EL · Read the filing

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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 fiscal 2021, 2020 and 2019 and reflects the basis of presentation described in Item 8. Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies and Note 22 – Segment Data and Related Information 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.

Year Ended June 30

NET SALES

By Product Category:

Returns associated with restructuring and other activities (14) — (3)

By Region(1):

Returns associated with restructuring and other activities (14) — (3)

OPERATING INCOME (LOSS)

By Product Category:

Charges associated with restructuring and other activities (228) (83) (241)

By Region(1):

Charges associated with restructuring and other activities (228) (83) (241)

(1)The net sales from our travel retail business are included in the Europe, the Middle East & Africa region, with the exception of the 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.

Table of Contents

During fiscal 2020, changes were made to reflect certain Leading Beauty Forward enhancements made to the capabilities and cost structure of our travel retail business, which are primarily centralized in The Americas region, and resulted in a change to the royalty structure of the travel retail business to reflect the value created in The Americas region. Accordingly, the fiscal 2019 operating income of The Americas was increased, with a corresponding decrease in Europe, the Middle East & Africa, by $866 million, to conform with the fiscal 2021 and 2020 methodology and presentation.

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

Year Ended June 30

Operating expenses:

Selling, general and administrative 57.8 60.4 59.6

Restructuring and other charges 1.3 0.5 1.4

Goodwill impairment 0.3 5.7 0.5

Impairment of other intangible and long-lived assets 0.8 4.3 0.1

Interest income and investment income, net 0.3 0.3 0.4

Other components of net periodic benefit cost (0.1) — —

Earnings before income taxes 20.5 7.3 15.5

Provision for income taxes (2.8) (2.4) (3.4)

Net earnings attributable to noncontrolling interests (0.1) (0.1) (0.1)

Net loss attributable to redeemable noncontrolling interest — — —

Net earnings attributable to The Estée Lauder Companies Inc. 17.7 % 4.8 % 12.0 %

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

Table of Contents

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 weighted-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 continues to disrupt our operating environment, including impacts on retail traffic and changes in certain consumer preferences. During fiscal 2021, the spread of COVID-19, as well as the resurgences in COVID-19 cases and the rapid spread of variants, including the Delta variant, particularly in the United Kingdom, Continental Europe, Latin America, and Asia outside of China, led to government restrictions to prevent further spread of the virus. Restrictions in many parts of the world at various times during fiscal 2021 have included temporary business closures, curtailment of travel, mask wearing, social distancing and quarantines.

Retail Impact

Most brick-and-mortar retail stores that sell our products, whether operated by us or our customers, were open during the fiscal 2021 second quarter in China and the United States. There were intermittent closures throughout the rest of the world, particularly in the second half of fiscal 2021. In most of the Asia/Pacific region (with the exception of China), the United Kingdom, Continental Europe, Canada, and much of Latin America, many retail stores were temporarily closed for some period during the fiscal 2021 fourth quarter due to the resurgence of COVID-19 cases. In much of the United Kingdom and Continental Europe, retail locations gradually reopened during the fourth quarter but with capacity and other safety restrictions in place. Globally, in areas where stores were open, consumer traffic has not recovered to the pre-COVID-19 pandemic levels. International travel has remained largely curtailed globally due to both government restrictions and consumer health concerns that continue to adversely impact consumer traffic in most travel retail locations. Conversely, domestic travel in China, especially in Hainan, and some other travel corridors in Asia/Pacific and The Americas were open.

Somewhat offsetting the significant declines in brick-and-mortar channels, net sales growth of our products online (through our own websites, third-party platforms and websites of our retailers) remained strong in every region during fiscal 2021.

Due in large part to the continued challenging retail environment and uncertainties stemming from the COVID-19 pandemic, we recognized Goodwill, other intangible asset and long-live asset impairments. See Item 8. Financial Statements and Supplementary Data – Note 6 – Goodwill and Other Intangible Assets and Note 7 – Leases for further information.

Consumer Preferences

The 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. Specifically, the demand for makeup continues to be weak given fewer makeup usage occasions and ongoing mask wearing, while other categories have been more resilient.

Cost Controls

In response to the ongoing impacts from the COVID-19 pandemic, we continue to implement cost control actions in certain areas of the business to effectively manage the changing business environment.

Government Assistance

Beginning in the second half of fiscal 2020, many governments in locations where we operate announced programs to assist employers whose businesses were impacted by the COVID-19 pandemic, including programs that provide rebates to incentivize employers to maintain employees on payroll who were unable to work for their usual number of hours. During fiscal 2021 and 2020, we qualified for and recorded $84 million and $99 million, respectively, in government assistance, which reduced Selling, general and administrative expenses by $78 million and $87 million, respectively, and Cost of sales by $6 million and $10 million, respectively. The remaining $2 million recorded in fiscal 2020 was deferred and recognized in fiscal 2021 as a reduction to Cost of sales. We are continuing to review applicable government assistance programs globally.

We will continue to monitor the impacts of COVID-19 and adjust our action plans accordingly as the situation progresses.

Table of Contents

Business Update

We are a leader in prestige beauty, which combines the repeat purchase and relative affordability of consumer goods with the high quality products and services of luxury goods. Within prestige beauty, we are well diversified by product category, geography, brand, product sub-category, channel, consumer segment and price point. This diversity 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.

•In fiscal 2021, global prestige skin care continued to lead product category growth. Our skin care net sales benefited from the enduring strength of hero product lines such as Advanced Night Repair from Estée Lauder, Crème de La Mer from La Mer, and the Dramatically Different products and Even Better Clinical Radical Dark Spot Corrector + Interrupter from Clinique, as well as recent product launches, the growth in Asia and targeted expanded consumer reach. The launches of Advanced Night Repair Synchronized Multi-Recovery Complex, Revitalizing Supreme+ Bright, and the relaunch of Perfectionist Pro from Estée Lauder, Genaissance de la Mer The Concentrated Night Balm from La Mer, and Moisture Surge 100H Auto-Replenishing Hydrator from Clinique were particularly successful in Asia/Pacific. Net sales of skin care products in fiscal 2021 rose in every geographic region, led by Estée Lauder. La Mer and Dr. Jart+, which we acquired in December 2019.

•Global prestige makeup sales declined as COVID-19 limited social and business activities and consumers overall wore less makeup. Some sub-categories in makeup performed better in the COVID-19 environment, including lip gloss and makeup with skin care benefits such as tinted moisturizers, while demand for lipstick and foundation remained weak. During fiscal 2021, our makeup net sales benefited from targeted expanded consumer reach and the continued success of existing products, such as the Futurist line of products from Estée Lauder, The Luminous Lifting Cushion Foundation from La Mer and the Lip Injection line from Too Faced.

•Our fragrance net sales growth accelerated during fiscal 2021, driven by continued resilience in luxury fragrance. The growth was led by strength in colognes, bath, body and home subcategories at Jo Malone London, the successful launches of Bitter Peach and Rose Prick Private Blend fragrances from Tom Ford Beauty and targeted expanded consumer reach of Le Labo.

•Our hair care net sales grew as salons and retail stores reopened throughout the year and strong online growth continued. Hero products led growth at Aveda, supported by the brand’s “100% vegan” campaign.

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 strengthen our presence in large, image-building core markets, while broadening our presence in emerging markets.

•In North America, we deployed a number of strategies to drive growth, which began to deliver improvements through the second half of fiscal 2021. Net sales in fiscal 2021 from our specialty-multi and online channels led growth. In Latin America, we continue to launch new brands, develop our online business, expand social media outreach and encourage consumers to trade up from mass beauty products.

•In Europe, the Middle East & Africa, we continue to expand the consumer reach of many of our brands and strengthen their digital and social media presences.

