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PRESIDENT AND CEO THE ESTÉE LAUDER COMPANIES
FABRIZIO FREDA
SEPTEMBER 8, 2016
LEADING GROWTH
IN PRESTIGE BEAUTY
EXECUTIVE VICE PRESIDENT AND CFO THE ESTÉE LAUDER COMPANIES
TRACEY T. TRAVIS
FORWARD-LOOKING INFORMATION THE FORWARD-LOOKING STATEMENTS IN THIS PRESENTATION, INCLUDING THOSE CONTAINING WORDS LIKE “EXPECT,” “PLANS,” “MAY,” “COULD,” “ANTICIPATE,” “ESTIMATE,” “PROJECTED,” “FORECASTED,” THOSE IN MR. FREDA’S AND MS. TRAVIS’S REMARKS AND THOSE IN THE “NEAR AND LONGER-TERM GOALS” SLIDE INVOLVE RISKS AND UNCERTAINTIES. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE FORWARD-LOOKING STATEMENTS INCLUDE THE FOLLOWING:
(1) INCREASED COMPETITIVE ACTIVITY FROM COMPANIES IN THE SKIN CARE, MAKEUP, FRAGRANCE AND HAIR CARE BUSINESSES;
(2) THE COMPANY’S ABILITY TO DEVELOP, PRODUCE AND MARKET NEW PRODUCTS ON WHICH FUTURE OPERATING RESULTS MAY DEPEND AND TO SUCCESSFULLY ADDRESS CHALLENGES IN THE COMPANY’S BUSINESS;
(3) CONSOLIDATIONS, RESTRUCTURINGS, BANKRUPTCIES AND REORGANIZATIONS IN THE RETAIL INDUSTRY, AND OTHER FACTORS CAUSING A DECREASE IN THE NUMBER OF STORES THAT SELL THE COMPANY’S PRODUCTS, AN INCREASE IN THE OWNERSHIP CONCENTRATION WITHIN THE RETAIL INDUSTRY, OWNERSHIP OF RETAILERS BY THE COMPANY’S COMPETITORS OR OWNERSHIP OF COMPETITORS BY THE COMPANY’S 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 THE TIMING OR THE SCOPE, OF ADVERTISING, SAMPLING AND MERCHANDISING PROGRAMS;
(6) SHIFTS IN THE PREFERENCES OF CONSUMERS AS TO WHERE AND HOW THEY SHOP FOR THE TYPES OF PRODUCTS AND SERVICES THE COMPANY SELLS;
(7) SOCIAL, POLITICAL AND ECONOMIC RISKS TO THE COMPANY’S 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, THE COMPANY’S BUSINESS, INCLUDING THOSE RELATING TO ITS 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 THE COMPANY MAY TAKE AS A RESULT;
(9) FOREIGN CURRENCY FLUCTUATIONS AFFECTING THE COMPANY’S RESULTS OF OPERATIONS AND THE VALUE OF ITS FOREIGN ASSETS, THE RELATIVE PRICES AT WHICH THE COMPANY AND ITS FOREIGN COMPETITORS SELL PRODUCTS IN THE SAME MARKETS AND THE COMPANY’S OPERATING AND MANUFACTURING COSTS OUTSIDE OF THE UNITED STATES;
(10) CHANGES IN GLOBAL OR LOCAL CONDITIONS, INCLUDING THOSE DUE TO THE VOLATILITY IN THE GLOBAL CREDIT AND EQUITY MARKETS, NATURAL OR MAN-MADE DISASTERS, REAL OR PERCEIVED EPIDEMICS, OR ENERGY COSTS, THAT COULD AFFECT CONSUMER PURCHASING, THE WILLINGNESS OR ABILITY OF CONSUMERS TO TRAVEL AND/OR PURCHASE THE COMPANY’S PRODUCTS WHILE TRAVELING, THE FINANCIAL STRENGTH OF THE COMPANY’S CUSTOMERS, SUPPLIERS OR OTHER CONTRACT COUNTERPARTIES, THE COMPANY’S OPERATIONS, THE COST AND AVAILABILITY OF CAPITAL WHICH THE COMPANY MAY NEED FOR NEW EQUIPMENT, FACILITIES OR ACQUISITIONS, THE RETURNS THAT THE COMPANY IS ABLE TO GENERATE ON ITS PENSION ASSETS AND THE RESULTING IMPACT ON ITS FUNDING OBLIGATIONS, THE COST AND AVAILABILITY OF RAW MATERIALS AND THE ASSUMPTIONS UNDERLYING THE COMPANY’S CRITICAL ACCOUNTING ESTIMATES;
