The Estée Lauder Companies Inc. (EL) Earnings Call Transcript & Summary

Okay. Good morning, everybody, and welcome back. I'm Steve Powers. I'm the head of Deutsche Bank's U.S. Consumer Staples franchise. And I am thrilled to welcome back Estee Lauder and CFO, Tracey Travis. This has become somewhat of a tradition for us, and I look forward to it every year. So thanks for rejoining us.

Well, it's one of our favorite conferences, so thank you for having us back. We were sorry to miss it last year.

Okay. So we're going to dive right in, and I actually want to pick up with the Profit Recovery Plan. There could be a lot of topic -- a lot of discussion of top line trends, but I think this is -- as we move into fiscal '25 and fiscal '26, this is becoming -- this is going to become increasingly important. And I know you've spoken about many of the benefits, being born in gross margin. I'd love to begin just getting a sense of different contributors and initiatives that underpin those contributions, and maybe a little bit of description about where the savings have come from, how much is going to come from reduced obsolescence versus more normalized promotions versus true cost savings, et cetera.

Yes, yes. No, it's probably helpful just to talk a bit about the journey that we've been on this year that positions us for the Profit Recovery Plan. So obviously, it's been a bit of a challenging couple of years for the company. One of the things, as we emerge from the pandemic in many of our markets, and some of the actions that we've taken to really get both our internal inventory under better control given some of the shocks that we experienced as well as some of the inventory in trade, specifically as it relates to Asia travel retail required us to really pull back significantly on production. And so when you look at our third quarter results and the fact, we called at an inflection point and we're returning to growth, we returned to growth really by taking some hard actions in the first half of the year to recover, if you will, from some of the effects of the pandemic and what it had on us. Now that we're in a position to grow, we're shipping replenishment back to Asia travel retail, we want to make sure we grow at a margin that is acceptable, obviously, from a company standpoint. So the Profit Recovery Plan is an acceleration of margin recovery as we grow. And it was important for us to take the actions, in particular in gross margin, as you indicate, Steve, in order for us to make sure growth at our current margin level, obviously, would not be something that we would -- that would be acceptable. And so a lot of our focus, when you think about where we've lost a lot of gross -- margin, a lot of it has been in gross margin. And so gross margin recovery is certainly the big focus area for us. It helps to fuel growth, having the growth -- higher gross margins. And the areas that we're focused on in gross margin primarily are with some of the inventory work that we've done that will certainly help us in terms of obsolescence. It will also help us in terms of discounting. And so we should start to see those benefits, obviously, over the next few quarters. And that's been an important element of our Profit Recovery Plan. So we have already done that. We've already positioned ourselves to start to realize some of those savings. We've also invested in changes in process as well as really leveraging some of our tools a bit more to help our supply chain in terms of demand forecasting and try to get our SKU forecast accuracy up. That, too, will help us in terms of discounts and obsolescence. The other thing that we are focused on is innovation. And obviously, innovation is key in our industry. As we looked at our future pipeline of innovation, we have basically cut the tail, if you will, on some of the innovation that was less accretive, and that allows us to focus resources on the bigger, more profitable growth programs. And some of which we launched in the second half of this year, which we'll see the full benefit of next year. But that was also an important enabler for us in terms of gross margin recovery. And then the last area that we're focused on is really looking at our footprint in terms of manufacturing and making sure that we are rightsizing, if you will, some of our manufacturing expenses to the level of production as we ramp back up production. And so those are areas that will manifest themselves in terms of gross margin recovery. In terms of expense areas, and that's the other, obviously, area that's important for us from a margin recovery standpoint, there are two primary areas of focus. One is on procurement. And so we've got an accelerated indirect procurement program to really look at our spend and, in some cases, eliminate spend; in other cases leverage our cost a bit better with our supply base. And then the other area, obviously, is restructuring, which we talked about in the February call. So those are the key elements. There are lots of programs underneath those, as you can well imagine, but those are some of the key areas of the Profit Recovery Plan that we're focused on executing against.

Okay. Very good. I will say that in my haste and excitement to get started, I forgot to mention that there was a disclosure slide. Guys, I'm sure you all saw it before we started. If someone would like to put that back up, feel free so people can look at it again. But I just wanted to make sure we highlighted that. That is my oversight, so I apologize. And if we think about the contributions of those various -- so is it fair to assume sort of 1/3 of the benefits to come from obsolescence, 1/3 from sort of promotional normalization and simplification, and then 1/3 are from some of the procurement and restructuring incentives? Or is it skewed more disproportionate than that?

We'll -- as we said on our last call, we'll give more specific guidance in our August call when we give guidance in terms of the cadence of how we expect the recovery to occur. But I don't think that's completely out of line, but it's not exact.

Okay. Very good. Okay. So the program overall is expected to yield $1.1 billion to $1.4 billion of incremental net operating profit flow-through. Maybe you can give us a sense of the magnitude of the reinvestment opportunity that sits above those numbers just so we get a sense of how much -- so I think there is a fear that if those savings all flow through that there's not enough investment going to the business to spur a growth recovery. So maybe you can help dispel that notion.

