Sentences and paragraphs of EL's Risk Factors and MD&A, 10-K 2026-08-19 against 10-K 2025-08-20.
Each links to the text at sec.gov.
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RewordedRisk Factors
As we outsource functions, functions and consolidate service providers, we become more dependent on the entities performing those functions. functions and services.
Read it in 10-K 2026-08-19 at sec.gov ↗
RewordedRisk Factors
In addition, some of our suppliers, vendors, service providers, cloud solution providers and customers have in the past experienced, and may in the future experience, such incidents, which could in turn disrupt our business. business or compromise the security of our Company data.
Read it in 10-K 2026-08-19 at sec.gov ↗
RewordedRisk Factors
Such risks include industrial accidents, environmental events, strikes and other labor disputes, capacity constraints, disruptions in ingredient, material or packaging supply or availability of natural resources (e.g., water), as well as global shortages, disruptions in supply chain or information technology, loss or impairment of key manufacturing or distribution sites or suppliers, product quality control, safety, increase in commodity prices and energy costs, licensing requirements and other regulatory issues, as well as natural disasters, outages due to fire, floods, power loss, telecommunications failures, break-ins and other events or external factors over which neither we nor our suppliers have no control.
Read it in 10-K 2026-08-19 at sec.gov ↗
RewordedRisk Factors
Achieving our long-term strategy will require investment in new capabilities, brands, categories, distribution channels, supply chain facilities, technologies technologies, including AI and data analytics, and emerging and more mature geographic markets.
Read it in 10-K 2026-08-19 at sec.gov ↗
Quiet changesRisk Factors
These applications may become are becoming increasingly important in our operations over time.
Read it in 10-K 2026-08-19 at sec.gov ↗
AddedMD&A
(2) The net sales and operating results from our travel retail business are included in the Asia/Pacific region.
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AddedMD&A
While we have seen improvements within our business, we are mindful of areas of volatility and uncertainty that may impact our results. We continue to face challenges in key markets in the West, including in some markets in Western Europe and the United States. Within our Asia travel retail business, we continue to monitor the impacts of the change in duty-free retailers servicing the Beijing and Shanghai airports, including the related online businesses. We are also monitoring the conflict in the Middle East as it relates to our business in the domestic markets and travel retail locations in the region. Net sales from locations impacted by the conflict in the Middle East accounted for approximately 2% of consolidated net sales in fiscal 2025. We continue to monitor and assess the impact that these areas of volatility and uncertainty may have on net sales and profitability, including impacts to our effective tax rate from changes to our geographical mix of earnings.
Read it in 10-K 2026-08-19 at sec.gov ↗
AddedMD&A
On February 20, 2026, the U.S. Supreme Court ruled that the U.S. tariffs imposed under the International Emergency Economic Powers Act (“IEEPA”) on goods imported into the U.S. were unauthorized. The ruling did not address potential refunds, however on March 4, 2026, the U.S. Court of International Trade ordered U.S. Customs and Border Protection to begin refunding all tariffs imposed under IEEPA. During the fiscal 2026 fourth quarter, we submitted claims for a portion of our eligible IEEPA tariffs paid, and have begun to receive refunds. For refunds received during the period, we have recorded these as an offset to cost of sales. As of June 30, 2026, the remaining amount of potential IEEPA tariff refunds not yet submitted or for which refunds have not been received are not considered material to the consolidated financial statements.
Read it in 10-K 2026-08-19 at sec.gov ↗
AddedMD&A
As of June 30, 2026, approvals under the Restructuring Program concluded, and by the end of fiscal 2027, the cumulative approved initiatives are expected to be substantially completed.
