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Text: Unless otherwise stated, all net sales growth numbers are in constant currency and all organic results exclude the non-comparable impacts of acquisitions, divestitures, brand closures, and the impact of currency translation.
As a reminder, references to online sales include sales we make directly to our consumers through our brand.com sites and through third-party platforms.
It also includes estimated sales of our products through our retailers' websites.
We are grateful you have joined us today.
We delivered excellent performance to begin fiscal year 2022, reinforcing our optimism in the opportunities of tomorrow as we discussed with you in August.
Our multiple engines of growth strategy enabled us to excel amid continued volatility and variability from the pandemic.
Organic sales rose 18%, and adjusted diluted earnings per share grew an even stronger 31%.
Encouragingly, relative to the pre-pandemic first quarter of fiscal year 2020, our business is 13% larger on a reported basis and more profitable.
We achieved these outstanding results with increasingly diverse growth engines as we expected.
By virtue of our dynamic strategy, we could act locally amid the complexity of the pandemic to both create and capture demand.
The growth engines of makeup, developed markets in the West, and brick-and-mortar reignited and complemented momentum in skincare, fragrance, Mainland China, Travel Retail in Asia Pacific, and global online.
13 brands contributed double-digit organic sales growth, demonstrating the breadth of strength across our portfolio.
Estée Lauder and MAC drove makeup emerging renaissance, while La Mer and Clinique delivered standout results in skincare.
Impressively, skincare solidly outpaced its prior-year organic sales growth performance despite having the far toughest comparison among the categories.
Fragrance showed double digits, driven by Tom Ford Beauty and Jo Malone London.
Let me share a few highlights by brand.
Estée Lauder advanced planning for the makeup renaissance delivered significant sales growth.
As social and professional usage occasions resumed in certain markets, the brand was well-positioned with compelling innovation, superb merchandising, and on-point communication.
Its double wear and futurist foundation franchises rose strong double digits, while its new pure color whipped matte lipstick was a hit.
MAC strategically engaged consumers to drive performance in makeup.
In the Americas and EMEA, excellent results from in-store activations and regional MAC the Moment campaigns combined with desirable innovation like luster glass sheer shine lipstick and magic extension mascara.
The brand's new omnichannel capabilities, which leverage its freestanding stores, also contributed to the strength and demonstrate a new capability for MAC to benefit from going forward.
La Mer performed magnificent and led the company with sales rising strong double digits.
Its new hydrating infused emulsion expanded our portfolio of east to west innovation captivating consumers in every region.
It is a striking example of the innovation gains we can achieve when the power of our data analytics combined with our creative talent and R&D.
La Mer's iconic creme de la Mer prospered as a new global campaign focused on its moisturizing benefit realized terrific initial results.
Clinique strived in skincare from the strength of its heroes.
Moreover, its new smart clinical repair wrinkle correcting serum with powerful clinically led claims and compelling before-and-after visualizations extended Clinique win streak with innovation and further demonstrated the brand's ability to be highly relevant for consumers of all ages.
DECIEM complemented our organic sales growth in skincare with its coveted vegan brand, The Ordinary.
DECIEM is known for its transparency, which has enamored it with consumers.
And in the first quarter, we launched the insightful Everything is Chemicals campaign.
And the new Regimen Builder by The Ordinary on brand.com realized spectacular adoption, further enhancing the brand's powerful online ecosystem.
Fragrance momentum continued with stellar double-digit performance in every region, powered by hero products and innovation from Tom Ford Beauty, Jo Malone London in our artisanal offerings.
We are excited for the Estée Lauder brand launch of its luxury collection in the second quarter as it expands our portfolio in the high-growth segment of fragrances.
Our fragrance category benefits from diversification among our categories as well as regions with outstanding performance from both historically strong markets for fragrance and emerging fragrance opportunities.
The self-care rituals related to scent, which were embraced during the pandemic, continued even as social and professional usage occasions resumed.
Of note, Tom Ford Beauty performed strongly in both fragrance and makeup such that the brand was among our top performers in the quarter.
Its new Ombre Leather perfume and hero's Oud Wood and Lost Cherry fueled the brand's success.
Our growth engines also diversified geographically, led by developed markets in the West.
Our business in North America executed with excellence to deliver strong double-digit organic sales growth, powered by readiness for makeup's emerging renaissance, ongoing strength in skincare and fragrance, and recovery in hair care.
Strategic go-to-market initiatives supported by on-trend innovation increased advertising spending, and expert in-store virtual services delighted consumers.
