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Item 1A. Risk Factors.

There are risks associated with an investment in our securities. Please consider the following risks and all of the other information in this annual report on Form 10-K and in our subsequent filings with the Securities and Exchange Commission (“SEC”). Our business may also be adversely affected by risks and uncertainties not presently known to us or that we currently believe to be immaterial. If any of the events contemplated by the following discussion of risks should occur or other risks arise or develop, our business, which includes our prospects, financial condition and results of operations, the trading prices of our securities and our reputation, may be adversely affected.

Risks related to our Business and our Industry

The extent to which the COVID-19 pandemic could materially adversely affect our financial results will depend on future developments that are highly uncertain and difficult to predict.

The outbreak and global spread of the COVID-19 pandemic has continued to significantly disrupt our operating environment, including retail stores, travel retail, and the ability of some of our customers to operate. We have also seen shifts in consumer preferences and practices.

Considerable uncertainty remains regarding this pandemic, including responsive measures being taken by various authorities and others. As we continue to monitor COVID-19 developments, including the impacts on our consumers, customers and suppliers, we have taken and will continue to take further measures. Some of the actions we take could adversely impact our business, and there is no certainty that our actions will be sufficient to mitigate the risks and the impacts of COVID-19.

The degree to which COVID-19 continues to impact our business will depend on future developments that are highly uncertain and cannot be predicted, many of which are outside our control, including the extent to which there are sustainable improvements in the retail environment and general economic conditions.

The beauty business is highly competitive, and if we are unable to compete effectively our results will suffer.

We face vigorous competition from companies throughout the world, including multinational consumer product companies. Some competitors have greater resources than we do, others are newer companies (some backed by private-equity investors), and some are competing in distribution channels where we are less represented. In some cases, we may not be able to respond to changing business and economic conditions as quickly as our competitors. Competition in the beauty business is based on a variety of factors including pricing of products, innovation, perceived value, service to the consumer, promotional activities, advertising, special events, new product introductions, e-commerce and m-commerce initiatives and other activities. It is difficult for us to predict the timing and scale of our competitors’ actions in these areas.

Our ability to compete also depends on the continued strength of our brands, our ability to attract and retain key talent and other personnel, the efficiency of our manufacturing facilities and distribution network, and our ability to maintain and protect our intellectual property and those other rights used in our business. Our Company has a well-recognized and strong reputation that could be negatively impacted by social media and many other factors. If our reputation is adversely affected, our ability to attract and retain customers, consumers and employees could be impacted. In addition, certain of our key retailers around the world market and sell competing brands or are owned or otherwise affiliated with companies that market and sell competing brands. Our inability to continue to compete effectively in key countries around the world (e.g., China) could have a material adverse effect on our business.

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Our inability to anticipate and respond to market trends and changes in consumer preferences could adversely affect our financial results.

Our continued success depends on our ability to anticipate, gauge and react in a timely and cost-effective manner to changes in consumer preferences for skin care, makeup, fragrance and hair care products, attitudes toward our industry and brands, as well as to where and how consumers shop. We must continually work to develop, manufacture and market new products, maintain and adapt our “High-Touch” services to existing and emerging distribution channels, maintain and enhance the recognition of our brands, achieve a favorable mix of products, successfully manage our inventories, and modernize and refine our approach as to how and where we market and sell our products. We recognize that consumer preferences cannot be predicted with certainty and can change rapidly, driven by the use of digital and social media by consumers and the speed by which information and opinions are shared. If we are unable to anticipate and respond to sudden challenges that we may face in the marketplace, trends in the market for our products and changing consumer demands and sentiment, our financial results will suffer. In addition, from time to time, sales growth or profitability may be concentrated in a relatively small number of our brands, channels or countries (e.g., China). If such a situation persists or one or more brands, channels or countries fails to perform as expected, there could be a material adverse effect on our business.

In certain key markets, such as the United States, we have seen a longer-term decline in retail traffic in our department store customers and in our freestanding stores. We continue to see the shift in consumer preference to the online channel, which accelerated in response to the COVID-19 pandemic. Consolidation or liquidation in the retail trade, from these or other factors, may result in us becoming increasingly dependent on key retailers and could result in an increased risk related to the concentration of our customers. A severe, adverse impact on the business operations of our customers could have a corresponding material adverse effect on us. If one or more of our largest customers change their strategies (including pricing or promotional activities), enter bankruptcy (or similar proceedings) or if our relationship with any large customer is changed or terminated for any reason, there could be a material adverse effect on our business.

Our future success depends, in part, on our ability to achieve our long-term strategy.

Achieving our long-term strategy will require investment in new capabilities, brands, categories, distribution channels, supply chain facilities, technologies and emerging and more mature geographic markets (e.g., China). These investments may result in short-term costs without any current sales and, therefore, may be dilutive to our earnings. In addition, we may dispose of or discontinue select brands or streamline operations and incur costs or restructuring and other charges in doing so. Although we believe that our strategy will lead to long-term growth in sales and profitability, we may not realize the anticipated benefits. The failure to realize benefits, which may be due to our inability to execute plans, global or local economic conditions, competition, changes in the beauty industry and the other risks described herein, could have a material adverse effect on our business.

Acquisitions and divestitures may expose us to additional risks.

We continuously review acquisition and strategic investment opportunities that would expand our current product offerings, our distribution channels, increase the size and geographic scope of our operations or otherwise offer growth and operating efficiency opportunities. In addition, we periodically review our brand portfolio, and our strategy includes potential divestitures of certain brands as we rationalize product offerings. There can be no assurance that we will be able to identify these strategic actions and consummate such transactions on favorable terms.

Acquisitions including strategic investments or alliances entail numerous risks, which may include: (i) difficulties in integrating acquired operations or products, including the loss of key employees from, or customers, consumers or suppliers of, acquired businesses; (ii) diversion of management’s attention from our existing businesses; (iii) adverse effects on existing business relationships with suppliers, customers and consumers of ours or the companies in which we invest; (iv) adverse impacts of margin and product cost structures different from those of our current mix of business; (v) reputational risks associated with the activities of the businesses that we acquire or in which we invest; and (vi) risks of entering distribution channels, categories or markets in which we have limited or no prior experience.

If required, the financing for these transactions could result in an increase in our indebtedness, dilute the interests of our stockholders or both. The purchase price for some acquisitions may include additional amounts to be paid in cash in the future, a portion of which may be contingent on the achievement of certain future operating results of the acquired business. If the performance of any such acquired business exceeds such operating results, then we may incur additional charges and be required to pay additional amounts.

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Completed acquisitions typically result in additional goodwill and/or an increase in other intangible assets on our balance sheet. We are required at least annually, or as facts and circumstances exist, to test goodwill and other intangible assets with indefinite lives to determine if impairment has occurred. We cannot accurately predict the amount and timing of any impairment of assets. Should the value of goodwill or other intangible assets become impaired, there could be a material adverse effect on our business.

Our failure to achieve the long-term plan for acquired businesses, as well as any other adverse consequences associated with our acquisition, divestiture and investment activities, could have a material adverse effect on our business.

Our business could be negatively impacted by social impact and sustainability matters.

There is an increased focus from certain investors, customers, consumers, regulators, employees, and other stakeholders concerning social impact and sustainability and other ESG matters. From time to time, we announce certain initiatives, including goals and commitments, regarding our focus areas, which include environmental matters, packaging, responsible sourcing, social investments and inclusion and diversity. We could fail, or be perceived to fail, in our achievement of such initiatives, or in accurately reporting our progress on such initiatives. Such failures could be due to changes in our business (e.g., shifts in business among distribution channels or acquisitions). Moreover, the standards by which ESG efforts and related matters are measured are developing and evolving, and certain areas are subject to assumptions that could change over time. In addition, we could be criticized for the scope of our initiatives or goals or perceived as not acting responsibly in connection with these matters. Any such matters, or related ESG matters, could have a material adverse effect on our business.

A general economic downturn, or sudden disruption in business conditions may affect consumer purchases of discretionary items and/or the financial strength of our customers that are retailers, which could adversely affect our financial results.

The general level of consumer spending is affected by a number of factors, including general economic conditions, inflation, interest rates, energy costs, and consumer confidence generally, all of which are beyond our control. Consumer purchases of discretionary items tend to decline during recessionary periods, when disposable income is lower, and may impact sales of our products. A decline in consumer purchases of discretionary items also tends to impact our customers that are retailers. We generally extend credit to a retailer based on an evaluation of its financial condition, usually without requiring collateral. However, the financial difficulties of a retailer could cause us to curtail or eliminate business with that customer. We may also assume more credit risk relating to the receivables from that retailer. In the event of a retailer liquidation, we may incur additional costs if we choose to purchase the retailer’s inventory of our products to protect brand equity. Our inability to collect receivables from our largest customers or from a group of customers could have a material adverse effect on our business.