•In Asia/Pacific, particularly in China, we continue to leverage our diversified brand portfolio and expansion on third-party online malls to benefit from the strong consumer demand for prestige beauty. In mainland China, net sales grew strong double digits reflecting growth in virtually all product categories, as well as in nearly every brand and double-digit growth in every channel, led by online.

We approach distribution strategically by product category and location and seek to optimize distribution by matching our brands with appropriate opportunities while seeking to maintain high productivity per door. We are expanding our brands in online and travel retail, which we believe will be higher growth channels in the long term. We also focus on brand-building retail activities, technology-driven activations and omnichannel capabilities that enhance the shopping experience for consumers.

Table of Contents

•As part of this strategy, we have built a leadership position in the global travel retail channel, that historically allowed us to leverage the robust and growing international passenger traffic. While COVID-19 has significantly curtailed international travel in the near-term, we continue to believe that global travel retail is a growth opportunity for the long-term. Travel retail continues to be an important channel for brand building due to the increase in traveling consumers, particularly those from emerging markets, who often experience our brands for the first time while traveling. We continue to expand our strategic presence in travel retail across duty-free locations primarily in airports and downtown stores and increasingly through online pretail. We engage consumers at the airport through compelling pop-up activations in non-traditional commercial areas, and we ensure we have appropriate communication and curated assortments for targeted consumer groups. At the same time, travel retail is susceptible to a number of external factors, including fluctuations in currency exchange rates and consumers’ willingness and ability to travel and spend.

•Online net sales have continued to grow strongly on a global basis, rising strong double digits for fiscal 2021. Nearly every brand grew as we continue to enhance and launch e- and m-commerce sites of our own in new and existing markets, collaborate with our retail customers on their e- and m-commerce sites, and sell through select third-party online malls. We believe our success in delivering particularly strong online growth is a result of adapting our strategy to meet local market and cultural needs. We also continue to develop and implement omnichannel concepts, virtual try-on tools and compelling content to deliver an integrated consumer experience and better serve consumers as they shop across channels.

Our multiple engines of growth, which have historically enabled us to produce excellent net sales growth, are also helping to mitigate the impact of the COVID-19 pandemic. We also benefited from the transformation of certain operations that freed up resources to invest behind further growth opportunities. Our Leading Beauty Forward Program and Post-COVID Business Acceleration Program (described below) enabled us to reduce costs and invest in new capabilities such as digital marketing and data analytics as well as increased advertising.

In fiscal 2021, we continued to further integrate social impact and sustainability into our strategy and business operations. Areas of differentiation include climate & energy, green chemistry, social investments, employee engagement and safety and inclusion, diversity & equity. Other areas of focus include responsible sourcing, plastics & packaging, ingredient transparency, and animal welfare.

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, as well as restructurings and bankruptcies in the retail industry, including among our customers, and shifts in preferences as to where and how consumers shop, as well as changes in their preferences for certain products. We are mindful that these trends, the resurgence of COVID-19 cases globally and the related government restrictions 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. 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 and the long-lived assets in certain of our freestanding stores (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 potential inflation; 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.

Table of Contents

The uncertainty around the timing, speed and duration of the recovery from the adverse impacts of the COVID-19 pandemic 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 progresses, 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.

Leading Beauty Forward

In May 2016, we announced a multi-year initiative (“Leading Beauty Forward” or the “LBF Program”) to build on our strengths and better leverage our cost structure to free resources for investment to continue our growth momentum. Leading Beauty Forward was designed to enhance our go-to-market capabilities, reinforce our leadership in global prestige beauty and our ability to continue creating sustainable value. As of June 30, 2019, we concluded the approvals of all major initiatives under Leading Beauty Forward related to the optimization of select corporate functions, supply chain activities, and corporate and regional market support structures, as well as the exit of underperforming businesses, and have substantially completed those initiatives through fiscal 2021. For additional information about restructuring and other charges, see Item 8. Financial Statements and Supplementary Data – Note 8 – Charges Associated with Restructuring and Other Activities.

Post-COVID Business Acceleration Program

On August 20, 2020, we announced a two-year restructuring program, Post-COVID Business Acceleration Program (the “PCBA Program”), designed to realign our business to address the dramatic shifts to our distribution landscape and consumer behaviors in the wake of the COVID-19 pandemic. The PCBA Program is designed to help improve efficiency and effectiveness by rebalancing resources to growth areas of prestige beauty. It is expected to further strengthen us by building upon the foundational capabilities in which we have invested.

The PCBA Program’s main areas of focus include accelerating the shift to online with the realignment of our distribution network reflecting freestanding store and certain department store closures, with a focus on North America and Europe, the Middle East & Africa; the reduction in brick-and-mortar point of sale employees and related support staff; and the redesign of our regional branded marketing organizations, plus select opportunities in global brands and functions. This program is expected to position us to better execute our long-term strategy while strengthening our financial flexibility.

We previously estimated a net reduction over the duration of the PCBA Program in the range of approximately 1,500 to 2,000 positions globally, including temporary and part-time employees. We have revised these estimates based on the review of the PCBA Program. At this time, we estimate a net reduction over the duration of the PCBA Program in the range of 2,000 to 2,500 positions globally, 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. We also estimate the closure over the duration of the PCBA Program of approximately 10% to 15% of our freestanding stores globally, primarily in Europe, the Middle East & Africa and in North America.

We plan to approve specific initiatives under the PCBA Program through fiscal 2022 and expect to complete those initiatives through fiscal 2023. We expect that the PCBA Program will result in related restructuring and other charges totaling between $400 million and $500 million, before taxes, consisting of employee-related costs, contract terminations, asset write-offs and other costs to implement these initiatives.

Once fully implemented, we expect the PCBA Program to yield annual benefits, primarily in Selling, general and administrative expenses, of between $300 million and $400 million, before taxes. We expect to reinvest a portion behind future growth initiatives. For additional information about restructuring and other charges, see Item 8. Financial Statements and Supplementary Data – Note 8 – Charges Associated with Restructuring and Other Activities.

Table of Contents

Impairment Testing

We assess goodwill and other indefinite-lived intangible assets at least annually for impairment or more frequently if certain events or circumstances exist.

During November 2020, given the actual and the estimate of the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting us and lower than expected results from geographic expansion, we made further revisions to the internal forecasts relating to our GLAMGLOW reporting unit. We concluded that the changes in circumstances in this reporting unit triggered the need for an interim impairment review of its trademark and goodwill. These changes in circumstances were also an indicator that the carrying amounts of GLAMGLOW's long-lived assets, including customer lists, may not be recoverable. Accordingly, we performed an interim impairment test for the trademark and a recoverability test for the long-lived assets as of November 30, 2020. We concluded that the carrying value of the trademark for GLAMGLOW 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 of $21 million. In addition, we concluded that the carrying value of the GLAMGLOW customer lists intangible asset was fully impaired and recorded an impairment charge of $6 million. The fair value of all other long-lived assets of GLAMGLOW exceeded their carrying values and were not impaired as of November 30, 2020. After adjusting the carrying values of the trademark and customer lists intangible assets, we completed an interim quantitative impairment test for goodwill and recorded a goodwill impairment charge of $54 million, reducing the carrying value of goodwill for the GLAMGLOW reporting unit to zero. The fair value of the GLAMGLOW reporting unit was 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 unit.

Based on our annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2021, we determined that the carrying value of the GLAMGLOW and Smashbox trademarks exceeded their fair values. This determination was made based on updated internal forecasts, finalized and approved in June 2021, that reflected lower net sales growth projections due to a softer than expected retail environment for these brands, as well as the continued impacts relating to the uncertainty of the duration and severity of the COVID-19 pandemic. These changes in circumstances were also indicators that the carrying amounts of their respective long-lived assets may not be recoverable. We concluded that the carrying values of the trademarks exceeded their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded impairment charges. We concluded that the carrying amounts of the long-lived assets were recoverable. The carrying values of the customer lists and goodwill relating to the GLAMGLOW and Smashbox reporting units were zero as of November 30, 2020 and June 30, 2020, respectively.