Our expanded consumer reach enhanced these initiatives as Bobbi Brown launched in Ulta Beauty exceeded expectations, and we are encouraged by the early results of the new Ulta Beauty at Target and Sephora at Kohl's relationships.
In Asia Pacific, many markets faced COVID-induced lockdowns and temporary store closures, which pressured performance.
Despite this, the region still grew 10% organically driven by strength in Greater China and Korea.
Mainland China achieved double-digit organic sales growth owing to skin care and fragrance, with online and brick-and-mortar both higher.
We launched locally relevant innovation which proved highly desirable, while we also increased advertising spending, strategically expanded our consumer reach to match success on JD, and designed successful activation for Chinese Valentine's Day.
We continue to invest in the vibrant and compelling long-term growth opportunity in Mainland China, led by our talented local team.
We are enthusiastic for our new innovation center in Shanghai to open in the second half of this fiscal year.
This new world-class innovation center will be the first of its kind for our company.
With it, we will have a unique ability to grow and build on our market and consumer insights to develop exceptional products to meet and surpass the needs and desires of Chinese consumers.
What is more, we are seeing the benefits of recent investment in online fulfillment, which have led to higher service levels and better inventory manager while setting the stage for expanded omnichannel capabilities in the market.
From a channel perspective globally, brick-and-mortar grew strongly in markets which are gradually emerging from the latest wave of COVID-19.
We realized excellent results across the board in brick-and-mortar, most especially in the Americas and EMEA.
Our brands created excitement in store with enticing high-touch services and unique activations.
We are encouraged by improving trends in the productivity of brick-and-mortar, owing to both increased traffic and our strategic actions, including those under the post-COVID business acceleration program.
As brick-and-mortar reignites, our global online business continued to showcase its tremendous promise, with impressive organic results despite significant organic sales growth in the year-ago period.
Online grew to be nearly double the size, on a reported basis, of the pre-pandemic first quarter of fiscal year 2020.
Many markets capitalized on the remarkable new consumer acquisition trend of the pandemic to deliver sustained gain in repeat purchases.
As we seek to engage with consumers in innovative ways, we advanced our work with Instagram, Snapchat, TikTok, WeChat, and others to capitalize on exciting trends in social commerce.
We also deployed a technology solution, which enables brands to better customize consumer outreach by leveraging data to merchandise and personalized communication.
This is leading to higher conversion rates for new consumers and a deeper level of relationship building after the initial purchase to foster retention.
Initiatives such as this position us well to realize even greater success with trial and repeat.
We continued to invest in online to strategically expand our consumer reach and realize promising results.
For example, in the first quarter, La Mer launched on Lazada in Southeast Asia to tremendous success with differentiated merchandising, unique services, and prestige packaging, making it one of the platform's biggest brand launches ever.
Our relationship with Lazada expanded in the current quarter with Jo Malone London's debut.
Before I close, I wanted to share that today we will release our fiscal year 2021 social impact and sustainability report.
We are incredibly inspired by the achievements of our employees globally.
The report highlights initiatives across key areas, including inclusion, diversity, and equity.
Climate, packaging, social investment, responsible sources, and green chemistry.
I'm particularly proud of our support to employees globally who faced financial hardships due to COVID-19.
The ELC Cares Employee Relief Fund awarded nearly 14,000 grants and distributed nearly $8 million through June 30, 2021.
Here, a few among the many other highlights of the report: We are continuing to contribute to a low-carbon future.
For the second year in a row, we sourced 100% renewable electricity globally for our direct operations and achieved net-zero scope one and scope two emissions.
The company also made strong progress in its Science-based Targets for scope one and two and made efforts toward meeting its scope three science-based targets.
We achieved our existing post-consumer recycled content goal ahead of schedule and announced a more ambitious goal to increase the amount of such material in our packaging to 25% or more by the end of calendar year 2025.
We also committed to reduce the amount of virgin petroleum plastic in our packaging to 50% or less by the end of calendar year 2030.
On the last few earnings calls, I discussed actions we are taking to make more progress on our commitments for racial equity as well as women's advancement and gender equality, which are reflected in the report.
We also deepened our work by further aligning the strategy of The Estee Lauder Companies' charitable foundation to identify and support programs at the intersection of climate, justice, human rights, and well-being with a focus on equity, building upon our legacy of founding girls' education and leadership programs.
In the beginning of fiscal year 2022 and aligned with our social impact commitments, we were pleased to announce a three-year partnership with Amanda Gorman, activist, award-winning writer, and the youngest inaugural poet in U.S. history.
The Estée Lauder Companies will contribute $3 million over three years to support Writing Change, a special initiative to advance literacy as a pathway to equality, access, and social change.