(11) SHIPMENT DELAYS, COMMODITY PRICING, DEPLETION OF INVENTORY AND INCREASED PRODUCTION COSTS RESULTING FROM DISRUPTIONS OF OPERATIONS AT ANY OF THE FACILITIES THAT MANUFACTURE NEARLY ALL OF THE COMPANY’S SUPPLY OF A PARTICULAR TYPE OF PRODUCT (I.E., FOCUS FACTORIES) OR AT THE COMPANY’S DISTRIBUTION OR INVENTORY CENTERS, INCLUDING DISRUPTIONS THAT MAY BE CAUSED BY THE IMPLEMENTATION OF INFORMATION TECHNOLOGY INITIATIVES OR BY RESTRUCTURINGS;
(12) REAL ESTATE RATES AND AVAILABILITY, WHICH MAY AFFECT THE COMPANY’S ABILITY TO INCREASE OR MAINTAIN THE NUMBER OF RETAIL LOCATIONS AT WHICH THE COMPANY SELLS ITS PRODUCTS AND THE COSTS ASSOCIATED WITH THE COMPANY’S OTHER FACILITIES;
(13) CHANGES IN PRODUCT MIX TO PRODUCTS WHICH ARE LESS PROFITABLE;
(14) THE COMPANY’S ABILITY TO ACQUIRE, DEVELOP OR IMPLEMENT NEW INFORMATION AND DISTRIBUTION TECHNOLOGIES AND INITIATIVES ON A TIMELY BASIS AND WITHIN THE COMPANY’S COST ESTIMATES AND THE COMPANY’S 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;
(15) THE COMPANY’S 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;
(16) 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;
(17) THE TIMING AND IMPACT OF ACQUISITIONS, INVESTMENTS AND DIVESTITURES; AND
(18) ADDITIONAL FACTORS AS DESCRIBED IN THE COMPANY’S FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION, INCLUDING ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 2016.
THE COMPANY ASSUMES NO RESPONSIBILITY TO UPDATE FORWARD-LOOKING STATEMENTS MADE HEREIN OR OTHERWISE.
NON-GAAP DISCLOSURES
THESE MATERIALS INCLUDE SOME NON-GAAP FINANCIAL MEASURES RELATING TO: CONSTANT CURRENCY; CHARGES ASSOCIATED WITH RESTRUCTURING ACTIVITIES; ACCELERATED ORDERS ASSOCIATED WITH THE COMPANY’S SMI ROLLOUT; THE VENEZUELA REMEASUREMENT CHARGES; AND INTEREST EXPENSE ON DEBT EXTINGUISHMENT. WE USE SUCH 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 TWO 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. INFORMATION ABOUT GAAP AND NON-GAAP FINANCIAL MEASURES, INCLUDING RECONCILIATION INFORMATION, IS INCLUDED ON THE INVESTOR AREA OF THE COMPANY’S WEBSITE, WWW.ELCOMPANIES.COM, UNDER THE HEADING “GAAP RECONCILIATION.”
WE ARE GLOBAL LEADER IN PRESTIGE
BEAUTY
$11 BILLION IN SALES
25+ BRANDS
150 COUNTRIES AND TERRITORIES
MORE THAN 10 PRESTIGE DISTRIBUTION CHANNELS
46,000 EMPLOYEES WORLDWIDE
WHO
BEAUTY DATA: ELC ESTIMATES, EUROMONITOR 2015 FOR SKIN CARE, MAKEUP AND FRAGRANCES.
HPC: AVERAGE OF PAST FIVE YEARS ORGANIC SALES GROWTH FOR SELECT CONSUMER GOODS COMPANIES.