A summary of the impairment charges for the three and twelve months ended June 30, 2021 and the remaining trademark, customer lists and goodwill carrying values as of June 30, 2021, for each reporting unit, are as follows:

Impairment Charge

GLAMGLOW Skin care $ 25 $ — $ — $ 46 $ 6 $ 54 $ 11 $ — $ —

Smashbox Makeup 11 — — 11 — — 21 — —

The impairment charges for the three and twelve months ended June 30, 2021 were reflected in the Americas region.

The fair values of all reporting units, which were determined based on qualitative or quantitative assessments, with material goodwill were substantially in excess of their respective carrying values, with the exception of the DECIEM reporting unit. The carrying values of the DECIEM reporting unit and other intangible assets as of June 30, 2021 approximated their fair values.

The fair values of the Smashbox and GLAMGLOW trademarks were equal to their carrying values subsequent to the impairment charges taken as of April 1, 2021. The key assumptions used to determine the estimated fair value of the reporting units 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 these reporting units operate, resulting changes in the key assumptions could have negative impacts on the estimated fair values of the reporting units and it is possible we could recognize additional impairment charges in the future.

For additional information, see Item 8. Financial Statements and Supplementary Data – Note 6 – Goodwill and Other Intangible Assets.

Table of Contents

Fiscal 2020 as Compared with Fiscal 2019

See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020 for the fiscal 2020 to fiscal 2019 comparative discussion.

Fiscal 2021 as Compared with Fiscal 2020

NET SALES

Year Ended June 30

As Reported:

$ Change from prior year 1,921 (569)

% Change from prior year 13 % (4) %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 11 % (3) %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

The fiscal 2021 increase in reported net sales mainly reflected higher net sales in the second half of the fiscal year compared to the prior-year period. Fiscal 2020 reported net sales reflected the negative impacts of the COVID-19 pandemic that started in the second half of that fiscal year, including the temporary closing of businesses deemed “non-essential,” travel bans and restrictions, social distancing and quarantines. Reported net sales increased in fiscal 2021, primarily due to higher net sales in skin care, fragrance and hair care, as well as growth in our Asia/Pacific and Europe, the Middle East & Africa regions. Skin care net sales growth primarily reflected higher net sales from Estée Lauder, La Mer, Dr. Jart+ and Clinique, as well as incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter. Fragrance net sales increased, primarily benefiting from higher net sales from Jo Malone London, Tom Ford Beauty and Le Labo, and higher net sales from Aveda and Bumble and bumble drove the growth in hair care. The increase in net sales in mainland China, our travel retail business and Korea drove growth internationally. Our direct-to-consumer online net sales continued to have strong growth.

The fiscal 2021 reported net sales increase was impacted by approximately $357 million of favorable foreign currency translation.

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 fiscal 2021 impact of returns associated with restructuring and other activities of approximately $14 million.

Table of Contents

Product Categories

Skin Care

Year Ended June 30

As Reported:

% Change from prior year 28 % 13 %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 25 % 14 %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported skin care net sales increased in fiscal 2021, primarily reflecting higher net sales from Estée Lauder, La Mer, Clinique and Dr. Jart+, combined, of approximately $1,896 million, as well as incremental net sales attributable to our acquisition of Dr. Jart+ at the end of the fiscal 2020 second quarter and the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter, combined, of approximately $332 million. Net sales increased from Estée Lauder and La Mer, led by our travel retail business (primarily in Hainan) and mainland China, reflecting strong growth from direct-to-consumer online net sales of products from these brands primarily due to successful holiday and promotional events. The net sales increase from Estée Lauder reflected the continued success of hero product franchises, such as Advanced Night Repair, Nutritious, Micro Essence, Revitalizing Supreme+ and Re-Nutriv, as well as fiscal 2021 product launches, such as Advanced Night Repair Synchronized Multi-Recovery Complex and Revitalizing Supreme+ Bright. The increase in net sales from La Mer also benefited from the continued success of hero products, such as The Treatment Lotion, Crème de la Mer, The Moisturizing Soft Cream and The Concentrate, as well as the fiscal 2021 launch of the Genaissance de la Mer The Concentrated Night Balm and targeted expanded consumer reach. Net sales increased from Clinique, primarily due to higher net sales in our travel retail business (primarily in Hainan), and higher net sales in North America and mainland China, reflecting the continued success of existing products, such as Dramatically Different products and Even Better Clinical Radical Dark Spot Corrector + Interrupter, new product launches, such as Moisture Surge 100H Auto-Replenishing Hydrator, and strong direct-to-consumer online net sales growth.

The skin care net sales increase was impacted by approximately $225 million of favorable foreign currency translation.

Makeup

Year Ended June 30

As Reported:

$ Change from prior year (591) (1,066)

% Change from prior year (12) % (18) %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency (14) % (17) %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported makeup net sales decreased in fiscal 2021, primarily due to lower net sales from virtually all brands, led by M·A·C and Clinique, combined, of approximately $476 million. The makeup product category continues to be more negatively impacted by the effects of the COVID-19 pandemic, especially the challenging environment in brick-and-mortar retail locations and fewer makeup usage occasions. The continued decline in prestige makeup and ongoing competitive activity in North America also contributed to the decline in net sales from these brands.

The makeup net sales decrease was impacted by approximately $82 million of favorable foreign currency translation.

Table of Contents

Fragrance

Year Ended June 30

As Reported:

$ Change from prior year 363 (239)

% Change from prior year 23 % (13) %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 21 % (12) %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported fragrance net sales increased in fiscal 2021, reflecting a recovery compared to the prior-year challenges, including store closures, stemming from the COVID-19 pandemic. The fiscal 2021 increase in fragrance net sales was led by higher net sales from Jo Malone London, Tom Ford Beauty and Le Labo, combined, of approximately $317 million. The increase in net sales from Jo Malone London, led by mainland China and North America, benefited from successful holiday and promotional events, the success of certain hero product franchises and the new Blossoms Collection. Net sales from Tom Ford Beauty increased, reflecting growth in all geographic regions where we continued to have success with hero products, such as Oud Wood and Black Orchid, and new product launches, such as Bitter Peach, Tubereuse Nue and Costa Azzurra. Net sales from Le Labo grew strong double digits, reflecting higher net sales in all geographic regions driven by hero fragrances, home products and targeted expanded consumer reach.

The fragrance net sales increase was impacted by approximately $41 million of favorable foreign currency translation.

Hair Care

Year Ended June 30

As Reported:

$ Change from prior year 56 (69)

% Change from prior year 11 % (12) %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 9 % (11) %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported hair care net sales increased in fiscal 2021, primarily due to higher net sales from Aveda and to a lesser extent Bumble and bumble, combined, of approximately $60 million, reflecting a recovery compared to the prior-year challenges, including salon and store closures, stemming from the COVID-19 pandemic. The increase in net sales from Aveda also benefited from the success of existing product franchises, such as Nutriplenish and Invati, and the new product launch of Botanical Repair, which led to growth in all geographic regions.

Table of Contents

Geographic Regions

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

The Americas

Year Ended June 30

As Reported:

$ Change from prior year 3 (947)

% Change from prior year — % (20) %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 1 % (20) %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Fiscal 2021 reported net sales in The Americas increased slightly as compared to the prior-year period. Reported net sales in The Americas reflected higher net sales in North America, offset by the net sales decline in Latin America due to lower net sales in Brazil. Net sales in North America increased, reflecting a recovery compared to the prior-year challenges stemming from the COVID-19 pandemic and incremental net sales from the increase in our ownership of DECIEM in the fourth quarter. Latin America net sales declined, due to the resurgence of COVID-19 cases in Brazil that led to government restrictions. Net sales in virtually all other markets in Latin America increased, reflecting a recovery compared to the prior-year challenges stemming from the COVID-19 pandemic. Our direct-to-consumer online net sales in The Americas grew double digits in fiscal 2021.

