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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 3 Months Ended
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Sep. 30, 2025
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying consolidated financial statements include the accounts of The Estée Lauder Companies Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated. The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP in annual financial statements. The unaudited interim consolidated financial statements reflect all normal and recurring adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025. Certain prior-year amounts in the notes to the consolidated financial statements have been reclassified to conform to current-year presentation. Management Estimates The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2025. Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, as relevant, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions will be reflected in the consolidated financial statements in future periods. Currency Translation and Transactions All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at monthly average rates of exchange for the period. Unrealized translation (losses) gains, net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) were $(32) million and $115 million, net of tax, during the three months ended September 30, 2025 and 2024, respectively. For the Company’s subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency, and these subsidiaries are not material to the Company's consolidated financial statements or liquidity as of and for the three months ended September 30, 2025 and 2024. Remeasurement adjustments in financial statements in a highly inflationary economy and other transactional gains and losses are reflected in earnings. The Company enters into foreign currency forward contracts to hedge foreign currency transactions for periods consistent with its identified exposures. The Company also uses cross-currency swap contracts to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt. Additionally, the Company enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. See Note 4 – Derivative Financial Instruments for further discussion. The Company categorizes these instruments as entered into for purposes other than trading. The accompanying consolidated statements of earnings (loss) include net exchange (losses) gains on foreign currency transactions of $(6) million and $19 million during the three months ended September 30, 2025 and 2024, respectively. Concentration of Credit Risk The Company is a worldwide manufacturer, marketer and seller of skin care, makeup, fragrance and hair care products. The Company’s sales subject to credit risk are made primarily to department stores, duty-free retailers, specialty multi retailers, online pure players, perfumeries and pharmacies, and salons and spas. The Company grants credit to qualified customers. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor its customers' abilities, individually and collectively, to make timely payments. Inventory and Promotional Merchandise Inventory and promotional merchandise consists of the following:
(In millions) |  | September 30, 2025 |  | June 30, 2025
Raw materials |  | $ | 593 |  |  | $ | 631 |
Work in process |  | 250 |  |  | 283 |
Finished goods |  | 1,062 |  |  | 996 |
Promotional merchandise |  | 157 |  |  | 164 |
Total inventory and promotional merchandise |  | $ | 2,062 |  |  | $ | 2,074 |
Property, Plant and Equipment Property, plant and equipment consists of the following:
($ in millions) |  | September 30, 2025 |  | June 30, 2025
Assets (Useful Life) |  |  |  |
Land and improvements(1) |  | $ | 74 |  |  | $ | 75 |
Buildings and improvements (10 to 40 years) |  | 1,051 |  |  | 1,057 |
Machinery and equipment (3 to 20 years) |  | 1,431 |  |  | 1,429 |
Computer hardware and software (4 to 10 years) |  | 2,077 |  |  | 1,926 |
Furniture and fixtures (5 to 10 years) |  | 143 |  |  | 145 |
Leasehold improvements |  | 2,646 |  |  | 2,631 |
Construction in progress |  | 319 |  |  | 462 |
Total property, plant and equipment, gross |  | 7,741 |  |  | 7,725 |
Less accumulated depreciation and amortization |  | (4,676) |  |  | (4,553) |
Total property, plant and equipment, net |  | $ | 3,065 |  |  | $ | 3,172 |
(1)Land improvements are depreciated over a 10 year useful life. Depreciation and amortization of property, plant and equipment was $170 million and $168 million during the three months ended September 30, 2025 and 2024, respectively. Depreciation and amortization related to the Company’s manufacturing process is included in Cost of sales, and all other depreciation and amortization is included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings (loss). Income Taxes The effective rate for income taxes was 56.9% and 13.3% for the three months ended September 30, 2025 and 2024, respectively. The increase in the effective tax rate of 4,360 basis points was attributable in part to the loss before income taxes in the fiscal 2025 first quarter as well as the estimated unfavorable impact of the newly enacted U.S. tax legislation, a higher effective tax rate on the Company's foreign operations due to the Company's full year geographical mix of earnings in the current and prior-year periods and an unfavorable impact associated with the establishment of a valuation allowance against