Estee Lauder Companies Inc (EL) June 2, 2026 Conference Transcript

All right.

Good morning, everybody. Welcome. I am very excited to welcome the Estee Lauder companies back to the stage here in Paris, and I'm equally excited to welcome back both President and CEO, Stéphane Delafavre, as well as Executive Vice President and Chief Value Chain Officer, Roberto Canavari. Behind me, for those in the room, you will see Estee Lauder's disclosure slide, please take heed. And for those of you who are listening in online, you will find the same disclosures on Estee Lauder's investor relations website. And with that, Stefan, Roberto, we'll kick it off. Looking forward to it. Okay. Good. So, you know, a year ago when we were on this stage, we spoke a bit about portfolio optimization. And in that context, the conversation was mostly about organic optimization over time. And just to, I think, address maybe a probably elephant in the room, you've obviously since that time looked at a very large acquisition of a portfolio of brands, and you've continued to be active in minority and majority investments in other assets, as well as hiring advisors to overall do a portfolio review. So, I guess, as we kind of reset and think about the business from here and your strategy from here, how do we think about the role in M&A, of M&A going forward? Do you have the right portfolio of brands to achieve what your aspirations are? Or do you need something more transformational from an M&A perspective to achieve the value creation targets that you set?

Thank you for addressing the elephant in the room on the first question, which I'm sure everybody is waiting for. So let me start by the end of your question. Do we have the right portfolio of brand to compete in the prestige beauty market today? And the answer is absolutely yes. I think we have a fantastic portfolio of brands today. We have many markets around the world where we're getting market share. You know, China, like even in the U.S., we are like, you know, the right trajectory in the emerging market online around the world. So I believe from our portfolio, and we divide our portfolio of brand in three groups. You have what we call the large brands that are a billion dollar or close to a billion dollar and more anything that is between 500 million in net sales and a billion and the smaller brands and I have to say our large brands our mid-sized brand are very very good and we have some really up-and-coming smaller brands that are growing fast think about brand like Killian that now is the fastest growing brand in the in the company we have Le Labo as a mid-sized brand that is the second fastest growing brand in company and La Mer within some of our largest brand that is gaining market sharing pretty much every market around the world let alone you know brands like The Ordinary which are like you know performing extremely well so I would say I'm very proud of like the portfolio brand and when we were on stage last year I think there was still a lot of question mark of are our brands impaired or not because obviously we've like you know three years of deleverage there was question mark and I think this year when you look at us being able to just go back into growth and in many geographies and channel and market share growth I think it is for me the proof that our portfolio of brands is very strong but I've also been very public that we will be part of the M&A discussion we've always been part of the M&A conversation you think about it of the 25 brands plus that we have in the portfolio four were created in the company the rest have been small or large-scale innovation the two largest one being Tom Ford and DCM that have been done over the past like you know five years so we will be part of it sometimes we have to revisit the portfolio and we are looking at it have been clear that we've advised we've hired advisor to look at some of our brand sometimes brands don't fit anymore the consumer needs and this is what we are in the process of re-looking at now to address the elephant in the room and Pooch obviously that has been on many people's mind. When you look at what we discussed yesterday about Beauty Reimagined, Beauty Reimagined at its core obviously have the five pillars and I think everybody knows very well but it was about the rebalancing of the growth from a geography from a category standpoint and from a channel standpoint and it is true when you look at the portfolio of this that our company in prestige beauty we are the leader in skincare around the world with very strong position in Asia Pacific and many other markets around the world we are the leader in makeup especially with brands like Mac but obviously in France is this is the smallest of the three large one obviously I care we are playing a much smaller role in the prestige market even though we see a great potential and we are we're extremely proud of the lead of the portfolio of luxury brand artisanal niche however people are calling them that we have from the label Tom Ford Dremel and Kilian and so on and so forth but it is true that when you go from east to west the more west you go the higher the penetration of prestige finances is especially in Europe and in Latin America Europe you are roughly 40 50 percent of the business that is in prestige finances and in Latin America I can be in excess of 50 60 percent and we have less of a presence on this one so when if an opportunity one day comes and we can look at it but I want to be very clear it has to be a creative from a growth standpoint has to be a creative from a profitability standpoint over time it has to create shareholder values and if we cannot reach the growth and the profitability at the right price point then that is not an option and this is why obviously this deal didn't go through because it was not at the right price and this is as the president of the CEO of this our company nothing that I will ever do to the companies or like you know to our shareholders to just do something that doesn't make sense financially strategically it may make sense because the complementarity of the portfolio are very interesting but it has to make sense like you know financially and I just want to just address like you know one of the things also as part of a large size acquisition merger what it is even though it's maybe not at the heart of what we are seeking within beauty reimagine something that is merging transformational we will continue to look at opportunities but one of the things that people have questioned is at the right time right and that's what i just also wanted to address because we are part as part of the PRGP our profit recovery and growth plan we're in the midst of a major transformation from an operational standpoint cultural and leadership standpoint I want to be very clear this transformation in 29 days is over in term of approval of the PRGP so by the end of June 30th or the end of our fiscal year we are done I would have been approving with the leadership team hundred percent of the business case which we've expanded but the execution of this transformation will be largely completed by the end of this calendar year, that it is the back office, that is the transfer of our media planning with WPP or the integration with Shopify from a direct-to-consumer. This will be largely done by the end of 2026, which allows us to obviously take more transformational deal if we decide to in the future. But again, it has to be at the right price and it has to make sense within the existing portfolio. to our companies.