The net sales increase in The Americas included approximately $39 million of unfavorable foreign currency translation.

Europe, the Middle East & Africa

Year Ended June 30

As Reported:

$ Change from prior year 684 (190)

% Change from prior year 11 % (3) %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 9 % (2) %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported net sales in Europe, the Middle East & Africa increased in fiscal 2021, reflecting higher net sales primarily in our travel retail business and Russia, combined, of approximately $633 million. The increase in net sales reflected a recovery compared to the prior-year challenges stemming from the COVID-19 pandemic. Despite the continued curtailment of international travel as a result of the COVID-19 pandemic, the increase in net sales from our travel retail business was led by the continued success of hero product franchises from Estée Lauder, La Mer and Clinique, reflecting the increase in China travel retail (primarily Hainan) due, in part, to increased duty-free purchase limits and the acceleration of new digital selling models. Direct-to-consumer online net sales in Europe, the Middle East & Africa grew double digits in fiscal 2021.

The net sales increase in Europe, the Middle East & Africa included approximately $101 million of favorable foreign currency translation.

Table of Contents

Asia/Pacific

Year Ended June 30

As Reported:

% Change from prior year 29 % 15 %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 22 % 18 %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported net sales in Asia/Pacific increased in fiscal 2021, reflecting higher net sales primarily in mainland China, Korea and Australia, combined, of approximately $1,279 million, driven by our skin care products. Incremental net sales in Asia/Pacific attributable to our acquisition of Dr. Jart+ at the end of the fiscal 2020 second quarter and the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter, combined, was approximately $325 million. The increase in net sales in mainland China reflected higher net sales primarily of our skin care products, led by Estée Lauder, La Mer and Dr. Jart+, and in our third-party platform and department store channels. Net sales increased in Korea, primarily benefiting from incremental net sales from our acquisition of Dr. Jart+ at the end of the fiscal 2020 second quarter and higher net sales from Jo Malone London. The increase in net sales in Australia reflected a recovery compared to the prior-year challenges stemming from the COVID-19 pandemic. Direct-to-consumer online net sales in Asia/Pacific grew double digits in fiscal 2021.

Partially offsetting these increases in fiscal 2021, were lower net sales in Japan and Hong Kong, of approximately $71 million, combined, primarily due to the ongoing challenges stemming from the COVID-19 pandemic, including reduced consumer traffic in brick-and-mortar retail locations and the continued curtailment of international travel.

The net sales increase in Asia/Pacific included approximately $295 million of favorable foreign currency translation.

GROSS MARGIN

Gross margin in fiscal 2021 increased to 76.4% as compared with 75.2% in fiscal 2020.

Fiscal 2021 vs. Fiscal 2020Favorable (Unfavorable) Basis Points

Mix of business 100

Obsolescence charges 40

Foreign exchange transactions (40)

Manufacturing costs and other 20

Charges associated with restructuring and other activities —

The favorable impact from our mix of business for fiscal 2021 was primarily due to the favorable change in strategic pricing, lower costs from product sets and lower costs of promotional items as a result of reduced consumer traffic in brick-and-mortar retail locations.

Table of Contents

OPERATING EXPENSES

Operating expenses as a percentage of net sales in fiscal 2021 decreased to 60.2% as compared with 70.9% in fiscal 2020.

Fiscal 2021 vs. Fiscal 2020Favorable (Unfavorable) Basis Points

General and administrative expenses (120)

Advertising, merchandising, sampling and product development 100

Shipping —

Store operating costs 60

Stock-based compensation (60)

Foreign exchange transactions 10

Charges associated with restructuring and other activities (80)

Goodwill, other intangible and long-lived asset impairments 890

Changes in fair value of contingent consideration (10)

Acquisition-related stock option expense (30)

The fiscal 2021 decrease in operating expense margin was driven by the favorable year-over-year comparison of goodwill, other intangible and long-lived asset impairments of $1,238 million and a decrease in selling expense, due to the impacts of the COVID-19 pandemic on brick-and-mortar retail locations, including the decline in consumer traffic, store closures, and the continued shift in consumer preference to online. The advertising, merchandising, sampling and product development favorability was driven by the increase in net sales, partially offset by the increase in advertising and promotional expense, primarily due to continued strategic investments and a difficult comparison to the prior-year period that reflected cost saving actions implemented in response to the impacts of the COVID-19 pandemic.

Partially offsetting these favorable impacts were increases in general and administrative expenses, primarily due to an increase in employee incentive compensation as compared to the prior-year period, which reflected lower accrued employee incentive compensation attributable to the impacts of the COVID-19 pandemic on performance.

OPERATING RESULTS

Year Ended June 30

As Reported:

% Change from prior year 100+% (74) %

Operating Margin 16.1 % 4.2 %

Non-GAAP Financial Measure(1):

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Table of Contents

The reported operating margin for fiscal 2021 increased from the prior year driven primarily by the year-over-year comparison of goodwill, other intangible and long-lived asset impairments of $1,238 million, or 890 bps, the decrease in operating expenses as a percentage of net sales and the increase in gross margin, as previously noted.

The fiscal 2021 and 2020 goodwill, intangible and long-lived asset impairments and the changes in fair value of contingent consideration impacted the operating results of our product categories and geographic regions as follows:

Product Category:

Other — — — — (1) (1) 1

Region:

Asia/Pacific — — — — (8) (8) 8

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 fiscal 2021 and 2020 impact of charges associated with restructuring and other activities of $228 million, or 1% of net sales and $83 million, or 1% of net sales, respectively.

Product Categories

Skin Care

Year Ended June 30

As Reported:

$ Change from prior year 911 200

% Change from prior year 43 % 10 %

Non-GAAP Financial Measure(1):

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Table of Contents

Reported skin care operating income increased in fiscal 2021, primarily driven by higher results from Estée Lauder, La Mer and Clinique, combined, of approximately $1,183 million. The increases in operating income from these brands primarily reflected higher net sales, as well as lower selling expenses due to the impacts of the COVID-19 pandemic on brick-and-mortar retail locations, discussed above. These increases were partially offset by increased advertising and promotional activities primarily to support holiday and promotional events and new product launches.

Partially offsetting these increases in operating income were higher general and administrative expenses, primarily due to increased employee incentive compensation from the prior-year period, which reflected lower accrued employee incentive compensation attributable to the impacts of the COVID-19 pandemic on performance, as well as acquisition-related expenses, primarily related to DECIEM's stock options of $40 million. See Item 8. Financial Statements and Supplementary Data –Note 18 –Stock Plans for additional information relating to DECIEM stock options.

Makeup

Year Ended June 30

As Reported:

% Change from prior year 73 % (100+)%

Non-GAAP Financial Measure(1):

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported makeup operating results increased in fiscal 2021, driven by the favorable year-over-year comparison of goodwill and other intangible asset impairments related to Too Faced, BECCA and Smashbox, combined, of $1,120 million and freestanding store long-lived asset impairments relating to COVID-19 of approximately $108 million.

Partially offsetting the decreases in operating loss were lower results from M·A·C primarily due to the decrease in net sales, offset by lower selling expense and store operating costs, due to the impacts of the COVID-19 pandemic on brick-and-mortar retail locations, discussed above.

Fragrance

Year Ended June 30

As Reported:

Operating income $ 215 $ 17

$ Change from prior year 198 (123)

% Change from prior year 100+% (88) %

Non-GAAP Financial Measure(1):

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported fragrance operating results increased in fiscal 2021, primarily driven by higher results from Tom Ford Beauty and Jo Malone London, combined, of approximately $183 million. The increase in operating results from these brands reflected higher net sales, partially offset by increased advertising and promotional activities primarily to support holiday and promotional events and new product launches.

