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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 2023, 2022 and 2021 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 (27) (4) (14)

By Region(1):

Returns associated with restructuring and other activities (27) (4) (14)

OPERATING INCOME (LOSS)

By Product Category:

Other 6 — (2)

Charges associated with restructuring and other activities (85) (144) (228)

By Region(1):

Charges associated with restructuring and other activities (85) (144) (228)

(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 60.2 55.7 57.8

Restructuring and other charges 0.3 0.8 1.3

Goodwill impairment — — 0.3

Impairment of other intangible and long-lived assets 1.3 1.4 0.8

Interest income and investment income, net 0.8 0.2 0.3

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

Other income, net — — 5.2

Earnings before income taxes 8.8 17.1 20.5

Provision for income taxes 2.4 3.5 2.8

Net earnings attributable to noncontrolling interests — — (0.1)

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

Net earnings attributable to The Estée Lauder Companies Inc. 6.3 % 13.5 % 17.7 %

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 mix and those due to strategic pricing actions, (ii) volume, including changes driven by the impact of new product innovation, (iii) acquisitions and/or divestitures, and/or (iv) foreign currency translation. The percentages disclosed for these impacts are calculated on an individual basis.

The net sales impact from pricing consists of changes in list prices, due to strategic pricing actions, and mix shifts within and among product categories, geographic regions, brands 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 changes related to existing products or where they are sold, 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. 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.

Overview

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 diversified by product category, geography, brand, product sub-category, channel, consumer segment and price point. We also 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.

During the fiscal year ended June 30, 2023, the operating environment continued to be disrupted by the impact of the COVID-19 pandemic. Most notably, the pace of recovery in Asia travel retail and mainland China was slower than anticipated. In Hainan, prolonged store closures initially presented a headwind and, thereafter, low levels of conversion occurred when travel resumed. This was compounded by inventory tightening by certain retailers. In Korea, the travel retail business slowed during the transition to post-COVID-19 regulations. In addition, the slower than anticipated resumption of international flights, granting of visas, and organized group tours further challenged the Asia travel retail recovery. As a result, our Asia travel retail business was challenged throughout the fiscal year by the slower than anticipated recovery. In mainland China, our performance in the first half of fiscal 2023 was hindered by low retail traffic as a result of COVID-19-related restrictions and the rise in COVID-19 cases.

Elsewhere, the recovery from the COVID-19 pandemic progressed across markets globally over the course of the fiscal year as restrictions lifted. In the West, our recovery from the pandemic continued with net sales growth in many markets in Europe, the Middle East & Africa and in Latin America. In Asia/Pacific, certain of our markets emerged strongly into recovery across the fiscal year, to deliver net sales growth throughout the region.

In the United States, net sales was unfavorably impacted by the slower than anticipated pace of our improvement at retail and the tightening of inventory in certain retailers in the first half of fiscal 2023 due to inflationary pressures and recession concerns.

Finally, our business was also pressured by the strong U.S dollar, inflation and recession concerns globally.

During fiscal 2023, net sales decreased 10%, reflecting the impacts noted above.

•Our skin care net sales declined 17%, including the unfavorable impact of foreign currency translation of 3%, driven by declines from Estée Lauder, La Mer and Dr.Jart+, primarily reflecting the challenges in our Asia travel retail business throughout the year, as previously discussed. Partially offsetting these declines was growth in every geographic region from The Ordinary, reflecting the success of hero products and new product launches, and from M·A·C, driven by the launch of the Hyper Real line of products.

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•Our makeup net sales decreased 3%, primarily due to the unfavorable impact of foreign currency translation of 4%. Net sales declines from Estée Lauder, TOM FORD and La Mer, primarily reflect the challenges in Asia travel retail throughout the year and in mainland China in the first half of the fiscal year, as previously discussed, were partially offset by higher net sales from M·A·C, primarily driven by the recognition of the previously deferred revenue due to changes to the BACK-To-M·A·C take back program, and Clinique.

•Our fragrance net sales remained virtually flat as growth driven by Estée Lauder, Le Labo, TOM FORD, Clinique, and Kilian Paris was offset by the impact of the license terminations effective June 30, 2022 related to certain of our designer fragrances of 9% and the unfavorable impact of foreign currency translation of 4%.

•Our hair care net sales increased 3%, driven by higher net sales from The Ordinary reflecting the recent launch of hair care products by the brand, partially offset by the unfavorable impact of foreign currency translation of 3%.

Our global distribution capability and operations allow us to focus on targeted expanded consumer reach wherever consumer demographics and trends are 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 inclusion and cultural diversity. We continuously strengthen our presence in large, image-building core markets, while broadening our presence in emerging markets.

•Net sales in The Americas decreased 2%, primarily driven by a decrease in the United States, reflecting the slower than anticipated pace of our improvement at retail, the tightening of inventory from certain of our retailers during the first half of fiscal 2023 and the impact of the license terminations related to certain of our designer fragrances. Partially offsetting this decrease in The Americas was an increase in net sales in Latin America, led by Brazil and Mexico, driven by growth in makeup, which reflected new product launches and successful performance during key shopping moments.

•Net sales in Europe, the Middle East & Africa decreased 19%, including the unfavorable impact of foreign currency translation of 3%, driven primarily by lower net sales from our travel retail business reflecting the challenges in our Asia travel retail business as previously discussed.

•Net sales in Asia/Pacific decreased 4%, driven by the unfavorable impact of foreign currency translation of 8% and the challenges stemming from the COVID-19 pandemic, led by our Dr.Jart+ travel retail business in Korea, partially offset by the increase in net sales in Hong Kong SAR and Macau SAR and Southeast Asia, reflecting the continued COVID-19 recovery and successful brand activations and new product launches in Hong Kong SAR and Macau SAR.

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.

•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 the Asia travel retail business continued to be pressured by the slower than anticipated recovery from the COVID-19 pandemic, we realized 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, particularly for those consumers who 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.

•We continue to support e- and m-commerce sites of our own, collaborate with our retailers on their e-commerce sites, and sell through select third-party online malls. We believe our success in the channel 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.

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In fiscal 2023, we continued to further integrate social impact and sustainability into our strategy and business operations. Areas of focus include climate and energy; packaging; sourcing; green chemistry and ingredient transparency; inclusion, diversity and equity; employee health and safety; and social investments.

Outlook

We are experiencing a more gradual and prolonged recovery from the COVID-19 pandemic, particularly in our Asia travel retail business. In Asia travel retail, there have been, and are likely to continue to be, impacts on our business in the near-term, from the slower than anticipated depletion of elevated levels of retailer inventory and, therefore, lower replenishment orders, as well as the slower than anticipated resumption of international flights, granting of visas, and organized group tours. Additionally, in Korea, the shipments to duty free retailers were pressured owing to the transition to post-COVID-19 regulations as traveling consumers gradually return. In addition to impacting net sales and profitability, including any unfavorable impacts to our effective tax rate from changes to our geographical mix of earnings, 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; inflationary pressures; supply chain challenges; social and political issues; regulatory matters, including the imposition of tariffs and sanctions; geopolitical tensions; and global security issues. For example, the strengthening of the U.S. dollar could negatively impact results within Europe, the Middle East & Africa due to pricing pressures on our retail customers and consumers in key international travel retail locations. Additionally, 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.