Great, okay. Thank you. You're welcome. So as you say... Hopefully it addresses the elephant as well. So we're now, as you say, the PRGP kind of winding down and being fully embedded in execution. It's 18 months thereabouts since Beauty Reimagined was rolled out. I guess, how do you parse or how do you respond to, I guess concerns or criticism that okay, Estee Lauder has started to put some points on the board, but it's low-hanging fruit. How do we parse out between what's low-hanging fruit versus what's more structural momentum that you can build on as you go into the future?

I think it's a really good question. In fact, I'll start with the market. So what it's seen as low-hanging fruit is hard work from the team, and I'm extremely proud of the work that the team must put like you know over the years the last two years really to just do this transformation that is not something that is insignificant it is the biggest operational transformation that we've ever done and we are doing it in the market that is below historical growth algorithm you know we believe that especially calendar 25 I think prestige beauty group two to three percent in this context I've been very clear at the last earning calls that this year we're going to deliver the top end of our guidance of three percent so today I confirm again we will be in position to deliver the three percent growth for the year which will translate into slightly higher retail sales growth there's still a bit of a disconnect between retail to net for us and in many markets like in China in emerging market online we believe that we're getting strong market share and we can we can elaborate on that like you know in more detail if you want to so I think we have a lot of great momentum this momentum is allowing us also to confirm today the preliminary view that we've given during the earning calls of three to five percent net sales growth for next year which will translate to roughly four to six percent in retail again because of the switch of the channels that we are going from more traditional channel to specialty multi you know platform like Amazon you know some of the accounting rules from growth to net is slightly different which we have a higher retail sales with a 4 to 6 at the mid to the higher point we will gain market share globally so and that's the one thing that I would like everybody like you know to remember is within the year after the PRGP Estelo their company will be back into market share gain at the mid to the higher point of the preliminary view that we're getting and we're doing it also by continuing to expand profitability we've given also a range of 12.5 to 13 percent like oi for next fiscal year and that's the beginning and the continuation of us being able to just like you know recover us to future meetings in terms of profitability for this their company so i think i would say on the five pillars of beauty reimagine everything is moving in the right direction from the consumer coverage we've really like you know deploy our brands where consumers are we have 12 brands in 10 markets now today like you know with Amazon we have like you know many brands in tik-tok shop around the world we've expanded on VIP.com in China we expanded on Shopee in Southeast in Asia so many many like in a great opportunity from an innovation standpoint we are accelerating if you remember I've put a of saying that at least 25% of our sales will come from innovation and that we will triple the number of innovation coming to market in less than a year. We are making a lot of progress this year we are going to deliver roughly 24 25% of our sales from innovation so it's a net acceleration compared to where we used to be and in term of bringing innovation to market in less than the year we are in a high double digit for a high teens at this point which obviously it's very encouraging and we're moving faster than the category that is benefiting from the most is makeup the third one is we're accelerating our consumer facing I was very clear at the beginning of the journey of beauty reimagine it was not only we could have taken the benefit of the PRGP drop everything to the bottom line everybody would have been happy with like a net increase of the EPS at a moment in time it was very clear for us we needed to reignite the retail demand and think about like the US after a decade of market share erosion for this their company now we are gaining market chain volume in all four categories and that for me that's the very good sign that we are now going into stabilization to acceleration because we are recruiting a lot of consumers the fourth pillar PRGP we've expanded it in the last call now the benefits are going to be between 1 and 1.1 billion dollar of like, you know, benefit for the company. So it's not insignificant, but think about more the benefit as the agility that we're creating into the company, the speed. And at this moment in time, after three years of the leverage, being back into positive, confirming the top end of the guidance this year, and already putting a top guidance for next year in the midst of the current environment with high level of volatility, should hopefully give a lot of like, you know, confidence that we have the momentum to go back into markets again and the last one certainly the one that I'm the most proud of is the cultural transformation of the company and we've challenged the ways of working we're much more agile we are one team we've changed also the incentive program of the leadership team that is really rewarding on the success of the one ELC so the one company and we're seeing today we've already you know 7,000 position that we've already eliminated and you know we're going to go anywhere between 9,000 to 10,000, that we're seeing a lot more agility and speed and collaboration within the company with clear sense of who does what between the brands, the regions, the affiliates, and obviously we have the very strong support of the function like, you know, obviously Roberto is doing.

