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CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES | 12 Months Ended
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Jun. 30, 2024
Restructuring and Related Activities [Abstract] |
CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES | CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES During fiscal 2024, the Company incurred charges associated with restructuring activities as follows:
|  | Sales Returns (included in Net Sales) |  | Cost of Sales |  | Operating Expenses |  | Total
(In millions) |  |  |  | Restructuring Charges |  | Other Charges |
Restructuring Program Component of the Profit Recovery and Growth Plan |  | $ | — |  |  | $ | — |  |  | $ | 92 |  |  | $ | 23 |  |  | $ | 115 |
Post-COVID Business Acceleration Program |  | 1 |  |  | 1 |  |  | 1 |  |  | 7 |  |  | 10 |
Total |  | $ | 1 |  |  | $ | 1 |  |  | $ | 93 |  |  | $ | 30 |  |  | $ | 125 |
The types of activities included in restructuring and other charges, and the related accounting criteria, are described below. Charges associated with restructuring and other activities are not allocated to the Company's 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. Restructuring Program Component of the Profit Recovery and Growth Plan ("Restructuring Program") As announced on November 1, 2023, the Company launched a Profit Recovery Plan, now known as the Profit Recovery and Growth Plan ("PRGP"), to help progressively rebuild its profit margins in fiscal years 2025 and 2026. The PRGP is focused on rebuilding stronger, more sustainable profitability, supporting sales growth acceleration and increasing speed and agility. The plan is designed to improve gross margin, lower the cost base and reduce overhead expenses, while increasing investments in key consumer-facing activities. Upon completion of this plan, the Company expects to have improved its gross margin and expense base to drive greater operating leverage for the future. As a component of the PRGP, on February 5, 2024, the Company announced a two-year restructuring program. The restructuring program’s main focus includes the reorganization and rightsizing of certain areas of the Company as well as simplification and acceleration of processes. The Company committed to this course of action on February 1, 2024. In connection with the restructuring program, as of June 30, 2024, the Company estimates a net reduction in the range of approximately 1,800 to 3,000 positions globally, which is about 3-5% of its positions including temporary and part-time employees as of June 30, 2023. This reduction takes into account the elimination of some positions as well as retraining and redeployment of certain employees in select areas. The Company plans to substantially complete specific initiatives under the restructuring program through fiscal 2026. The Company expects that the restructuring program will result in restructuring and other charges totaling between $500 million and $700 million, before taxes, consisting of employee-related costs, contract terminations, asset write-offs and other costs associated with implementing these initiatives. Restructuring Program Approvals The Restructuring Program cumulative charges approved by the Company as of June 30, 2024 and through July 19, 2024, as previously disclosed on July 23, 2024, were:
|  | Sales Returns (included in Net Sales) |  | Cost of Sales |  | Operating Expenses |  | Total
(In millions) |  |  |  | Restructuring Charges |  | Other Charges |
Total Charges Approved |  |  |  |  |  |  |  |  |  |
Cumulative charges through June 30, 2024 |  | $ | — |  |  | $ | — |  |  | $ | 109 |  |  | $ | 78 |  |  | $ | 187 |
July 1, 2024 - July 19, 2024 |  | 1 |  |  | 9 |  |  | 24 |  |  | 12 |  |  | 46 |
Cumulative charges through July 19, 2024 |  | $ | 1 |  |  | $ | 9 |  |  | $ | 133 |  |  | $ | 90 |  |  | $ | 233 |
Included in the above table, cumulative Restructuring Program restructuring initiatives approved by the Company as of June 30, 2024 and through July 19, 2024, as previously disclosed on July 23, 2024, by major cost type were:
(In millions) |  | Employee- Related Costs |  | Asset- Related Costs |  | Contract Terminations |  | Other Exit Costs |  | Total
Restructuring Charges Approved |  |  |  |  |  |  |  |  |  |
Cumulative charges through June 30, 2024 |  | $ | 93 |  |  | $ | 7 |  |  | $ | — |  |  | $ | 9 |  |  | $ | 109 |
July 1, 2024 - July 19, 2024 |  | 23 |  |  | — |  |  | — |  |  | 1 |  |  | 24 |
Cumulative charges through July 19, 2024 |  | $ | 116 |  |  | $ | 7 |  |  | $ | — |  |  | $ | 10 |  |  | $ | 133 |