As the invasion of Ukraine continues and international sanctions evolve, we have scaled down our operations in Russia. We expect to continue selling a limited selection of products to retailers in Russia. We will continue to monitor the risks and evolving situation that may further affect our business and will adjust our plans accordingly. In fiscal 2023, our net sales in Ukraine and Russia accounted for approximately 1% of consolidated net sales. There are uncertainties related to the future impacts on our business, including possible new sanctions that are difficult to predict due to the high level of geopolitical volatility. On a broader perspective, there could be additional negative impacts to our net sales, earnings, assets and cash flows from such uncertainties. We also note that worsening conditions could exacerbate economic challenges in other countries such as inflationary pressures, energy shortages, recessions 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, 2023, 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 in Asia travel retail and mainland China and the other macro challenges we are facing, will continue to affect our ability to grow sales profitably. We believe we can, to some extent, offset the impact of some of these 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, including continuing to execute upon and benefit from efficiencies attributable to previously approved initiatives under the 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.

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Cybersecurity Incident Disclosed in July 2023

As previously disclosed on July 18, 2023, we identified a cybersecurity incident in which an unauthorized third party gained access to some of our systems. After becoming aware of the incident, we proactively took down some of our systems to help secure our business operations and subsequently brought back online core systems within days. While the response to the incident resulted in some disruptions to our business operations, most notably general corporate activities and order processing, our production and sales operations were minimally impacted.

Our investigation into the systems and the unauthorized access is substantially complete. We determined that the unauthorized third party obtained some data from our systems. We are continuing to work to understand the nature and scope of the data obtained, and can confirm, based on the investigation to date, that the data obtained includes some consumer data (such as names, contact information, and dates of birth). We took steps, and continue to take steps, to enhance the security of our systems. We are also continuing to coordinate with law enforcement authorities. We have provided and will continue to provide notification to governmental authorities in certain jurisdictions and we also will notify affected individuals where required by law.

Based on the information available to date, we believe the incident is contained. Based on this information, the incident is not expected to have a material impact on net sales and is expected to be dilutive approximately $.07 to earnings per share for the fiscal 2024 first quarter and full year.

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 was designed to help improve efficiency and effectiveness by rebalancing resources to growth areas of prestige beauty. 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 and strengthen our financial flexibility. We approved specific initiatives under the PCBA Program through fiscal 2022 and substantially completed those initiatives through fiscal 2023. 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.

Impairment Analysis

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 2023 second quarter, given the lower-than-expected results in the overall business, we revised the internal forecasts relating to our Smashbox 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 $21 million reducing the carrying value to zero.

During the fiscal 2023 second quarter, the Dr.Jart+ reporting unit experienced lower-than-expected growth within key geographic regions and channels that continue to be impacted by the spread of COVID-19 variants, 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 reporting unit. In addition, due to macro-economic factors, Dr.Jart+ has experienced lower-than-expected growth within key geographic regions. The Too Faced reporting unit experienced lower-than-expected results in key geographic regions and channels coupled with delays in future international expansion to areas that continue to be impacted by COVID-19. As a result, we revised the internal forecasts relating to our Dr.Jart+ and Too Faced reporting units. Additionally, there were increases in the weighted average cost of capital for both reporting units as compared to the prior year annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2022.

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We concluded that the changes in circumstances in the reporting units, along with increases in the weighted average cost of capital, 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 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 November 30, 2022. We concluded that the carrying value of the trademark intangible assets exceeded their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows and recorded an impairment charge of $100 million for Dr.Jart+ and $86 million for Too Faced. We concluded that the carrying amounts of the long-lived assets were recoverable. 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+ 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 values of the Dr.Jart+ and Too Faced trademark intangible assets was the weighted average cost of capital, which was 11% and 13%, respectively.

A summary of the trademark impairment charges for fiscal 2023 and the remaining carrying values as of June 30, 2023, for each reporting unit, are as follows:

Impairment Charges Carrying Value

Reporting Unit Geographic Region Trademarks Goodwill Trademarks Goodwill

Smashbox The Americas $ 21 $ — $ — $ —

The impairment charges for fiscal 2023 were reflected in the skin care product category for Dr.Jart+ and the makeup product category for Smashbox and Too Faced.

Based on our annual goodwill impairment testing as of April 1, 2023, the fair values of all reporting units, which were determined based on qualitative or quantitative assessments, with material goodwill were substantially in excess of their respective carrying values.

Based on our annual other indefinite-lived intangible asset impairment testing as of April 1, 2023, the estimated fair value of the Dr.Jart+ and Too Faced trademarks exceeded their carrying values by 12% and 14%, respectively. For the Dr.Jart+ and Too Faced trademarks, if all other assumptions are held constant, a decrease of 10% in the estimated future cash flows, inclusive of the terminal value, or an increase of 75 basis points for Dr.Jart+ and 100 basis points for Too Faced in the weighted average cost of capital, would have caused the carrying value of these trademarks to approximate their fair value. The key assumptions used to determine the estimated fair value of the reporting units and their respective trademarks are primarily predicated on the anticipated recovery from the impacts of COVID-19, the success of future new product launches, ability to secure strategic price increases, 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 units, and their respective trademarks, 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 2022 as Compared with Fiscal 2021

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, 2022 for the fiscal 2022 to fiscal 2021 comparative discussion.

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Fiscal 2023 as Compared with Fiscal 2022

NET SALES

Year Ended June 30

As Reported:

% Change from prior year (10) % 9 %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency (7) % 10 %

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

Reported net sales decreased in fiscal 2023, driven by lower net sales from the skin care and makeup product categories, slightly offset by higher net sales in the hair care product category. Fragrance net sales were virtually flat.

Reported net sales decreased in fiscal 2023, reflecting lower net sales from all geographic regions.

During fiscal 2023, our business was challenged by the slower than anticipated recovery from the COVID-19 pandemic, including restrictions in mainland China and the rising number of COVID-19 cases earlier in the fiscal year. This impacted our business in Asia travel retail, including the tightening of inventory by certain of our retailers, as well as the low levels of conversion when travel resumed. This resulted in lower product shipments, compounded by the impact of retailers continuing to reduce inventory. In mainland China, the aforementioned restrictions earlier in the fiscal year negatively impacted our business, however, lower COVID-19 related restrictions in the second half of fiscal 2023, as compared to the second half of fiscal 2022, resulted in increased net sales in the second half of fiscal 2023.