Table of Contents

Hair Care

Year Ended June 30

As Reported:

Operating income $ (19) $ (19)

$ Change from prior year — (58)

% Change from prior year — % (100+)%

Non-GAAP Financial Measure(1):

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported hair care operating results in fiscal 2021 were flat as compared to the prior-year period. Fiscal 2021 operating results reflected higher general and administrative expenses primarily due to increased employee incentive compensation from the prior-year period, which reflected lower accrued employee incentive compensation attributable to the impacts of the COVID-19 pandemic on performance. This decrease in operating results in fiscal 2021 is partially offset by higher operating results from Aveda, primarily driven by higher net sales, and the favorable year-over-year impact of freestanding store long-lived asset impairments relating to COVID-19 of approximately $10 million.

Geographic Regions

The Americas

Year Ended June 30

As Reported:

% Change from prior year 100+% (100+)%

Non-GAAP Financial Measure(1):

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported operating results in The Americas increased in fiscal 2021, primarily due to the favorable year-over-year comparison of goodwill, other intangible and freestanding store long-lived asset impairments and the change in fair value of contingent consideration of $1,167 million. The increase in operating results also reflected higher intercompany royalty income primarily from the growth in our travel retail business, as well as lower selling expenses due to the impacts of the COVID-19 pandemic on brick-and-mortar retail locations, discussed above.

Partially offsetting these increases in operating results were higher general and administrative expenses, primarily due to increased employee incentive compensation from the prior-year period, which reflected lower accrued employee incentive compensation attributable to the impacts of the COVID-19 pandemic on performance, and increased advertising and promotional activities primarily to support holiday and promotional events.

Table of Contents

Europe, the Middle East & Africa

Year Ended June 30

As Reported:

$ Change from prior year 338 (156)

% Change from prior year 34 % (14) %

Non-GAAP Financial Measure(1):

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported operating results in Europe, the Middle East & Africa increased in fiscal 2021, primarily driven by higher results from our travel retail business and France, combined, of approximately $247 million, reflecting disciplined expense management, and higher nets sales from our travel retail business. The increase in fiscal 2021 operating results also benefited from the favorable year-over-year comparison of freestanding store long-lived asset impairments relating to COVID-19 of $56 million.

Asia/Pacific

Year Ended June 30

As Reported:

$ Change from prior year 257 7

% Change from prior year 35 % 1 %

Non-GAAP Financial Measure(1):

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported operating income in Asia/Pacific increased in fiscal 2021, primarily driven by higher results from mainland China and Korea, combined, of approximately $227 million, reflecting the increase in net sales. The increase in net sales in mainland China was partially offset by the increase in advertising and promotional expense, primarily due to investments to support holiday events and campaigns and new product launches and a difficult comparison to the prior-year period that reflected cost saving actions implemented in response to the impacts of the COVID-19 pandemic.

Partially offsetting the increase in operating income was lower results from Japan, reflecting the decrease in net sales.

INTEREST AND INVESTMENT INCOME

Year Ended June 30

Interest income and investment income, net $ 51 $ 48

Interest expense increased in fiscal 2021 primarily due to the issuance of additional long-term debt in November 2019, April 2020 and March 2021, partially offset by the favorable impact from interest rate swaps.

Table of Contents

Interest income and investment income, net increased reflecting higher equity method investment income from our minority investments, partially offset by decreases in investment income due to lower interest rates.

OTHER INCOME, NET

On May 18, 2021, we acquired additional shares in DECIEM, a Toronto-based skin care company, for $1,092 million in cash, including proceeds from the issuance of debt. DECIEM is a multi-brand beauty company with a brand portfolio that includes The Ordinary and NIOD. This acquisition is expected to further strengthen our leadership position in prestige skin care, expand our global consumer reach and complement our business in the online and specialty-multi channels. We originally acquired a minority interest in DECIEM in June 2017. The minority interest was accounted for as an equity method investment, which had a carrying value of $65 million at the acquisition date. The acquisition of additional shares increased our fully diluted equity interest from approximately 29% to approximately 76% and was considered a step acquisition. On a fully diluted basis, the DECIEM stock options approximated 4% of the total capital structure. Accordingly, for purposes of determining the consideration transferred, we excluded the DECIEM stock options, which resulted in an increase in our post-acquisition undiluted equity interest from approximately 30% to approximately 78% and the post-acquisition undiluted equity interest of the remaining noncontrolling interest holders of approximately 22%. We remeasured the previously held equity method investment to its fair value of $912 million, resulting in the recognition of a gain of $847 million. The gain on our previously held equity method investment is included in Other income, net in the accompanying consolidated statements of earnings for the year ended June 30, 2021. As part of the increase in our investment, we were granted the right to purchase (Call Option), and granted the remaining investors a right to sell to us (Put Option), the remaining interests after a three-year period, with a purchase price based on the future performance of DECIEM (the net Put (Call) Option). As a result of this redemption feature, we recorded redeemable noncontrolling interest, at its acquisition‐date fair value, that is classified as mezzanine equity in the accompanying consolidated balance sheets at June 30, 2021.

See Item 8. Financial Statements and Supplementary Data –Note 5 –Acquisition of Businesses for additional information.

On December 18, 2019, we acquired the remaining equity interest in Have&Be Co. Ltd. (“Have & Be”), the global skin care company behind Dr. Jart+ and men’s grooming brand Do The Right Thing, for $1,268 million in cash. Based on the final purchase price and working capital adjustments, we estimated a refund receivable of $32 million that was outstanding as of June 30, 2020 and was received in the first quarter of fiscal 2021. We originally acquired a minority interest in Have & Be in December 2015, which included a formula-based call option for the remaining equity interest. The original minority interest was accounted for as an equity method investment, which had a carrying value of $133 million at the acquisition date. The acquisition of the remaining equity interest in Have & Be was considered a step acquisition, whereby we remeasured the previously held equity method investment to its fair value of $660 million, resulting in the recognition of a gain of $530 million. The acquisition of the remaining equity interest also resulted in the recognition of a previously unrealized foreign currency gain of $4 million, which was reclassified from accumulated other comprehensive income. The total gain on our previously held equity method investment of $534 million is included in Other income, net in the accompanying consolidated statements of earnings for the year ended June 30, 2020.

The amount paid at closing was funded by cash on hand including the proceeds from the issuance of debt. In anticipation of the closing, we transferred cash to a foreign subsidiary for purposes of making the closing payment. As a result, we recognized a foreign currency gain of $23 million, which is also included in Other income, net in the accompanying consolidated statements of earnings for the year ended June 30, 2020.

The Tax Cuts and Jobs Act (the “TCJA”), which was enacted on December 22, 2017, presented us with opportunities to manage cash and investments more efficiently on a global basis. Accordingly, during fiscal 2019, as part of the assessment of those opportunities, we sold our available-for-sale securities, which liquidated our investment in the foreign subsidiary that owned those securities. As a result, we recorded a realized foreign currency gain on liquidation of $77 million and a gross loss on the sale of available-for-sale securities of $6 million, both of which were reclassified from accumulated OCI and are reflected in Other income, net for the year ended June 30, 2019. See Item 8. Financial Statements and Supplementary Data –Note 2– Summary of Significant Accounting Policies – Currency Translation and Transactions for further information.

Table of Contents

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 year-to-year 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.

The TCJA included broad and complex changes to the U.S. tax code that impacted our accounting and reporting for income taxes. See Item 8. Financial Statements and Supplementary Data – Note 9 – Income Taxes for further discussion relating to the TCJA.