current period foreign tax credit and research and development tax credit U.S. deferred tax assets. On July 4, 2025, new U.S tax legislation was enacted known as the One Big Beautiful Bill Act. This legislation includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of certain business tax provisions. The legislation has multiple effective dates, with certain provisions becoming effective in fiscal 2026. The most impactful provision effective beginning in fiscal 2026 relates to the expansion of the business interest expense deduction limitation. The resulting increase in tax deductible interest expense reduced U.S. taxable income and increased the excess foreign tax credits generated which require a valuation allowance. The estimated unfavorable fiscal 2026 impact of the One Big Beautiful Bill Act has been included in the provision for income taxes, and the impact for the three months ended September 30, 2025 was $8 million. In December 2021, the Organization for Economic Cooperation and Development issued "Pillar Two" Global Anti-Base Erosion model rules for countries to enact into domestic law that would establish a 15% global minimum tax applied on a country-by-country basis for multinational companies. In certain countries that have enacted legislation incorporating the global minimum tax, it became effective for the Company at the beginning of fiscal 2025. The estimated tax impact of such legislation has been included in the provision for income taxes for the three months ended September 30, 2025 and was not material. As of September 30, 2025 and June 30, 2025, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $141 million and $140 million, respectively. The total amount of unrecognized tax benefits at September 30, 2025 that, if recognized, would affect the effective tax rate was $134 million. The total gross interest and penalties accrued related to unrecognized tax benefits during the three months ended September 30, 2025 in the accompanying consolidated statements of earnings (loss) was $2 million. The total gross accrued interest and penalties in the accompanying consolidated balance sheets at September 30, 2025 and June 30, 2025, was $21 million and $19 million, respectively. On the basis of the information available as of September 30, 2025, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months. At September 30, 2025 and June 30, 2025, total Other assets of $1,836 million and $1,805 million included $1,366 million and $1,339 million of deferred tax assets, respectively. Supplier Finance Programs Under its supplier finance programs, the Company agrees to pay the banks the stated amount of confirmed invoices from its designated suppliers on the due dates of the invoices. The Company may terminate the agreements upon written notice (with notice periods ranging from 30 to 60 days) or immediately upon a breach. The supplier invoices that have been confirmed as valid under the programs require payment in full within 90 days of the invoice date. Outstanding obligations confirmed as valid totaling $65 million and $82 million as of September 30, 2025 and June 30, 2025, respectively, are included in Accounts payable in the accompanying consolidated balance sheets. Other Accrued Liabilities Other accrued liabilities consist of the following:
(In millions) |  | September 30, 2025 |  | June 30, 2025
Accrued employee compensation |  | $ | 432 |  |  | $ | 551 |
Accrued income taxes |  | 200 |  |  | 282 |
Accrued payroll and other non-income taxes |  | 351 |  |  | 307 |
Accrued restructuring |  | 292 |  |  | 279 |
Accrued sales incentives |  | 318 |  |  | 321 |
Accrued selling, advertising, marketing, promotion and product development |  | 311 |  |  | 287 |
Deferred revenue |  | 332 |  |  | 314 |
Sales return accrual |  | 267 |  |  | 255 |
Other |  | 873 |  |  | 933 |
Total other accrued liabilities |  | $ | 3,376 |  |  | $ | 3,529 |
Recently Issued Accounting Standards FASB ASU No. 2025-06 – Targeted Improvements to the Accounting for Internal-Use Software (Subtopic 350-40) In September 2025, the FASB issued authoritative guidance to modernize the accounting for the costs to develop software for internal use to align better with current software development methods, such as agile programming. Capitalization of eligible costs will begin when (1) management has authorized and committed to funding the software project, and (2) it is probable that the project will be completed and the software will be used to perform the function intended. In evaluating whether it is probable the project will be completed, entities are required to consider whether there is significant uncertainty associated with the development activities of the software. The new standard does not change the types of costs that are capitalizable once the threshold for capitalization is met. Capitalization ceases when the software project is substantially complete and ready for its intended use, which typically occurs after all substantial testing is completed. Furthermore, the guidance supersedes website development costs guidance and incorporates the recognition requirements for website-specific development costs into Subtopic 350-40. The guidance clarifies that existing disclosure requirements under ASC 360 for property, plant and equipment apply to capitalized costs under the new standard, regardless of how the internal-use software is classified on the balance sheet