The fiscal 2023 reported net sales decrease was impacted by approximately $629 million of unfavorable foreign currency translation.

Reported net sales decreased 10% in fiscal 2023, driven by the decrease from volume of 7%, the unfavorable impact from foreign currency translation of 4% and the net impact from acquisitions, divestitures and brand closures of 1%. Partially offsetting these decreases was an increase from pricing of 1%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.

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 2023 and fiscal 2022 impacts of returns associated with restructuring and other activities of approximately $27 million and $4 million, respectively.

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Product Categories

Skin Care

Year Ended June 30

As Reported:

$ Change from prior year (1,684) 402

% Change from prior year (17) % 4 %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency (14) % 4 %

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

Reported skin care net sales decreased in fiscal 2023, primarily driven by lower net sales from Estée Lauder, La Mer, Dr.Jart+, Clinique and Origins, combined, of approximately $1,830 million, that were mostly attributable to the aforementioned challenges in Asia travel retail.

Partially offsetting these decreases in skin care net sales in fiscal 2023 were higher net sales from The Ordinary and M·A·C, combined, of approximately $133 million. The increase in net sales from The Ordinary was driven by growth in every geographic region, reflecting success of hero products and new product launches. The increase in net sales from M·A·C was primarily driven by the fiscal 2023 launch of the Hyper Real line of products.

The skin care net sales decrease was impacted by approximately $337 million of unfavorable foreign currency translation.

Reported skin care net sales decreased 17% in fiscal 2023, driven by the decrease from volume of 13% and the unfavorable impact from foreign currency translation of 3%. The impact from pricing was flat period-over-period, due to the favorable impact from strategic pricing actions offset by changes in mix.

Makeup

Year Ended June 30

As Reported:

$ Change from prior year (151) 464

% Change from prior year (3) % 11 %

Non-GAAP Financial Measure(1):

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

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

Reported makeup net sales decreased in fiscal 2023, primarily driven by lower net sales from Estée Lauder, TOM FORD and La Mer, combined, of approximately $271 million, primarily reflecting the aforementioned challenges in Asia travel retail and mainland China, as well as the unfavorable impacts of foreign currency translation.

Partially offsetting these decreases in makeup net sales in fiscal 2023 was an increase in net sales from M·A·C and Clinique, combined, of approximately $114 million. The increase in net sales from M·A·C was driven by the recognition of previously deferred revenue due to changes to the BACK-To-M·A·C take back program, as well as growth in the face, lip, and eye subcategories. Net sales from Clinique increased, benefiting from solid performance in the lip, face and eye subcategories.

The makeup net sales decrease was impacted by approximately $166 million of unfavorable foreign currency translation.

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Reported makeup net sales decreased 3% in fiscal 2023, driven by the unfavorable impact from foreign currency translation of 4% and the decrease from volume of 3%. Partially offsetting these decreases was an increase from pricing of 3% due to the favorable impact from strategic pricing actions, partially offset by changes in mix.

Fragrance

Year Ended June 30

As Reported:

$ Change from prior year 4 582

% Change from prior year — % 30 %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 4 % 32 %

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

Reported fragrance net sales remained virtually flat in fiscal 2023, driven by higher net sales from Estée Lauder, Le Labo, TOM FORD, Clinique, and Kilian Paris, combined, of approximately $261 million. Net sales from Estée Lauder increased, reflecting a successful campaign for Beautiful Magnolia and successful performance during holiday and key shopping moments. Net sales from Le Labo increased, reflecting the continued success of hero product franchises, targeted expanded consumer reach, successful performance during holiday and key shopping moments and new product launches. The increase in net sales from TOM FORD reflected the continued success of Signature and Private Blend fragrances, expanded distribution, new product launches and successful performance during holiday and key shopping moments. Net sales from Clinique increased, primarily reflecting growth in the Clinique Happy franchise line of products. Net sales from Kilian Paris increased, reflecting new product launches and expanded distribution.

Offsetting these increases in fragrance net sales was the impact of the license terminations related to certain of our designer fragrances effective June 30, 2022 and lower net sales from Jo Malone London, combined, of approximately $261 million. The decrease in net sales from Jo Malone London primarily reflected the unfavorable impact of foreign currency translation.

Fragrance net sales was impacted by approximately $108 million of unfavorable foreign currency translation.

Reported fragrance net sales remained virtually flat in fiscal 2023, driven by the increase in volume of 10% and the increase from pricing of 4%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix. Offsetting these increases were the impact from the license terminations of certain of our designer fragrances of 9% and the unfavorable impact from foreign currency translation of 4%.

Hair Care

Year Ended June 30

As Reported:

$ Change from prior year 22 60

% Change from prior year 3 % 11 %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 6 % 12 %

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

Reported hair care net sales increased in fiscal 2023, driven by higher net sales from The Ordinary due to the recent launch of hair care products.

The hair care net sales increase was impacted by approximately $16 million of unfavorable foreign currency translation.

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Reported hair care net sales increased 3% in fiscal 2023, driven by an increase from pricing of 5%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix, and the increase in volume of 1%. Partially offsetting these increases was the unfavorable impact from foreign currency translation of 3%.

Geographic Regions

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

The Americas

Year Ended June 30

As Reported:

$ Change from prior year (105) 826

% Change from prior year (2) % 22 %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency (3) % 21 %

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

Reported net sales in The Americas decreased in fiscal 2023, primarily driven by a decrease in net sales in the United States of approximately $133 million, reflecting the slower than anticipated pace of our improvement at retail, the tightening of inventory from certain of our retailers in the first half of the fiscal year and the impact of the license terminations related to certain of our designer fragrances. Partially offsetting this decrease in The Americas in fiscal 2023 was an increase in net sales in Latin America of approximately $51 million, led by Brazil and Mexico, driven by growth in makeup, which reflected new product launches and successful performance during key shopping moments.

The net sales decrease in The Americas included approximately $11 million of favorable foreign currency translation.

Reported net sales in The Americas decreased 2% in fiscal 2023, driven by the decrease from volume of 4% and the net impact from acquisitions, divestitures and brand closures of 2%. Partially offsetting these decreases was an increase from pricing of 3%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix.

Europe, the Middle East & Africa

Year Ended June 30

As Reported:

$ Change from prior year (1,456) 735

% Change from prior year (19) % 11 %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency (16) % 12 %

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

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Reported net sales decreased in Europe, the Middle East & Africa in fiscal 2023, primarily driven by lower net sales from our travel retail business, and to a significantly lesser extent, Russia and the United Kingdom, combined, of approximately $1,551 million. The decrease in net sales from our travel retail business reflects the aforementioned challenges in Asia travel retail. Net sales from Russia decreased in fiscal 2023, as we sold a limited selection of products to certain retailers, and completed the closure of all of our freestanding stores during the first half of fiscal 2023. The decrease in net sales from the United Kingdom in fiscal 2023 is driven by the unfavorable impact of foreign currency translation, partially offset by brick-and-mortar recovery, reflecting an increase in traffic, compared to the prior year.

