EPS of $-0.79 decreased by 757.8% from previous year
Gross margin of 71.8%
Net income of -284.00M
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The Estée Lauder Companies Inc (0JTM.L) QQ4 2024 Results: Revenue Resilience Faces Near-Term Margin Pressures and Leverage Headwinds
Executive Summary
The Estée Lauder Companies reported QQ4 2024 revenue of $3.871 billion, up 7.3% year over year but down 1.8% versus the prior quarter. The quarter delivered robust gross margins at approximately 71.8%, underscoring pricing power and a strong product mix, yet the company posted an operating loss of $233 million and a net loss of $284 million, resulting in a negative earnings per share of $0.79. EBITDA was modest at $26 million, with an EBITDAR margin near 0.67%, signaling ongoing operating leverage challenges in the near term.
Cash generation remained healthy with operating cash flow of $889 million and free cash flow of $672 million for QQ4 2024. The balance sheet shows ample liquidity (cash and equivalents of $3.395 billion) but a substantial debt load (total debt of $9.826 billion; net debt of $6.431 billion) and leverage metrics that remain elevated (debt to capitalization about 0.649; debt to equity ~1.85). Despite earnings weakness, the company generated positive free cash flow, supporting deleveraging and potential capital allocation flexibility over time. Valuation metrics imply a premium to book and sales, reflecting the strength of Esteé Lauder’s brand portfolio, but the lack of near-term profitability weighs on earnings-based multiples.
Overall, the QQ4 2024 results illustrate a high-quality brand engine generating solid cash flow in a challenged profitability environment. The key question for investors is whether the company can translate brand strength and direct-to-consumer (DTC) growth into meaningful margin expansion and earnings recovery while managing leverage in a uneven macro backdrop.
Expense and productivity:
- Research & Development: $0.360 billion.
- Selling, General & Administrative Expenses: $2.444 billion.
- Other expenses: $0.567 billion.
- Cost of Revenue: $1.093 billion; Cost and Expenses: $4.104 billion; Interest Expense: $0.091 billion.
Cash flow and liquidity:
- Operating cash flow: $0.889 billion; Free cash flow: $0.672 billion.
- Capex (investments in PPE): $0.217 billion.
- Net cash from operating activities: $0.889 billion; Net change in cash: -$0.306 billion; Cash at end of period: $3.395 billion.
Balance sheet and leverage:
- Total assets: $21.677 billion; Total liabilities: $16.363 billion; Total stockholders’ equity: $5.314 billion.
- Cash and cash equivalents: $3.395 billion; Total debt: $9.826 billion; Net debt: $6.431 billion.
- Long-term debt: $8.968 billion; Short-term debt: $0.858 billion.
- Current ratio: 1.389; Quick ratio: 1.008; Cash ratio: 0.595.
- Goodwill: $2.143 billion; Intangible assets: $5.183 billion; Goodwill and intangibles: $7.326 billion.
- Leverage indicators: Debt to capitalization ~0.649; Debt to equity ~1.85; Price to book ~7.13; EV multiple around 1,704 (contextual, market-based).
Quarterly trend context:
- Four-quarter trailing revenue shows variability: Q1 2024: ~$3.519B; Q2 2024: ~$4.279B; Q3 2024: ~$3.940B; QQ4 2024: ~$3.871B, indicating seasonality and mix effects across quarters. Despite mid-year strength, the quarter ended with a loss, underscoring margin pressures that offset topline gains.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
3.87B
7.26%
-1.75%
Gross Profit
2.78B
13.57%
-1.94%
Operating Income
-233.00M
-4 560.00%
-143.88%
Net Income
-284.00M
-760.61%
-186.06%
EPS
-0.79
-757.76%
-185.87%
Key Financial Ratios
currentRatio
1.39
grossProfitMargin
71.8%
operatingProfitMargin
-6.02%
netProfitMargin
-7.34%
returnOnAssets
-1.25%
returnOnEquity
-5.34%
debtEquityRatio
1.85
operatingCashFlowPerShare
$2.47
freeCashFlowPerShare
$1.87
dividendPayoutRatio
-83.5%
priceToBookRatio
7.13
priceEarningsRatio
-33.34
Net Income vs. Revenue
Expense Breakdown
Management Commentary
No earnings call transcript was provided in the dataset. Consequently, there are no management quotes or theme-based highlights to extract/annotate at this time.