Read it in 10-K 2026-08-19 at sec.gov ↗
AddedMD&A
On December 7, 2023 and January 22, 2024, purported securities class action complaints were filed in the United States District Court for the Southern District of New York against the Company and its then Chief Executive Officer and Chief Financial Officer. The actions were consolidated on February 20, 2024. On March 22, 2024, plaintiffs filed a consolidated amended complaint alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on alleged materially false and misleading statements between February 3, 2022 and October 31, 2023. On March 31, 2025, the Court denied defendants’ motion to dismiss. On April 2, 2026, the parties reached an agreement in principle to settle the securities class action litigation. In light of these discussions, during the fiscal 2026 third quarter, we recorded a loss contingency of $84 million, net of the estimated probable insurance recoveries, in the consolidated statements of earnings (loss) relating to a potential settlement of the securities class action. As of June 30, 2026, the total settlement amount has been funded, including amounts paid by the insurance carriers. This matter is subject to final approval from the Court.
Read it in 10-K 2026-08-19 at sec.gov ↗
AddedMD&A
Aligned with our policy on Goodwill and Other Indefinite-lived Intangible Assets, as described in Item 8. Financial Statements and Supplementary Data – Note 2 – Summary of Significant Accounting Policies, we performed our annual impairment assessments as of April 1, 2026. Goodwill and trademark intangible assets were evaluated using either qualitative or quantitative assessments, as appropriate based on the reporting unit or brand. Based on the results of these assessments, no impairment charges were recorded, however, certain trademarks have limited excess fair value over carrying value.
Read it in 10-K 2026-08-19 at sec.gov ↗
AddedMD&A
Reported makeup net sales increased $71 million, or 2%, in fiscal 2026, including the favorable impact of foreign currency translation of 2%. Including the favorable impact of foreign currency translation, the increase in makeup net sales was primarily driven by M·A·C, reflecting higher net sales in the lip subcategory, driven by Powder Kiss Lipstick, Lip Pencil, MACximal Silky Matte Lipstick and MACximal Sleek Satin Lipstick. Also contributing to the increase in M·A·C net sales was the benefit from targeted expanded consumer reach.
Read it in 10-K 2026-08-19 at sec.gov ↗
AddedMD&A
The increase in net sales from Le Labo was led by the Classic Collection, including growth from targeted expanded consumer reach and the benefit from new product launches. Net sales from TOM FORD increased, reflecting the benefit from new product launches which created halo benefits on existing products, with overall growth in both the Signature and Private Blend franchises. Net sales from KILIAN PARIS increased, driven by the Angels' Share and Love, don't be shy franchises including growth attributable to new product launches and key campaigns, as well as growth from targeted expanded consumer reach.
Read it in 10-K 2026-08-19 at sec.gov ↗
AddedMD&A
The increase in net sales from The Ordinary reflected growth of the Multi-Peptide Serum for Hair Density, as well as the benefit from targeted expanded consumer reach.
Read it in 10-K 2026-08-19 at sec.gov ↗
AddedMD&A
The decrease in net sales from Aveda reflects the brand’s strategies to improve long-term performance, including (i) planned rebalancing of online promotional activity and (ii) the exit from underperforming doors, including freestanding stores. These declines were partially offset by the impact from its launch in Amazon's U.S. Premium Beauty store during the fiscal 2025 fourth quarter.
Read it in 10-K 2026-08-19 at sec.gov ↗
AddedMD&A
(1)The net sales from our travel retail business are included in the Asia/Pacific region.
Read it in 10-K 2026-08-19 at sec.gov ↗
AddedMD&A
The increase in net sales in our travel retail business was driven by Asia travel retail, including (i) the increase in net sales in Korea travel retail and Hong Kong SAR travel retail, benefiting from retailer shifts toward more profitable duty-free business models, which helped reduce discounting, as well as the increase in traveling consumers, (ii) net sales growth in Hainan travel retail, reflecting the improvement in retail sales, benefiting from higher traffic and key campaigns to drive growth, and (iii) the net sales decline in the rest of mainland China travel retail, primarily driven by the transitory pressure from the change of duty-free retailers servicing the Beijing and Shanghai airports, including the related online businesses.
Read it in 10-K 2026-08-19 at sec.gov ↗
RemovedMD&A
(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. This is primarily due to certain capabilities related to the travel retail business that are centralized in The Americas region and, as such, a component of the operating income generated by this business is transferred to The Americas through an intercompany royalty.