Partially offsetting the decreases in net sales in Europe, the Middle East & Africa in fiscal 2023 were increases in net sales from Turkey and India, combined, of approximately $55 million. The net sales increase in Turkey and India was driven by growth across all product categories.

The net sales decrease in Europe, the Middle East & Africa included approximately $205 million of unfavorable foreign currency translation.

Reported net sales in Europe, the Middle East & Africa decreased 19% in fiscal 2023, driven by the decrease from volume of 15%, the unfavorable impact from foreign currency translation of 3%, a decrease from pricing of 1%, due to the unfavorable impact from changes in mix, partially offset by strategic pricing actions, and the impact from the license terminations of certain of our designer fragrances of 1%.

Asia/Pacific

Year Ended June 30

As Reported:

$ Change from prior year (243) (49)

% Change from prior year (4) % (1) %

Non-GAAP Financial Measure(1):

% Change from prior year in constant currency 4 % (1) %

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

Reported net sales decreased in Asia/Pacific in fiscal 2023, primarily driven by the unfavorable impact of foreign currency of 8%. The decrease in net sales, including the unfavorable impact of foreign currency, was primarily driven by mainland China and Korea, led by the Dr.Jart+ travel retail business in Korea, combined, of approximately $371 million. The decrease in net sales in mainland China reflects the unfavorable impact of foreign currency translation as well as the aforementioned challenges in mainland China in the first half of the fiscal year. The decrease in net sales in our Dr.Jart+ travel retail business in Korea reflects the aforementioned challenges in Asia travel retail.

Partially offsetting the net sales decrease in Asia/Pacific in fiscal 2023 were increases in Hong Kong SAR and Macau SAR and Southeast Asia, combined, of approximately $136 million, reflecting the continued COVID-19 recovery. Also contributing to the net sales increase in Hong Kong SAR and Macau SAR were successful brand activations and new product launches.

The net sales decrease in Asia/Pacific included approximately $435 million of unfavorable foreign currency translation.

Reported net sales in Asia/Pacific decreased 4% in fiscal 2023, driven by the unfavorable impact from foreign currency translation of 8%. Partially offsetting this decrease was an increase from pricing of 2%, due to the favorable impact from strategic pricing actions, partially offset by changes in mix, and the increase in volume of 1%.

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GROSS MARGIN

Gross margin in fiscal 2023 decreased to 71.3% as compared with 75.7% in fiscal 2022.

Fiscal 2023 vs. Fiscal 2022Favorable (Unfavorable) Basis Points

Mix of business (225)

Obsolescence charges (100)

Manufacturing costs and other (145)

Foreign exchange transactions 30

The decrease in gross margin in fiscal 2023 reflected unfavorable impacts from changes in our mix of business, higher manufacturing costs and other, and higher obsolescence charges. The unfavorable impact from our mix of business is primarily driven by category mix, driven by the decrease in skin care net sales which typically have higher margins than other product categories, as well as higher costs associated with promotional items. Manufacturing costs and other increased, driven by higher expenses within our inventory deferrals recognized during the current year reflecting lower production volume due to lower demand and higher costs for freight and material commodities. The unfavorable impact from obsolescence charges is primarily due to excess inventory on hand and increased levels of inventory destruction and reserves driven by lower demand that resulted in lower product shipments.

OPERATING EXPENSES

Operating expenses as a percentage of net sales in fiscal 2023 increased to 61.8% as compared with 57.9% in fiscal 2022.

Fiscal 2023 vs. Fiscal 2022Favorable (Unfavorable) Basis Points

General and administrative expenses (80)

Advertising, merchandising, sampling and product development (190)

Selling (90)

Shipping (40)

Store operating costs (50)

Stock-based compensation 30

Foreign exchange transactions 10

Charges associated with restructuring and other activities 50

Other intangible asset impairments 10

Changes in fair value of acquisition-related stock options (40)

The unfavorable change in operating expense margin in fiscal 2023 reflected unfavorable impacts relating to advertising, merchandising, sampling and product development, selling expenses, general and administrative expenses, and shipping expenses, driven by the decrease in net sales.

Operating expenses in total decreased $425 million in fiscal 2023, at a slower pace as compared to the decrease in net sales, as we continued to invest in our business, particularly in advertising, merchandising sampling and product development, as well as in selling, while also decreasing certain expenses through disciplined expense management. Additionally, general and administrative expenses decreased in fiscal 2023, driven by lower employee incentive compensation.

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OPERATING RESULTS

Year Ended June 30

As Reported:

$ Change from prior year (1,661) 552

% Change from prior year (52) % 21 %

Operating Margin 9.5 % 17.9 %

Non-GAAP Financial Measure(1):

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

The reported operating margin for fiscal 2023 decreased from the prior year, primarily driven by the decreases in net sales, gross margin and operating expense margin, discussed 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 2023 and 2022 impact of charges associated with restructuring and other activities of $85 million, or approximately 1% of net sales and $144 million, or approximately 1% of net sales, respectively.

Product Categories

Skin Care

Year Ended June 30

As Reported:

$ Change from prior year (1,549) (283)

% Change from prior year (56) % (9) %

Non-GAAP Financial Measure(1):

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

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Reported skin care operating income decreased in fiscal 2023 reflecting lower operating results from Estée Lauder, La Mer, Clinique and Origins, combined, of approximately $1,556 million, primarily driven by decreases in net sales, partially offset by disciplined advertising and promotional expense management, as well as an unfavorable year-over-year impact for the change in fair value of acquisition-related stock options of $75 million relating to the fiscal 2021 increase in our investment in DECIEM. Also contributing to the decrease in skin care operating income from Estée Lauder, La Mer and Clinique was a higher cost of sales. The increase in cost of sales from Estée Lauder was due in part to higher manufacturing costs and obsolescence charges. The increase in cost of sales from La Mer was due in part to higher manufacturing costs and the increase in cost of sales from Clinique was due in part to higher costs for promotional items. The decrease in operating income from Origins was also partially offset by a lower cost of sales due to the net sales decrease and lower selling expenses due to the closure of freestanding stores during fiscal 2023.

Partially offsetting the decrease in skin care operating income in fiscal 2023 was the favorable year-over-year impact of other intangible asset impairments related to Dr.Jart+ and GLAMGLOW of $141 million, combined, and lower employee incentive compensation compared to the prior year.

