Estee Lauder at 2025 dbAccess Conference: Embracing Agility and Growth

On Tuesday, 03 June 2025, Estee Lauder Companies (NYSE:EL) presented its strategic vision at the 2025 dbAccess Global Consumer Conference. The focus was on its "Beauty Reimagine" strategy, highlighting both the company’s robust fundamentals and the challenges of adapting to a dynamic market. Estee Lauder aims to reignite growth and enhance operating margins, while also addressing the need for agility and speed in response to evolving consumer behavior.

Key Takeaways

• Estee Lauder’s "Beauty Reimagine" strategy focuses on consumer coverage, tailored innovation, and efficiency.
• The company is committed to a gross margin of at least 73.5% and has improved by 300 basis points over the past three quarters.
• A shift in capital expenditure from building capacity to consumer-facing investments aims to enhance growth.
• Estee Lauder is leveraging AI and data analytics to optimize supply chain and consumer communication.
• A strategic focus on emerging markets, particularly China, and reducing reliance on travel retail.

Financial Results

• Gross margin improved by 300 basis points in the last three quarters.
• Commitment to maintaining at least a 73.5% gross margin.
• Reduction in middle management by 20% and executive team by 30%.
• Excess and obsolete inventory reduced by 50% over the past year.
• Procurement savings increased to high single-digit percentages year-on-year.
• In-market quality issues improved by 80%, with consumer complaints decreasing by 20% annually.

Operational Updates

• The "Beauty Reimagine" strategy is structured around five key pillars.
• Expansion into new channels, with 12 brands now available on Amazon US.
• AI applications are being developed for automatic stock deployment based on global trends.
• Digital twins are utilized in all factories for real-time production modeling.
• Estee Lauder has nine manufacturing sites globally, with significant production in North America, Europe, and Japan.
• New distribution centers in China enhance resilience and multichannel fulfillment.

Future Outlook

• Industry growth is expected to resume at mid to high single-digit rates in the mid to long term.
• 2026 is anticipated as a pivotal year due to political changes and China’s next fifteen-year plan.
• Focus on capturing the emerging middle class, with over 500 million new consumers anticipated by 2030.
• Strategic rebalancing of growth across geographies, reducing reliance on travel retail.
• Continued evaluation and repositioning of brand portfolios to align with market demands.

Q&A Highlights

• Affiliates have flexibility in crafting brand messages for local markets, supported by AI tools.
• AI platforms like ConsumerIQ and Trans Studio are used to monitor trends and deploy messages.
• The company maintains a clear distinction between brand, regional, and functional roles.

In conclusion, Estee Lauder’s strategic initiatives signal a commitment to agility, innovation, and market expansion. For a deeper dive, refer to the full transcript below.

Full transcript - 2025 dbAccess Global Consumer Conference:

Steve, Unidentified role: Good morning, and welcome, everybody. Thanks for joining us. Today, I am thrilled to welcome Gas de lauder companies back to the conference but with new faces. Stephane de La Fabre, president and chief executive officer, welcome. And with us also is Roberto Canaveri, executive vice president of global supply chain.

Thank you both for joining us.

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: Thank you for

Steve, Unidentified role: Before we engage in some q and a, Estee Lauder has prepared for us a little video. So let’s let’s roll that tape. Great. Thank you. That was up that was uplifting.

Energizing. Lifting to stop the day. So, Stephane, let’s maybe start with with with you and your your perspective over the last several months since you assumed the CEO position not quite six months ago. Not even. Busy busy start to ’25 calendar ’25.

I guess, you know, how would you sort of summarize the experience and your key learnings, and how has it informed the beauty reimagine strategy and your key p r priorities going forward?

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: Absolutely. And thank you. First of all, Steve, thank you for having me, you know, today. And, Roberto, we are very excited to be here. Yes.

Indeed. It’s been not, like, a bit more than hundred days. Like, you know, since January 1, it’s been, like, you know, not touching ground, you know, flying pretty much everywhere around the world and being with our teams, like, you know, on the ground, our partners, you know, retailers, suppliers, and etcetera. I have to say one thing is I’m convinced more than ever, and Roberto will say you the same thing, that the fundamentals of the company are strong. We have very strong brands.