In addition, sudden disruptions in local or global business conditions, for example, from events such as a pandemic or other health issues, geo-political or local conflicts, civil unrest, terrorist attacks, adverse weather conditions, climate changes or seismic events, can have a short-term and, sometimes, long-term impact on consumer spending.

Events that impact consumers’ willingness or ability to travel or purchase our products while traveling may impact our business, including travel retail, a significant contributor to our overall results, and our strategy to market and sell products to international travelers at their destinations.

A downturn in the economies of, or continuing recessions in, the countries where we sell our products or a sudden disruption of business conditions in those countries could adversely affect consumer confidence, the financial strength of our retailers and our sales and profitability. We are also cautious of foreign currency movements, including their impact on tourism. Additionally, we continue to monitor the effects of the global macroeconomic environment; social, political and human rights issues; regulatory matters, including the imposition of tariffs or sanctions; geopolitical tensions; and global security issues.

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Volatility in the financial markets and a related economic downturn in key markets or markets generally throughout the world could have a material adverse effect on our business. While we typically generate significant cash flows from our ongoing operations and have access to global credit markets through our various financing activities, credit markets may experience significant disruptions. Deterioration in global financial markets or an adverse change in our credit ratings could make future financing difficult or more expensive. If any financial institutions that are parties to our revolving credit facility or other financing arrangements, such as foreign exchange or interest rate hedging instruments, were to declare bankruptcy or become insolvent, they may be unable to perform under their agreements with us. This could leave us with reduced borrowing capacity or unhedged against certain foreign currency or interest rate exposures which could have a material adverse effect on our business.

Our success depends, in part, on the quality, efficacy and safety of our products.

Our success depends, in part, on the quality, efficacy and safety of our products. If our products are found to be defective or unsafe, our product claims are found to be deceptive, or our products otherwise fail to meet our consumers’ expectations, our relationships with customers or consumers could suffer, the appeal of our brands could be diminished, and we could lose sales and become subject to liability or claims, any of which could result in a material adverse effect on our business. In addition, counterfeit versions of some of our products may be sold by third parties, which may pose safety risks, may fail to meet consumers’ expectations, and may have a negative impact on our business.

Our success depends, in part, on our key personnel.

Our success depends, in part, on our ability to retain our key personnel, including our executive officers and senior management team. The unexpected loss of, or misconduct by, one or more of our key employees could adversely affect our business. Our success also depends, in part, on our continuing ability to identify, hire, train and retain personnel across all levels of our business. Competition for employees can be intense. We may not be able to attract, assimilate or retain necessary personnel in the future, and our failure to do so could have a material adverse effect on our business. This risk may be exacerbated by the stresses associated with the implementation of our strategic plan and other initiatives, as well as by market conditions.

We are subject to risks related to the global scope of our operations.

We operate on a global basis, with a substantial majority of our fiscal 2022 net sales and operating income generated outside the United States. We maintain offices in over 50 countries and have key operational facilities located inside and outside the United States that manufacture, warehouse or distribute goods for sale throughout the world. Our global operations are subject to many risks and uncertainties, including: (i) fluctuations in foreign currency exchange rates and the relative costs of operating in different places, which can affect our results of operations, the value of our foreign assets, the relative prices at which we and competitors sell products in the same markets, the cost of certain inventory and non-inventory items required in our operations, and the relative prices at which we sell our products in different markets; (ii) foreign or U.S. laws, regulations and policies, including restrictions on trade, immigration and travel, operations, and investments; currency exchange controls; restrictions on imports and exports, including license requirements; tariffs; sanctions; and taxes; (iii) lack of well-established or reliable legal and administrative systems in certain countries in which we operate; (iv) adverse weather conditions and natural disasters; (v) concentration of sales growth or profitability in one or more countries (e.g., China); and (vi) social, economic and geopolitical conditions, such as a pandemic, terrorist attack, war or other military action. These risks could have a material adverse effect on our business.

A disruption in our operations or supply chain could adversely affect our business.

As a company engaged in manufacturing and distribution on a global scale, we are subject to the risks inherent in such activities, including industrial accidents, environmental events, strikes and other labor disputes, capacity constraints, disruptions in ingredient, material or packaging supply, as well as global shortages, disruptions in supply chain or information technology, loss or impairment of key manufacturing or distribution sites or suppliers, product quality control, safety, increase in commodity prices and energy costs, licensing requirements and other regulatory issues, as well as natural disasters and other external factors over which we have no control. If such an event were to occur, it could have a material adverse effect on our business.

We use a wide variety of direct and indirect suppliers of goods and services from around the world. Some of our products rely on a single or a limited number of suppliers. Changes in the financial or business condition of our suppliers could subject us to losses or adversely affect our ability to bring products to market. Further, the failure of our suppliers to deliver goods and services in sufficient quantities, in compliance with applicable standards, and in a timely manner could adversely affect our customer service levels and overall business. In addition, any increases in the costs of goods and services for our business may adversely affect our profit margins if we are unable to pass along any higher costs in the form of price increases or otherwise achieve cost efficiencies in our operations.

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As we outsource functions, we become more dependent on the entities performing those functions.

As part of our long-term strategy, we are continually looking for opportunities to provide essential business services in a more cost-effective manner. In some cases, this requires the outsourcing of functions or parts of functions that can be performed more effectively by external service providers. These include certain information technology, supply chain, finance and human resource functions. The failure of one or more such providers to deliver the expected services, provide them on a timely basis or to provide them at the prices we expect may have a material adverse effect on our business. In addition, when we transition external service providers, we may experience challenges that could have a material adverse effect on our business.

Risks related to Legal and Regulatory Matters

Changes in laws, regulations and policies that affect our business could adversely affect our financial results.

Our business is subject to numerous laws, regulations and policies around the world. Changes in these laws, regulations and policies, including the interpretation or enforcement thereof, that affect our business could adversely affect our financial results. These changes include accounting standards, as well as laws and regulations relating to tax matters, trade (including sanctions), data privacy (e.g., General Data Protection Regulation (GDPR)), cybersecurity, anti-corruption, advertising, marketing, manufacturing, distribution, customs matters, product registration, ingredients, chemicals, packaging, selective distribution, and environmental or climate change matters.

Disputes and other legal or regulatory proceedings could adversely affect our financial results.

We are, and may in the future become, party to litigation, other disputes or regulatory proceedings across a wide range of matters, including ones relating to product liability matters (including asbestos-related claims), advertising, regulatory, employment, intellectual property, real estate, environmental, trade relations, tax and privacy. In general, claims made by us or against us in litigation, disputes or other proceedings can be expensive and time consuming and could result in settlements, injunctions or damages that could significantly affect our business. It is not possible to predict the final resolution of the litigation, disputes or proceedings to which we currently are or may in the future become party to, and the impact of certain of these matters could have a material adverse effect on our business.

Government reviews, inquiries, investigations and actions could harm our business.

As we operate in various locations around the world, our operations are subject to governmental scrutiny and may be adversely impacted by the results of such scrutiny. The regulatory environment with regard to our business is evolving, and officials often exercise broad discretion in deciding how to interpret and apply applicable regulations. From time to time, we may receive formal and informal inquiries from various government regulatory authorities, as well as self-regulatory organizations, about our business and compliance with local laws, regulations or standards. Any determination that our operations or activities, or the activities of our employees, are not in compliance with existing laws, regulations or standards could negatively impact us in a number of ways, including the imposition of substantial fines, interruptions of business, loss of supplier, vendor or other third-party relationships, termination of necessary licenses and permits, or similar results, all of which could potentially harm our business. Regardless of the outcomes, these reviews, inquiries, investigations and actions could create negative publicity which could harm our business.

Risks related to Technology and Cybersecurity Matters

Our information technology and websites may be susceptible to cybersecurity breaches, outages and other risks.

We rely on information technology that supports our business processes, including product development, marketing, sales, order processing, production, distribution, finance and intracompany communications throughout the world. We have e-commerce, m-commerce and other Internet websites in the United States and many other countries. These systems may be susceptible to outages due to fire, floods, power loss, telecommunications failures, break-ins and other events. Our systems and data may be vulnerable to constantly evolving cybersecurity threats such as malware, break-ins and similar disruptions from unauthorized tampering. The occurrence of these or other events could disrupt or damage our information technology, including operational technology, and adversely affect our business. Insurance policies that may provide coverage with regard to such events may not cover any or all of the resulting financial losses.