Makeup

Year Ended June 30

As Reported:

Operating income (loss) $ (22) $ 133

$ Change from prior year (155) 517

Non-GAAP Financial Measure(1):

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

Reported makeup operating income decreased in fiscal 2023, reflecting lower results from Estée Lauder, TOM FORD and La Mer, combined, of approximately $191 million, primarily driven by a decrease in net sales, as well as the fiscal 2023 second quarter other intangible asset impairments related to Too Faced and Smashbox of $107 million, combined. The decrease in operating income from TOM FORD also reflected a higher cost of sales, due in part to higher manufacturing costs and higher obsolescence charges. Also contributing to the decrease in operating income from La Mer was higher advertising and promotional activities, partially offset by a lower cost of sales due to lower net sales compared to the prior year. Partially offsetting the decrease in operating income from Estée Lauder was disciplined advertising and promotional expense management.

Partially offsetting the decrease in makeup operating income in fiscal 2023 were higher results from M·A·C, primarily driven by the recognition of previously deferred revenue due to changes to the BACK-To-M·A·C take back program and lower store operating costs, partially offset by an increase in cost of sales, as well as lower employee incentive compensation compared to the prior year.

Fragrance

Year Ended June 30

As Reported:

$ Change from prior year (16) 241

% Change from prior year (4) % 100+%

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Reported fragrance operating income decreased in fiscal 2023, reflecting lower results from Jo Malone London and the impact of license terminations related to certain of our designer fragrances effective June 30, 2022, combined, of approximately $98 million. The lower results from Jo Malone London were driven by a decrease in net sales, higher cost of sales, due, in part, to an increase in promotional items, and higher selling expenses due to increased staffing costs compared to the prior year.

Partially offsetting the decrease in fragrance operating income were higher results from Estée Lauder and Le Labo, combined, of approximately $83 million, driven by increases in net sales. Also contributing to the increase in operating income from Estée Lauder was disciplined advertising and promotional expense management, partially offset by a higher cost of sales. Partially offsetting the increase in operating income from Le Labo was higher advertising and promotional activities, higher selling expenses due to increased staffing costs compared to the prior year and higher store operating costs. Also partially offsetting the decrease in fragrance operating income was lower employee incentive compensation compared to the prior year.

Hair Care

Year Ended June 30

As Reported:

Operating loss $ (34) $ (28)

$ Change from prior year (6) (9)

% Change from prior year (21) % (47) %

Reported hair care operating results decreased in fiscal 2023, primarily driven by lower results from Aveda and Bumble and bumble, combined, of approximately $53 million. The lower results from Aveda reflected a higher cost of sales, higher advertising and promotional activities to support the brand's expansion into mainland China during fiscal 2023 and key shopping moments and a decrease in net sales. Operating results from Bumble and bumble decreased, primarily driven by higher cost of sales.

Partially offsetting the decrease in hair care operating income was lower employee incentive compensation compared to the prior year.

Geographic Regions

The Americas

Year Ended June 30

As Reported:

Operating income $ (73) $ 1,159

$ Change from prior year (1,232) 641

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

Non-GAAP Financial Measure(1):

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

Reported operating results decreased in The Americas in fiscal 2023, primarily reflecting lower operating results from North America of approximately $1,226 million. The decrease in operating results in North America was primarily driven by the United States, reflecting lower intercompany royalty income of $670 million compared to the prior year, driven by a decrease in net sales in our travel retail business, higher cost of sales driven by higher manufacturing costs and obsolescence charges, a decrease in net sales, and the unfavorable year-over-year impact of other intangible asset impairments of $96 million. Also contributing to the decrease in operating income in North America was the unfavorable year-over-year impact of the change in fair value of acquisition-related stock options of $77 million relating to the fiscal 2021 increase in our investment in DECIEM.

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Europe, the Middle East & Africa

Year Ended June 30

As Reported:

$ Change from prior year (517) 25

% Change from prior year (38) % 2 %

Reported operating income decreased in Europe, the Middle East & Africa in fiscal 2023, primarily driven by lower results from our travel retail business, primarily driven by the decrease in net sales, partially offset by the associated decrease in intercompany royalty expense to The Americas of $670 million.

Asia/Pacific

Year Ended June 30

As Reported:

$ Change from prior year 29 (198)

% Change from prior year 4 % (20) %

Non-GAAP Financial Measure(1):

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

Reported operating income increased in Asia/Pacific in fiscal 2023, primarily reflecting a favorable year-over-year impact of other intangible asset impairments of $130 million and higher results from Hong Kong SAR and Macau SAR and Southeast Asia, combined of approximately $67 million, primarily driven by an increase in net sales, partially offset by a higher cost of sales.

Partially offsetting the increase in operating income in Asia/Pacific in fiscal 2023 were lower operating results in mainland China, Korea and Japan, combined, of approximately $149 million. The lower operating results in mainland China were driven by a decrease in net sales and an increase in cost of sales reflecting higher obsolescence charges and an increase in promotional items, partially offset by disciplined advertising and promotional expense management and lower selling costs compared to the prior year. Operating income in Korea decreased, led by Dr.Jart+, due to decreases in net sales, partially offset by lower selling expenses and cost of sales. Operating income in Japan decreased, driven by the decrease in net sales, partially offset by lower selling expenses.

INTEREST AND INVESTMENT INCOME

Year Ended June 30

Interest income and investment income, net $ 131 $ 30

Interest expense increased in fiscal 2023, primarily reflecting a higher debt balance, due in part to the financing of our acquisition of the TOM FORD brand, including the issuance of commercial paper primarily in the second half of fiscal 2023, and the issuance of Senior Notes in May 2023 and higher interest rates compared to the prior year. Interest income and investment income, net increased, primarily reflecting higher interest rates compared to the prior year.

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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. 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 – Business and Asset Acquisitions for additional information.

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: $ 1,397 $ 3,036

As Reported:

Effective rate for income taxes 27.7 % 20.7 %

Basis-point change from prior year 700 700

Non-GAAP Financial Measure(1):

Effective rate for income taxes 26.5 % 21.3 %

(1)Excludes the net impact on the effective tax rates of charges associated with restructuring and other activities, other intangible asset impairments and changes in the fair value of acquisition-related stock options.

The effective tax rate for fiscal 2023 increased approximately 700 basis points. The increase was primarily attributable to a higher effective tax rate on the Company's foreign operations of approximately 720 basis points, due to the Company's geographical mix of earnings for fiscal 2023.

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NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.