In addition, Mrs. Gorman will bring her voice of change to the Estée Lauder brand, debuting her first campaign in the second half of this fiscal year.
In closing, we delivered outstanding performance to begin the new fiscal year amid the volatility and variability of the pandemic, while continuing to invest in sustainable long-term growth drivers.
We are focusing on fundamental capabilities for product quality and the consumer-centric elements of acquisition, engagement, and high-touch experiences and services.
We are doing this while improving our cost structure, diversifying our portfolio and its distribution, investing behind the best growth opportunities, and leading our values.
Our confidence in the long-term growth opportunities for global prestige beauty and our company is reflected in the announcement today to raise the quarterly dividend.
I'm forever grateful to the grace, wisdom, and ingenuity of our employees globally, who are making us a stronger company each and every day.
We are off to an outstanding start with first-quarter net sales growing 18% organically, driven by the nascent recovery in the Americas and EMEA during the quarter compared to a more difficult environment in the prior year.
Global logistics constraints caused some retailers, primarily in North America, to order earlier to ensure popular sets and products would be on counter for holiday.
We estimate that this contributed approximately 1.5 points to our first-quarter sales growth that otherwise would have occurred in the second quarter.
The inclusion of sales from the May 2021 DECIEM investment added approximately three points to reported net sales growth, and currency added just over two points.
From a geographic standpoint, organic net sales in the Americas climbed 27% as COVID restrictions eased throughout the region.
Brick-and-mortar retail grew sharply across all formats compared to the prior-year period when many stores were temporarily shut down.
Distribution in Kohl's with Sephora and in Target with Ulta Beauty began its phased rollout to initial stores and online in mid-August, with minimal impact on net sales growth for the quarter.
With the strong resurgence of brick-and-mortar traffic, online organic sales growth in the Americas declined single digits against a sharp increase last year, while organic online penetration remained solid at 31% of sales.
The inclusion of sales from DECIEM added about nine points to the overall reported growth in the region.
In our Europe, the Middle East, and Africa region, organic net sales rose 19% with virtually every market contributing to growth, led by the emerging markets in the Middle East, Turkey, and Russia as well as the U.K. Most markets throughout the region saw COVID restrictions lifted, and some tourism resumed during the peak summer months.
By channel, the region saw more balance between brick-and-mortar and online growth.
All major categories grew this quarter, and the region saw the strongest growth in fragrance and makeup as social occasions increased.
Our global Travel Retail business grew double-digit as China and Korea continued to be strong.
Internal travel restrictions during the quarter in China slowed Hainan sales temporarily, but restrictions lifted in early September, and traffic rebounded.
Retailers also responded to the August dip by driving post-travel consumption online.
Summer holiday travel in Europe and the Americas picked up, but international travel still reached only 40% of pre-COVID levels.
In our Asia Pacific region, organic net sales rose 10%, driven by Greater China and Korea.
The region overall experienced higher levels of COVID lockdowns this quarter compared to last year's quarter due to the rise of the delta variant, although online remains strong.
Sales growth in Mainland China was somewhat slower due to COVID restrictions during July and August.
And the pace of online sales growth slowed following the successful 6.18 programs last quarter and in anticipation of the 11.11 shopping festival.
As we've mentioned before, these key shopping moments have created some additional seasonality in our business in this region.
More than half of our brands in virtually all channels rose double-digit in Mainland China.
Hong Kong and Macau were bright spots this quarter.
They benefited from strong new product launches from La Mer and Jo Malone and successful marketing campaigns from several other brands.
From a category perspective, net sales growth in fragrance jumped nearly 50%.
Virtually every brand that participates in the category contributed to growth, with exceptional double-digit increases from Tom Ford Beauty, Jo Malone London, and Le Labo.
Perfumes and colognes led the category growth; and bath, body, and home fragrances continue to perform well.
Net sales in makeup rose 18% as markets in the Americas and Europe began to recover from COVID shutdowns.
We are encouraged by the sequential improvement in makeup versus pre-COVID levels.
However, makeup sales in the quarter were still 19% below two years ago.
Nonetheless, Estée Lauder foundations continue to resonate strongly with consumers, and MAC leaned into the makeup recovery with a number of fun and compelling campaigns.
Skincare sales remained strong during the quarter.
Organic net sales grew 12%, and the inclusion of sales from DECIEM added six percentage points to reported growth.
Nearly all of our skincare brands contributed to growth, although Estée Lauder had a tough comparison with the prior-year launch of its improved Advanced Night Repair Serum.