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Failure to adequately maintain the security of our electronic and other confidential information could materially adversely affect our business.

We are dependent upon automated information technology processes. As part of our normal business activities, we collect and store certain information that is confidential, proprietary or otherwise sensitive, including personal information with respect to customers, consumers and employees. We share some of this information with certain vendors who assist us with business matters. Moreover, the success of our e-commerce and m-commerce operations depends upon the secure transmission of confidential and personal data over public networks, including the use of cashless payments. Any failure on the part of us or our vendors to maintain the security of our confidential data and personal information, including via the penetration of our network security and the misappropriation of confidential and personal information, could result in business disruption, damage to our reputation, financial obligations to third parties, fines, penalties, regulatory proceedings and private litigation with potentially large costs, and also result in deterioration in our employees’, consumers’ and customers’ confidence in us and other competitive disadvantages, and thus could have a material adverse effect on our business. In addition, a security or data privacy breach could require that we expend significant additional resources to enhance our information security systems and could result in a disruption to our operations. Furthermore, third parties, including our suppliers and customers, also rely on information technology and may be subject to cybersecurity breaches that could impact their businesses and could in turn disrupt our supply chain and/or our business.

We are subject to risks associated with our global information technology.

Our implementation, maintenance and utilization of global information technology, including operational technology, supply chain and finance systems, human resource management systems, creative asset management and retail operating systems, as well as associated hardware and use of cloud-based models, involve risks and uncertainties. Failure to implement, maintain or utilize these and other systems as planned, in terms of timing, specifications, security policies, costs, or otherwise, could have a material adverse effect on our business.

Risks related to our Securities and our Ownership Structure

The trading prices of our securities periodically may rise or fall based on the accuracy of predictions of our financial performance.

Our business planning process is designed to maximize our long-term strength, growth and profitability, not to achieve an earnings target in any particular fiscal quarter. We believe that this longer-term focus is in the best interests of the Company and our stockholders. At the same time, however, we recognize that it may be helpful to provide investors with guidance as to our expectations regarding certain aspects of our business. This could include forecasts of net sales, earnings per share and other financial metrics or projections. We assume no responsibility to provide or update guidance, and any longer-term guidance we may provide is based on goals that we believe, at the time guidance is given, are reasonably attainable for growth and performance over a number of years. We historically have paid dividends on our common stock and repurchased shares of our Class A Common Stock; however, at times we have suspended the declaration of dividends and/or the repurchase of our Class A Common Stock. Going forward, at any time, we could stop or suspend payment of dividends or stop or suspend our stock repurchase program, and any such action could cause the market price of our stock to decline.

In all of our public statements when we make, or update, a forward-looking statement about our business, whether it be about net sales or earnings expectations or expectations regarding restructuring or other initiatives, or otherwise, we accompany such statements directly, or by reference to a public document, with a list of factors that could cause our actual results to differ materially from those we expect. Such a list is included, among other places, in our earnings press release and in our periodic filings with the SEC (e.g., in our reports on Form 10-K and Form 10-Q). These and other factors may make it difficult for us and for outside observers, such as research analysts, to predict what our earnings or other financial metrics, or business outcomes, will be in any given fiscal quarter or year.

Outside analysts and investors have the right to make their own predictions of our business for any future period. Outside analysts, however, have access to no more material information about our results or plans than any other public investor, and we do not endorse their predictions as to our future performance. Nor do we assume any responsibility to correct the predictions of outside analysts or others when they differ from our own internal expectations. If our actual results differ from those that outside analysts or others have been predicting, the market price of our securities could be affected. Investors who rely on the predictions of outside analysts or others when making investment decisions with respect to our securities do so at their own risk. We take no responsibility for any losses suffered as a result of such changes in the prices of our securities.

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We are controlled by the Lauder family. As a result, the Lauder family has the ability to prevent or cause a change in control or approve, prevent or influence certain actions by us.

As of August 17, 2022, members of the Lauder family beneficially own, directly or indirectly, shares of the Company’s Class A Common Stock (with one vote per share) and Class B Common Stock (with 10 votes per share) having approximately 84% of the outstanding voting power of the Common Stock. In addition, there are four members of the Lauder family who are Company employees and members of our Board of Directors.

As a result of their stock ownership and positions at the Company, as well as our dual-class structure, the Lauder family has the ability to exercise significant control and influence over our business, including all matters requiring stockholder approval (e.g., the election of directors, amendments to the certificate of incorporation, and significant corporate transactions, such as a merger or other sale of our Company or its assets) for the foreseeable future. In addition, if significant stock indices decide to prohibit the inclusion of companies with dual-class stock structures, the price of our Class A Common Stock could be negatively impacted and could become more volatile.

We are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a result, are relying on exemptions from certain corporate governance requirements that are designed to provide protection to stockholders of companies that are not “controlled companies.”

The Lauder family and their related entities own more than 50% of the total voting power of our common shares and, as a result, we are a “controlled company” under the New York Stock Exchange corporate governance standards. As a controlled company, we are exempt under the New York Stock Exchange standards from the obligation to comply with certain New York Stock Exchange corporate governance requirements, including the requirements that (1) a majority of our board of directors consists of independent directors; (2) we have a nominating committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and (3) we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities.

While we have voluntarily caused our Board to have a majority of independent directors and the written charters of our Nominating and ESG Committee and the Compensation Committee to have the required provisions, we are not requiring our Nominating and ESG Committee and Compensation Committee to be comprised solely of independent directors. As a result of our use of the “controlled company” exemptions, investors will not have the same protection afforded to stockholders of companies that are subject to all of the New York Stock Exchange corporate governance requirements.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

The following table sets forth our principal owned and leased manufacturing, assembly, research and development (“R&D”) and distribution facilities, some of which include contiguous office space, as well as our principal executive offices, as of August 17, 2022. The leases expire at various times through 2079 subject to certain renewal options.

The Americas Europe, the MiddleEast & Africa Asia/Pacific

Owned Leased Owned Leased Owned Leased

Manufacturing 2 2 2 — — —

Distribution — 6 1 9 — 2

Manufacturing and R&D 1 — 1 — — —

Manufacturing and Assembly — 3 — — — —

Distribution and Manufacturing — — 1 — — —

Principal Executive Offices — 1 — — — —

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Certain of our manufacturing facilities are utilized primarily for the production of products relating to particular product categories: three for makeup; two for skin care; two for skin care and fragrance; and one for skin care and hair care. As demand changes, certain of our manufacturing facilities can produce products from categories other than their primary category. In fiscal 2022, four of our primarily makeup facilities also produced a significant volume of skin care products. In fiscal 2021, we began construction of a new manufacturing facility near Tokyo that we will own. Construction of the first phase was completed in fiscal 2022 and we expect the remainder of the site to be completed and operational in early fiscal 2024.

In fiscal 2021, we began construction at a newly leased site that will become our innovation center in Shanghai. Construction is nearly completed and the facility is now expected to be operational in early fiscal 2023.

We consider our properties to be generally in good condition and believe that our facilities are adequate for our operations and provide sufficient capacity to meet anticipated requirements.

Item 3. Legal Proceedings.

For a discussion of legal proceedings, see Item 8. Financial Statements and Supplementary Data – Note 16 – Commitments and Contingencies.

Item 4. Mine Safety Disclosures.

Not applicable.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market for Registrant’s Common Equity and Related Stockholder Matters

Our Class A Common Stock is publicly traded on the New York Stock Exchange under the symbol “EL.”

On August 17, 2022, a dividend was declared in the amount of $.60 per share on our Class A and Class B Common Stock. The dividend is payable in cash on September 15, 2022 to stockholders of record at the close of business on August 31, 2022. We expect to continue the payment of cash dividends in the future, but there can be no assurance that the Board of Directors will continue to declare them.

As of August 17, 2022, there were 2,201 record holders of Class A Common Stock and 13 record holders of Class B Common Stock.

Share Repurchase Program

We are authorized by the Board of Directors to repurchase shares of our Class A Common Stock in the open market or in privately negotiated transactions, depending on market conditions and other factors. The following table provides information relating to our repurchase of Class A Common Stock during the referenced periods:

(1)Includes shares that were repurchased by the Company to satisfy tax withholding obligations upon the payout of certain stock-based compensation arrangements.

(2)The Board of Directors has authorized the current repurchase program for up to 80.0 million shares. The total amount was last increased by the Board on October 31, 2018. Our repurchase program does not have an expiration date.