Yes, and Roberto, underpinning all of that has been, you know, a number of changes on the supply chain. You spoke about last year as well, you know, I'm supporting beauty reimagining the PRGP. I guess, as you know, last year we were talking about tariffs. I guess there's still tariff uncertainty. We now have other uncertainties related to conflict. The list is long. I guess when you step back and think about the supply chain journey and how you're handling current volatility, you know, what more is there to do from here? And how would navigating the current environment, that looked differently a couple years ago versus what you're able to do today? Yeah, well, a number of things.

Maybe, but let me start with what we're doing, and then I'll explain how and give some elements. What we're doing is we're definitely driving what we call our dynamic value chain or supply chain. Dynamic value chain has three ingredients. It's speed, so time to market, has agility and resilience, given what is happening around us. Those three elements are the principle of dynamic value chain. Why we're doing it, agility is needed now. We want to enable the growth wherever it comes from, however it comes from, and what is happening around us requires quite a lot of agility. But at the same time, we want to continue the journey of gross margin expansion that has been very successful so far, and we want to continue to do it while we give this speed and agility. So that's what we're trying to do. it. The how is insisting a lot on a strategy that we started a while ago on regionalizing our network. Both the manufacturing network what we have but also the sourcing network with our supplier partners. I think I can say I'm very proud of the network that we've built today and I think is one of the most diversified of the industry. We are present, strong presence in the three major continents that we operate. The idea is basically, if I simplify, is source where we make and make where we sell. Now some data points to explain what I'm saying. 60% plus of our finished good production is done in the region we sell. 70% and growing, 70% of the raw and packaging material is sourced in the region where we make so that's where we are today and the journey continues of course we want to make it as efficient as possible but that's the journey that's where we are today and on top of that we qualify for the same product we could qualify always multiple sources of manufacturing so that we can give optionality to our network and if something is happening we can we can play with the diversified network that's that's really what is happening again more specific example i think last year we were mentioning about our factory in japan the sakura factory in japan in less than 12 months in less than 12 months including the reason that we're saying before tariffs we moved from a 10 million unit produced to a 80 plus million unit produced in less than 12 months moving the network around to mitigate tariffs so now this year we can say what we have done last year we're saying that's what we plan to do that's what we have done we have China today as sourcing from North America which is less than 10% all of that has allowed us to mitigate 60% plus of our tariff exposure so that is what we are doing from a money fashioning and sourcing standpoint but there is more fulfillment today and what is happening today fulfillment is another challenge so what we what we're doing part of the same transformation and fulfillment we've been doing three things essentially simplifying the network so reducing stock points simplifying the network variabilizing the cost as much as we can to follow I mean the volatility that we have but also investing in key strategic places to be closer to customer consumers so that we can anticipate stock where is needed for resilience. We have done one in Dubai and is helping quite a lot today to supply in that area. We have one in Aina and for travel retail I think is the first beauty I think distribution center in Aina and anyhow it's a key presence for us. We have simplified our network invested in a state-of-the-art in Shanghai. That's from a fulfillment of stock point standpoint and then we work a lot and again especially relevant in this period on alternative freight lanes. example but there might be disruption in global supply chains as we've seen and unfortunately in the past what we're doing is multiple sources multiple lanes so we're using Asia to Europe sea freight air freight but they could be challenged so we're using now also a train from China from China to Germany and this train is a pretty good lead time and it's definitely competitive much competitive than from a cost and point and air freight so basically we're giving us a lot of optionality to play with the network best example and I have here the product not by chance but heavy on the product this is our double wear I still order double wear so one of the main product we have we which we relaunched recently we have applied old and this is a big one this is 700 millions of gross sales, 900 SKU, 70 shades, 45 million units, so that's a big one. It's 98% regionalized from a manufacturing finished product standpoint, so almost 100%, it's 100% regionalized from a packaging standpoint and the lead time is 20% faster. So that is kind of trying to give proof point of a theory that I was saying at the beginning but this is really happening as we speak and we continue.