Specific actions taken since the Restructuring Program inception through July 19, 2024, to reorganize and right-size certain areas of the Company to drive future sales growth and productivity to rebuild gross and operating margin profitability include: •Value Chain Optimization – The Company approved initiatives to reduce spans and layers and right-size organizational capability within its supply chain. These actions will primarily result in employee severance through a net reduction in workforce, as well as costs to decommission and relocate activities, and asset write-offs. •Enabling Function Re-Invention - The Company approved initiatives to reorganize and right-size its go-to market structure, including across various corporate functions. These activities will primarily result in employee severance through a net reduction in workforce. •Future of Brand-led Model – The Company approved initiatives to focus on spans and layers to begin to develop a leaner, faster, and more agile marketing and creative organization. These activities will primarily result in employee severance through a net reduction in workforce. •Go-to-Market Operating Model Acceleration – The Company approved initiatives to exit unprofitable brands from specific markets and distribution channels. These activities will result in inventory write-offs, employee severance through a net reduction in workforce, as well as costs associated with sales returns. Restructuring Program Restructuring and Other Charges The Company classifies restructuring charges as follows: Employee-Related Costs – Employee-related costs are primarily comprised of severance and other post-employment benefit costs, calculated based on salary levels, prior service and other statutory minimum benefits, if applicable. Asset-Related Costs – Asset-related costs primarily consist of asset write-offs or accelerated depreciation related to long-lived assets (including rights associated with commercial operating leases and operating lease right-of-use assets) that will be taken out of service prior to their existing useful life as a direct result of a restructuring initiative. Contract Terminations – Costs related to contract terminations include continuing payments to a third party after the Company has ceased benefiting from the rights conveyed in the contract, or a payment made to terminate a contract prior to its expiration. Other Exit Costs – Other exit costs related to restructuring activities generally include costs to relocate facilities or employees, recruiting to fill positions as a result of relocation of operations, and outplacement for separated employees. The Company classifies other charges associated with restructuring activities as follows: Sales Returns and Cost of Sales – Product returns (offset by the related cost of sales) and inventory write-offs or write-downs as a direct result of an approved restructuring initiative to exit certain businesses or locations will be recorded as a component of Net sales and/or Cost of sales when estimable and reasonably assured. Other Charges – Other charges related to the design and implementation of approved initiatives, which are charged to Operating expenses as incurred and primarily include the following: •Consulting and other professional services for organizational design of the future structures and processes as well as the implementation thereof; •Temporary labor backfill; •Costs to establish and maintain a Project Management Office for the duration of the Restructuring Program, including internal costs for employees dedicated solely to project management activities, and consulting services to assist with business case development; and •Recruitment and training costs for new and reskilled employees to acquire and apply the capabilities needed to perform responsibilities as a direct result of an approved restructuring initiative. The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met. Total cumulative charges recorded associated with restructuring and other activities for the Restructuring Program through June 30, 2024 were:
|  | Sales Returns (included in Net Sales) |  | Cost of Sales |  | Operating Expenses |  | Total
(In millions) |  |  |  | Restructuring Charges |  | Other Charges |
Total Charges |  |  |  |  |  |  |  |  |  |
Cumulative charges through June 30, 2024 |  | $ | — |  |  | $ | — |  |  | $ | 92 |  |  | $ | 23 |  |  | $ | 115 |
(In millions) |  | Employee- Related Costs |  | Asset- Related Costs |  | Contract Terminations |  | Other Exit Costs |  | Total
Restructuring Charges |  |  |  |  |  |  |  |  |  |
Cumulative charges through June 30, 2024 |  | $ | 90 |  |  | $ | 2 |  |  | $ | — |  |  | $ | — |  |  | $ | 92 |
Changes in accrued restructuring charges from the Restructuring Program inception through June 30, 2024 were:
(In millions) |  | Employee- Related Costs |  | Asset- Related Costs |  | Contract Terminations |  | Other Exit Costs |  | Total
Charges |  | $ | 90 |  |  | $ | 2 |  |  | $ | — |  |  | $ | — |  |  | $ | 92 |
Cash payments |  | — |  |  | — |  |  | — |  |  | — |  |  | — |
Non-cash asset write-offs |  | — |  |  | (2) |  |  | — |  |  | — |  |  | (2) |
Translation and other adjustments |  | (2) |  |  | — |  |  | — |  |  | — |  |  | (2) |
Balance at June 30, 2024 |  | $ | 88 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 88 |
