like online.
    • The Company also estimates the closure of between 10-15% of its freestanding stores globally, as well as certain less productive department store counters that the Company elects to close.
    • Once fully implemented, the Company expects to take restructuring and other charges of between $400 million and $500 million, before taxes, consisting of employee-related costs, contract terminations across areas being restructured, asset write-offs and other costs associated with implementing these initiatives.
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