You said this is why this agility that we've built in the supply chain allows us in this moment in time of high volatility and disruption, even with the Middle East, to just be able to yet still confirm our guidance because obviously we are mitigating the impact. And in this moment in time, the impact from the Middle East has been minimal for us because of how we've been using the agility and the speed of our value chain. Yeah.

And that redundancy, regionalization, that was very different.

Completely eliminated from what it was even a year ago. Exactly.

Okay. Okay. Maybe we can tag team on this one. So you've spoken in the past about the need to re-energize recruitment, right? And you talked about in the US about volume growth, but not necessarily market share growth from a value perspective. How do you balance accessibility, increasing accessibility into Prestige and into your portfolio without blurring the lines between between prestige and mass or diluting brand equity?

Yeah, and that's a very good question because we remain a pure play in prestige, beauty, prestige and luxury, so we're very careful and the attention we put it on brand desirability first. So accessibility in this moment in time doesn't mean that you are diluting your brand equity and this is also the reason why we are combining consumer coverage with great new innovation and consumer facing investment. And I think once you start missing one of the elements, you're missing actually the magic equation about how do you maintain and you continue to build the equity. So when you think about the reach of consumers, yes, we're continuing to invest in top-hand luxury distribution, like top-hand department stores or freestanding store. But at the same time, we go all the way to platform like Amazon that allows us to just like, you know, get rich. But there's a clear understanding of where the experience is and where the replenishment is. And so today, we have a very good understanding and control of the ecosystem of where discovery starts and where retention continues. And that is very important. Remember, we are not in the business of only acquisition. We are actually first and foremost in the business of retention because this is where the profitability will start, like building. Now, you can do it also by having the right innovation. And innovation, I was very clear when we say we want to accelerate innovation, now it's not necessarily in quantities, now it depends on makeup, you need more innovation, it may be less in skin care and finances, but it's also playing the size, the impact, the breakthrough, but also at the same time, sizing and price points. I've been very clear that on innovation today, we're bringing more innovation at the entry of prestige especially on makeup or brand like the ordinary and clinic that are allowing us to just reignite the recruitment wheel but at every single time we're doing it at accretion of gross margin there's no innovation that we are allowing to launch in the portfolio that are not growth margin accretive to the total so we're doing that and then by increasing consumer facing investment remember last quarter we increased consumer facing by five percent every quarter before it is anywhere between between three and four percent that allows us to put more investment into consumer facing driving equity driving rich so think about the media today which is desirable it's equity first then these are ability for rich and making sure that we're putting our brand into culture just to illustrate one good example with Mac Mac we've expanded Mac into Sephora both into the US and into the Middle East that gives us access to the largest part of the makeup business in this region. We've went after more innovation, like Powder Kiss, for instance, which has been a global success in the lipstick area. At the lower price point, we've reignited the retail. And then third, we've put back the brand into culture. We've hired ambassadors like Doja Cat, like Kris Jenner, and etc. And now, as a result, in the U.S., for the last quarter, the first quarter of the calendar year, the MAC brand grew 250 basis points of market share in lip gloss and grew close to triple digits in lip in total. So that's actually the model that we're applying on every single of our brand when you combine equity, desirability, and culture is how you maintain the strong desirability of the brand overall.

The target to 30% new products by innovation, is that more innovation or is that more effective bigger innovation? Is it both? And I guess what are the bottlenecks or what needs to happen from here to hit that target?