Read it in 10-K 2025-08-20 at sec.gov ↗
RemovedMD&A
We have experienced challenges within our business and we expect volatility and uncertainty to continue. Although there are early signs of stabilization in mainland China, travel retail continues to be weak and challenges persist in the West, including subdued sentiment in the U.S. and Western Europe. These challenges are collectively expected to impact net sales and profitability, including impacts to our effective tax rate from changes to our geographical mix of earnings.
Read it in 10-K 2025-08-20 at sec.gov ↗
RemovedMD&A
We are also monitoring certain provisions in global tax regulations that may expire during fiscal 2026, which, if not extended, could increase our effective tax rate.
Read it in 10-K 2025-08-20 at sec.gov ↗
RemovedMD&A
During the fiscal 2025 second quarter, the TOM FORD brand experienced lower-than-expected growth within key geographic regions and channels, including in mainland China, Asia travel retail and Hong Kong SAR. Also during the fiscal 2025 second quarter, the Too Faced reporting unit experienced lower-than-expected results in key geographic regions and channels. As a result, we made revisions to the internal forecasts relating to our TOM FORD brand and Too Faced reporting unit. Additionally, there were increases in the weighted average cost of capital for both the TOM FORD brand and Too Faced reporting unit as compared to the prior-year annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2024.
Read it in 10-K 2025-08-20 at sec.gov ↗
RemovedMD&A
We concluded that the changes in circumstances in the TOM FORD brand and Too Faced reporting unit, along with increases in the weighted average cost of capital, triggered the need for interim impairment reviews of the TOM FORD trademark and the Too Faced trademark and goodwill. These changes in circumstances were also an indicator that the carrying amounts of Too Faced’s long-lived assets, including customer lists, may not be recoverable. Accordingly, we performed interim impairment tests for the TOM FORD and Too Faced trademarks and Too Faced goodwill as well as a recoverability test for the Too Faced long-lived assets as of December 31, 2024. 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, and recorded an impairment charge of $773 million for TOM FORD and $75 million for Too Faced. We concluded that the carrying amounts of the long-lived assets for Too Faced were recoverable. Additionally, as a result of the interim impairment review, the remaining carrying value of Too Faced’s goodwill was not recoverable and we recorded an impairment charge of $13 million, reducing the carrying value to zero. The significant assumptions used in the relief-from-royalty method include revenue growth rates and profit margins, terminal values, weighted average cost of capital used to discount future cash flows and royalty rates. The most significant unobservable input used to estimate the fair value of the TOM FORD and Too Faced trademark intangible assets was the weighted average cost of capital, which was 11.5% and 14%, respectively.
Read it in 10-K 2025-08-20 at sec.gov ↗
RemovedMD&A
Based on our annual goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2025, we determined that the carrying value of the Dr.Jart+ and Too Faced trademarks exceeded their estimated fair values. As it relates to Dr.Jart+, a decision was made in the prior year in the reporting unit’s operating plan to exit the travel retail channel. A revised strategy was implemented that included increased direct investment in other areas of the business, including in mainland China, to support the brand’s future growth. However, given the lower-than-expected growth within key geographic regions in fiscal 2025, specifically within mainland China and Korea, it was determined that revisions to the internal forecasts were necessary which were finalized and approved in the fiscal 2025 fourth quarter in connection with the brand’s annual planning process, and reflected in the goodwill and other indefinite-lived intangible asset impairment testing as of April 1, 2025. The Too Faced reporting unit continued to experience lower-than-expected results in key geographic regions and channels and, as such, it was determined that revisions to the internal forecasts were necessary. These changes in circumstances were also indicators that the carrying amounts of their respective long-lived assets, including customer lists, may not be recoverable.