Subsequent to June 30, 2022 and as of August 17, 2022, we purchased approximately 0.2 million additional shares of our Class A Common Stock for $63 million pursuant to our share repurchase program.

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Performance Graph

The following graph compares the cumulative five-year total stockholder return (stock price appreciation plus dividends) on the Company’s Class A Common Stock with the cumulative total return of the S&P 500 Index and the S&P Consumer Staples Index. The returns are calculated by assuming an investment of $100 in the Class A Common Stock and in each index on June 30, 2017.

Item 6. [Reserved]

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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 2022, 2021 and 2020 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 (4) (14) —

By Region(1):

Returns associated with restructuring and other activities (4) (14) —

OPERATING INCOME (LOSS)

By Product Category:

Other — (2) 4

Charges associated with restructuring and other activities (144) (228) (83)

By Region(1):

Charges associated with restructuring and other activities (144) (228) (83)

(1)The net sales from the Company’s travel retail business are included in the Europe, the Middle East & Africa region, with the exception of net sales of Dr.Jart+ in the travel retail channel that are reflected in Korea in the Asia/Pacific region. Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.

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

Year Ended June 30

Operating expenses:

Selling, general and administrative 55.7 57.8 60.4

Restructuring and other charges 0.8 1.3 0.5

Goodwill impairment — 0.3 5.7

Impairment of other intangible and long-lived assets 1.4 0.8 4.3

Interest income and investment income, net 0.2 0.3 0.3

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

Other income, net — 5.2 3.9

Earnings before income taxes 17.1 20.5 7.3

Provision for income taxes (3.5) (2.8) (2.4)

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

Net loss (earnings) attributable to redeemable noncontrolling interest (0.1) — —

Net earnings attributable to The Estée Lauder Companies Inc. 13.5 % 17.7 % 4.8 %

Not adjusted for differences caused by rounding

Period-over-period changes in our net sales are generally attributable to the impacts from (i) pricing on our base portfolio, including changes in strategic pricing actions and mix, (ii) volume, including changes driven by the impact of new product innovation, (iii) acquisitions and/or divestitures, and/or (iv) foreign currency translation.

The net sales impact from pricing consists of changes in list prices, due to strategic pricing initiatives, and mix shifts within and among product categories, geographic regions and distribution channels. The prices at which we sell our products vary by brand, distribution channel (e.g., wholesale or direct-to-consumer) and may also vary by country. Our brands and products cover a broad array of pricing tiers. Prices of skin care and fragrance products are typically higher than makeup and hair care products.

New product innovation includes the introduction of new products, as well as the innovation of existing products, including reformulations, regional expansion, repackaging and sets. A product is considered "new innovation" for the twelve-month period following the initial shipment date. Our innovation is launched at different price points than existing products and value derived from innovation may vary from year to year. 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 often has some cannibalizing effect on sales of existing products, which we take into account in our business planning. The impact of new product introductions, including timing compared to introductions in prior periods, also affects our results.

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Non-GAAP Financial Measures

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. Beginning in fiscal 2022, we calculate constant currency information by translating current-period results using monthly average foreign currency exchange rates and adjusting for the period-over-period impact of foreign currency cash flow hedging activities. Prior to fiscal 2022, constant currency information was calculated using the prior-year period weighted-average exchange rates. This change is not material to prior-period constant currency information presented herein.

Overview

COVID-19 Business Update

The COVID-19 pandemic continued to disrupt our operating environment globally, primarily impacting supply chain, inventory levels and other logistics during the year ended June 30, 2022. The resurgence of COVID-19 cases in many Chinese provinces led to restrictions late in the fiscal 2022 third quarter that remained in place through the end of fiscal 2022 to prevent further spread of the virus. Consequently, retail traffic, travel, and distribution capabilities were temporarily curtailed. Our distribution facilities in Shanghai operated with limited capacity to fulfill brick-and-mortar and online orders beginning in mid-March 2022 and returned to normal capacity by early June 2022.

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 2022, 2021 and 2020, we qualified for and recorded $12 million, $84 million and $99 million, respectively, in government assistance, which reduced Selling, general and administrative expenses by $9 million, $78 million and $87 million, respectively, and Cost of sales by $3 million, $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 will continue to monitor the impacts of COVID-19 and adjust our action plans accordingly as the situation progresses.

Business Update

We are a leader in prestige beauty, which combines the repeat purchase and relative affordability of consumer goods with high quality products and services. Within prestige beauty, we are well diversified by product category, geography, brand, product sub-category, channel, consumer segment and price point. This diversification allows us to leverage consumer analytics and insights with agility by deploying our brands to fast growing and profitable opportunities. These analytics and insights, combined with our creativity, inform our innovation to provide a broad, locally-relevant and inclusive range of prestige products allowing us to compete effectively for a greater share of a consumer's beauty routine.

•In fiscal 2022, our global prestige fragrance net sales increased 30%, leading category growth. Consumers gravitated to luxury and artisanal offerings from Jo Malone London, Tom Ford Beauty, Le Labo and Kilian Paris. Colognes led growth at Jo Malone London, while bath & body and home subcategories continued to thrive. Tom Ford Beauty saw strong fragrance growth across regions owing to the popularity of Oud Wood and the launch of Ombre Leather Parfum. Outstanding growth from Le Labo and Kilian Paris reflected compelling activations and expanded consumer reach.

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•We began to see demand for makeup products increase as COVID restrictions lifted and consumers returned to social and professional settings. In fiscal 2022, net sales in makeup grew double-digits driven by strong activations, expanded consumer reach and the launch of MACStack mascara, increases in Estée Lauder DoubleWear and Futurist foundation products, as well as a strong performance in foundation and lip from Clinique.

•Our skin care net sales growth reflected incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter, as well as continued strength in La Mer hero products and the launches of the Hydrating Infused Emulsion and the upgrade to The Treatment Lotion. The category has been pressured by COVID restrictions, primarily in Asian markets, at various points throughout fiscal 2022.

•Our hair care net sales also grew double digits, reflecting brick-and-mortar channel recovery and new product launches from both Aveda and Bumble and bumble.

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.

•The increase in net sales during fiscal 2022 was led by The Americas, primarily reflecting the recovery of brick-and-mortar stores, targeted expanded consumer reach and incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter.

•Net sales rose in Europe, the Middle East & Africa, led by recovery in western markets and emerging markets as brick-and-mortar retail reopened across the region. Europe, the Middle East & Africa also benefited from ongoing increases in our travel retail business, partly relating to the increase in traffic as a result of the easing of travel restrictions in The Americas and Europe, the Middle East & Africa.

•Net sales decreased slightly in Asia/Pacific, reflecting the resurgence of COVID-19 cases in many Chinese provinces which led to restrictions to further prevent the spread of the virus during the second half of fiscal 2022. Online continued to thrive, primarily due to the current-year launch on a new third-party online platform, while brick-and-mortar retail remains challenged.

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

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

For the year ended June 30, 2022, the results of operations related to Russia and Ukraine were not material to our consolidated financial statements.

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.

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•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 are seeing some recovery in The Americas and Europe, the Middle East & Africa and we continue to believe that global travel retail is a long-term growth opportunity. 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 retail. 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 on a global basis, rising double digits for fiscal 2022. 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-commerce sites, and sell through select third-party online malls. We believe our success in delivering 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 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 2022, 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 and supply chain disruptions. We are mindful that these trends may continue to impact the pace of recovery. The continued curtailment in international travel is also affecting our travel retail business, particularly in Asia, 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, as well as long-lived assets (i.e. potentially resulting in impairments).

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

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

In fiscal 2022, net sales from Donna Karan New York, DKNY, Michael Kors, Tommy Hilfiger and Ermenegildo Zegna accounted for approximately 1% of consolidated net sales and 10% of fragrance net sales. As noted above, we previously announced that we would not be renewing our license agreements for these product lines when their respective terms expire in June 2023. We have since negotiated early termination agreements with each of the licensors effective June 30, 2022 and continued to sell products under these licenses until such time. We are working with the licensors and their respective new licensee, where applicable, to transition the business to the new licensees.