We have amazing teams around world. Now that being said, we need to just move with a lot more agility and speed than we’ve ever done before. And I think this is somehow what has informed, you know, the strategy and of beauty reimagine and what we’re going to discuss this morning. I think the fundamental of the company, we are going to turn 80 years old as a company next year. We’ve been 80 years old strong, and we have to adapt.

We have to adapt faster because the retail the consumers, retailers are moving faster than ever. I think in the in the way, Beauty Reimagine is here to address some of the challenges that we faced over the last few years. And Beauty Reimagine in a way has, like, you know, five pillars, and you saw some of it. There’s a glimpse of it in the videos, and each of them are here to just address the agility, the speed to be able for us to become the best consumer centric beauty prestige company in the world, but also to make sure that we reignite growth and rebuild solid double digit operating margin in the next few years. And if you allow me, like, you know, few minutes, you know, for for the team and for everybody here on the five pillars of BTO Imagine.

The first one and certainly one that is going to redefine who we are as a company is the consumer coverage. Consumers are moving faster than ever. And I think in the post COVID era, we’ve never seen consumers, regardless if you are, like, in The US, if you are in Europe, if you are in the emerging market in China, moving to new channel of distribution. And I think we as a team realized and that we were not moving fast enough to new channels, and we made a conscious decision that wherever a prestige consumer moves, we move. There’s no more debate as an organization going forward, but it has to be where the prestige consumer is because we remain a prestige beauty company as such.

So we’re moving to channel such as Amazon. In The US, you saw the move that we did now about a year ago. And now as of, like, last week, we have 12 brands on Amazon US, and it has allowed us to just reignite market share growth for the first time in many, many years in The US. And I could take more example in Shopee in Southeast Asia, TikTok shop that we have signed a global agreement with globally, which allows us to expand our brands in The US, in The UK, in Europe, in Southeast Asia, you name it. Now we have global platform that allows us to just deploy our brands at the speed of light in a way that has never been done before.

The second pillar is that when

Roberto Canaveri, Executive Vice President of Global Supply Chain, Estee Lauder: you have the right distribution,

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: the risk is a bit of a fragmented distribution around the world when you think about it. So you need to tailor your innovation to what distribution is, and so a much better understanding of what distribution is about. Is it trial? Is it replenishment? Or is it experience?

That’s the way you would define the three type of distribution that are the at our tip of our finger. I think when as a team, when we looked at Beauty Reimagine, what I know we were very good at is making the product that consumers love about us stronger. You think about the advanced like repair, the creme de la Mer from La Mer or Moisture Search from Clinique. We made this product stronger than ever. But, Steve, you know it’s this industry, there’s anywhere between 20 to 30% of the sales any given year that are coming from innovation.

And I think we were a little bit on the lower side as a company. So one of the thing that I’m absolutely committed with the team is to accelerate innovation. We’ve committed to triple innovation that comes to market in less than twelve months in the market across every single categories that is makeup, skincare, hair, or perfume. So once you have the right distribution and what you have, the right innovation, the right innovation, you need also to make sure it’s at the right price point. I’m sure we’ll talk about consumer sentiment in this moment in time.

I think the right innovation at the right price point in the right channel is more critical than ever, and we’ve developed a lot of capabilities and insights and data that allows to meet the consumers where they are. The third thing, when you have the right distribution, the right innovation, you need to make sure you boost your investment. In a subdued consumer economy these days, again, I’m sure we’ll talk about it, the cost of acquisition is going up.

Roberto Canaveri, Executive Vice President of Global Supply Chain, Estee Lauder: Yep.

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: And a lot of the work that we are doing is how every dollar we spend is becoming much more efficient. We need to just make sure we’re not focused only on the top of the marketing funnel, about the retention of the consumer, which obviously we need to make sure that we become the best company at retaining consumer because this is what gives the future profitability. But at the same time, you need to make sure that we bring a wide range of consumers from every age, every ethnicities around the world. Now you would say, how do you do that at the moment where you need to rebuild margin for this stellar company? And that’s the fourth pillar of beauty reimagine, which is how we create bold efficiency in the organization.

And we’ve announced in November 2023 the PRGB, the profit recovery and growth plan. At the end of at the beginning, it was not even the g was not there, and we added the g, if you remember Yes. About, like, you know, really focusing on growth. And it is, in a way, for everybody to understand the simple ways, how are we flipping the p and l on its head to have way less fixed cost and more viable cost. More viable cost to be able to invest in the business, but also more viable cost to go through volatility that seems to be the norm Yep.