Maybe we'll tacking on these two things because I think there is like what we do on the product standpoint and what we're doing from a value chain standpoint to get there. I think it's a combination depending on the categories like I said I think makeup is more innovation skincare and for instance is bigger and most disruptive innovation I think we look at innovation in about three buckets the breakthrough innovation so this one's have to be like you know what we do for instance in longevity with Estee Lauder or Creme de la Mer that brought like regenerating night cream both like in a face and eye these are smaller smaller in quantities but big in size really like you know we want to place any of this innovation in the top three of the subcategory we are launching every single time then there's what we call on trend innovation in makeup you have to be fast lip oil is trending okay you need to just like you know bring a lip oil in the market in six to twelve months or you're missing potentially the wave or even if not you are missing it the cost of entry becomes so high because there's too many players so the combination of being fast at the entry of where subcategories trending is absolutely key and that's why i'm putting the accent of bringing product faster to market never compromising quality or high performance but you have to be faster and the last one is what roberto was saying with like you know double wear which is what we call like commercial innovation so it's a product that people love it's number one foundation in many markets around the world but you can't just like you know bring it through a different eyes to the consumer with new ingredients new technology inside but it's still the double where you love but it is a what we call Kaizen you know it's like what we know is good we can make it even better you know going forward so that's what it is and then there's many things that we are doing to be able to just bring product to market faster using AI that allows us to never compromise in quality or performance and maybe things that you can say.

I'll give some example of that and one is back to the 30% what we're doing to enabling speed there are a number of things we're well underway we are we have doubled actually whereas when we start to have doubled the launches that we do under under 12 months we are in the high teens as Stefan was saying but also below 18 months it's more than 50 percent so it's it's it's it's there it's coming i have no doubt we will we will get there and we've done it and we are doing it in two ways one a lot of systemic changes in our value chain processes there are many again i like to give example a quick one the way we do quality the way we harmonize um testing and validation to respect quality with our third party manufacturers especially make up third party manufacturing is is an important component of our value chain network by eliminating some activities by simplifying and synchronizing some activities by parallel pathing some actions we're reducing by several weeks that pass so this is all speed that is gaining that we gain in the launch more relevant and I think for for what we are doing today and for the future that we're building to achieve and beat the 30% is the what that we're doing with technology, digital technology and AI being a big component of that. In order to, one risk that we wanted to avoid was to have a lot of AI initiatives but in a way not connected. A lot of pilots one after the other, which is then difficult to scale. What we wanted to do since the beginning is to say whatever we do has to have an end-to-end view first, so it has to be full value chain view and second we are able to scale it so we have created internally what we call our digital atelier which is basically a competent center where we identify and scale and define how to scale the best digital solution ai solution we invest in training and work what we call our workers for the future and of course we look at our data structure to make sure that there again examples design to manufacture so we go upstream we were developing an intelligent packaging technical packaging design using AI that is what we're trying to do is to link a marketing brief to a packaging that is either already existing or similar packagings that are aligned with the the brief but with the small modifications they are immediately industrialized meaning we don't need to once we did the pack it's much faster the way we develop the packaging first but second equally important the packaging is industrialized meaning when it goes to a factory line it can be produced we don't need to do the pilot run and do the testing etc etc this is months months of two to four months we believe of savings in the development and the industrialization this could be saving, will be saving because it's not about double tooling as an example so there will be speed, agility and efficiency at the same time we're ready to deploy it, we're finishing it so that's why we believe we have plenty of solutions to double down on that another example that I like to mention because it's now a presence in our value chain in the manufacturing environment we have an AI solution which we call Ella is a new colleague we call her it stands for Estee Lauder Line Assistant is essentially a AI solution augmenting the capabilities of our people to identify immediately the best setup of the line for a launch or for a change in the line for a performance requirement something that used to last I mean quite a lot with different line operators is now instantaneously provided by Ella so again its speed its agility and its efficiency because of course this is this is allowing more time to produce and more time to set up the the third example there are many but I'll stop with the third one but it's the one that I really like because it has helped us to manage the network everything that I was saying before it's also thanks to our digital solution that we call the our digital twin of our money of our value chain network so basically we have map the network digitally and we with all the different technology in the different sides all the different lanes full full network so that when we want to play with scenarios now with that what is happening we play with different scenarios we can quickly identify which is the bottleneck where do we have a risk where we don't have enough agility over or resilience and then we can zoom in and find solutions there so those are all the technologies that we have we're building and will allow us i think to definitely go where stefan wants to be maybe a bit but that's it's very interesting how ai for the time being is seeing we're seeing a lot of benefit in the value chain and in r d but like you know the ability to just be much more resilient much