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

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

Post-COVID Business Acceleration Program

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 2,000 to 2,500 positions globally, including temporary and part-time employees. We have revised these estimates based on the review of the PCBA Program. As of June 30, 2022, we estimate a net reduction over the duration of the PCBA Program in the range of 2,500 to 3,000 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 approved specific initiatives under the PCBA Program through fiscal 2022 and expect to substantially complete those initiatives through fiscal 2023. We previously estimated that the PCBA Program would result in related restructuring and other charges totaling between $400 million and $500 million, before taxes. After concluding the final approvals and reviewing the progress of previously approved initiatives under the PCBA Program that are being implemented, we have revised our estimates for cost approvals under the PCBA Program. Inclusive of approvals from inception through June 28, 2022, we now estimate that the PCBA Program may result in related restructuring and other charges totaling between $500 million and $515 million, before taxes.

We previously expected, once fully implemented, the PCBA Program to yield annual benefits, primarily in Selling, general and administrative expenses, of between $300 million and $400 million, before taxes. As of June 30, 2022, we now expect, once fully implemented, the PCBA Program to yield annual benefits, primarily in Selling, general and administrative expenses, of between $390 million and $410 million, before taxes. We expect to reinvest a portion of the savings 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.

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

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

We concluded that the changes in circumstances in the reporting units triggered the need for interim impairment reviews of their trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of Dr.Jart+’s, DECIEM’s and Too Faced’s long-lived assets, including customer lists, may not be recoverable. Accordingly, we performed interim impairment tests for the trademarks and a recoverability test for the long-lived assets as of February 28, 2022. We concluded that the carrying amounts of the long-lived assets were recoverable. For the Dr.Jart+ reporting unit, we also concluded that the carrying value of the trademark intangible asset exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded an impairment charge of $205 million. For the Too Faced and DECIEM reporting units, as the carrying values of the trademarks did not exceed their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, we did not record impairment charges. The estimated fair values of Too Faced’s and DECIEM's trademarks exceeded their carrying values by 13% and 3%, respectively. For the Too Faced and DECIEM trademark intangible assets, if all other assumptions are held constant, an increase of 100 basis points and 50 basis points, respectively, in the weighted average cost of capital would result in an impairment charge. After adjusting the carrying values of the trademarks, we completed interim quantitative impairment tests for goodwill. As the estimated fair value of the Dr.Jart+, DECIEM and Too Faced reporting units were in excess of their carrying values, we concluded that the carrying amounts of the goodwill were recoverable and did not record a goodwill impairment charge related to these reporting units. The fair values of these reporting units were based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting units. The significant assumptions used in these approaches include revenue growth rates and profit margins, terminal values, weighted average cost of capital used to discount future cash flows and royalty rates for trademarks. The most significant unobservable input used to estimate the fair value of the Dr.Jart+ trademark intangible asset was the weighted-average cost of capital, which was 10.5%.

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Based on our annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2022, we determined that the carrying value of the Dr.Jart+ trademark exceeded its fair value. This determination was made based on updated internal forecasts. Given the lower-than-expected growth within key geographic regions and channels that continued to be impacted by the spread of COVID-19 variants, the resurgence in cases, regional lockdowns and the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the financial performance of the brand, we made revisions to the internal forecasts relating to the Dr.Jart+ reporting unit. 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 value of the trademark intangible asset exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded an impairment charge of $25 million. We concluded that the carrying amount of the long-lived assets were recoverable. After adjusting the carrying value of the trademark, we completed a quantitative impairment test for goodwill. As the estimated fair value of the reporting unit was in excess of its carrying value, we concluded that the carrying amount of the goodwill was recoverable and did not record a goodwill impairment charge related to the reporting unit. The fair value of the 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 units. The significant assumptions used in these approaches include revenue growth rates and profit margins, terminal values, weighted average cost of capital used to discount future cash flows and royalty rates for trademarks. The most significant unobservable input used to estimate the fair value of the trademark intangible asset was the weighted-average cost of capital, which was 10.5%.

A summary of the trademark impairment charges for the three and twelve months ended June 30, 2022 and the remaining carrying values as of June 30, 2022, for each reporting unit, are as follows:

(In millions) Impairment Charge Carrying Value

GLAMGLOW The Americas $ — $ 11 $ —

The impairment charges for the three and twelve months ended June 30, 2022 were reflected in the skin care product category.

The fair values of all reporting units, which were determined based on quantitative assessments, with goodwill were substantially in excess of their respective carrying values, with the exception of the DECIEM reporting unit. The carrying value of the DECIEM reporting unit as of June 30, 2022 approximated its fair value.

The fair value of the Dr.Jart+ trademark was equal to its carrying value subsequent to the impairment charge taken as of April 1, 2022. Additionally, the fair values of the Smashbox, DECIEM and Too Faced trademark intangible assets approximated their carrying values as of April 1, 2022. The key assumptions used to determine the estimated fair value of the reporting unit are primarily predicated on the estimated future impacts of COVID-19, the success of future new product launches, the achievement of distribution expansion plans, and the realization of cost reduction and other efficiency efforts. If such plans do not materialize, or if there are further challenges in the business environments in which the reporting unit operates, resulting changes in the key assumptions could have negative impacts on the estimated fair value of the reporting unit and it is possible we could recognize additional impairment charges in the future.

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

Fiscal 2021 as Compared with Fiscal 2020

Except as disclosed herein, 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, 2021 for the fiscal 2021 to fiscal 2020 comparative discussion.

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Fiscal 2022 as Compared with Fiscal 2021

NET SALES

Year Ended June 30

As Reported:

% Change from prior year 9 % 13 %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 10 % 11 %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 49 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

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

Reported net sales increased from every product category in fiscal 2022. Fragrance net sales grew double digits, led by Jo Malone London, Tom Ford Beauty and Le Labo. The continued progression towards recovery in makeup compared to the prior-year period contributed to the double-digit increase in makeup net sales, led by M·A·C and Estée Lauder. Skin care net sales benefited from incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter and higher results from La Mer, Bobbi Brown and Clinique, partially offset by lower results from Estée Lauder and Origins. Hair care net sales increased, due to higher net sales from Aveda and Bumble and bumble.

Fiscal 2022 reported net sales grew double digits in The Americas and Europe, the Middle East & Africa benefiting from incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter. Net sales increased in Europe, the Middle East & Africa, reflecting recovery across the region, led by our travel retail business and the United Kingdom. The increases in net sales in The Americas reflected higher net sales throughout the region. Partially offsetting the increase in reported net sales in fiscal 2022 were lower net sales in Asia/Pacific, primarily due to a resurgence of COVID-19 cases across many Chinese provinces which led to restrictions to further prevent the spread of the virus during the second half of fiscal 2022.

The fiscal 2022 reported net sales increase was impacted by approximately $88 million of unfavorable foreign currency translation.

Reported net sales increased 9% in fiscal 2022, driven by the increase from pricing of 7%, due to favorable impacts from changes in mix and strategic pricing actions; incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter of 2%; and the increase from volume of 1%. Partially offsetting these increases was the unfavorable impact of foreign currency translation of 1%.

Reported net sales increased 13% in fiscal 2021, driven by the increase from volume of 7%, due to new product innovation. The increases from foreign currency translation, pricing and acquisitions individually accounted for approximately 2% of the increase in fiscal 2021 net sales.

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 2022 and fiscal 2021 impacts of returns associated with restructuring and other activities of approximately $4 million and $14 million, respectively.

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Product Categories

Skin Care

Year Ended June 30

As Reported:

% Change from prior year 4 % 28 %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 4 % 25 %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 49 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported skin care net sales increased in fiscal 2022, primarily reflecting incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter and higher net sales from La Mer, Bobbi Brown and Clinique, combined, of approximately $837 million. Net sales from La Mer increased, led by our travel retail business and mainland China, primarily reflecting continued success of hero products, including Crème de la Mer and the upgrade to The Treatment Lotion, the current-year launch of The Hydrating Infused Emulsion, and targeted expanded consumer reach, including the current-year launch of a new third-party online platform in mainland China. Bobbi Brown net sales increased, led by our travel retail business and mainland China, primarily driven by continued success of hero products, such as Soothing Cleansing Oil and Vitamin Enriched Face Base, successful performance during holiday and key shopping moments and targeted expanded consumer reach. Clinique net sales increased, primarily driven by our travel retail business and North America, reflecting the continued success of existing products, such as the Take The Day Off line of products and Even Better Clinical Radical Dark Spot Corrector + Interrupter, and the current-year launch of Smart Clinical Repair Wrinkle Correcting Serum.

Partially offsetting the fiscal 2022 increase in skin care net sales were lower net sales from Estée Lauder and Origins of approximately $528 million, combined. The decrease in net sales from Estée Lauder and Origins reflected the challenges due to the resurgence of COVID-19 cases in Asia during the second half of fiscal 2022, which led to restrictions to prevent further spread of the virus. Also contributing to the decrease in net sales for Estée Lauder was lower net sales from the Advanced Night Repair product franchise primarily due to the prior-period launch of Advanced Night Repair Synchronized Multi-Recovery Complex.