These days in in the world. So and we’ll talk about it because the first year of the PRGP, which we are in today, it’s a two year program. Our fiscal twenty five and fiscal twenty six, the first year was really about rebuilding our gross margin and making sure that we are starting to just, you know, delay the organization. From a gross margin, we’ve made massive progress. Every quarter for the last three quarters, we’ve improved by 300 basis points our gross margin, and we’ve committed to at least 73.5% gross margin and on our way to continuous improvement, but also delayering the organization for more agility and more speed.

We’ve reduced the middle management by 20% already since the beginning of the fiscal year, and even my executive team, which is now 73% new in their position, has been reduced by 30%. So much more agile, and we are seeing, obviously, the benefit of that faster decision, much more agility, and and speed of decision. And the last part, certainly, that I’m somehow I’m excited about every pillars of beauty reimagine, but the last one is how do we reinvent the ways of working for us internally. And I’ve heard it from many of you that I’ve met over the last you know, even before I was officially in the position in the months of October, November, December, I spent a lot of time with everybody saying, we need to clarify who does what within the Estee Lauder organization. And I think today, we’re very clear between the brand, the region slash the affiliate, and the function who does what.

Let me make it very simple and very blunt is the brands are focusing on the long range vision, creating the best innovation. Once this is done, the regions are taking over and really are executing and scaling with the affiliate and executing with excellence, and the functions are here to really enable the vision. That’s why at the last earning calls at the April, I announced that we were moving officially the responsibility of the p and l into the region. Yep. So there was, you know, no misunderstanding of who takes the decision.

And that was that was one of the reason, but it’s also the second reason. If you want to move with speed Yep. You need to be close to the consumer. The p and l needs to be much closer to the consumer. So somehow that’s what has the last hundred plus days as informant.

We are moving really fast. Yeah. If you remember the beauty, imagine we announced it with, like, you know, maybe I was thirty five days in the job officially working with the team and spent countless hours cascading that through the organization and very confident that we are starting to see the beginning of some green shoot Mhmm. With market share again in The US, in China, in Japan, and some emerging market. Our way for to recovery and to growth is not a linear one because of the the environment that we are in, but I’m really confident today with the team that we are going to rebuild growth and profitability.

Great.

Steve, Unidentified role: One quick follow-up on the the affiliate versus the the brand. How much leeway do do the individual affiliates or individual geographies have in sculpting the brand message, you know, for the locality versus the the global brands Yeah. Kind of framework? And where does that decision how does that made?

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: That’s a that’s a very good question, Steve. And I think there’s a lot more leeway these days because I think AI allows you also to be and to tailor the communication. One thing as a company that I believe we are very strong is our ability to have a local relevant message depending if you are in India, if you are in China, if you are in France, you are in The US. I think the global brands define what you would call the top of the funnel. What is the desirability?

What is the global message? Regardless of what capital of the world or city you sit in, there’s a consistent message. But the way you would talk about skincare, take an example with a Chinese consumer and Americans consumer or an Indian consumer is very different, and the ability through insights and data, the consumer can and our affiliate can do it. Just to give you an example, a few weeks ago, we’ve announced a partnership with Microsoft. Mhmm.

And we’ve created two property tool, one that is called ConsumerIQ, and the other one is called Trans Studio. Trans Studio in a way allows us to sense any type of trends and conversation in real time happening around the world. That’s a proprietary tool that we’ve developed. Now once you have the sensing, you would say, okay. Many people can do that.

But the beauty of it is you marry it with a consumer tool, which is consumer IQ, which is mining all the data of the Astellas company over the last seventy nine years. And mining the trend with our internal information allows us in real time to deploy new messages, and AI is going to be here to allow, frankly, the tailoring of messages, communication on the ground in a much faster fashion going forward. Great.

Steve, Unidentified role: And then we gotta supply the product

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: to Now you have to supply

Steve, Unidentified role: the Yes.

Roberto Canaveri, Executive Vice President of Global Supply Chain, Estee Lauder: Please. Yeah. That’s the beauty of AI, and now we’re working very closely on all those things. But what Stefan is saying, we’re working on a AI application, which is an automatic deploy deployment of stock. So what happens?