0%
1%
2%
3%
4%
5%
6%
PRESTIGEBEAUTY
MASS & DIRECTBEAUTY
HPC
5-Year CAGR
GLOBAL GROWTH ESTIMATES CAGR 2010 - 2015
GROWTH INDUSTRY
PRESTIGE BEAUTY IS A
PRESTIGE BEAUTY IS ONE OF THE FASTEST GROWING
CATEGORIES
ELC IS SOLELY FOCUSED ON PRESTIGE BEAUTY
WE LEVERAGE OUR POWERFUL BRAND
PORTFOLIO TO PURSUE HIGH GROWTH AREAS
ITS #1 POSITION
AND GROWN SHARE
ELC HAS REINFORCED SHARE OF GLOBAL PRESTIGE BEAUTY
13.5%
2010
14.5%
2015
ELC ESTIMATES AND EUROMONITOR 2015 FOR PRESTIGE SKIN CARE, MAKEUP AND FRAGRANCES;
EXCLUDES TRAVEL RETAIL.
13%
14%
12%
STRONG RESULTS
SALES +7% IN CONSTANT CURRENCY; ABOVE INDUSTRY
COST SAVINGS THROUGH RESTRUCTURING AND IMPROVED
FINANCIAL DISCIPLINE
OPERATING MARGIN +250 BPS
DOUBLE-DIGIT EPS GROWTH IN CONSTANT CURRENCY
MARKET CAP +$13 BILLION
TOTAL SHAREHOLDER RETURN +84%, ABOVE S&P 500 AND ~2X
PEER GROUP AVERAGE
WE HAVE DELIVERED
0%
1%
2%
3%
4%
5%
6%
7%
8%
Estée Lauder Prestige Beauty Mass & DirectBeauty
HPC
5 YEAR GLOBAL SALES GROWTH
80
100
120
140
160
180
200
2011 2012 2013 2014 2015 2016
Estée Lauder S&P 500 Peer Avg
5 YEAR TOTAL SHAREHOLDER RETURN
+84%
+77%
+40%
ENDURING STRENGTHS
POWERFUL BRAND PORTFOLIO
UNRIVALED CREATIVITY, SERVICE AND INNOVATION
BALANCED AND DIVERSIFIED BUSINESS
MULTIPLE ENGINES OF GROWTH
CULTURE OF ANTICIPATING AND EMBRACING CHANGE
AGILITY IN INVESTMENT ALLOCATION
RESULTS DRIVEN BY OUR
OUR BRAND PORTFOLIO THE POWER OF
PROGRESSIVE CLASSIC
PREMIUM
ENTRY PRICE POINT
BRAND BUILDERS
WE ARE
FIT BRANDS TO BEST OPPORTUNITIES
ACQUIRE NEW BRANDS STRATEGICALLY
CATEGORY STRENGTH BY
$4,446
$4,703
$1,487
$554
$3,719
$3,371
$1,236
$432
FY2016 FY2011
SKIN CARE CAGR +3.6%
MAKEUP CAGR +6.9%
FRAGRANCE CAGR +3.8%
HAIR CARE CAGR +5.1%
($ MILLIONS)
ALL CATEGORIES ARE GROWING
MAKEUP STRONG IN ALL REGIONS
INNOVATION SUPPORTS GROWTH
GLOBAL LEADER IN PRESTIGE MAKEUP
WE ARE THE
EUROMONITOR 2015 GLOBAL PRESTIGE COLOR COSMETICS
27.7%
13.0%
10.1% 8.7%
5.0%
ELC L’OREAL SHISEIDO LVMH KAO
INNOVATION
CATEGORY GROWTH SUPPORTED BY
SUPERIOR QUALITY
RESEARCH & DEVELOPMENT
TECHNOLOGY & INNOVATION
PATENT PORTFOLIO +40%
GEOGRAPHY STRENGTH BY
ALL REGIONS AND VIRTUALLY ALL MARKETS ARE GROWING
EMERGING MARKETS EXCL. CHINA +25%
U.K. +DOUBLE-DIGITS FOR 3 YEARS
$1,761
$3,258
$3,796
$2,173
$4,381
$4,710
FY2016 FY2011
AMERICAS
CAGR 4.4%
EMEA
CAGR 6.1%
ASIA/PACIFIC
CAGR 4.3%
($ MILLIONS)
MULTIPLE CHANNELS
STRENGTH ACROSS
46%
12%
11%
8%
6%
5%
12%
FY2016
Other*
Perfumeries
Brand.com
Specialty-Multi
FreestandingRetail Stores
Travel Retail
DepartmentStores
*OTHER INCLUDES SALONS, SPAS, MILITARY AND PHARMACIES
10-YEAR COMPASS PROVIDES DIRECTION
SUSTAINABLE, RELIABLE GROWTH
IDENTIFIES LONG-TERM BEAUTY TRENDS
DETERMINES AREAS OF FASTEST GROWTH AND GREATEST OPPORTUNITIES TO FOCUS ON
ALLOCATES RESOURCES IN AN AGILE WAY
“KEEPS OUR BOAT IN THE WIND.”