Reported skin care net sales increased 4% in fiscal 2022, driven by incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter of 4%. Pricing contributed 9% to growth, due to favorable impacts from changes in mix and strategic pricing actions and was offset by the decrease from changes in volume of 9%, primarily due to new product innovation that reflected a difficult comparison to the prior year due to the launch of Advanced Night Repair Synchronized Multi-Recovery Complex and the challenges due to the resurgence of COVID-19 cases in Asia during the second half of fiscal 2022.

Reported skin care net sales increased 28% in fiscal 2021, driven by the increase from volume of 23%, due to new product innovation; incremental net sales attributable to the increase in our ownership of Dr.Jart+ in the second quarter of fiscal 2020 and the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter of 4%, combined; the favorable impact from foreign currency translation of 3%. Partially offsetting these increases was a decrease from pricing of 2%, due to unfavorable impacts from changes in mix.

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Makeup

Year Ended June 30

As Reported:

$ Change from prior year 464 (591)

% Change from prior year 11 % (12) %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 12 % (14) %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 49 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported makeup net sales increased in fiscal 2022, led by higher net sales from M·A·C and Estée Lauder, of approximately $337 million, combined. The continued progression towards recovery in makeup, including increased usage occasions compared to the prior-year period, led to the increase in makeup net sales in The Americas and Europe, the Middle East & Africa. The increase in net sales from M·A·C was primarily driven by the continued success of hero products, such as Studio Fix, current-year new product launches, such as MACStack mascara, and successful social media campaigns during key shopping moments. Net sales from Estée Lauder increased, led by our travel retail business, primarily due to the continued success of existing products, such as the Double Wear and Futurist product franchises and new product launches, such as the current-year launches of Double Wear Sheer Long-Wear Makeup.

The makeup net sales increase was impacted by approximately $50 million of unfavorable foreign currency translation.

Reported makeup net sales increased 11% in fiscal 2022, driven by the increase from volume of 12%, given the continued progression towards recovery and increased makeup usage occasions compared to the prior-year period, partially offset by the unfavorable impact from foreign currency translation of 1%.

Reported makeup net sales decreased 12% in fiscal 2021, driven by the decrease from volume of 19%, due to the continued challenges from the COVID-19 pandemic, including fewer makeup usage occasions. Partially offsetting this decrease was an increase from pricing of 5%, due to favorable impacts from changes in mix and strategic pricing actions, and the favorable impact from foreign currency translation of 2%.

Fragrance

Year Ended June 30

As Reported:

$ Change from prior year 582 363

% Change from prior year 30 % 23 %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 32 % 21 %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 49 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported fragrance net sales increased in fiscal 2022, primarily driven by Jo Malone London, Tom Ford Beauty and Le Labo of approximately $440 million, combined. Fragrance net sales grew in every geographic region, reflecting continued growth in luxury fragrances, the brick-and-mortar and travel recovery in various parts of the world due to more store openings, and successful performance during holiday and key shopping moments. The increases in net sales from Jo Malone London also reflected the continued success of our hero products, current-year launches and continued growth of the cologne, home and bath & body subcategories. Net sales increased from Tom Ford Beauty, also reflecting the continued success of Private Blend and Signature fragrances, current-year product launches and the diversification of product offerings by region. Net sales from Le Labo increased, also reflecting the continued success of hero product franchises, current-year product launches and targeted expanded consumer reach.

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The fragrance net sales increase was impacted by approximately $33 million of unfavorable foreign currency translation.

Reported fragrance net sales increased 30% in fiscal 2022, driven by the increase from volume of 29%, primarily due to the continued growth in luxury fragrances, as well as the brick-and-mortar and travel recovery, and the increase from pricing of 3%, due to the favorable impacts from strategic pricing actions and changes in mix. Partially offsetting these increases was the unfavorable impact from foreign currency translation of 2%.

Reported fragrance net sales increased 23% in fiscal 2021, driven by the increase in pricing of 15%, due to favorable impacts from changes in mix and strategic pricing actions; the increase in volume of 5%, reflecting a recovery compared to the prior-year challenges and growth in luxury fragrances; and the favorable impact from foreign currency translation of 3%.

Hair Care

Year Ended June 30

As Reported:

$ Change from prior year 60 56

% Change from prior year 11 % 11 %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 12 % 9 %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 49 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported hair care net sales increased in fiscal 2022, reflecting higher net sales from Aveda and Bumble and bumble of approximately $47 million, combined, primarily due to the continued progression towards salon and retail store recovery in North America. Net sales from Aveda increased, reflecting the continued success of existing product franchises, the current-year relaunch of Full Spectrum Semi-Permanent Treatment Hair Color and Smooth Infusion, as well as new product launches. The increase in net sales from Bumble and bumble also reflected the success of hero products, current-year product launches of Bb. Thickening Plumping Mask and Bb. Thickening Go Big Plumping Treatment, and targeted expanded consumer reach.

The hair care net sales increase was impacted by approximately $8 million of unfavorable foreign currency translation.

Reported hair care net sales increased 11% in fiscal 2022, driven by the increase from pricing of 15%, due to favorable impacts from changes in mix and strategic pricing actions. Partially offsetting this increase was a decrease from volume of 3%, due to new product innovation, including the launches of lower-priced products as compared to the prior-year period, and the unfavorable impact from foreign currency translation of 1%.

Reported hair care net sales increased 11% in fiscal 2021, driven by the increase from volume of 7%, due to new product innovation, including the launches of higher-priced products as compared to the prior-year period; the increase from pricing of 2%, primarily due to a favorable impact from strategic pricing actions; and the favorable impact from foreign currency translation of 2%.

Geographic Regions

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

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The Americas

Year Ended June 30

As Reported:

$ Change from prior year 826 3

% Change from prior year 22 % — %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 21 % 1 %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 49 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported net sales in The Americas increased in every country and product category in fiscal 2022, reflecting the brick-and-mortar and makeup recovery from the prior-year challenges that included store closures, lower retail traffic, fewer makeup usage occasions and quarantines, stemming from the COVID-19 pandemic. The net sales increases were led by higher net sales in North America of approximately $761 million, reflecting incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter, higher net sales from many of our brands, led by M·A·C and Clinique, and targeted expanded consumer reach.

The net sales increase in The Americas included approximately $22 million of favorable foreign currency translation.

Reported net sales in The Americas increased 22% in fiscal 2022, driven by the increase from volume of 16%, reflecting the brick-and-mortar and makeup recovery from the prior-year challenges; incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter of 5%; and the favorable impact from foreign currency translation of 1%.

Europe, the Middle East & Africa

Year Ended June 30

As Reported:

$ Change from prior year 735 684

% Change from prior year 11 % 11 %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 12 % 9 %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 49 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 2022, reflecting continued recovery across the region, primarily due to store openings, increased retail traffic, and the easing of travel restrictions compared to the prior year, led by our travel retail business and the United Kingdom of approximately $541 million, combined. Despite the resurgence in COVID-19 cases in many Chinese provinces, which led to restrictions to prevent further spread of the virus and the curtailment of travel during the second half of fiscal 2022, net sales increased in our travel retail business, reflecting continued strength of our brands with the Chinese consumer, the easing of travel restrictions in Europe, the Middle East & Africa and The Americas, and continued success of hero product franchises from La Mer, Jo Malone London, Tom Ford Beauty, Clinique and M·A·C. These benefits were partially offset by lower net sales from Estée Lauder products, primarily reflecting lower net sales from the Advanced Night Repair product franchise primarily due to the prior-period launch of Advanced Night Repair Synchronized Multi-Recovery Complex. Net sales in the United Kingdom increased, primarily reflecting incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter, brick-and-mortar recovery, as noted above, and benefiting from the growth in makeup and fragrance.

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The net sales increase in Europe, the Middle East & Africa included approximately $117 million of unfavorable foreign currency translation.

Reported net sales in Europe, the Middle East & Africa increased 11% in fiscal 2022, driven by the increase from pricing of 9%, due to favorable impacts from changes in mix and strategic pricing actions, and incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter of 2%.

Reported net sales in Europe, the Middle East & Africa increased 11% in fiscal 2021, driven by the increase from volume of 6%, primarily due to new product innovation, including the launches of higher-priced products compare to the prior-year period; the increase from pricing of 3%, due to strategic price increases and the favorable impact from changes in mix; the favorable impact from foreign currency translation of 2%.