Accrued restructuring charges at June 30, 2024 relating to the Restructuring Program are expected to result in cash expenditures funded from cash provided by operations of approximately $59 million, $24 million, and $5 million for fiscal 2025, 2026, and 2027, respectively. Post-COVID Business Acceleration Program On August 20, 2020, the Company announced a two-year restructuring program, Post-COVID Business Acceleration Program (the “PCBA Program”), designed to realign the Company's business to address the dramatic shifts to its distribution landscape and consumer behaviors in the wake of the COVID-19 pandemic. The PCBA Program’s main areas of focus included accelerating the shift to online with the realignment of the Company’s 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 the Company’s regional branded marketing organizations, plus select opportunities in global brands and functions. As of June 30, 2024, the net reduction of positions over the duration of the PCBA Program was approximately 2,800 positions globally. This reduction included the elimination of some positions, retraining and redeployment of certain employees and investment in new positions in key areas. As of June 30, 2024, over the duration of the PCBA program, the Company closed approximately 16% of its freestanding stores. The Company approved specific initiatives under the PCBA Program through fiscal 2022 and has substantially completed those initiatives. Inclusive of approvals from inception through June 30, 2022, as of June 30, 2024, that the PCBA Program resulted in related restructuring and other charges totaling approximately $435 million, before taxes. Specific actions taken during the PCBA Program include: •Optimize Digital Organization and Other Go-To-Market Organizations – The Company approved initiatives to enhance its go-to-market capabilities and shift more resources to support online growth. These initiatives resulted in a net reduction of the workforce, which includes position eliminations, the re-leveling of certain positions and an investment in new capabilities. •Optimize Select Marketing, Brand and Global Functions – The Company reduced its corporate and certain of its brand office footprints, by restructuring where and how its employees work and collaborate. In addition, the Company approved initiatives to reduce organizational complexity and leverage scale across various Global functions. These actions resulted in asset write-offs, employee severance, lease termination fees, and consulting and other professional services for the design and implementation of the future structures and processes. •Optimize Distribution Network – To help restore profitability to pre-COVID-19 pandemic levels in certain areas of its distribution network and, as part of a broader initiative to be completed in phases, the Company approved initiatives to close a number of underperforming freestanding stores, counters and other retail locations, mainly in certain affiliates across all geographic regions, including the Company's travel retail network. These closures reflected changing consumer behaviors including higher demand for online and omnichannel capabilities. These activities resulted in product returns, termination of contracts, a net reduction in workforce, and inventory and other asset write-offs. •Exit of the Global Distribution of BECCA Products – In reviewing the Company's brand portfolio to improve efficiency and the sustainability of long-term investments, the decision was made to exit the global distribution of BECCA products due to its limited distribution, the ongoing decline in product demand and the challenging environment caused by the COVID-19 pandemic. These activities resulted in charges for the impairment of goodwill and other intangible assets, product returns, termination of contracts, and employee severance. •Exit of Certain Designer Fragrance Licenses – In reviewing the Company’s brand portfolio of fragrances and to focus on investing its resources on alternative opportunities for long-term growth and value creation globally, the Company announced that it would not renew its license agreements for the Donna Karan New York, DKNY, Michael Kors, Tommy Hilfiger and Ermenegildo Zegna product lines when their respective terms expired in June 2023. The Company negotiated early termination agreements with each of the licensors effective June 30, 2022. These actions resulted in asset write-offs, including charges for the impairment of goodwill, employee-related costs, and consulting and legal fees. •Brand Transformation – In reviewing the Company’s brand portfolio to accelerate growth within the makeup product category and to support long-term investments, the decision was made to strategically reposition Smashbox to capitalize on changing consumer preferences and to mitigate the impact caused by the COVID-19 pandemic on the brand. These actions primarily resulted in product returns and inventory write-offs. PCBA Program Restructuring and Other Charges For the classification of the restructuring and other charges for the PCBA program, please refer to the Restructuring Program Component of the Profit Recovery and Growth Plan above. The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met. Total cumulative charges recorded associated with restructuring and other activities for the PCBA Program were:
|  | Sales Returns (included in Net Sales) |  | Cost of Sales |  | Operating Expenses |  | Total
(In millions) |  |  |  | Restructuring Charges |  | Other Charges |
Total Charges |  |  |  |  |  |  |  |  |  |
Fiscal 2021 |  | $ | 14 |  |  | $ | 2 |  |  | $ | 201 |  |  | $ | 4 |  |  | $ | 221 |
Fiscal 2022 |  | 4 |  |  | 5 |  |  | 109 |  |  | 9 |  |  | 127 |
Fiscal 2023 |  | 27 |  |  | 3 |  |  | 35 |  |  | 12 |  |  | 77 |
Fiscal 2024 |  | 1 |  |  | 1 |  |  | 1 |  |  | 7 |  |  | 10 |
Cumulative through June 30, 2024 |  | $ | 46 |  |  | $ | 11 |  |  | $ | 346 |  |  | $ | 32 |  |  | $ | 435 |
(In millions) |  | Employee- Related Costs |  | Asset- Related Costs(1) |  | Contract Terminations |  | Other Exit Costs |  | Total
Restructuring Charges (Adjustments) |  |  |  |  |  |  |  |  |  |
Fiscal 2021 |  | $ | 119 |  |  | $ | 75 |  |  | $ | 6 |  |  | $ | 1 |  |  | $ | 201 |
Fiscal 2022 |  | 84 |  |  | 11 |  |  | 13 |  |  | 1 |  |  | $ | 109 |
Fiscal 2023 |  | 3 |  |  | 31 |  |  | (2) |  |  | 3 |  |  | 35 |
Fiscal 2024 |  | (4) |  |  | 4 |  |  | 1 |  |  | — |  |  | 1 |
Cumulative through June 30, 2024 |  | $ | 202 |  |  | $ | 121 |  |  | $ | 18 |  |  | $ | 5 |  |  | $ | 346 |
(1)Asset-related costs include fiscal 2021 goodwill and other intangible asset impairment charges of $13 million and $34 million, respectively, relating to the exit of the global distribution of BECCA products. Changes in accrued restructuring charges from the PCBA Program inception through June 30, 2024 were:
(In millions) |  | Employee- Related Costs |  | Asset- Related Costs |  | Contract Terminations |  | Other Exit Costs |  | Total
Charges |  | $ | 119 |  |  | $ | 75 |  |  | $ | 6 |  |  | $ | 1 |  |  | $ | 201 |
Cash payments |  | (18) |  |  | — |  |  | (6) |  |  | (1) |  |  | (25) |
Non-cash asset write-offs |  | — |  |  | (75) |  |  | — |  |  | — |  |  | (75) |
Balance at June 30, 2021 |  | 101 |  |  | — |  |  | — |  |  | — |  |  | 101 |
Charges |  | 84 |  |  | $ | 11 |  |  | $ | 13 |  |  | 1 |  |  | 109 |
Cash payments |  | (52) |  |  | — |  |  | $ | (13) |  |  | 1 |  |  | (64) |
Non-cash asset write-offs |  | — |  |  | (11) |  |  |  |  |  |  | (11) |
Translation and other adjustments |  | (8) |  |  | — |  |  | $ | — |  |  | (2) |  |  | (10) |
Balance at June 30, 2022 |  | 125 |  |  | — |  |  | — |  |  | — |  |  | 125 |
Charges |  | 3 |  |  | 31 |  |  | (2) |  |  | $ | 3 |  |  | 35 |
Cash payments |  | (40) |  |  | — |  |  | (1) |  |  | $ | (3) |  |  | (44) |
Non-cash asset write-offs |  | — |  |  | (31) |  |  | — |  |  | $ | — |  |  | (31) |
Translation and other adjustments |  | (7) |  |  | — |  |  | 4 |  |  | $ | — |  |  | (3) |
Balance at June 30, 2023 |  | 81 |  |  | — |  |  | 1 |  |  | — |  |  | 82 |
Charges |  | (4) |  |  | 4 |  |  | 1 |  |  | — |  |  | 1 |
Cash payments |  | (49) |  |  | — |  |  | (1) |  |  | — |  |  | (50) |
Non-cash asset write-offs |  | — |  |  | (4) |  |  | — |  |  | — |  |  | (4) |
Translation and other adjustments |  | — |  |  | — |  |  | (1) |  |  | — |  |  | (1) |
Balance at June 30, 2024 |  | $ | 28 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 28 |
Accrued restructuring charges at June 30, 2024 relating to the PCBA Program are expected to result in cash expenditures funded from cash provided by operations of approximately $25 million and $3 million for each of fiscal 2025 and 2026, respectively.

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- Definition The entire disclosure for restructuring and related activities. Description of restructuring activities such as exit and disposal activities, include facts and circumstances leading to the plan, the expected plan completion date, the major types of costs associated with the plan activities, total expected costs, the accrual balance at the end of the period, and the periods over which the remaining accrual will be settled. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 420 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (b)(2) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482017/420-10-50-1 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 420 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482017/420-10-50-1 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 420 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//420/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 420 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 1 -Subparagraph (e) -Publisher FASB -URI https://asc.fasb.org//1943274/2147482017/420-10-50-1 Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 420 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 2 -Subparagraph (SAB Topic 5.P.4(e)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147479823/420-10-S99-2 + Details
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