Read it in 10-K 2025-08-20 at sec.gov ↗
RemovedMD&A
For purposes of calculating the estimated fair values of the trademark intangible assets, we utilized the relief-from-royalty method, and recorded an impairment charge of $83 million for Dr.Jart+ and $50 million for Too Faced. We then performed a recoverability analysis of the Dr.Jart+ and Too Faced long-lived asset groups and, based on the estimated undiscounted cash flows of the asset groups, concluded that the carrying amount of the long-lived assets for Dr.Jart+ were not recoverable, whereas for Too Faced were recoverable. For purposes of calculating the impairment charge for the long-lived assets of Dr.Jart+, the asset group was determined to be the reporting unit. The estimated fair value of the asset group was based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the asset group. As a result, the calculated impairment charge to be allocated to the long-lived assets of Dr.Jart+ was $292 million. We concluded that the carrying value of the Dr.Jart+ customer list intangible asset exceeded its estimated fair value, which was determined utilizing the multi-period excess earnings income approach by discounting the incremental after-tax cash flows over multiple periods. The estimated fair value of all other long-lived assets of Dr. Jart+ exceeded their carrying values. As a result, the $292 million impairment charge was allocated entirely to the Dr.Jart+ customer list intangible asset.
Read it in 10-K 2025-08-20 at sec.gov ↗
RemovedMD&A
The significant assumptions used in the calculations of the Dr.Jart+ and Too Faced trademark and Dr.Jart+ customer list impairments 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 impairments was the weighted average cost of capital, which was 10.5% for Dr.Jart+ for both the trademark and customer list impairments, and 13.5% for Too Faced.
Read it in 10-K 2025-08-20 at sec.gov ↗
RemovedMD&A
A summary of the impairment charges for the three and twelve months ended June 30, 2025 and the remaining trademark, customer list and goodwill carrying values as of June 30, 2025, for the TOM FORD brand and the Too Faced and Dr.Jart+ reporting units, are as follows:
Read it in 10-K 2025-08-20 at sec.gov ↗
RemovedMD&A
Impairment Charges(1) Carrying Value (In millions) Three Months Ended Twelve Months Ended As of June 30, 2025 June 30, 2025 June 30, 2025 Brand/Reporting Unit Geographic Region Trademark Customer List Goodwill Trademark Customer List Goodwill Trademark(2) Customer List Goodwill TOM FORD The Americas $ — $ — $ $ 773 $ — $ — $ 1,805 $ — $ Too Faced The Americas 50 — — 125 — 13 62 50 — Dr.Jart+(3) Asia/Pacific 83 292 — 83 292 — 42 189 — Total $ 133 $ 292 $ $ 981 $ 292 $ 13 $ 1,909 $ 239 $
Read it in 10-K 2025-08-20 at sec.gov ↗
RemovedMD&A
(1)The date of the fair value measurement for the TOM FORD trademark intangible asset was December 31, 2024. The dates of the fair value measurement for the Too Faced trademark intangible asset and Too Faced reporting unit were December 31, 2024 and April 1, 2025. The date of the fair value measurement for the Dr. Jart+ trademark intangible asset and asset group was April 1, 2025.
Read it in 10-K 2025-08-20 at sec.gov ↗
RemovedMD&A
(2)The carrying values of the trademark intangible assets, immediately subsequent to the impairment charges, are equal to their estimated fair values.