Asia/Pacific

Year Ended June 30

As Reported:

$ Change from prior year (49) 1,248

% Change from prior year (1) % 29 %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency (1) % 22 %

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 49 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported net sales decreased in Asia/Pacific in fiscal 2022, primarily driven by lower results in Korea, led by Dr.Jart+, Hong Kong and Thailand of approximately $134 million, combined, due to the resurgence of COVID-19 cases during the second half of fiscal 2022 that led to border closures to prevent further spread of the virus.

Partially offsetting the fiscal 2022 decrease in Asia/Pacific were increased net sales from mainland China and Australia of approximately $82 million, combined. Net sales increased in mainland China, primarily due to the continued success of hero products franchises from La Mer and Jo Malone London, reflecting continued growth in skin care and strong momentum in fragrance, successful performance during holiday and key shopping moments, new product launches, and the current-year launch on a new third-party online platform. This increase was achieved despite the resurgence in COVID-19 cases in many Chinese provinces during the second half of fiscal 2022, which led to restrictions to prevent further spread of the virus and the curtailment of travel. Net sales in Australia increased, primarily driven by incremental net sales attributable to the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter.

The net sales decrease in Asia/Pacific included approximately $7 million of favorable foreign currency translation.

Reported net sales in Asia/Pacific decreased 1% in fiscal 2022, driven by the decrease from volume of 9%, reflecting the challenges stemming from the resurgence of COVID-19 cases during the second half of fiscal 2022. Partially offsetting this decrease was an increase from pricing of 7%, due to favorable impact from changes in mix and strategic pricing actions, and the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter of 1%.

Reported net sales in Asia/Pacific increased 29% in fiscal 2021, due to the increase from volume of 15%, driven by new product innovation, including the launches of higher-priced products compared to the prior-year period; the favorable impact of foreign currency translation of 7%; incremental net sales attributable to the increase in our ownership of Dr.Jart+ in the second quarter of fiscal 2020 and the increase in our ownership of DECIEM in the fiscal 2021 fourth quarter of 6%, combined; and the increase from pricing of 1%.

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GROSS MARGIN

Gross margin in fiscal 2022 decreased to 75.7% as compared with 76.4% in fiscal 2021.

Fiscal 2022 vs. Fiscal 2021Favorable (Unfavorable) Basis Points

Mix of business (35)

Obsolescence charges (15)

Foreign exchange transactions 50

Manufacturing costs and other (60)

Subtotal (60)

Charges associated with restructuring and other activities (10)

The decrease in gross margin for fiscal 2022 reflected unfavorable impacts from manufacturing costs and our mix of business, partially offset by a favorable impact from transactional foreign exchange due to the strengthening of the U.S. Dollar. The unfavorable impact from manufacturing costs was primarily due to supply chain disruptions, including manufacturing and transportation delays, port congestion, labor and container shortages, and shipment delays. The unfavorable impact from our mix of business was primarily due to the change in category mix, driven by the increase in makeup and fragrance net sales, higher costs from new products and product sets, and lower gross margins on DECIEM products, partially offset by strategic price increases.

OPERATING EXPENSES

Operating expenses as a percentage of net sales in fiscal 2022 decreased to 57.9% as compared with 60.2% in fiscal 2021.

Fiscal 2022 vs. Fiscal 2021Favorable (Unfavorable) Basis Points

General and administrative expenses 100

Advertising, merchandising, sampling and product development 80

Shipping (70)

Store operating costs (20)

Stock-based compensation 20

Foreign exchange transactions (20)

Charges associated with restructuring and other activities 50

Goodwill, other intangible and long-lived asset impairments (30)

Changes in fair value of acquisition-related stock options 60

The favorable change in operating expense margin in fiscal 2022 was driven by the increase in net sales, disciplined general and administrative expense management, disciplined advertising and promotional activities primarily to support new product launches and holiday and key shopping moments, and the favorable impact from selling expenses, primarily due to the shift in channel mix to specialty-multi and pure-play sites, partially offset by higher shipping costs due to the increase in net sales volume and increased shipping rates.

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OPERATING RESULTS

Year Ended June 30

As Reported:

% Change from prior year 21 % 100+%

Non-GAAP Financial Measure(1):

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 49 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

The reported operating margin for fiscal 2022 increased from the prior-year period, primarily driven by the increase in net sales and the decrease in operating expenses as a percentage of net sales, partially offset by the decrease in gross margin, as noted above.

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 2022 and 2021 impact of charges associated with restructuring and other activities of $144 million, or approximately 1% of net sales and $228 million, or approximately 1% of net sales, respectively.

Product Categories

Skin Care

Year Ended June 30

As Reported:

$ Change from prior year (283) 911

% Change from prior year (9) % 43 %

Non-GAAP Financial Measure(1):

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 49 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported skin care operating income decreased in fiscal 2022, reflecting lower results from Estée Lauder and Origins of approximately $571 million, combined, as well as the unfavorable year-over-year impact of goodwill and other intangible asset impairments of $135 million. The decrease in operating income from Estée Lauder and Origins was primarily due to a decrease in net sales.

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Partially offsetting the decreases in operating income in fiscal 2022 were higher results from La Mer and Bobbi Brown of approximately $217 million, combined, as well as the favorable year-over-year impact of changes in fair value of acquisition-related stock options relating to the increase in our investment in DECIEM during the fiscal 2021 fourth quarter of $93 million. The higher results from La Mer reflected an increase in net sales, partially offset by the increase in cost of sales that was mostly due to higher costs for promotional items and higher advertising and promotional activities primarily to support holiday and key shopping moments and new product launches. Operating income from Bobbi Brown increased, primarily driven by an increase in net sales.

See Item 8. Financial Statements and Supplementary Data –Note 18 –Stock Programs for additional information relating to DECIEM stock options.

Makeup

Year Ended June 30

As Reported:

% Change from prior year 100+% 73 %

Non-GAAP Financial Measure(1):

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 49 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported makeup operating income increased in fiscal 2022, reflecting higher results from M·A·C and Estée Lauder of approximately $248 million, combined, and the favorable year-over-year impact of other intangible and long-lived asset impairments of $63 million. Operating income from M·A·C increased due to the increase in net sales, partially offset by higher advertising and promotional activities to support new product launches and higher selling costs due to the brick-and-mortar recovery, including more stores being open and increased retail traffic compared to the prior year. Operating income from Estée Lauder increased primarily due to the increase in net sales, partially offset by higher advertising and promotional activities relating to strategic investments to support the makeup recovery and digital advertising and social media spending.

Fragrance

Year Ended June 30

As Reported:

$ Change from prior year 241 198

% Change from prior year 100+% 100+%

Non-GAAP Financial Measure(1):

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 49 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

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Reported fragrance operating income increased in fiscal 2022, primarily driven by higher results from Jo Malone London, Tom Ford Beauty and Le Labo of approximately $182 million, combined. The higher results from Jo Malone London primarily reflected the increase in net sales, partially offset by higher cost of sales given the growth of the home subcategory and the increase in advertising and promotional activities and the increase in selling costs resulting from the brick-and-mortar recovery and new product launches. Operating results from Tom Ford Beauty increased, primarily due to higher net sales, partially offset by higher cost of sales due, in part, to the increase in promotional items and the increase in advertising and promotional activities to support strategic investments in digital advertising and social media spending (including costs associated with influencers), hero product franchises, and new product launches. The increases in operating income from Le Labo was primarily driven by the increase in net sales.

Hair Care

Year Ended June 30

As Reported:

Operating loss $ (28) $ (19)

$ Change from prior year (9) —

% Change from prior year (47) % — %

Non-GAAP Financial Measure(1):

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 49 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported hair care operating results decreased in fiscal 2022, primarily driven by lower results from Aveda due to increased operating expenses to support the salon and retail store recovery, partially offset by higher results from Bumble and bumble, primarily due to the increase in net sales, as discussed above.

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 49 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported operating results increased in The Americas in fiscal 2022, primarily reflecting higher operating results from North America of approximately $612 million, primarily due to the increase in net sales, higher intercompany royalty income primarily from growth in our travel retail business, favorable year-over-year impact of goodwill, other intangible and long-lived asset impairments of $129 million and the favorable year-over-year impact of changes in fair value of acquisition-related stock options relating to the increase in our investment in DECIEM during the fiscal 2021 fourth quarter of $95 million.