or how it was acquired. Effective for the Company: The guidance becomes effective for the Company’s first quarter of fiscal 2029. The guidance can be applied prospectively, retrospectively or through a modified transition approach. Early adoption is permitted. Impact on consolidated financial statements: The Company is currently evaluating the impact that this guidance will have on its consolidated financial statements. FASB ASU No. 2025-05 – Measurement of Credit Losses for Accounts Receivable and Contract Assets (Topic 326) In July 2025, the FASB issued authoritative guidance related to the estimation of expected credit losses for current accounts receivable and current contract assets. The guidance allows entities to elect a practical expedient to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset in the development of a reasonable and supportable forecast as part of estimating expected credit losses. Entities electing the practical expedient are still required to adjust historical loss information to reflect current conditions to the extent that historical loss information does not reflect current conditions. An entity that elects to use the practical expedient is required to disclose that fact. Effective for the Company: The guidance becomes effective for the Company’s first quarter of fiscal 2027 and is applied prospectively. Early adoption is permitted. Impact on consolidated financial statements: The Company is currently evaluating the impact that this guidance will have on its accounts receivable balance and consolidated financial statement disclosures. FASB ASU No. 2024-03 and 2025-01 – Disaggregation of Income Statement Expenses (Subtopic 220-40) In November 2024 and January 2025, the FASB issued authoritative guidance requiring disclosures, in a tabular format in the notes to the consolidated financial statements, on the disaggregation of relevant expense captions that are included on the face of the consolidated statement of earnings (loss) within continuing operations. The relevant expense captions are required to be disaggregated into natural expense categories including purchases of inventory, employee compensation, depreciation and intangible asset amortization. The guidance also requires certain expenses, gains or losses that require disclosure under existing U.S. GAAP, and that are recorded in a relevant expense caption on the face of the consolidated statement of earnings (loss), to be presented in the same tabular disclosure. Qualitative disclosures about any remaining amounts in relevant expense line items are required as well. In addition, companies are required to disclose the total amount of selling expenses and, on an annual basis, how it defines selling expenses. Effective for the Company: The guidance is effective for the Company’s fiscal year ending June 30, 2028 Form 10-K and then in interim periods beginning in the Company’s first quarter of fiscal 2029. Early adoption is permitted. The guidance should be applied on a prospective basis; however, retrospective application is permitted. Impact on consolidated financial statements: The Company is currently evaluating the impact that this guidance will have on its consolidated financial statement disclosures. FASB ASU No. 2023-09 – Income Taxes (Topic 740): Improvements to Income Tax Disclosures In December 2023, the FASB issued authoritative guidance to amend and enhance existing annual in come tax disclosures primarily focusing on two reporting areas: (1) greater disaggregation of information in the effective tax rate reconciliations and (2) disclosure of income taxes paid, disaggregated by applicable jurisdiction. Companies are required to use specific categories to prepare and disclose a tabular rate reconciliation (using both percentages and reporting currency amounts) of: •the reported income tax expense (or benefit) from continuing operations and the product of the income (or loss) from continuing operations before income taxes and the applicable statutory federal income tax rate of the jurisdiction of domicile; and •reconciling items within certain categories that are equal to or greater than a specified quantitative threshold, including the nature, effect, and underlying causes of the reconciling items and the judgment used in categorizing the reconciling items. The guidance also requires companies to disclose the amount of income taxes paid (net of refunds received) disaggregated by federal, state, and foreign jurisdictions including individual jurisdictions with amounts paid equal to or greater than a specified quantitative threshold. The guidance also codifies existing SEC rules that require companies to disclose income (or loss) from continuing operations before income tax expense (or benefit) disaggregated between domestic and foreign as well as income tax expense (or benefit) from continuing operations disaggregated by federal, state, and foreign jurisdictions. Effective for the Company – The guidance is effective for the Company’s fiscal year ending June 30, 2026 Form 10-K. Early adoption is permitted. The guidance should be applied on a prospective basis with the option to apply the standard retrospectively. Impact on consolidated financial statement s – The Company is currently evaluating the impact that this guidance will have on its consolidated financial statement disclosures.

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