Year Ended June 30

($ in millions, except per share data) 2023 2022

As Reported:

Net earnings attributable to The Estée Lauder Companies Inc. $ 1,006 $ 2,390

$ Change from prior year (1,384) (480)

% Change from prior year (58) % (17) %

Diluted net earnings per common share $ 2.79 $ 6.55

% Change from prior year (57) % (16) %

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; other intangible asset impairments; 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) 2023 2022 Variance

Returns associated with restructuring and other activities 27 4 23

Charges associated with restructuring and other activities 85 144 (59)

Other intangible asset impairments 207 241 (34)

Change in fair value of acquisition-related stock options 22 (55) 77

Charges associated with restructuring and other activities .18 .31 (.13)

Other intangible asset impairments .44 .50 (.06)

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 (27) (4) (23) — (23)

By Region:

Returns associated with restructuring and other activities (27) (4) (23) — (23)

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The following tables reconcile the change in operating results by product category and geographic region, as reported, to the change in operating income excluding the impact of other intangible asset impairments and the change in fair value of acquisition-related stock options:

Year Ended June 30

By Product Category:

Charges associated with restructuring and other activities (85) (144)

By Region:

Charges associated with restructuring and other activities (85) (144)

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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, 2023, we had cash and cash equivalents of $4,029 million compared with $3,957 million at June 30, 2022. 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. During the fourth quarter of fiscal 2023, we temporarily reduced our holdings of bank deposits and increased our allocation of government money market funds, due to stresses in the global banking system.

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. As explained in further detail in Item 8. Financial Statements and Supplementary Data – Note 9 – Income Taxes, during the fiscal 2023 fourth quarter, we changed our assertion regarding our ability and intent to indefinitely reinvest undistributed earnings from certain foreign subsidiaries. We continue to analyze the indefinite reinvestment assertion on our remaining applicable foreign earnings. We do not believe that continuing to reinvest these remaining applicable 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.

Inflation impacted our operating results during fiscal 2023 and we expect it to continue. Generally, we have plans to introduce new products at higher prices, increase prices and implement other operating efficiencies which we expect to offset some of these 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 11, 2023, our long-term debt is rated A+ with a negative 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 59% at June 30, 2023 from 49% at June 30, 2022, primarily due to the increase in total debt, reflecting the financing of our acquisition of the TOM FORD brand, including the issuance of commercial paper primarily in the second half of fiscal 2023, and the issuance of Senior Notes in May 2023.

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 $ 1,731 $ 3,040

Net cash used for investing activities $ (3,217) $ (945)

Net cash provided by (used for) financing activities $ 1,590 $ (3,036)

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The change in net cash flows provided by operating activities primarily reflected lower earnings before tax, excluding non-cash items, partially offset by the favorable change in working capital, reflecting a favorable change in inventory and promotional merchandise and accounts receivable, partially offset by lower accounts payable due to timing of payments and lower other accrued and noncurrent liabilities, which includes the settlement of net investment hedges.

The change in net cash flows used for investing activities was primarily driven by cash paid in connection with the acquisition of the TOM FORD brand during the fiscal 2023 fourth quarter and also reflects a favorable impact from the settlement of net investment hedges, which is offset by the unfavorable change in other accrued liabilities as discussed above.

The change in net cash flows provided by (used for) financing activities primarily reflected lower treasury stock purchases compared to the prior year, an increase in debt due to the issuance of Senior Notes in May 2023 and the issuance of commercial paper in the second half of fiscal 2023, due in part to finance our acquisition of the TOM FORD brand, partially offset by an increase in repayments of long-term debt.

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, 2022 for the fiscal 2022 to fiscal 2021 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, 2023 and through August 11, 2023, 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 2023 and 2022, we met or exceeded all contribution requirements under ERISA regulations for the U.S. Qualified Plan. We expect to make a $50 million discretionary contribution to the U.S. Qualified Plan in the first quarter of fiscal 2024. As we continue to monitor the funded status, we may decide to make additional cash contributions to the U.S. Qualified Plan or our post-retirement medical plan in the United States during fiscal 2024.

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 $ 28 $ 35 $ 38

Post-retirement plan benefit payments $ 11 $ 13 $ 11

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).

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Contractual Obligations

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

Derivative Financial Instruments and Hedging Activities

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

Foreign Exchange Risk Management

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

Credit Risk

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

Market Risk

We address certain financial exposures through a controlled program of market risk management that includes the use of foreign currency forward contracts to reduce the effects of fluctuating foreign currency exchange rates and to mitigate the change in fair value of specific assets and liabilities on the balance sheet. To perform a sensitivity analysis of our foreign currency forward contracts, we assess the change in fair values from the impact of hypothetical changes in foreign currency exchange rates. A hypothetical 10% weakening of the U.S. dollar against the foreign exchange rates for the currencies in our portfolio would have resulted in a net decrease in the fair value of our portfolio of approximately $265 million and $259 million as of June 30, 2023 and 2022, respectively. This potential change does not consider our underlying foreign currency exposures.

We also enter into cross-currency swap contracts to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt. A hypothetical 10% weakening of the U.S. dollar against the foreign exchange rates for the currencies in our cross-currency swap contracts would have resulted in a net decrease in the fair value of our cross-currency swap contracts of approximately $49 million as of June 30, 2023.

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 $55 million and $41 million as of June 30, 2023 and 2022, 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.

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CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of our financial condition at June 30, 2023 and our results of operations for the three fiscal years ended June 30, 2023 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 and Other Indefinite-lived Intangible Assets - Impairment Assessment, Income Taxes, and Asset Acquisition.

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

Goodwill and Other Indefinite-lived Intangible 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 2023, we elected to perform the qualitative assessment for the goodwill in certain of our reporting units and other 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 its reporting units were below carrying value. We considered macroeconomic factors including the global economic growth, general macroeconomic trends for the markets in which the reporting units operate and the intangible assets are employed, and the growth of the global prestige beauty industry. In addition to these macroeconomic factors, among other things, we considered the reporting units’ current results and forecasts, any changes in the nature of the business, any significant legal, regulatory, contractual, political or other business climate factors, changes in the industry/competitive environment, changes in the composition or carrying amount of net assets and its intention to sell or dispose of a reporting unit or cease the use of a trademark.

For fiscal 2023, a quantitative assessment was performed for the goodwill in certain of our reporting units and other indefinite-lived intangible assets. We engaged third-party valuation specialists and used industry accepted valuation models and criteria that were reviewed and approved by various levels of management. To determine the estimated fair value of the reporting units, we used an equal weighting of the income and market approaches. Under the income approach, we determined fair value using a discounted cash flow method, projecting future cash flows of each reporting unit, as well as a terminal value, and discounting such cash flows at a rate of return that reflected the relative risk of the cash flows. Under the market approach, we utilized market multiples from publicly traded companies with similar operating and investment characteristics as the reporting unit. The significant assumptions used in these two approaches include revenue growth rates and profit margins, terminal value, the weighted average cost of capital used to discount future cash flows and comparable market multiples. To determine the estimated fair value of other indefinite-lived intangible assets, we used an income approach, specifically the relief-from-royalty method. This method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. The significant assumptions used in this approach include revenue growth rates, terminal value, the weighted average cost of capital used to discount future cash flows and royalty rate.