When we have those trends, the AI version that we’re working on is looking at what is happening around the world and where is better depending on where we anticipate the trend to position the inventory to follow the trend real time constantly and actually learning from itself. So the more we do it, the more it will become accurate. So it’s all this is the demand side and the supply side, and the and those actions are very, very connected. All all our wanted to add.

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: All our factories have digital twins now. So we’re able to just modelize in real time depending on this trend Yep. How we need to service inventory around the world. And then once we agree on what it is, it can be just deployed in real time for production and deployments. Okay.

Steve, Unidentified role: I wanna geek out in the supply chain a bit, but but before I do so, you know, building these five pillars and unlocking the value of them, I think, would be, in some ways, easier if there was robust demand kinda at your back, which I don’t think is the case right now. It’s very dynamic and choppy. So I guess, you know, what is your sense of the current environment? You know, what do you are you what are the what are the key dynamics you’re monitoring as you wrap up fiscal twenty five and plan fiscal twenty six? But then stepping back, you know, as you think longer term, what are the how are you positioning the company?

You know, what are the key drivers of demand as you think longer term, and how do you balance those two those those two requirements?

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: I think it’s I think it’s on everybody’s mind. So where is the market is today and where is the market going? I have to say I’ve been blessed to be twenty five years in the beauty industry. I’ve never seen so much volatility, but at sometimes so much opportunity. I think you need to differentiate the cyclical and the structural trend that are happening in the market.

And, obviously, the cyclical one in the short term are affecting consumer confidence. I think it is everybody knows it, like consumer confidence in China has been subdued now for more than two years because of the real estate situation and everything that has happened post COVID. The US has been the surprise low consumer confidence because we all went into the calendar year thinking The US was going to be, like, know, the driver of the economy in so many consumption, like, you know, consumer goods product, including beauty. And Europe has been also a little bit subdued for some time. But I think that is linked clearly to some macroeconomic and political instability or, like, you know, volatility that happen.

It can be, like, you know, still fairly high interest rates, inflation that has been, like, you know, ramping up for, like, you know, many years. But I think that on the short term, I think, you know, shows that clearly the market is in the low single digits. Yep. No growth around the world. And I think it’s rebalanced by the fact that China has universalized the worst, and I think, you know, China now is back into low positive territory, but still it helps mathematically to just maintain the world to this low single digit growth.

Now when you look at the more mid to long term, I think the structural changes that are happening are really positive for the industry. And I think we are going to see industry resume with what is more mid to high single digit growth in the mid to long term. I just want to make sure that I’m not defining what mid to long term is because of the amount of volatility, but 2026 is going to be a very defining year for many reasons because you have political changes. You have midterm in The US. You have the next fifteen year plan of China that will be announced in March 2026.

So there’s a lot of defining moments that could accelerate consumer confidence or just, like, you know, anchor it into a little bit longer what it is. But on the structural changes, I see, like, you know, a few things that are happening in positive. The first one is the emerging of the emergence of emerging middle class around the world. And I think we call it, like, know, well over 500,000,000 consumers that will enter the middle class between now and 2030. Now when you think about beauty, prestige beauty, we’re still fairly accessible luxury.

Yeah. So middle class consumers is definitely the pool of consumers that we’re going to. So well over 500,000,000 new consumers of which some are coming well over a hundred millions from China, and then you have, like, India. And you have a lot also of emerging consumers in The US and in Continental Continental Europe that we are tapping into, I think, gives a lot of great new opportunity. Now, obviously, we need to adapt to these consumers.

The second thing is and surprisingly, the maturing of China make China more predictable in the future. I think we went through, obviously, a downtrend post COVID, but the maturing of China now part of the maturing of China is also the rise of the lead the the the local brands. Yep. But there’s still a balance between local and international that stays true. We’ve seen that in Japan.

We’ve seen that in Korea. We’ve seen it in many market. We are seeing it in India now, and we are adapting as a company to also being able to just win in this market. We have a new innovation center that we inaugurated at the beginning of 2023 that is re ramping up fast. Now we’ve, like, in new innovation, we launched an innovation on clinic clinic CX that is on the post procedure that was % like, you know, developed, but we have many others.