faster and agile on how to bring and to scale our innovation so and i think it's only the beginning we'll see a lot more benefit from what ai can just bring even on consumer facing optimization going for a while we could spend another 40 minutes on ai but yeah i know we have about seven left and i want to make sure we hit um two key markets that perpetually come up in conversation yes u.s and china you got it okay and so i guess perspective on the state of the the market the consumer the health vibrancy of each of those geographies i think from a u.s perspective the the focus is okay there's volume there's momentum there's volume growth but um when do we get to value share growth? And when do we get the gap between, you know, organic sales and consumption to close? And then in China, there's a million questions, but I think the one that is, I feel that most often recently is just, you know, how does Estee Lauder navigate, you know, with all the different local indie brands that are coming up? You know, is the portfolio as potent today as it has been historically?

Yeah, I think these are, you know, joke aside, these are the two markets to talk about not that I want to diminish the importance of all the others but if we can if this two market continues to be in the mid teens from a growth a mid single digit sorry from a growth standpoint I think we are in a really good position like you know globally as a category and then our ability to gain market share is really what is just going to make us like in overall gain market share in the total so looking at the US I would say first So coming from the decade of market share, the leverage that we have had, I'm very proud of what the team has done in a very short period of time. And I think, especially online, I think the momentum is very strong with what we've done with Amazon, what we've done with TikTok shop now, or frankly, even our brand.com. And I think the early sign of the transformation and the move from our internal platform to Shopify with Tom Ford has really shown like you know increased epi's in terms of satisfaction close retention of the the consumers on brand.com and you remember that all direct to consumer in the u.s is not captured in any of the circana panel and frankly we're doing pretty well in direct to consumer especially you know linked to brands like le labo where the majority of the cells are in direct to consumer therefore not captured in Syracana. So on that front I think you know the momentum that we are US for me the first stage was put back the brand in volume growth and gain market share. Now from a value standpoint we're already gaining market share on brands like the ordinary. The ordinary is actually like you know flying not only in the US but frankly everywhere around the world. I was with the team last night you know just doing a quick review and the brand is in high double digit growth in pretty much every market around the world we're seeing good momentum with our perfume brands also like you know with tom ford like joe malone like le labo especially really getting strongly but you're you're right the for us we need to go from volume market share growth to value market share growth consistently and we're still dealing with the rebalancing of the distribution so in our case it is purely a distribution rebalancing we've made some really clear move lately I think it was made a headline you know Bobby Brown we decided to exit Bobby Brown from the department stores in the North America market to really focus on the high growth channel there's nothing wrong with the brand on the contrary the brand is doing very well but it's doing well and it's well positioned to just work in specialty multi and online and that's what we decided to do at the same time the expansion of the PRGP that we announced at the last earning calls 70% of the expansion of the number of position eliminated are field position of Beauty Advisor because we are accelerating the cut of the tail of both freestanding stores that are no longer working for us because the traffic is not there or frankly the tail of department store so the faster we continue to just shift from I would say roughly mid 30% of our business in department store to mid 20% of our department store in the US I think then we will poise for a very strong market share acceleration thanks to the momentum that we are having both on specialty multi and online one of the big move we made is Mac entering Sephora in the US after you know 41 years title basically in the USA they took them 41 one years to just go to Sephora. Yeah, but Mac was not built for that. Mac was built as a direct to consumer brand, but when the consumer started to shift to go to online and specialty multi, it was time for us to do it. And frankly, the result of the partnership that we have had with Sephora, frankly, we've altered and many of our specialty multi retailers have been absolutely fantastic. So the faster we shift the distribution, the faster we will just get back into market share again. Now, going east completely to the other big block of beauty, I'm very confident of what we are seeing in China. Now, I just want to make it very clear. I don't believe that China will just resume to consistent double-digit market growth as a market, because China is a mature market. Obviously, you've said it. There is, from a pre-COVID to a past COVID, there's been a complete transformation of the role of the local brands. But it's not that we don't know that. we've seen that in Japan, we've seen it in Korea, we see it now in China. We just purchased a brand in India with Forest Essentials, that is the number one brand in India and we're seeing the rise of the indie brand, we've seen the rise of the Korean brand. So there's something that we deal and we deal by making sure that our brands are the most locally relevant in the market where we operate. Don't forget one thing, we've been now 32 years in China, so we know how to operate in China of the last eight quarters we have had seven quarters of market share gain and what I'm the most excited about this especially since the deployment of Beauty Reimagined is the growth is much more balanced in the past a lot of the growth in China was dependent on Lauder and La Mer that are continuing to do very well but we're seeing net acceleration of Tom Ford, Le Labo, Le Labo now as the number one productivity per door of any beauty brand in China We have Jo Malone that is doing very strong and last year we launched The Ordinary very successfully that allows us to compete at the entry of prestige with many of the local brands. So do I worry about the local brand? No. Do I look at the local brand? Do I learn from the local brand? Yes, because they have one thing, is the speed. And having the R&D center based in China now today allows us, after two years of really setting up the operation nicely, to have a net acceleration of the number of innovation that we are developing in China for China. 30% of the global innovation for the estate of the company will come from Shanghai. And the large majority are targeting the Chinese consumer. So I'm really confident. Today I was just early in the morning, I was like talking to the China team to just get an update on 618. I think you always organize like the conference like right in the middle of some of the biggest shopping festivals around the world. And I'm happy to report, actually, the momentum is strong for the time being. It's too early to tell, obviously, because there's still another 17 days before the conclusion of the festival. But very excited about the balance of the growth and the momentum that we are getting, which hopefully puts us again into market, again into this quarter.