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For fiscal 2022, we elected to perform the quantitative assessment for the goodwill in each of its 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. To determine the estimated fair value of the reporting units, we used an equal weighting of the income and market approaches. Under the income approach, we determined fair value using a discounted cash flow method, projecting future cash flows of each reporting unit, as well as a terminal value, and discounting such cash flows at a rate of return that reflected the relative risk of the cash flows. Under the market approach, we utilized market multiples from publicly traded companies with similar operating and investment characteristics as the reporting unit. The significant assumptions used in these two approaches include revenue growth rates and profit margins, terminal value, the weighted average cost of capital used to discount future cash flows and comparable market multiples. To determine the estimated fair value of other indefinite-lived intangible assets, we used an income approach, specifically the relief-from-royalty method. This method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. The significant assumptions used in this approach include revenue growth rates, terminal value, the weighted average cost of capital used to discount future cash flows and royalty rate.

For further discussion of the methods used and factors considered in our estimates as part of the impairment testing for Goodwill and Other Indefinite-lived Intangible 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 credit and other carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates when the assets and liabilities are expected to be realized or settled. We regularly review deferred tax assets for realizability and establish valuation allowances based on available evidence including historical operating losses, projected future taxable income, expected timing of the reversals of existing temporary differences, and appropriate tax planning strategies. If our assessment of the realizability of a deferred tax asset changes, an increase to a valuation allowance will result in a reduction of net earnings at that time, while the reduction of a valuation allowance will result in an increase of net earnings at that time.

We provide tax reserves for 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.

Asset Acquisition

We recognize assets acquired in an asset acquisition based on the cost to the Company on a relative fair value basis, which includes transaction costs in addition to consideration transferred and liabilities assumed or issued as part of the transaction. Neither goodwill nor bargain purchase gains are recognized in an asset acquisition; any excess of consideration transferred over the fair value of the net assets acquired, or the opposite, is allocated to qualifying assets based on their relative fair values. The determination of fair value, as well as the expected useful lives of certain assets acquired, requires management to make judgments and may involve the use of significant estimates, including assumptions with respect to estimated future cash flows and discount rates, among other things. Management estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable.

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During fiscal 2023, we acquired 100% of the equity interests in 001 Del LLC (“001”) in exchange for $2,550 million in consideration (the “TOM FORD Acquisition”). The TOM FORD Acquisition has been accounted for as an asset acquisition as the fair value of the gross assets acquired is concentrated in the value of the TOM FORD trademark intangible asset. The acquisition of 001 included existing license relationships for certain uses of the brand name, which were modified, terminated or otherwise renegotiated in connection with the transaction.

The total cost of the asset acquisition is $2,578 million and was allocated to the TOM FORD trademark. We engaged a third-party valuation specialist and used an income approach, specifically the relief-from-royalty method, to determine the fair value of the TOM FORD trademark. This method assumes that, in lieu of ownership, a third party would be willing to pay a royalty in order to obtain the rights to use the comparable asset. The significant assumptions used to estimate the fair value were revenue growth rates, terminal value, beauty royalty savings, the weighted average cost of capital used to discount future cash flows and royalty rates.

For further discussion of Business Combinations and Asset Acquisitions, see Item 8. Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies, Note 5 – Business and Asset Acquisitions and Note 6 – Goodwill and Other Intangible Assets.

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;

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(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;

(14)changes in product mix to products which are less profitable;

(15)our ability to acquire, develop or implement new information technology, including operational technology and websites, on a timely basis and within our cost estimates; to maintain continuous operations of our new and existing information technology; and to secure the data and other information that may be stored in such technologies 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, 2023.

We assume no responsibility to update forward-looking statements made herein or otherwise.

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

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

Item 8. Financial Statements and Supplementary Data.

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

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

None.

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Item 9A. Controls and Procedures.

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure. The Chief Executive Officer and the Chief Financial Officer, with assistance from other members of management, have evaluated the effectiveness of our disclosure controls and procedures, and, based on their evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that the disclosure controls and procedures were effective as of June 30, 2023.

As part of our review of internal control over financial reporting, we make changes to systems and processes to improve such controls and increase efficiencies, while ensuring that we maintain an effective internal control environment. There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the fourth quarter of fiscal 2023 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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

Item 9B. Other Information.

Trading Arrangements

During the fiscal 2023 fourth quarter, none of the Company’s directors or officers (as defined in Rule 16a-1(f) under the Exchange Act) adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” each as defined in Item 408(a) of Regulation S-K under the Exchange Act.

Compensatory Arrangements of Certain Officers

We are reporting the following information regarding our Executive Annual Incentive Plan in this Item 9B in lieu of filing such information on a Current Report on Form 8-K under Item 5.02(e) “Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensation Arrangements of Certain Officers.”

On August 14, 2023, the Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) of the Company adopted a new executive annual incentive plan, The Estée Lauder Companies Inc. Executive Annual Incentive Plan (the “Plan”). Commencing for the Company’s fiscal year beginning July 1, 2023, the Plan replaces the executive annual incentive plan adopted by the Compensation Committee on August 21, 2013 (the “2013 Plan”), which the Company will cease using.

The principal purposes of the Plan are to provide incentives and rewards to the “executive officers” of the Company and to assist the Company in motivating them to achieve the Company’s annual performance goals. The Plan is administered by the Compensation Committee or such other committee as may be appointed by the Board (the “Committee”). The Committee, in its discretion, may grant opportunities to executive officers for each fiscal year of the Company as it shall determine. For purposes of the Plan, “executive officers” means those persons who are denoted as such from time to time by the Company in the Company’s filings with the Securities and Exchange Commission, or those persons as determined by the Board from time to time.

Under the Plan, each participant is granted an annual opportunity for a payment if performance targets are achieved. Performance targets are based on the nature of the participant’s role and amount of time in that role, achievement of hurdle rates, and targets and/or growth in one or more business criteria that apply to the individual participant, one or more business units or the Company as a whole. The business criteria may include, individually or in combination: (i) net earnings; (ii) earnings per share; (iii) net sales; (iv) market share; (v) net operating profit; (vi) expense control; (vii) return on invested capital; (viii) operating margin; (ix) return on equity; (x) return on assets; (xi) planning accuracy (as measured by comparing planned results to actual results); (xii) gross margin; (xiii) market price per share; (xiv) total return to stockholders; (xv) ESG measures; and (xvi) any other measure determined by the Committee. In addition, the annual performance targets may include comparisons to performance at other companies, such performance to be measured by one or more of the foregoing business criteria. Furthermore, the measurement of performance against targets may exclude or adjust for the impact of certain events or occurrences as set forth in the Plan.