CAPTURING GROWTH
THE CHANGING DYNAMICS IN BEAUTY
DEMOGRAPHIC SHIFTS
INSPIRE OUR BUSINESS
AGELESS, MILLENNIAL, GEN Z
THE RISE OF SOCIAL MEDIA
FOCUS ON THE BIGGEST
GROWTH OPPORTUNITIES
OUR LONG-TERM STRATEGY
INCREASING OUR REACH TO TARGET CONSUMERS BY CHANNEL
AND GEOGRAPHY
ENHANCING CONSUMER ENGAGEMENT WITH INNOVATIVE
PRODUCTS AND SERVICES
EXPAND CONSUMER REACH
OPTIMIZING DISTRIBUTION TO
• MAINTAIN HIGH PRODUCTIVITY PER DOOR
• BRING BRANDS TO NEW CONSUMERS
• GLOBAL OPPORTUNITY
• RECRUIT FROM MASS
0 20 40 60 80 100
Top Brands
Smashbox
Tom Ford
MAC
La Mer
Jo Malone
INDEXED DISTRIBUTION
IN ONLINE PRESTIGE BEAUTY
ELC HAS FURTHER OPPORTUNITY
DOUBLE-DIGIT GROWTH IN EXISTING SITES
E/M-COMMERCE SITES IN ~ 30 COUNTRIES VERSUS MORE THAN 150 WITH BRICK AND
MORTAR DISTRIBUTION
OPPORTUNITY TO ADD BRANDS TO EXISTING MARKETS & EXPAND INTO NEW MARKETS
0
20
40
60
80
100
120
140
160
180
EsteeLauder
Clinique MAC BobbiBrown
Jo Malone Smashbox
ONLINE VS TOTAL MARKETS
ONLINE MARKETS
IN SPECIALTY- MULTI BEAUTY
ELC ACCELERATING
GROWING DOUBLE-DIGITS IN CHANNEL
APPEALING, EXPERIENTIAL RETAILING
WIN WITH BRAND PORTFOLIO, SPECIALIZED PRODUCT ASSORTMENT, INNOVATIVE
MERCHANDISING, SAMPLING
OPPORTUNITY TO ADD BRANDS TO EXISTING RETAIL & GROW WITH RETAILER EXPANSION
ACCELERATION IN FREESTANDING RETAIL STORES
FAST GROWTH BRANDS DRIVE
GROWING DOUBLE-DIGITS IN ~1,260 COMPANY-OPERATED STORES GLOBALLY
ENTER MARKETS WHERE PRESTIGE DISTRIBUTION IS UNDERDEVELOPED
MARGIN ACCRETIVE BY YEAR 3
OMNICHANNEL CAPABILITIES
NEW STORE FORMATS / LOWER COSTS
0
50
100
150
200
250
FY2012 FY2013 FY2014 FY2015 FY2016
ANNUAL STORE INCREASE
MAC Jo Malone Bobbi Brown
Acquisitions Other
IN TRAVEL RETAIL
BROADENING CONSUMER REACH
EQUITY DRIVER FOR THE BRANDS
INTERNATIONAL PASSENGER TRAFFIC RISING
INCREASE CONVERSION
EXPANDING BRANDS WITHIN CURRENT DISTRIBUTION AND IN NEW AIRPORTS
NEWLY ACQUIRED BRANDS ADD INCREMENTAL OPPORTUNITY
0 500 1000 1500 2000
Estee Lauder
Clinique
Tom Ford
La Mer
MAC
Origins
Smashbox
Bobbi Brown
Jo Malone
GlamGlow
Aveda
Darphin
Le Labo
Frederic Malle
Kilian
TRAVEL RETAIL LOCATIONS
IN PRESTIGE DEPARTMENT
STORES
OPPORTUNITIES
INTERNATIONAL AND HIGH-END DEPARTMENT STORES ARE GROWING