And we also launched in February our 17 brand in China, the ordinary, that is perfectly positioned from a price point to really compete with the local brands. So I think the the the maturing of the market and the more predictability of the market and the 17 brands that we have in the portfolio give us that we have a lot more to tap into. After there is also many trends from the consumers that are very interesting that are going to develop new opportunity. Think about the wellness. In a post COVID world, a lot of people are looking at wellness, and we are all going to live younger longer.

Mhmm. That’s what we aim to. You know? There’s this amazing stat that I was looking at the other day that fifty percent of the kids below five years old in The US will live over a hundred years old, and that’s actually true in Europe and in many other markets. So how obviously beauty plays in a role in wellness, in longevity, and etcetera.

The male consumer also now because of the rise of social media and platform like Amazon makes the accessibility of beauty much greater than it has been before. For the twenty last twenty five years, I’ve been hearing every year, oh, it’s the year of men. I’m like, you know, so like, it’s not been until, obviously, platform like Amazon, TikTok shop makes it more easy for this consumer to access beauty, and we are seeing already a a fast acceleration with Jo Malone, for instance. We’ve launched Cypress and Grapevine with the actor Tom Hardy, like, you know, the British brand and the actor, and we’ve seen tremendous growth in triple digit in some of the market being able to capture a new consumer to the brand. So I would say from from a consumer standpoint from a channel standpoint, there’s a big evolution.

Channels, as I said, there was the first pillar of beauty reimagine allows us to just communicate with the consumers in a greater way than ever before. And from a communication standpoint also, more platform, there’s more retailer networks that you can tap into, which makes with AI every dollar you spend much more efficient and much more tailored to every single person that is in this room and around the world. So the ability to connect with your consumer in a deeper way now is much greater than what it was and will only get better in the years to come. So I think when you look at all of that, I think in the midterm, it is true that the industry is under a lot of pressure between before because of the consumer confidence, but I’m really confident because of the structural challenge that we are seeing and monitoring. And we are adapting every single of our brands and our ways of working to this new structural change to be able to just capture our fair share of the future growth.

Great.

Steve, Unidentified role: Okay. Great. So, Roberto, the I’m very glad you’re here because I think the supply chain at Estee Lauder has not got enough attention over the course of over the course of time, and I think it’s very important to the future execution of everything that Stephan just articulated. So maybe you can just ground us a bit on where the supply chain, you know, has come from and where it is today and, you know, how you see it, you know, fit for fit for need given the the beauty reimagined strategy going forward.

Roberto Canaveri, Executive Vice President of Global Supply Chain, Estee Lauder: Yeah. Well, first of all, thanks a lot for for having Yes. Us on stage. I’m very happy to be here and talk about supply chain. So so a few things.

Where we come from? First, you’re saying. Well, we come from a place of growth where, actually, the company was in building, investing, and building capabilities and capacity ahead of anticipated growth. That’s where we were. And now we are really focusing on leveraging what we have and optimizing strongly optimizing those capabilities.

That’s that’s where we are today. That’s what we have done. That’s where we are today. So three or four things that I can mention on what we have the step change achievement we have done so far. I cannot start talking supply chain without mentioning, I think, what is the the foundation of every supply chain program, which is the IBP, the integrated business planning.

Why that? Well, essentially is we work on understanding the demand. So we demand plan. And then with the IBP, which is people, process, technology, basically, what we are trying to do, understanding the demand is synchronizing all the supply chain, all the ecosystem with our our sites, our suppliers, all the ecosystem, our supply chain to better fulfill this demand. That has been a significant focus on the in these few years because without this, it’s very difficult to optimize all the all the other capabilities in a supply chain.

The way I’ve done this, again, people process technology, but we’ve also built capabilities using this on scenario planning. Because as Stephane was saying, the volatility is such that we can do a lot of effort to try to understand better the demand, and then how do we synchronize. But we need scenarios because it’s it’s such a volatility that is very difficult to anticipate everything. So we are preparing we have we have prepared a lot of scenarios so that we can pivot quickly from one to the other when it’s the case. So that’s the IBP.

What have we really achieved with this? Well, we’ve improved quite a lot, almost 10 points. So, actually, 10 points, our our forecast accuracy, which has led to keeping the service or actually improving our service to our customers to the consistently mid nineties, which is a, I mean, a solid performance. But we have done that while we have strongly impacted our inventory level. Actually, when we started, we were well above the 200 days of cover, significantly above the two hundred days of cover, and we have taken out in excess of eighty days.