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In no event may a participant receive more than $10 million under the Plan on account of any fiscal year. Payouts pursuant to opportunities granted under the Plan occur following approval by the Committee of achievement. Payouts are in cash (unless otherwise determined by the Committee) as soon as practicable following approval by the Committee, but not later than December 31 of the calendar year in which the applicable fiscal year ends. The Committee may determine that the payout of an opportunity or a portion of an opportunity shall be deferred and may also allow voluntary deferrals in accordance with Section 409A of the Internal Revenue Code of 1986, as amended (the “IRC”). In the event a participant’s employment is terminated prior to the payout of an opportunity previously granted, the Plan provides for payment under certain circumstances as specified in the Plan. Payouts are subject to repayment by a participant to the Company in accordance with the Company’s recoupment, recovery or clawback policy or policies in effect from time to time.

The Plan is subject to amendment or termination at any time by the Committee but no such action may adversely affect any rights or obligations with respect to any opportunities previously granted under the Plan.

The foregoing brief description of the terms and conditions of the Plan is qualified in its entirety by reference to the full text of the Plan, a copy of which is attached as Exhibit 10.5a hereto, and is incorporated into this Item by reference.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this Item, not already provided herein under Item 1. Business – Information about our Executive Officers, will be included in our Proxy Statement for the 2023 Annual Meeting of Stockholders (the “2023 Proxy Statement”). The 2023 Proxy Statement will be filed within 120 days after the close of the fiscal year ended June 30, 2023 and such information is incorporated herein by reference.

Item 11. Executive Compensation.

The information required by this Item will be included in the 2023 Proxy Statement. The 2023 Proxy Statement will be filed within 120 days after the close of the fiscal year ended June 30, 2023 and such information is incorporated herein by reference.

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

The information required by this Item, not already provided under Equity Compensation Plan Information as set forth below, will be included in the 2023 Proxy Statement. The 2023 Proxy Statement will be filed within 120 days after the close of the fiscal year ended June 30, 2023 and such information is incorporated herein by reference.

Equity Compensation Plan Information

The following table summarizes the equity compensation plans under which our securities may be issued as of June 30, 2023 and does not include grants made or cancelled and options exercised after such date. The securities that may be issued consist solely of shares of our Class A Common Stock and all plans were approved by stockholders of the Company.

Equity Compensation Plan Information as of June 30, 2023

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

(2)Consists of 7,497,084 shares issuable upon exercise of outstanding options, 1,789,851 shares issuable upon conversion of outstanding Restricted Stock Units, 601,845 shares issuable upon conversion of outstanding Performance Share Units (“PSUs”) (assuming maximum payout for unvested PSUs and PSUs vested as of June 30, 2023 pending approval by the Stock Plan Subcommittee of our Board of Directors), 112,680 shares issuable upon conversion of Share Units and 350,445 shares issuable upon conversion of Long-term PSUs, including Price-vested units (“PVUs”).

(3)Calculated based upon outstanding options in respect of 7,497,084 shares of our Class A Common Stock.

(4)The 2002 Plan authorizes the grant of shares and benefits other than stock options. As of June 30, 2023, there were 9,684,436 shares of Class A Common Stock available for issuance under the 2002 Plan (subject to the approval by the Stock Plan Subcommittee of expected payouts for PSUs vested as of June 30, 2023). Shares underlying grants cancelled or forfeited under prior plans or agreements may be used for grants under the 2002 Plan. The Director Plan currently provides for an annual grant of options and stock units to non-employee directors. As of June 30, 2023, there were 429,888 shares available for issuance under the Director Plan.

If all of the outstanding options, warrants, rights, stock units and share units, as well as the securities available for future issuance, included in the first and third columns in the table above were converted to shares of Class A Common Stock as of June 30, 2023, the total shares of Common Stock outstanding (i.e. Class A plus Class B) would increase 6% to 378,086,144. Of the outstanding options to purchase 7,497,084 shares of Class A Common Stock, options to purchase 3,354,289 shares have an exercise price less than $196.38, the closing price on June 30, 2023. Assuming the exercise of only in-the-money options, the total shares outstanding would increase by 1% to 360,974,204.

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

Item 14. Principal Accounting Fees and Services.

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

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

3. Exhibits:

ExhibitNumber Description

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ExhibitNumber Description

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ExhibitNumber Description

10.5a Executive Annual Incentive Plan (SEC File No. 1-14064).†

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ExhibitNumber Description

10.12 Employment Agreement with Peter Jueptner (SEC File No. 1-14064).†

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ExhibitNumber Description

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ExhibitNumber Description

21.1 List of significant subsidiaries.

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ExhibitNumber Description

23.1 Consent of PricewaterhouseCoopers LLP.

24.1 Power of Attorney.

____________________

* Incorporated herein by reference.

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

Item 16. Form 10-K Summary.

None.

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SIGNATURES

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

THE ESTÉE LAUDER COMPANIES INC.

By /s/ TRACEY T. TRAVIS

Tracey T. TravisExecutive Vice Presidentand Chief Financial Officer

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

Signature Title (s) Date

Fabrizio Freda

WILLIAM P. LAUDER* Executive Chairmanand a Director August 18, 2023

William P. Lauder

LEONARD A. LAUDER* Director August 18, 2023

Leonard A. Lauder

CHARLENE BARSHEFSKY* Director August 18, 2023

Charlene Barshefsky

WEI SUN CHRISTIANSON* Director August 18, 2023

Wei Sun Christianson

ANGELA WEI DONG* Director August 18, 2023

Angela Wei Dong

PAUL J. FRIBOURG* Director August 18, 2023

Paul J. Fribourg

JENNIFER HYMAN* Director August 18, 2023

Jennifer Hyman

JANE LAUDER* Director August 18, 2023

Jane Lauder

RONALD S. LAUDER* Director August 18, 2023

Ronald S. Lauder

ARTURO NUÑEZ* Director August 18, 2023

Arturo Nuñez

RICHARD D. PARSONS* Director August 18, 2023

Richard D. Parsons

LYNN FORESTER DE ROTHSCHILD* Director August 18, 2023

Lynn Forester de Rothschild

BARRY S. STERNLICHT* Director August 18, 2023

Barry S. Sternlicht

JENNIFER TEJADA* Director August 18, 2023

Jennifer Tejada

RICHARD F. ZANNINO* Director August 18, 2023

Richard F. Zannino

EL US Equity

EL · 10-K · period ended 2023-06-30

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

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

Item 8. Financial Statements and Supplementary Data.

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

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

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

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

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary.

EL US Equity☆

EL · 10-K · period ended 2023-06-30

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

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

Item 8. Financial Statements and Supplementary Data.

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

Item 9A. Controls and Procedures.

Item 9B. Other Information.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Item 10. Directors, Executive Officers and Corporate Governance.

Item 11. Executive Compensation.

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

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

Item 14. Principal Accounting Fees and Services.

Item 15. Exhibits, Financial Statement Schedules.

Item 16. Form 10-K Summary.

EL US Equity