Year Ended June 30

Earnings before income taxes: $ 3,331 $ 1,046

As Reported:

Effective rate for income taxes 13.7 % 33.5 %

Basis-point change from prior year(1) (1,980) 1,130

Non-GAAP Financial Measure(2):

Effective rate for income taxes 18.7 % 23.2 %

(1)For fiscal 2021 and 2020, the basis-point change in our effective tax rate was materially impacted by the increase from fiscal 2020 to fiscal 2021 and the decrease from fiscal 2019 to fiscal 2020, respectively, in earnings before income taxes.

(2)Fiscal 2021 and 2020 effective tax rates exclude the net impact on the effective tax rates of charges associated with restructuring and other activities, goodwill and other intangible asset impairments, other income, net and changes in the fair value of contingent consideration. There was no tax expense associated with the fiscal 2021 other income, net adjustment (previously held equity method investment in DECIEM). Fiscal 2021 was also adjusted to exclude the DECIEM stock option expense.

The effective tax rate for fiscal 2021 decreased approximately 1,980 basis points. The decrease was primarily attributable to a lower effective tax rate on our foreign operations of approximately 920 basis points, which included the impact of the U.S. government issuance of final global intangible low-taxed income (“GILTI”) tax regulations in July 2020 under the TCJA that provide for a high-tax exception to the current and applicable prior years’ GILTI tax, the impact of the gain on our previously held equity method investment in DECIEM with no associated tax expense of approximately 530 basis points, as well as the prior-year impact of nondeductible goodwill impairment charges associated with our Too Faced, BECCA and Smashbox reporting units of approximately 790 basis points. Partially offsetting these decreases was a decrease in excess tax benefit credits related to stock-based compensation arrangements of approximately 450 basis points.

Table of Contents

NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.

Year Ended June 30

($ in millions, except per share data) 2021 2020

As Reported:

Net earnings attributable to The Estée Lauder Companies Inc. $ 2,870 $ 684

% Change from prior year 100+% (62) %

Diluted net earnings per common share $ 7.79 $ 1.86

% Change from prior year 100+% (61) %

Non-GAAP Financial Measure(1):

(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.

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 and other intangible asset impairments; long-lived asset impairments relating to COVID-19; other income, net; the changes in the fair value of contingent consideration; acquisition-related stock option expense; and the effects of foreign currency translation. The tables provide reconciliations between these non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Table of Contents

Year Ended June 30 % Change % Change in Constant Currency

($ in millions, except per share data) 2021 2020 Variance

Returns associated with restructuring and other activities 14 — 14

Charges associated with restructuring and other activities 228 83 145

Goodwill, other intangible and long-lived asset impairments 188 1,426 (1,238)

Changes in fair value of contingent consideration (2) (17) 15

Acquisition-related stock option expense 40 — 40

Charges associated with restructuring and other activities .48 .19 .29

Goodwill, other intangible and long-lived asset impairments .40 3.31 (2.91)

Changes in fair value of contingent consideration (.01) (.04) .03

Acquisition-related stock option expense .09 — .09

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.

Table of Contents

The following table reconciles 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

Year Ended June 30

By Product Category:

Returns associated with restructuring and other activities (14) — (14) — (14)

By Region:

Returns associated with restructuring and other activities (14) — (14) — (14)

Table of Contents

The following table reconciles the change in operating income 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, changes in fair value of contingent consideration and acquisition-related stock option expense:

Year Ended June 30

By Product Category:

Charges associated with restructuring and other activities (228) (83)

By Region:

Charges associated with restructuring and other activities (228) (83)

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 June 30, 2021, we had cash and cash equivalents of $4,958 million compared with $5,022 million at June 30, 2020. 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 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.

Table of Contents

The effects of inflation have not been significant to our overall operating results in recent years, however we are mindful of emerging 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, which have been moderate.

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 August 20, 2021, 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 and Access to Liquidity

Total debt as a percent of total capitalization (excluding noncontrolling interests) decreased to 48% at June 30, 2021 from 61% at June 30, 2020, primarily due to the increase in total equity reflecting an increase in net earnings, partially offset by a higher treasury stock balance. Also contributing to the decrease was a decrease in total debt, primarily due to the fiscal 2021 repayments of the $750 million outstanding under our $1,500 million revolving credit facility and the $450 million aggregate principal amount of our 1.70% Senior Notes due May 10, 2021, partially offset by the March 2021 issuance of $600 million aggregate principal amount of our 1.950% Senior Notes due March 15, 2031.

For further information regarding our current and long-term debt and available financing, see Item 8. Financial Statements and Supplementary Data – Note 11 – Debt.

Cash Flows

Year Ended June 30

Net cash provided by operating activities $ 3,631 $ 2,280

Net cash used for investing activities $ (1,864) $ (1,698)

Net cash provided by (used for) financing activities $ (1,892) $ 1,461

The change in net cash flows from operations reflected higher earnings before taxes, excluding non-cash items, as well as the improvement in working capital. The improvement in working capital was primarily due to other accrued liabilities, including an increase in accrued employee incentive compensation and the settlement of foreign currency forward contracts, and accounts payable, partially offset by the unfavorable change in accounts receivable due primarily to the increase in net sales.

The change in net cash flows used for investing activities primarily reflected the settlement of net investment hedges, which is offset by the improvement in other accrued liabilities discussed above. Net cash used for investing activities in fiscal 2021 and fiscal 2020 included cash paid, net of cash acquired, in connection with the acquisition of additional shares in DECIEM and the acquisition of Have & Be, respectively.

The change in net cash flows from financing activities primarily reflected lower proceeds relating to the issuance of long-term debt (the November 2019 and April 2020 issuances in fiscal 2020, compared to the March 2021 issuance in fiscal 2021), the fiscal 2021 repayment of borrowings under our revolving credit facility, partially offset by lower treasury stock repurchases.

See Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Financial Condition of the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020 for the fiscal 2020 to fiscal 2019 comparative discussions.

Dividends

For a summary of quarterly cash dividends declared per share on our Class A and Class B Common Stock during the year ended June 30, 2021 and through August 20, 2021, see Item 8. Financial Statements and Supplementary Data – Note 17 – Common Stock.

Table of Contents

Pension and Post-retirement Plan Funding

Several factors influence the annual funding requirements for our pension plans. For our domestic trust-based noncontributory qualified defined benefit pension plan (“U.S. Qualified Plan”), we seek to maintain appropriate funded percentages. For any future contributions to the U.S. Qualified Plan, we would seek to contribute an amount or amounts that would not be less than the minimum required by the Employee Retirement Income Security Act of 1974, as amended, (“ERISA”) and subsequent pension legislation, and would not be more than the maximum amount deductible for income tax purposes. For each international plan, our funding policies are determined by local laws and regulations. In addition, amounts necessary to fund future obligations under these plans could vary depending on estimated assumptions. The effect of our pension plan funding on future operating results will depend on economic conditions, employee demographics, mortality rates, the number of participants electing to take lump-sum distributions, investment performance and funding decisions.

For the U.S. Qualified Plan, we maintain an investment strategy of matching the duration of a substantial portion of the plan assets with the duration of the underlying plan liabilities. This strategy assists us in maintaining our overall funded ratio. For fiscal 2021 and 2020, we met or exceeded all contribution requirements under ERISA regulations for the U.S. Qualified Plan. As we continue to monitor the funded status, we may decide to make cash contributions to the U.S. Qualified Plan or our post-retirement medical plan in the United States during fiscal 2022.

The following table summarizes actual and expected benefit payments and contributions for our other pension and post-retirement plans:

Year Ended June 30

International defined benefit pension plan contributions $ 38 $ 40 $ 25

Post-retirement plan benefit payments $ 9 $ 7 $ 8

Commitments and Contingencies

For a discussion of our contingencies, see to Item 8. Financial Statements and Supplementary Data – Note 16 – Commitments and Contingencies (Contractual Obligations).

Contractual Obligations

For a discussion of our contractual obligations, see Item 8. Financial Statements and Supplementary Data – Note 16 – Commitments and Contingencies (Contractual Obligations).