So it has been a mass massive, of course, improvement in that cash opportunity. That’s something that that we’ve done. And as a base, this has also resulted into an opportunity to drive the gross margin journey that you’ve seen and that Stephane was mentioning. Because with that, we’ve actually been able to bring the gross margin where it is today, and we can see the journey of continuous improvement. Few other things in the gross margin that we have been working on in leveraging the capabilities.

One starts with a zero waste mindset. We had waste and excess and obsoletes in our business while we are closing the year, cutting by half the amount of excess and obsolete. In the last twelve months, we actually reduced by 50% that part, which, of course, a big contribution to the gross margin. The second big contribution has been our procurement activities while buying ingredients and materials and components for our products. The it’s not only a procurement strategy, which we’ve been working quite a lot with with spend area management.

All the tech technicalities that we have in procurement, that is all done. But it’s a a lot also from a value chain standpoint, creating platform to ensure that we have multiple components for same brands. The the the whatever is not consumer facing can be leveraged, can be standardized so that we have we can scale up and and, of course, leverage the volume in a different place. This has been this has allowed us to move from a low single digit saving year year on year on our procurement activities to more than 5%. So we’re a high single digit savings.

So it’s it’s really a a I mean, of course, a significant impact. That’s the second part of the gross margin. And the third part, which personally I’m very proud of, is we’ve been working on a couple of programs in our manufacturing manufacturing performance that have manufacturing activities that have dramatically, I think, improved our manufacturing efficiencies. Actually, a large part of the majority of the PRGP that we are delivering so far comes from the gross margin, so comes from those contribution. And if I can, looking at the time, summarize what we’ve done is essentially two major program in manufacturing.

One really targeted at accelerating the performance improvement. So it’s really a a significant push on performance. But the other one in manufacturing, you need to make things sustainable. Otherwise, there is a risk that with the distributed network that we have that you you accelerate, you improve, but six months after, if you’re not sustaining it, it goes away. We we have another program that is actually sustaining the performance that we achieved and strongly working on continuous improvement.

So the journey is there to continuous improvement. So that’s what we have done. Last that I like a lot to mention, even those quality has always been a significant attribute of of the company. We’ve been focusing in leveraging capabilities there as well, and we actually improved 80% the in market quality issue. Our consumer complaints are being are reducing 20% year on year.

Last year was 25%. So a significant contribution even in an an hour where the company has always been very strong. And lastly, how are we prepared, as you’re saying, to cope with the current business need? I mean, we will never stop the continuous improvement. There is a lot ahead of us.

AI is bringing a lot of opportunities, but I I personally feel we’re in a in a very solid place. Actually, everything that I just said, we have achieved in a in a volume deleverage environment. So we have increased the gross margin to the level Stephane was mentioning in a volume deleverage environment. We’re very ready for volume leverage. By the way, we will not need any CapEx, any investments.

Stephane is is insisting on we need to do consumer facing. We we need to free up. We will. We are freeing actually, we are now freeing up CapEx because we don’t need investment for capacity and capabilities. We have them.

We can actually focus on making sure that we do consumer facing investment and the volume leverage opportunity ahead of us. I I think it will

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: That’s too that’s a very important point that what Roberto is saying is, like, we are shifting from a company where we build. We use a lot of CapEx in term of building capabilities to really now shifting CapEx into consumer facing, which is going to be one of the areas which allow us to to grow. Also, one of the benefit of all of it, and it’s well known in the prestige industry industry because in in different areas of beauty, people are used to have different manufacturing network around the world. But in prestige, usually, it’s very concentrated in one location. The seller company has nine sites around the world, five in North America, 3 in Europe, and one in Japan.

That allows allows us we’ve now all what Roberto say in term of agility to move production in different places around the world, and we’ve been able to mitigate a lot of the tariff impact Yes. On finished goods. Today, you look at Europe where we are today, 75% of what we sell on a given day in Europe will come from Europe or outside of The US. Seventy Five plus of what we sell in The US comes from The US or Canada and the protected under the USMCA agreement. And we have a line of sight that less than 10% of what we’ll sell in China will come from The US.