RETAILER.COM IS GROWING
ALLOCATING RESOURCES TO AREAS OF OPPORTUNITY
OPPORTUNITIES
ENHANCING CONSUMER ENGAGEMENT
HIGH-QUALITY, INNOVATIVE PRODUCTS
NEW EXPERIENCES AND SERVICES
ARTISANAL AND EXPERIENTIAL
FRAGRANCE
LUXURY FRAGRANCE
PORTFOLIO OF
MODERNIZATION AND EFFICIENCY
OUR STRATEGY IS SUPPORTED BY INCREASING
COMPLETED MODERNIZATION OF KEY SYSTEMS
CONTINUING INFORMATION TECHNOLOGY INVESTMENT
LEADING BEAUTY FORWARD INITIATIVE
COST LEVERAGE / SAVINGS
OUR STRATEGY IS SUPPORTED BY INVESTMENT IN
TALENT DEVELOPMENT AND
CAPABILITIES
TO CONTINUE TO WIN IN A VOLATILE WORLD
ELC IS WELL-POSITIONED
LEADING GROWTH
IN PRESTIGE BEAUTY
CONSISTENT, BEST-IN-CLASS SALES GROWTH
• PRESTIGE BEAUTY HAS CONSISTENTLY GROWN MID-SINGLE DIGITS
• ELC GREW FASTER THAN GLOBAL PRESTIGE BEAUTY OVER 5 YEARS
• GOAL TO GROW AT LEAST 1PP FASTER THAN PRESTIGE BEAUTY
• ACQUISITIONS TARGETED TO ADD ANOTHER POINT OF GROWTH OVER THREE YEARS
• GEOGRAPHIC, BRAND AND CHANNEL OPPORTUNITY
• PRICING / MIX 0%
1%
2%
3%
4%
5%
6%
7%
8%
EstéeLauder
PrestigeBeauty
Mass &DirectBeauty
HPC
ELC 5 YEARS ENDED 6/30/16
BEAUTY DATA: ELC ESTIMATES, EUROMONITOR 2015 FOR SKIN CARE, MAKEUP AND FRAGRANCES.
HPC: AVERAGE OF PAST FIVE YEARS ORGANIC SALES GROWTH FOR SELECT EUROPEAN AND US BASED CONSUMER GOODS COMPANIES.
5 YEAR GLOBAL SALES GROWTH
SMI-ENABLED COST SAVINGS AND EFFICIENCIES
0
20
40
60
80
100
120
140
160
180
200
FY2016
OTHER
DEMO
PROMO/ COLLATERAL
A&P EFFECTIVENESS
INDIRECT PROCUREMENT
SUPPLY CHAIN
• ~$150 MILLION IN SAVINGS TARGETED IN FY2017
$
ORGANIC GROWTH CURRENCY IMPACT ACQUISITIONS
OPERATING MARGIN TRENDS
COST SAVINGS INITIATIVES CURRENCY TRANSLATION
EXPENSE LEVERAGE INVESTMENTS / ACQUISITIONS
EFFICIENCY / EFFECTIVENESS RETAIL STORE ACCELERATION
PRODUCT MIX
FY2012 FY2013 FY2014 FY2015 FY2016
14.2%
15.2%
16.1% 15.9%
15.5% +110 BPS
+90 BPS
+50 BPS +20
BPS -10
BPS
-40 BPS -50
BPS
-30 BPS
-10 BPS
NOTE: ALL FIGURES EXCLUDE CHARGES AND SMI SALES SHIFTS
SUSTAINED DOUBLE-DIGIT EPS GROWTH
$2.27
$2.64
$2.95 $3.05
$3.20
$3.38 to $3.44
FY2012 FY2013 FY2014 FY2015 FY2016 FY2017
• LEVERAGING TOPLINE GROWTH
• MARGIN EXPANSION
• IMPACT OF ACQUISITIONS AND CURRENCY
• OPPORTUNITIES IN TAX RATE AND SHARE REPURCHASES