Read it in 10-K 2025-08-20 at sec.gov ↗
RewordedMD&A
Year Ended June 30, % Change % Change in Constant Currency ($ in millions, except per share data) 2026 2025 2024 Variance Net sales, as reported $ 15,049 $ 14,326 $ 15,608 $ (1,282) (8)% (8)% 723 5% 3% Returns associated with restructuring and other activities 12 (3) 1 (4) 15 Net sales, as adjusted $ 15,061 $ 14,323 $ 15,609 $ (1,286) (8)% (8)% 738 5% 3% Operating (loss) income, income (loss), as reported $ 780 $ (785) $ 970 $ (1,755) (100+)% (100+)% 1,565 100+% 100+% Charges associated with restructuring and other activities 823 486 124 362 Goodwill impairment 13 291 (278) 337 Securities class action litigation settlement 84 — 84 Impairment of goodwill and other intangible assets 1,273 180 1,093 — 1,286 (1,286) Talcum litigation settlement agreements 159 — 159 Change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax — 23 (23) (159) Operating income, as adjusted $ 1,687 $ 1,146 $ 1,588 $ (442) (28)% (27)% 541 47% 45% Provision for income taxes, as reported $ 335 $ 93 $ 363 $ (270) (74)% (73)% 242 100+% 100+% Effective rate for income taxes, as reported 64.8 % (8.9) % 47.0 % Charges associated with restructuring and other activities 156 105 27 78 Goodwill 51 Securities class action litigation settlement 18 — 18 Impairment of goodwill and other intangible asset impairments assets — 285 41 244 (285) U.S. deferred tax asset valuation allowance adjustment (172) — (172) 172 Talcum litigation settlement agreements 35 — 35 (35) Provision for income taxes, as adjusted $ 509 $ 346 $ 431 $ (85) (20)% (19)% 163 47% 45% Effective rate for income taxes, as adjusted 35.7 % 38.8 % 31.0 % Diluted net earnings (loss) earnings per common share, as reported $ .50 $ (3.15) $ 1.08 $ (4.23) (100+)% (100+)% 3.65 100+% 100+% Charges associated with restructuring and other activities 1.83 1.06 .27 .79 Goodwill .77 Securities class action litigation settlement .18 — .18 Impairment of goodwill and other intangible asset impairments assets — 2.78 1.19 1.59 (2.78) U.S. deferred tax asset valuation allowance adjustment .48 — .48 (.48) Talcum litigation settlement agreements .34 — .34 Change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax (less portion attributable to redeemable noncontrolling interest) — .05 (.05) (.34) Diluted net earnings per common share, as adjusted $ 2.51 $ 1.51 $ 2.59 $ (1.08) (42)% (41)% 1.00 66% 64%
Read it in 10-K 2026-08-19 at sec.gov ↗
RewordedMD&A
(1)Excludes the net impact on the effective tax rates of charges associated with restructuring and other activities, activities in both periods, the securities class action litigation settlement in fiscal 2026, and in fiscal 2025 also excludes the impact of the impairment of goodwill and other intangible asset impairments, assets, U.S. deferred tax asset valuation allowance adjustment and talcum the Talcum litigation settlement agreements for fiscal 2025 and charges associated with restructuring and other activities, goodwill and other intangible asset impairments and changes in the fair value of DECIEM acquisition-related stock options inclusive of payroll tax for fiscal 2024. agreements.
Read it in 10-K 2026-08-19 at sec.gov ↗
RewordedMD&A
The reported operating margin for fiscal 2025 decreased 2026 increased from the prior year, driven by the decrease in net sales as well as an increase in our favorable operating expense margin, reflecting which includes the unfavorable favorable year-over-year impact of goodwill and other intangible asset impairments relating to TOM FORD, Dr.Jart+ and Too Faced, combined, of $1,286 million impairment charges in fiscal 2025 compared with goodwill of $1,286 million, as well as the increase in net sales and other intangible asset impairments relating to Dr.Jart+ of $471 million in fiscal 2024, partially offset by an increase in gross margin, as discussed above.
Read it in 10-K 2026-08-19 at sec.gov ↗
RewordedMD&A
We expect that The total approved initiatives under the Restructuring Program will are expected to result in restructuring and other charges totaling between $1,200 million and $1,600 of $1,748 million, before taxes, slightly above the high end of the previously announced range of $1,500 million to $1,700 million, consisting of employee-related costs, asset-related costs, contract terminations and other costs associated with implementing these initiatives, which other than the non-cash charges, have been funded from cash provided by operations for initiatives implemented to date, and for the remaining initiatives are expected to result in future cash expenditures funded from cash provided by operations.