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Partially offsetting these increases in operating income were higher advertising and promotional activities, primarily to support strategic investments in digital advertising and social media spending and in-store promotions given the increase in brick-and-mortar traffic, and increases in selling expense due to the brick-and-mortar and makeup recovery compared to the prior-year.

Europe, the Middle East & Africa

Year Ended June 30

As Reported:

$ Change from prior year 25 338

% Change from prior year 2 % 34 %

Non-GAAP Financial Measure(1):

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 49 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported operating income increased in Europe, the Middle East & Africa in fiscal 2022, primarily driven by higher results from several affiliates across the region, led by the United Kingdom, reflecting the brick-and-mortar recovery, compared to the prior-year periods and favorable year-over-year impact of long-lived asset impairments of $48 million. Partially offsetting the increase in reported operating income was lower results from our travel retail business. The decrease in operating income from our travel retail business was primarily driven by an increase in intercompany royalty expense to The Americas primarily due to the growth of our travel retail business. Also contributing to the decrease in operating income from our travel retail business was higher advertising and promotional activity primarily to support strategic investments in key areas of growth (primarily hero products and the skin care product category), as well as to capture the current-year increase in airport traffic. These higher expenses were partially offset by the increase in net sales.

Asia/Pacific

Year Ended June 30

As Reported:

$ Change from prior year (198) 257

% Change from prior year (20) % 35 %

Non-GAAP Financial Measure(1):

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 49 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported operating income decreased in Asia/Pacific in fiscal 2022, reflecting the current year other intangible asset impairment relating to Dr.Jart+ of $230 million.

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INTEREST AND INVESTMENT INCOME

Year Ended June 30

Interest income and investment income, net $ 30 $ 51

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

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 $913 million, resulting in the recognition of a gain of $848 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. The accounting for the DECIEM business combination was finalized during the fiscal 2022 third quarter.

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.

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PROVISION FOR INCOME TAXES

The provision for income taxes represents U.S. federal, foreign, state and local income taxes. The effective rate differs from the federal statutory rate primarily due to the effect of state and local income taxes, the tax impact of share-based compensation, the taxation of foreign income and income tax reserve adjustments, which represent changes in our net liability for unrecognized tax benefits including tax settlements and lapses of the applicable statutes of limitations. Our effective tax rate will change from 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 Tax Cuts and Jobs Act (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: $ 3,036 $ 3,331

As Reported:

Effective rate for income taxes 20.7 % 13.7 %

Basis-point change from prior year 700 (1,980)

Non-GAAP Financial Measure(1):

Effective rate for income taxes 21.3 % 18.7 %

(1)Excludes the net impact on the effective tax rates of charges associated with restructuring and other activities, goodwill, other intangible and long-lived asset impairments, other income, net, changes in the fair value of contingent consideration and changes in the fair value of acquisition-related stock options. There was no tax expense associated with the fiscal 2021 other income, net adjustment (previously held equity method investment in DECIEM).

The effective tax rate for fiscal 2022 increased approximately 700 basis points. The increase was primarily attributable to the prior year impact of the fiscal 2021 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 retroactively electing the global intangible low-taxed income (“GILTI”) high-tax exception under the TCJA of approximately 140 basis points.

NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.

Year Ended June 30

($ in millions, except per share data) 2022 2021

As Reported:

Net earnings attributable to The Estée Lauder Companies Inc. $ 2,390 $ 2,870

$ Change from prior year (480) 2,186

% Change from prior year (17) % 100+%

Diluted net earnings per common share $ 6.55 $ 7.79

% Change from prior year (16) % 100+%

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.

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RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

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

Year Ended June 30 % Change % Change in Constant Currency

($ in millions, except per share data) 2022 2021 Variance

Returns associated with restructuring and other activities 4 14 (10)

Charges associated with restructuring and other activities 144 228 (84)

Goodwill, other intangible and long-lived asset impairments 241 188 53

Changes in fair value of contingent consideration — (2) 2

Change in fair value of acquisition-related stock options (55) 40 (95)

Charges associated with restructuring and other activities .31 .48 (.17)

Other income, net — (2.30) 2.30

Goodwill, other intangible and long-lived asset impairments .50 .40 .10

Changes in fair value of contingent consideration — (.01) .01

Diluted net earnings per common share, as adjusted $ 7.24 $ 6.45 $ .79 12 % 12 %

As diluted net earnings per common share, as adjusted, is used as a measure of the Company’s performance, we consider the impact of current and deferred income taxes when calculating the per-share impact of each of the reconciling items.

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The following 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 (4) (14) 10 — 10

By Region:

Returns associated with restructuring and other activities (4) (14) 10 — 10

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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 change in fair value of acquisition-related stock options:

Year Ended June 30

By Product Category:

Charges associated with restructuring and other activities (144) (228)

By Region:

Charges associated with restructuring and other activities (144) (228)

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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, 2022, we had cash and cash equivalents of $3,957 million compared with $4,958 million at June 30, 2021. Our cash and cash equivalents are maintained at a number of financial institutions. To mitigate the risk of uninsured balances, we select financial institutions based on their credit ratings and financial strength, and we perform ongoing evaluations of these institutions to limit our concentration risk exposure.

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

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

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

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 17, 2022, our long-term debt is rated A+ with a stable outlook by Standard & Poor’s and A1 with a stable outlook by Moody’s.

Debt and Access to Liquidity

Total debt as a percent of total capitalization (excluding noncontrolling interests) increased to 49% at June 30, 2022 from 48% at June 30, 2021.

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 $ 3,040 $ 3,631

Net cash used for investing activities $ (945) $ (1,864)

Net cash used for financing activities $ (3,036) $ (1,892)

The change in net cash flows provided by operations reflected higher working capital needs to support growth and to mitigate the global supply chain challenges, as well as higher cash paid for taxes, partially offset by higher earnings before taxes, excluding non-cash items.

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The change in net cash flows used for investing activities primarily reflected cash paid, net of cash acquired, in connection with the acquisition of additional shares in DECIEM in fiscal 2021 and the settlement of net investment hedges. These changes were partially offset by an increase in capital expenditures, primarily driven by increased investments for a new manufacturing facility in Japan, online capabilities, our freestanding stores and counters at retailers to support new and existing distribution and information technology enhancements, as well as investments to support the reopening of our offices located around the world, which were previously closed due to COVID-19.

The change in net cash flows used for financing activities primarily reflected an increase relating to higher treasury stock repurchases in fiscal 2022 and proceeds from the issuance of long-term debt, net in the prior-year period, partially offset by the repayment of short-term debt and repayments and redemptions of long-term debt made in the prior-year period.

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, 2021 for the fiscal 2021 to fiscal 2020 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, 2022 and through August 17, 2022, see Item 8. Financial Statements and Supplementary Data – Note 17 – Common Stock.

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 2022 and 2021, 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 2023.

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 $ 35 $ 38 $ 40

Post-retirement plan benefit payments $ 10 $ 11 $ 7

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).

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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 $259 million and $218 million as of June 30, 2022 and 2021, respectively. This potential change does not consider our underlying foreign currency exposures.

In addition, we enter into interest rate derivatives to manage the effects of interest rate movements on our aggregate liability portfolio, including future debt issuances. Based on a hypothetical 100 basis point increase in interest rates, the estimated fair value of our interest rate derivatives would decrease by approximately $41 million and $83 million as of June 30, 2022 and 2021, respectively.

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

OFF-BALANCE SHEET ARRANGEMENTS

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

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, 2022 and our results of operations for the three fiscal years ended June 30, 2022 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 and income taxes.

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.

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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 2022, we elected to perform the quantitative assessment for the goodwill in each of our reporting units and indefinite-lived intangible assets. We engaged a third-party valuation specialist and used industry accepted valuation models and criteria that were reviewed and approved by various levels of management. For fiscal 2021, we elected to perform the qualitative assessment for the goodwill in 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.

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 credits 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 to net earnings at that time, while the reduction to a valuation allowance will result in an increase to 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.

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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;

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

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

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

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

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

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

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

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

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

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(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, 2022.

EL US Equity

EL · 10-K · period ended 2022-06-30

Item 1A. Risk Factors.

Item 1B. Unresolved Staff Comments.

Item 2. Properties.

Item 3. Legal Proceedings.

Item 4. Mine Safety Disclosures.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Item 6. [Reserved]

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

EL US Equity☆

EL · 10-K · period ended 2022-06-30

Item 1A. Risk Factors.

Item 1B. Unresolved Staff Comments.

Item 2. Properties.

Item 3. Legal Proceedings.

Item 4. Mine Safety Disclosures.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Item 6. [Reserved]

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

EL US Equity