• DOUBLE-DIGIT EPS GROWTH CAN CONTINUE
NOTE: EXCLUDES CHARGES AND SMI SALES SHIFTS
REPORTED 16% 12% 3% 5% 6-8%
CONSTANT
CURRENCY 17% 12% 12% 13% 8-10%
RETURNING CASH TO STOCKHOLDERS
FY2012 FY2013 FY2014 FY2015 FY2016
OPERATING CASH FLOW $1,127 $1,226 $1,535 $1,943 $1,789
CAPEX 421 461 510 473 525
FREE CASH FLOW $706 $765 $1,025 $1,470 $1,263
DIVIDENDS 204 419 302 350 423
SHARE REPURCHASES 593 388 667 983 890
TOTAL $797 $807 $969 $1,333 $1,313
% OF FREE CASH FLOW 113% 105% 95% 91% 104%
NOTE: FY2014 AND FY2015 OPERATING CASH FLOW INCLUDES THE IMPACT OF APPROXIMATELY $173 MILLION RELATED TO THE SMI SALES SHIFTS.
$ MILLIONS
Ending Cash2011
Operating CashFlow
Debt Stock BasedComp/Other
Dividends /Buybacks
CapitalExpenditures
Acquisitions Ending Cash &Investments
2016
CASH FLOW DEPLOYMENT
7,620
1,014
1,253
580 (5,218)
(2,390)
(368) 2,491
$ MILLIONS
NEAR AND LONGER-TERM GOALS
FY2017 FY2017 - FY2019
NET SALES GROWTH +6% TO +7%
NET SALES GROWTH IN
CONSTANT CURRENCY +6% TO +7% +6% TO +8%
OPERATING MARGIN FLEXIBILITY +110 BPS TO +150 BPS
DILUTED EPS $3.38 TO $3.44
EPS GROWTH IN
CONSTANT CURRENCY +8% TO +10% +DOUBLE-DIGITS
INVENTORY DAYS
TO SELL IMPROVEMENT ~150 DAYS
NOTE: EXCLUDES RESTRUCTURING AND OTHER CHARGES.
OPERATING MARGIN GUIDANCE EVOLUTION
FY2017E FY2018E FY2019E
AUGUST 2014 GUIDANCE 17.5%
FY2015 FX AND ACQUISITION
IMPACTS (0.7)
ADJUSTED 16.8%
AUGUST 2015 GUIDANCE 16.8% - 17.2%
FY2016 FX AND ACQUISITION
IMPACTS (0.6)
ADJUSTED 16.2% - 16.6%
AUGUST 2016 GUIDANCE 16.6% - 17.0%
NOTE: EXCLUDES RESTRUCTURING AND OTHER CHARGES.
REDUCE COSTS DESIGN FOR LEVERAGE INVEST IN BRANDS
AND CAPABILITIES
• LOWER OUR OVERHEAD COST BASE FOR ANNUAL NET BENEFITS OF $200 TO $300M BEFORE TAX
• REDUCE OUR LEVERAGE RATIO
• REALLOCATE A PORTION OF NET BENEFITS TO FUND PRIORITY INVESTMENTS
• SUSTAINABLE LONG-TERM GROWTH
CREATING VALUE TOTAL SHAREHOLDER RETURN
SOURCE: BLOOMBERG, S&P 06/30/16. PEER GROUP INCLUDES P&G, AVON, BEIERSDORF, LVMH, L’OREAL AND SHISEIDO.
-2.9%
4.0%
6.4%
-10.0% 0.0% 10.0%
ONE YEAR
80
100
120
140
160
180
200
2011 2012 2013 2014 2015 2016
Estée Lauder S&P 500 Peer Avg
FIVE YEAR
+84%
+77%
+40%
ESTÉE LAUDER
S&P 500
PEER AVERAGE