Derivative Financial Instruments and Hedging Activities

For a discussion of our derivative financial instruments and hedging activities, see Item 8. Financial Statements and Supplementary Data – Note 12 – Derivative Financial Instruments.

Foreign Exchange Risk Management

For a discussion of foreign exchange risk management, see Item 8. Financial Statements and Supplementary Data – Note 12 – Derivative Financial Instruments (Cash Flow Hedges, Net Investment Hedges).

Credit Risk

For a discussion of credit risk, see Item 8. Financial Statements and Supplementary Data – Note 12 – Derivative Financial Instruments (Credit Risk).

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 $218 million and $222 million as of June 30, 2021 and 2020, respectively. This potential change does not consider our underlying foreign currency exposures.

Table of Contents

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 increase (decrease) by approximately $(83) million and $9 million as of June 30, 2021 and 2020, 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.

RECENTLY ISSUED ACCOUNTING STANDARDS

Refer to Item 8. Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies for discussion regarding the impact of accounting standards that were recently issued but not yet effective, on our consolidated financial statements.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition at June 30, 2021 and our results of operations for the three fiscal years ended June 30, 2021 are based upon our consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). 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. We consider accounting estimates to be critical if both (i) the nature of the estimate or assumption is material due to the levels of subjectivity and judgment involved, and (ii) the impact within a reasonable range of outcomes of the estimate and assumption is material to the Company’s financial condition. Our critical accounting policies relate to goodwill, other intangible assets and long-lived assets - impairment assessment, income taxes and business combinations.

Management of the Company has discussed the selection of critical accounting policies and the effect of estimates with the Audit Committee of the Company’s Board of Directors.

Goodwill, Other Intangible Assets and Long-Lived Assets – Impairment Assessment

Goodwill is calculated as the excess of the cost of purchased businesses over the fair value of their underlying net assets. Other indefinite-lived intangible assets principally consist of trademarks. Goodwill and other indefinite-lived intangible assets are not amortized.

When testing goodwill and other indefinite-lived intangible assets for impairment, we have the option of first performing a qualitative assessment to determine whether it is more-likely-than-not that the fair value of a reporting unit is less than its carrying amount as a basis for determining whether it is necessary to perform a quantitative impairment test. If necessary, we can perform a single step quantitative goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and record an impairment charge for the amount that the carrying amount exceeds the fair value, up to the total amount of goodwill allocated to that reporting unit. For fiscal 2021 and 2020, we elected to perform the qualitative assessment for certain of our reporting units and indefinite-lived intangible assets. This qualitative assessment included the review of certain macroeconomic factors and entity-specific qualitative factors to determine if it was more-likely-than-not that the fair values of our reporting units were below carrying value. For our other reporting units and other indefinite-lived intangible assets, a quantitative assessment was performed. We engaged third-party valuation specialists and used industry accepted valuation models and criteria that were reviewed and approved by various levels of management.

For further discussion of the methods used and factors considered in our estimates as part of the impairment testing for Goodwill, Other Intangible Assets and Long-Lived Assets, see Item 8. Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies, Note 6 – Goodwill and Other Intangible Assets and Note 7 – Leases.

Table of Contents

Income Taxes

We calculate and provide for income taxes in each tax jurisdiction in which we operate. As the application of various tax laws relevant to our global business is often uncertain, significant judgment is required in determining our annual tax expense and in evaluating our tax positions. The provision for income taxes includes the amounts payable or refundable for the current year, the effect of deferred taxes and impacts from uncertain tax positions.

We recognize deferred tax assets and liabilities for future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax basis, net operating losses, tax credit and other carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates when the assets and liabilities are expected to be realized or settled. We regularly review deferred tax assets for realizability and establish valuation allowances based on available evidence including historical operating losses, projected future taxable income, expected timing of the reversals of existing temporary differences, and appropriate tax planning strategies. If our assessment of the realizability of a deferred tax asset changes, an increase to a valuation allowance will result in a reduction of net earnings at that time, while the reduction of a valuation allowance will result in an increase of net earnings at that time.

We provide tax reserves for applicable U.S. federal, state, local and foreign tax exposures relating to periods subject to audit. The development of reserves for these exposures requires judgments about tax issues, potential outcomes and timing, and is a subjective critical estimate. We assess our tax positions and record tax benefits for all years subject to examination based upon management’s evaluation of the facts, circumstances, and information available at the reporting dates. For those tax positions where it is more-likely-than-not that a tax benefit will be sustained, we have recorded the largest amount of tax benefit with a greater than 50% likelihood of being realized upon settlement with a tax authority that has full knowledge of all relevant information. For those tax positions where it is more-likely-than-not that a tax benefit will not be sustained, no tax benefit has been recognized in the consolidated financial statements. We classify applicable interest and penalties as a component of the provision for income taxes. Although the outcome relating to these exposures is uncertain, in our opinion adequate provisions for income taxes have been made for estimable potential liabilities emanating from these exposures. If actual outcomes differ materially from these estimates, they could have a material impact on our consolidated net earnings.

For further discussion of Income Taxes, see Item 8. Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies and Note 9 – Income Taxes.

Business Combinations

We use the acquisition method of accounting for acquired businesses. Under the acquisition method, our consolidated financial statements reflect the operations of an acquired business starting from the closing date of the acquisition. We allocate the purchase price to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values on the acquisition date. Any residual purchase price is recorded as goodwill. The determination of fair value, as well as the expected useful lives of certain assets acquired, requires management to make judgements and may involve the use of significant estimates, including assumptions with respect to estimated future cash flows, discount rates and valuation multiples from comparable publicly traded companies, among other things. Management estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable.

Table of Contents

During fiscal 2021, we increased our investment in Deciem Beauty Group Inc. (“DECIEM”) on a fully diluted basis from approximately 29% to approximately 76%. On a fully diluted basis, the DECIEM employee stock options, approximated 4% of the total capital structure and represent a liability on our consolidated balance sheet as of the acquisition date. Accordingly, for purposes of determining the consideration transferred, we excluded the DECIEM stock options, which resulted in an increase in our post-acquisition undiluted equity interest from approximately 30% to approximately 78% and the post-acquisition undiluted equity interest of the remaining noncontrolling interest holders of approximately 22%. We originally acquired a minority interest in DECIEM in June 2017. The original minority interest was accounted for as a cost method investment and, in June 2020, we began to apply the equity method of accounting but we did not have to remeasure our investment in DECIEM since the passage of time does not constitute an observable price change. The acquisition of the increased equity interest in DECIEM was considered a step acquisition, whereby we remeasured the previously held equity method investment to its fair value, resulting in the recognition of a non-cash gain. The acquisition-date fair value of the previously held equity method investment was calculated by multiplying the gross-up of the total consideration for the acquired ownership interest of $2,988 million by the related effective previously held equity interest of approximately 30.5%.The acquisition-date fair value of the redeemable noncontrolling interest includes the acquisition-date fair value of the net Put (Call) Option of $234 million. The remaining acquisition-date fair value of the redeemable noncontrolling interest of $647 million was calculated by multiplying the gross-up of the total consideration for the acquired ownership interest of $2,988 million by the related noncontrolling interest of approximately 21.6%. As part of the acquisition of additional shares, DECIEM stock options were issued in replacement of and exchange for certain vested and unvested stock options previously issued by DECIEM. The total fair value of the DECIEM stock options of $294 million was recorded as part of the total consideration transferred, comprising of $191 million of Cash paid for vested options settled as of the acquisition date and $103 million reported as a stock options liability on the consolidated balance sheet as it is not an assumed liability of DECIEM and is expected to be settled in cash upon completion of the exercise of the Put (Call). The acquisition-date fair value of the DECIEM stock options liability was calculated by multiplying the acquisition-date fair value by the number of DECIEM stock options replaced the day after the acquisition date.The stock options replaced consist of vested and partially vested stock options.