That has basically been made possible because of this very agile and diverse manufacturing network that we have around the world.

Steve, Unidentified role: Yes. And just one question because it was an issue during COVID was the the the lack of robustness in terms of distribution centers.

Roberto Canaveri, Executive Vice President of Global Supply Chain, Estee Lauder: Is that remedied? It’s it’s it’s totally different. We have actually one one of the investment in the past the company have done is also in the distribution center. Galganin was one of the main investment in a in a distribution center for travel retail. We’ve been doing this, but we’ve also been working on on aligned with what Stephane was saying on variable cost.

We have opened actually replaced all most of the places where we were having our distribution centers, especially in Asia Pacific with third party distribution centers. So we are completely covered. We have been investing in China. China was of having only one distribution center, and that was one of the challenge in terms of resilience that we had when the Shanghai lockdown Mhmm.

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: We were

Roberto Canaveri, Executive Vice President of Global Supply Chain, Estee Lauder: closed then. Started. We were only in Shanghai. Now we have well, actually, multiplying multiple distribution center in China as well. It’s already now already today alive with the second one and the third one.

So we are in a very place. I personally believe the the fulfillment the multichannel fulfillment capability is absolutely there. Correct. 100%

Steve, Unidentified role: globally. Feeds both agility and business continuity. So

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: Absolutely. Yeah. This is and what that’s what you need today in today’s environment you need to just be agile to just move, like, you know, different between one geography to the other. And

Roberto Canaveri, Executive Vice President of Global Supply Chain, Estee Lauder: I mentioned multichannel because as as Stephane was saying from and as as a beauty, imagine we’re going where the customer where the consumer is, and we we can shift to a different channel. Yes. We are actually having a multi multichannel fulfillment capabilities for that one. So wherever we go, I think the capability is there to fulfill. Right.

Not really enough.

Steve, Unidentified role: I know one thing investors then ask about. Okay. The strategy is great. We believe in the execution. Mhmm.

Here we go. Is is the brand portfolio fit for purpose today? So, you know, what what’s your assessment, Stefan, of of the current brands you have, the ability to meet current needs, future needs, and how do you think about, you know, portfolio evolution, brand incubation, brand acquisition, even brand divestment?

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: You know, I think it’s a it’s a obviously, the question is on everybody’s mind. And one of the thing we do, and I’ve said it, you know, publicly, every brand goes through a very thorough strategy review every year. And this year, we’ve done it a little bit more in-depth than usual, obviously, being new in the position with a new executive team. And we we have a there there’s something because of beauty reimagine, there’s a possibility for us to just be able to reposition some of our brands where we have areas of improvement into, like, you know, new channels. But like I said it at the beginning, I really believe that the portfolio of brands that we have that allows us from all the way to La Mer, Le Labore, like, in term of luxury, all the way down to Clinique and oil and the ordinary to be able to tap into a very wide branch of, like, you know, consumers.

And one of the thing that I’ve said to the brand and asked the brand is really to just make sure that they have the right innovation for the right channel, the right consumer. Let me just, like, you know, very simply because you think about from the Estee Lauder brand all the way to, like, you know, smaller brand. The Estee Lauder brand this year with a very fast turnaround has been able to just, launch a new consider under the very famous Double Wear franchise, which is number one foundation in the world and is now been the number one makeup launch in The US in 2025. Then you take Clinique has launched the glow moisture surge at 49 $45.39 euro a year in Europe, and it’s been, like, the number one launch in serums around the world. Then you take Too Faced, one of our makeup brands have launched what we call the ribbon lash mascara that has been the entire campaign has been developed in less than six weeks through AI and has allowed us to tap into new consumers.

And Bumble and Bumble has been our most well over planned brand on Amazon. You know, if you know, like, on Amazon Air is one of the largest Yeah. Of the largest category. So now all of a sudden, you can look at this brand and say, how am I going to position them in the new channels and making sure that they have the right innovation at the right price point launch at the right speed. So we are always looking and reevaluating our brands, but I think today the focus is about reevaluating our brand to just make sure that they have the right innovation, right price point, right channel, right communication because there’s also one thing in the third pillar of beauty reimagine, we are reinventing our ways of communicating, make sure that we are flipping also the funnel of communication on its head and just getting more efficiency behind each of our brands.