We are at time, but I want to end on the final pillar of beauty reimagining culture. And we've talked about a lot of the change. There's been a change in the leadership team. There's been a dramatic flattening of the organization, dramatic changes in the ways that Estee Lauder work, Estee Lauder, the company works. What do you think has been the most difficult hurdles for the employee base to overcome amidst all that? and what are the keys to success from a cultural perspective as you go forward?

I think it's a beautiful question. One that is very close to my heart because all this operational transformation only sticks if you evolve the culture. And I think we've put a lot of effort into maintaining what are the core value of the company but evolving the culture. We've deployed what we call our beauty commitment. We're in beauty, so beauty commitment. And this stands for very simple. B of beauty is bold. We need to be a bolder organization. We need to go after the new ideas. E is to be more entrepreneurial as an organization. I think our founder was the ultimate, like, you know, girl's boss. And we want to be more entrepreneurial, which means that there's a lot more empowerment of the organization to go after new ideas. A is agile. I think we've demonstrated in supply chain our ability to go into new channel remember that in the US everybody was questioning why are we not going to new platform like Amazon we were like you know part of the last train now obviously this is behind and we're doing great movement in Europe and in the UK we're the first one doing it so we are learning you unified no beauty we're unified as one team we've clear clearly creating this one culture and one organization even by changing the incentive model all the leadership team as I said is going from thousands of different like in a mechanism of reward to just one we need to deliver the company as a leadership team when at the beginning of the year we tell you what is the guidance top line and bottom line our job is to meet it or to exceed it and I really want the leadership team to just be behind it T transformational I believe that when the PRGP is over the big transformation is done but it's going to be constant evolution we are in the world that frankly AI allows you to just like in a create efficiency like you know every day and then why it's a little bit the wink is yes yes to new idea yes to just like you know go to you know new brands new markets new channels as long as everything we do preserve what we have the two most important things in our company the best brands and the best team in the industry and Maybe, Roberto, you can say how you're applying that to your organization.

There is, we don't have a lot of time, maybe I'll just say one thing. What, on top of the incentive, what is working a lot, and it's certainly working in value chain to kill silos, and apart from the operating model, a number of things, is what Stéphane brought with Beauty and Imagine, the idea of the consumer voice. So it's a consumer-centric organization. At the end of the day, in the meetings, no silos, we say, what is adding value to the consumer? Is it adding value we go for that? is not adding value who cares that a function an area but that it means the strongest push to say that's the very end and all the rest gets organized and gets three lines for that so I think it's it's a it's a strong message and everybody's not talking about consumer value awesome with that we will wrap it but thank you both for your time and thank you all for joining