Our haircare net sales rose 8% as traffic in salons and stores in the U.S. and Europe began to return.
Both Aveda and Bumble and bumble saw growth in-hero products as well as continued strength from innovation.
Our gross margin declined 100 basis points compared to the first quarter last year.
The positive impacts from strategic pricing and currency were more than offset by higher obsolescence costs for both basic and holiday product sets and the inclusion of DECIEM.
Operating expenses decreased 240 basis points as a percent of sales.
Our strong sales growth was partly due to earlier orders from some North America retailers concerned about logistics constraints, and costs related to these sales are expected to be incurred in our second quarter.
We do continue to manage costs with agility, realizing savings from our cost initiatives, while also investing to support a continued brick-and-mortar recovery as well as our strategic initiatives.
Our operating income rose 32% to 941 million, and our operating margin rose 140 basis points to 21.4% in the quarter.
Diluted earnings per share of $1.89 increased 31% compared to the prior year.
During the quarter, we used 81 million in net cash flows from operating activities, which was below the prior year.
This reflects a more normalized first quarter where we typically have seasonally higher working capital needs.
We invested 205 million in capital expenditures as we ramped up our investment to build a new manufacturing facility in Japan.
And we returned 749 million in cash to stockholders through both share repurchases and dividends.
So now let's turn to our outlook.
We are encouraged by the green shoots we are seeing around the world, even in the context of an environment of increased volatility.
Our strong performance reflects our ability to navigate through the volatility while leveraging our multiple engines of growth.
At the same time, we are mindful that recovery is tenuous and likely to be uneven.
Nevertheless, we are cautiously optimistic, and our assumptions for fiscal 2022 remain consistent.
We continue to expect an emerging renaissance in the makeup category as restrictions are safely lifted and social occasions increase.
And as intercontinental restrictions are lifted, we expect international passenger traffic to build toward the end of the fiscal year.
We began taking strategic pricing actions in July.
And overall, pricing is expected to add at least three points of growth, helping to offset inflationary pressures.
On the costs side, we plan to continue to increase advertising to support our brands and drive traffic in all channels.
Selling costs are expected to rise to support the reopening of brick-and-mortar retail.
We also continue to invest behind key strategic capabilities like data analytics, innovation, technology, and sustainability initiatives.
As you are all aware, global supply chains are being strained by COVID and its related effects in some markets, resulting in port congestion, higher fuel costs, and labor shortages at a time when demand for goods is rising.
This is causing us to experience inflation in freight and procurement, which we expect to impact our cost of goods and operating expenses beginning next quarter.
Based on what we see through October, the expected benefit of pricing, combined with good cost discipline elsewhere, are enabling us to maintain our expectations for the year.
For the full fiscal year, organic net sales are forecasted to grow 9 to 12%.
Based on rates of 1.163 for the euro, 1.351 for the pound, and 6.471 for the Chinese yuan, we expect currency translation to be negligible for the full fiscal year.
This range excludes approximately three points from acquisitions, divestitures, and brand closures, primarily the inclusion of DECIEM.
Diluted earnings per share is expected to range between 7.23 and 7.38 before restructuring and other charges.
This includes approximately $0.04 of accretion from currency translation and $0.03 accretion from DECIEM.
In constant currency, we expect earnings per share to rise 11 to 14%.
At this time, we expect organic sales for our second quarter to rise eight to 10%.
The net incremental sales from acquisitions, divestitures, and brand closures are expected to add about three points to reported growth, and currency is forecasted to be neutral.
Operating expenses are expected to rise in the second quarter as we support holiday activations and the continued recovery of brick-and-mortar retail around the world.
Additionally, the prior-year quarter included some benefits of government subsidies, which are not anticipated in the current year quarter.
We expect second quarter earnings per share of $2.51 to $2.61.
Both currency and the inclusion of DECIEM are expected to be immaterial to EPS.
Notably, our earnings per share forecast also reflects a 23% tax rate, compared to 15.9% in the prior year when we benefited from certain one-time items.
In closing, we are pleased with the terrific start to the year and are proud of the continued efforts of our global team.
We remain confident in our corporate strategy with its multiple growth engines to drive sustainable, profitable growth.

user
sees q2 earnings per share $2.51 to $2.61 excluding items.
confirming full year outlook.
qtrly adjusted diluted earnings per common share to $1.89.
qtrly net sales increased 23% to $4.39 billion.
for fiscal 2022, we continue to expect strong net sales and adjusted earnings per share growth with margin expansion.
higher transportation and logistics costs to negatively impact cost of sales and operating expenses in fiscal 2022.

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