2020 Year in Review

In today’s ever-evolving, dynamic beauty landscape, The Estée Lauder Companies is innovating with increased focus around hero products and franchises — the beloved, loyalty-building products that consumers return to again and again. Today, we have more than 100 hero products across our brand portfolio, including Estée Lauder Advanced Night Repair, M•A•C Studio Fix Foundation, Clinique Moisture Surge, La Mer Crème de La Mer and TOM FORD BEAUTY signature fragrances. As consumers increasingly seek out trusted brands with high-quality products and ingredients, they are discovering, and returning to, these key franchises.

Like high-quality consumer and luxury products, our brands generate intense consumer loyalty, which is reflected in strong repurchase rates. And, we know that to continue to build meaningful market share in our industry, we need to go beyond simply getting consumers to try our products. Our high-quality, trusted hero products and franchises help turn first-time consumers into lifelong devotees, driving long-term value.

The Estée Lauder brand has consistently demonstrated success in focusing on high-quality hero products, generating unwavering trust and loyalty through franchises such as Advanced Night Repair, ReNutriv, Revitalizing Supreme+, Micro Essence, and Double Wear, which helped drive the brand’s growth during fiscal 2020.

Innovation continues to drive the strong performance of our hero franchises, accounting for over 25 percent of sales across our portfolio in fiscal 2020. Global consumer demand for these “next generation” versions of revolutionary products and formulas has been compelling; for example, Estée Lauder’s launch of Perfectionist Pro Rapid Brightening Treatment on Alibaba’s Hey Box was one of the brand’s most successful on the platform. Clinique’s Even Better line has been successful in China and has a highly devoted fan base in the United States, while La Mer’s The Eye Concentrate contributed to significant share gains in luxury on Tmall during fiscal 2020.

It’s clear that our laser-focus on hero products and franchises is a proven, winning strategy, and that these are bright stars within our portfolio, reflecting beautifully our multiple engines of growth.

Please explore some of our notable hero products, franchises and innovations below.

Non-GAAP Information

The Fiscal 2020 Year-in-Review materials contain references to the following non-GAAP financial measures: constant currency, adjusted net earnings and adjusted diluted earnings per share. We use such measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period, or 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. Click here for information about GAAP and non-GAAP financial measures, including reconciliation information.

Forward-Looking Statements

Certain statements in the Fiscal 2020 Year-in-Review materials 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. Click here for Cautionary Note Regarding Forward-Looking Statements. In addition, please refer to our reports with the SEC, click here, including our Form 10-K for fiscal 2020, where you’ll find factors that could cause actual results to differ materially from these forward-looking statements.

During fiscal 2020, the Online channel has continued to thrive and accelerate around the world. Through a click, a swipe or a text, our brands are delivering the products and experiences consumers love, right at their fingertips. Our Online presence is global and highly diversified, with Online sales in more than 50 countries, more than 350 brand.com sites, 80 brand boutiques on platforms such as Tmall and 1,700 retailer.com doors.

With COVID-19 impacting the world, and most of our brick-and-mortar distribution being closed during various timeframes this year, we quickly pivoted to our strong foundation in Online. We greatly accelerated our digital programming and investments across our brand sites and increased our focus on key Online shopping events, helping us capture global sales, reach more consumers and drive increased conversion rates. Online growth accelerated sharply in the second half of fiscal 2020, with our Online business in China demonstrating particular strength, elevated by well-integrated Online and offline campaigns for Singles Day and our brand expansion strategy on Tmall.

In conjunction with strong sales growth, consumer trends in Online are very promising. Beloved hero products like Estée Lauder’s Advanced Night Repair, La Mer’s Crème de La Mer, The Treatment Lotion and The Concentrate, and Clinique’s Moisture Surge have seen great global demand in the channel since early calendar year 2020, demonstrating the dynamism and enduring appeal of big brands. Conversion rates are sharply higher and our fiscal 2020 sales rose across all demographics — most notably, with ageless consumers who are discovering and familiarizing themselves with Online as a platform for commerce. These are trends that we expect to continue beyond the pandemic, and we are prepared to continue to and capture these opportunities.

As consumer behavior continues to evolve, we are harnessing our data in increasingly strategic ways, and leveraging our analytics capabilities and consumer insights to provide best-in-class services, further unlocking the potential of omnichannel and Online.

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Non-GAAP Information

The Fiscal 2020 Year-in-Review materials contain references to the following non-GAAP financial measures: constant currency, adjusted net earnings and adjusted diluted earnings per share. We use such measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period, or 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. Click here for information about GAAP and non-GAAP financial measures, including reconciliation information.

Forward-Looking Statements

Certain statements in the Fiscal 2020 Year-in-Review materials 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. Click here for Cautionary Note Regarding Forward-Looking Statements. In addition, please refer to our reports with the SEC, click here, including our Form 10-K for fiscal 2020, where you’ll find factors that could cause actual results to differ materially from these forward-looking statements.

As a global leader in prestige beauty, we have an unparalleled ability to imagine and create the products consumers didn't know they need, but can’t live without. Innovation is fundamental to our strategy and despite the challenges of fiscal 2020, innovation once again represented over 25 percent of sales. We continuously collaborate across the organization to leverage our data analytics and consumer insights, which help us anticipate industry and consumer trends to accelerate our competitive edge. In addition to the global beauty landscape, we are highly tapped in to global and regional trends in the interconnected worlds of fashion, art, technology and pop culture, all of which provide inspiration and inform our pipeline. We are able to efficiently and appropriately shift resources to capture the biggest opportunities, investing in the right areas that lead to consumer-inspired and creativity-driven innovation - all made possible by our best-in-class global talent.

Additionally, this fiscal year we increased our investment in the Asia/Pacific region to drive bold, breakthrough prestige beauty innovation. Expanding on our existing capabilities in China, we are building a new, state-of-the-art innovation center in Shanghai, complete with enhanced cutting-edge technologies and tools, which will help us innovate for our Chinese and Asian consumers with creativity and speed.

Other innovations from across our brand portfolio resonated with consumers globally, including Clinique’s Smart Clinical Multi-Dimensional Age Transformer moisturizer which was particularly well-received among ageless consumers. The Eye Concentrate from La Mer contributed to significant share gains in luxury on Tmall, while M•A•C’s Love Me Lipstick, an innovative formula combining bold color with lasting moisture, helped to increase the brand’s lip business.

Across every aspect of business - from sophisticated data analytics and consumer insights to cutting-edge formulas and technologically-advanced, sustainable packaging - continuous innovation is a hallmark of how we operate, enabling our brands to anticipate trends while always pivoting and adapting with agility.

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Non-GAAP Information

The Fiscal 2020 Year-in-Review materials contain references to the following non-GAAP financial measures: constant currency, adjusted net earnings and adjusted diluted earnings per share. We use such measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period, or 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. Click here for information about GAAP and non-GAAP financial measures, including reconciliation information.

Forward-Looking Statements

Certain statements in the Fiscal 2020 Year-in-Review materials 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. Click here for Cautionary Note Regarding Forward-Looking Statements. In addition, please refer to our reports with the SEC, click here, including our Form 10-K for fiscal 2020, where you’ll find factors that could cause actual results to differ materially from these forward-looking statements.