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Forward Guidance
No explicit forward guidance was included in the QQ4 2024 data. Given the mixed quarterly trajectory and ongoing profitability pressures, the path to earnings recovery will likely hinge on: (a) improved gross-to-net pricing realization and product mix optimization to lift operating margins; (b) continued growth in DTC and e-commerce to support margin expansion via higher contribution from direct-to-consumer channels; (c) continued cost discipline and SG&A optimization, and (d) deleveraging driven by ongoing free cash flow generation. Investors should monitor management commentary on brand portfolio strategy, inventory management, and any updates to expense alignment or potential cost-cutting initiatives. Sector dynamics to watch include premium beauty demand resilience, tourism and travel-related sales tailwinds, and currency/commodity pressures that could impact gross margins.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0JTM.L Focus
71.76%
-6.02%
-5.34%
-33.34%
0HRS.L
14.50%
3.68%
2.68%
12.43%
0R08.L
19.30%
9.94%
9.27%
20.96%
0LD8.L
24.70%
5.86%
10.30%
12.15%
0Y0Y.L
32.50%
14.30%
5.95%
31.59%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
The investment thesis rests on Estee Lauder’s durable premium-brand equity and substantial free cash flow generation, which can support deleveraging and strategic investments in DTC, e-commerce, and product innovation. Near-term profitability remains challenged, as evidenced by negative QQ4 2024 earnings despite solid gross margins. If the company can translate topline stability into margin expansion through cost discipline, improved channel mix, and higher DTC contribution, earnings visibility could improve. Investors should monitor leverage trajectory, inventory management efficiency, and any management updates on cost controls, capital allocation policy, and forward guidance. Given the current balance sheet and valuation metrics, the stock may appeal to long-term holders who can tolerate short-run earnings volatility in exchange for brand-driven growth and cash flow resilience.
Key Investment Factors
Growth Potential
A premium brand portfolio (Estee Lauder, Clinique, MAC, La Mer, Jo Malone, and others) supports pricing power and premiumization in skincare, makeup, and fragrance. Strong FCF generation enables potential deleveraging and opportunistic investments in DTC, e-commerce, and new product launches. Long-term growth drivers include expanding direct-to-consumer penetration, strength in skincare categories, new licenses, and geographic expansion in high-potential emerging markets.
Profitability Risk
Elevated leverage (total debt of $9.826B; net debt of $6.431B) and a negative near-term earnings trajectory pose financial risk and could constrain capital allocation flexibility. The margin landscape is fragile given a negative operating income and net income for QQ4 2024, leaving EBITDA as a narrow positive offset. High working capital and a protracted inventory cycle (days of inventory outstanding around 179) imply potential cash flow sensitivity to demand shifts. Dependence on premium/channel mix exposure (department stores, specialty retailers) could amplify channel disruption risks. Competitive intensity and inflationary pressures could pressure pricing and promotional activity.
Financial Position
Liquidity remains robust with cash of $3.395B and positive operating cash flow, but high leverage and negative earnings undercut balance sheet resilience. Current ratio of 1.389 and quick ratio of 1.008 indicate adequate near-term liquidity, yet debt burden and equity structure imply a leveraged proxy to industry peers. Valuation metrics show a premium implied by P/B around 7.13 and P/S around 9.78, reflecting brand strength but limited earnings support in the current period.
SWOT Analysis
Strengths
Iconic premium brand portfolio with global recognition (Estee Lauder, Clinique, MAC, La Mer, Jo Malone, Aveda, Bubbi Brown, Origins, etc.).
Diversified product categories across skincare, makeup, fragrance, and hair care.
Global distribution network including department stores, specialty retailers, e-commerce, freestanding stores, and licensed brands.
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