We recorded a preliminary allocation of the total consideration transferred to the tangible and identifiable intangible assets acquired and liabilities assumed based on their fair value at the acquisition date. The total consideration transferred includes the cash paid at closing, the fair value of its previously held equity method investment, the fair value of the redeemable noncontrolling interest, including the fair value of the net Put (Call) Option, and the fair value of the DECIEM stock options liability. The excess of the total consideration transferred over the fair value of the net tangible and intangible assets acquired was recorded as goodwill.

For further discussion of Business Combinations, see Item 8. Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies, Note 5 – Acquisition of Businesses and Note 18 – Stock Programs.

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:

(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;

Table of Contents

(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 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 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;

(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 this 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.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The information required by this item is set forth in Item 7 of this Annual Report on Form 10-K under the caption Liquidity and Capital Resources – Market Risk and is incorporated herein by reference.

Table of Contents

Item 8. Financial Statements and Supplementary Data.

The information required by this item appears beginning on page F-1 of this Annual Report on Form 10-K and is incorporated herein by reference.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure. The Chief Executive Officer and the Chief Financial Officer, with assistance from other members of management, have evaluated the effectiveness of our disclosure controls and procedures, including impacts of COVID-19, and, based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of June 30, 2021.

As part of our review of internal control over financial reporting, we make changes to systems and processes to improve such controls and increase efficiencies, while ensuring that we maintain an effective internal control environment. There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the fourth quarter of fiscal 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Management’s report on internal control over financial reporting and the report of independent registered public accounting firm on our internal control over financial reporting are incorporated herein from pages F-2 and F-3, respectively.

Item 9B. Other Information.

None.

Table of Contents

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this Item, not already provided herein under Item 1. Business – Information about our Executive Officers, will be included in our Proxy Statement for the 2021 Annual Meeting of Stockholders (the “2021 Proxy Statement”). The 2021 Proxy Statement will be filed within 120 days after the close of the fiscal year ended June 30, 2021 and such information is incorporated herein by reference.

Item 11. Executive Compensation.

The information required by this Item will be included in the 2021 Proxy Statement. The 2021 Proxy Statement will be filed within 120 days after the close of the fiscal year ended June 30, 2021 and such information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this Item, not already provided under Equity Compensation Plan Information as set forth below, will be included in the 2021 Proxy Statement. The 2021 Proxy Statement will be filed within 120 days after the close of the fiscal year ended June 30, 2021 and such information is incorporated herein by reference.

Equity Compensation Plan Information

The following table summarizes the equity compensation plans under which our securities may be issued as of June 30, 2021 and does not include grants made or cancelled and options exercised after such date. The securities that may be issued consist solely of shares of our Class A Common Stock and all plans were approved by stockholders of the Company.

Equity Compensation Plan Information as of June 30, 2021

(1)Includes the Amended and Restated Fiscal 2002 Share Incentive Plan (the “2002 Plan”) and the Amended and Restated Non-Employee Director Share Incentive Plan (the “Director Plan”).

(2)Consists of 7,615,191 shares issuable upon exercise of outstanding options, 1,857,165 shares issuable upon conversion of outstanding Restricted Stock Units, 1,536,083 shares issuable upon conversion of outstanding Performance Share Units (“PSUs”) (assuming maximum payout for unvested PSUs and PSUs vested as of June 30, 2021 pending approval by the Stock Plan Subcommittee of our Board of Directors), 141,555 shares issuable upon conversion of Share Units and 609,011 shares issuable upon conversion of Long-term PSUs, including Price-vested units (“PVUs”).

(3)Calculated based upon outstanding options in respect of 7,615,191 shares of our Class A Common Stock.

(4)The 2002 Plan authorizes the grant of shares and benefits other than stock options. As of June 30, 2021, there were 12,717,742 shares of Class A Common Stock available for issuance under the 2002 Plan (subject to the approval by the Stock Plan Subcommittee of expected payouts for PSUs vested as of June 30, 2021). Shares underlying grants cancelled or forfeited under prior plans or agreements may be used for grants under the 2002 Plan. The Director Plan currently provides for an annual grant of options and stock units to non-employee directors. As of June 30, 2021, there were 464,327 shares available for issuance under the Director Plan.

If all of the outstanding options, warrants, rights, stock units and share units, as well as the securities available for future issuance, included in the first and third columns in the table above were converted to shares of Class A Common Stock as of June 30, 2021, the total shares of Common Stock outstanding (i.e. Class A plus Class B) would increase 7% to 386,700,472. All outstanding options to purchase shares of Class A Common Stock, have an exercise price less than $318.08, the closing price on June 30, 2021. Assuming the exercise of only in-the-money options, the total shares outstanding would increase by 2% to 369,374,589.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Table of Contents

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a)1 and 2. Financial Statements and Schedules - See index on Page F-1.

3. Exhibits:

ExhibitNumber Description

Table of Contents

ExhibitNumber Description

Table of Contents

ExhibitNumber Description

Table of Contents

ExhibitNumber Description

Table of Contents

ExhibitNumber Description

Table of Contents

ExhibitNumber Description

Table of Contents

ExhibitNumber Description

21.1 List of significant subsidiaries.

23.1 Consent of PricewaterhouseCoopers LLP.

23.2 Consent of KPMG LLP.

24.1 Power of Attorney.

____________________

* Incorporated herein by reference.

† Exhibit is a management contract or compensatory plan or arrangement.

Item 16. Form 10-K Summary.

None.

Table of Contents

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

THE ESTÉE LAUDER COMPANIES INC.

By /s/ TRACEY T. TRAVIS

Tracey T. TravisExecutive Vice Presidentand Chief Financial Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated.

Signature Title (s) Date

Fabrizio Freda

WILLIAM P. LAUDER* Executive Chairmanand a Director August 27, 2021

William P. Lauder

LEONARD A. LAUDER* Director August 27, 2021

Leonard A. Lauder

CHARLENE BARSHEFSKY* Director August 27, 2021

Charlene Barshefsky

ROSE MARIE BRAVO* Director August 27, 2021

Rose Marie Bravo

WEI SUN CHRISTIANSON* Director August 27, 2021

Wei Sun Christianson

PAUL J. FRIBOURG* Director August 27, 2021

Paul J. Fribourg

IRVINE O. HOCKADAY, JR.* Director August 27, 2021

Irvine O. Hockaday, Jr.

JENNIFER HYMAN* Director August 27, 2021

Jennifer Hyman

JANE LAUDER* Director August 27, 2021

Jane Lauder

RONALD S. LAUDER* Director August 27, 2021

Ronald S. Lauder

RICHARD D. PARSONS* Director August 27, 2021

Richard D. Parsons

LYNN FORESTER DE ROTHSCHILD* Director August 27, 2021

Lynn Forester de Rothschild

BARRY S. STERNLICHT* Director August 27, 2021

Barry S. Sternlicht

JENNIFER TEJADA* Director August 27, 2021

Jennifer Tejada

RICHARD F. ZANNINO* Director August 27, 2021

Richard F. Zannino

Tracey T. Travis

___________________________________________

* By signing her name hereto, Tracey T. Travis signs this document in the capacities indicated above and on behalf of the persons indicated above pursuant to powers of attorney duly executed by such persons and filed herewith.

By /s/ TRACEY T. TRAVIS

Tracey T. Travis(Attorney-in-Fact)

Table of Contents

THE ESTÉE LAUDER COMPANIES INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Financial Statements:

Management’s Report on Internal Control Over Financial Reporting F- 2

EL US Equity

EL · 10-K · period ended 2021-06-30

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary.

EL US Equity☆

EL · 10-K · period ended 2021-06-30

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

Item 8. Financial Statements and Supplementary Data.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary.

EL US Equity