And the last thing I would say, we have internally an incubator. You know, when we purchased this, of which the ordinary was part, like, you know, in 2023 where we became finally the full owner of, like, you know, Descem. Descem was created as an incubator. That was the original idea. Today, beside the ordinary, we have three other brands.

We have Niod, we have Avastin, and we just launched a new brand in Bath and Body, Loofa, that we’ve launched on, like, you know, TikTok and some other brands and our brand and our brand.com, which allows us to test in rapid fashion brands that we can develop in less than a year, and there’s going to be more to come. So there is the organic, but there’s also the inorganic growth that we can create from internally. Great.

Steve, Unidentified role: The when we I think when investors look back, especially at the last, you know, five, six, seven years

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: Mhmm.

Steve, Unidentified role: China was so central to Estee Lauder’s growth for for that period of time.

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: Mhmm.

Steve, Unidentified role: I think as as we’ve listened to you today, as we turn the page look forward, the future is much more balanced. Yep. How do you think about the balance of growth and making sure that you are not just in the right channel, but the right the right geography and you’ve both from a, you know, a a brand and product, but also a a supply perspective?

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: Yeah. And I think the the best way to put it is I think about the world as the world. Now there’s one geography, one consumer. And I think, you know, the company has built tremendous strengths with the Chinese consumer, and I want to be very clear. The future of China is still very strong because of the the emerging media class that will

And I think we have position of strengths in this market. We have two of the top three brands in the market, and we intend to just build on thirty plus years of investment in China. But the very strong thing for us is the rebalancing of the growth. And I would say the first thing is North America, And we’re very excited to in the last quarter to announce that after many, many years, we were returning in growth. We have 10 brands that have maintained or grown market share in the last quarter, which was very strong, and we had growth in three of the four categories, mainly skincare, makeup, and hair, where we had some growth.

So a big focus on investment and, obviously, Amazon, TikTok shop, but also our historical partners in specialty multi like Altasifoire. And the the department stores, obviously, is always on everybody’s mind is reducing, you know, dramatically in term of penetration to the total, and there’s a natural attrition because of numbers of stores and more investment in the top department stores where there’s

Steve, Unidentified role: a lot

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: of traffic. The second area is emerging markets. As part of my new organization, I’ve announced the creation of the emerging market regions. We didn’t had one. It was separated within different geography.

And now the responsibility of Nadine Graf who is now the head of UCAM. UCAM is Europe, UK, and all emerging markets that span from Turkey to India to Southeast Asia, Middle East, and so on. We have a real clear focus of acceleration. I’m not happy yet on the result that we’re having on emerging market. We believe that there’s a much stronger potential, and often brands like MAC or the ordinary perfectly positioned in term of price point to be able to win in this market.

And then I I don’t want to forget, like, in a market like The UK and Korea. Korea, we’re the leader in this market. We’ve had some a little bit market share gain over the past few years, but we’re not there yet. So we have new leadership in both of this market in The UK and in Korea, and we are really deploying beauty reimagine to just make sure that once we can consolidate our leadership position and start regaining market share. But so you saw in the result, we have, like, you know, the the The US, we have China, we have Japan.

We still have a lot of work to do in other markets, but I think it’s just a matter of, like, you know, deploying beauty reimagine and, again, putting the right leaders in the right places. And what is on everybody’s mind is also travel retail. Travel retail has been a a big source of growth for the Estella company for many years. We’ve reduced significantly the dependency on travel retail, and I’ve announced it at the last call where we went from the mid twenties to, like, you know, mid teens now in term of penetration to the total business, which reduced the volatility to the channel. Now, like, you know, travel retail are still a very strategic role to play.

You know, many of you are traveling through the world. The airports are more beautiful places where you can express your brand in a way that is quite unique and consumers are often buying for the first time product in travel retail, but the volatility linked to the channel is is here to stay, frankly, but and also for us just to bring it back to a level that is more reasonable and having a much balanced course around the world. So we don’t depend on one geography of one consumers the way that we’ve had it in the past.

Steve, Unidentified role: Great. We are out of time. So I will respect the conference and not add another question.

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: Okay. Thank you

Steve, Unidentified role: very much.

Stephane de La Fabre, President and Chief Executive Officer, Estee Lauder: Thank you so much, Steve. I appreciate it. Thank you.

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