Read it in 10-K 2026-08-19 at sec.gov ↗
RewordedMD&A
Reported makeup operating results decreased $534 in The Americas increased $1,029 million, or over 100%, in fiscal 2025, primarily driven by 2026, reflecting the favorable year-over-year impacts of other intangible asset impairment charges in fiscal 2025 the prior year relating to TOM FORD and Too Faced, combined, of $295 $898 million and a goodwill impairment charge in fiscal 2025 the prior year relating to Too Faced of $13 million, as well as the charge in the fiscal 2025 first quarter associated with the talcum litigation settlement agreements of $159 million.
Read it in 10-K 2026-08-19 at sec.gov ↗
RewordedMD&A
Operating income (loss) income $ 780 $ (785) $ 970 $ Change from prior year 1,565 (1,755) (539) % Change from prior year 100+% (100+)% (36) % Operating Margin 5.2 % (5.5) % 6.2 % Non-GAAP Financial Measure(1): % Change in operating income (loss) income from the prior year adjusting for the impact of charges associated with restructuring and other activities, the securities class action litigation settlement, impairment of goodwill and other intangible asset impairments, assets and talcum litigation settlement agreements and the change in fair value of DECIEM acquisition-related stock options inclusive of payroll tax 47 % (28) % (13) %
Read it in 10-K 2026-08-19 at sec.gov ↗
RewordedMD&A
For The excess in the TOM FORD trademark, immediately subsequent current year is primarily driven by a decrease in the weighted average cost of capital as of April 1, 2026 compared to the impairment charges taken fair value calculated in the fiscal 2025 second quarter quarter, the period when impairment charges were taken and the estimated fair value of the trademark was equal to its carrying value.
Read it in 10-K 2026-08-19 at sec.gov ↗
RewordedMD&A
Reported makeup operating results in The Americas decreased $534 $986 million, or over 100%, in fiscal 2025, primarily driven by reflecting the unfavorable year-over-year impacts of other intangible asset impairment charges in fiscal 2025 relating to TOM FORD and Too Faced, combined, of $295 $898 million and a goodwill impairment charge in fiscal 2025 relating to Too Faced of $13 million, as well as the charge in the fiscal 2025 first quarter associated with the talcum litigation settlement agreements of $159 million.
Read it in 10-K 2026-08-19 at sec.gov ↗
RewordedMD&A
The focus of the now overall expanded restructuring program (now, collectively (collectively the “Restructuring Program”) includes (i) reorganization and rightsizing of certain areas and areas, (ii) simplification and acceleration of processes, along with the newly added focus on (i) (iii) outsourcing of select services and (ii) (iv) evolution of go-to-market footprint and selling models. models, all to help rebuild operating margin and also fuel reinvestment in consumer-facing areas to drive sustainable sales growth.
Read it in 10-K 2026-08-19 at sec.gov ↗
RewordedMD&A
The increase in gross margin in fiscal 2025 includes 2026 is driven by net benefits from the PRGP which drove overall favorability year-over-year, including the favorability PRGP, partially offset by unfavorable impacts within manufacturing costs and other and obsolescence charges. other, reflecting the impact of inflation on our costs, as well as tariffs.
Read it in 10-K 2026-08-19 at sec.gov ↗
RewordedMD&A
Accordingly, the following discussions of Net sales and Operating (loss) income results by Product Categories and Geographic Regions below exclude the fiscal 2025 impacts of returns and 2024 impact of charges associated with restructuring and other activities of $486 million, or approximately 3% of net sales and $124 million, or approximately 1% of net sales, respectively. activities.
Read it in 10-K 2026-08-19 at sec.gov ↗
RewordedMD&A
Reported net sales in The Americas decreased 4% increased 5% in fiscal 2025, 2026, driven by the decrease increase from volume of 8% and 2%, the unfavorable favorable impact from foreign currency translation of 1%. 2% and an increase from pricing of 1%, reflecting the favorable impact from strategic pricing actions and changes in mix.
Read it in 10-K 2026-08-19 at sec.gov ↗