Yes. So we haven't -- to your point, the $1.1 billion to $1.4 billion range of net savings that we expect to come over 2 years in the program is a net number, and we're actually targeting higher from a growth standpoint. The reinvestment will occur as the sales occur. And so we are very much committed to flowing through the savings that we have committed to. But again, the programs actually generate more than that. So you'll see the pace of reinvestment accelerate throughout fiscal '25, as we start to realize savings from this program. And that's very important as we look at some of the markets that we have -- have been more challenging for us, making sure we've got investment behind our brands that are growing, investment behind distribution expansion. When you think about our business, what's important for us, it's growth business. So prestige beauty is a growth category. It is -- has been growing anywhere between high single and low double digit in most markets -- most of the measured markets that we measure with the exception of China, which obviously has had more challenges as it relates to the recovery. So it's a great growth opportunity for us. What's important from a financial structure standpoint is that we have strong gross margins, so that we can invest in advertising, in distribution expansion for our brands and in the education that we do to consumers as well. And so that program -- this program is a growth fueling program, in addition to a margin recovery program.

Okay. And the program, as you've articulated before, is skewed slightly towards fiscal '25 versus fiscal '26. So assuming that's correct, I interpret that as kind of $600-plus million contribution to fiscal '25. Is that a fair interpretation?

I would underscore slight.

Okay. Fair enough, fair enough. Okay. It's $550 million plus. Very good. The -- I do want to get to growth, but I want to break our traditional habit of leaving capital allocation to the end. As the business makes good on that profit recovery, there should be lots of free cash flow that follows. And I'm curious as to given all of the work you have going on organically to reaccelerate growth, how do you prioritize that cash flow in terms of -- obviously, there's reinvestment back in the business. But to the extent there's excess free cash flow, is it returning that cash to shareholders? Or is the business in a position to lead into M&A as it goes through this recovery?

Well, I'm sure you saw the announcement that we did complete the remaining acquisition of DECIEM, The Ordinary brand. And so we are now the full owners of DECIEM. So that is certainly an acquisition that we have prioritized. We just anniversaried our 1-year acquisition of Tom Ford. So in terms of free cash flow, yes, just the work that we've done on inventory has freed up cash. And obviously, the processes that we are -- we've put in place to continue to keep that inventory level more disciplined is a big fueler of ours, obviously, as it relates to free cash flow. For the acquisitions that we've done recently, we have taken on additional debt. And so in addition to returning cash to shareholders, we are also returning cash to our debt holders as well. And I would say that, along with focusing on the PRP and the turnaround of the business, is our primary focus right now. We are always scanning the market for where we believe -- where we see real growth opportunity, margin accretive growth opportunity. Luxury skin care is an area that the La Mer brand has done incredibly well in the competitive space. Other brands in luxury skin care have done incredibly well. We have refocused the Estee Lauder brand in some of our Asian markets on Re-Nutriv, in addition to the other franchises, because that is the top of the line in terms of their skin care, while we also have The Ordinary, which is entry price point skin care. So that's the balance between shareholders and debt holders are the near-term focus areas. But if there is an acquisition that we see that we're interested in, and we always have a pipeline of things that, gee, if they were to come to market, we certainly would want to be able to participate in, that's something that we would do once we get -- once we satisfy our debt holders and some of our shareholders.

Okay. And how do you view the M&A landscape today relative to history? Is the market conducive to M&A in prestige beauty? Or is more conducive, less conducive than -- or kind of evergreen?

Yes. Interest rates have obviously stabilized a bit. They're still high. But when you look at the growth categories of the industry, it's still an attractive industry for the right assets. So I think the environment is conducive to M&A, and I think you will probably see more of it over the next few months.

Okay. One more question, then we'll get to growth.

Okay.

On the free cash flow recovery, should we expect that to come -- obviously, there's the inventory rebalancing that you've got going on. Is it really limited to profit recovery? Or -- we've talked in the past about reducing time to market, making the supply chain more efficient. You've got the plant now opened up in Tokyo, which over time should reduce cycle times. Is there working capital benefits to unlock as we go through this recovery above and beyond near-term inventory reductions? Or is that future?

Yes. We've reached a pretty good level of inventory right now. We do have plans to further reduce over time the inventory. And certainly, the agility that you mentioned of building a value chain in Asia, given the growth that we expect to continue to happen in the Asian market, will provide us with some additional inventory savings as it relates to working capital. We also expect some savings in other areas as well of working capital like payables, receivables, et cetera.

Yes. Okay. Great. Okay. So from a top line perspective, the second half of fiscal '24 have been positioned for some time as an important inflection point, where growth was expected to resume and then presumably continue to accelerate into fiscal '25. We've hit that inflection point. So where are you today most excited, most encouraged versus where do you see more work ahead?

Yes. Well, the work ahead certainly is the Profit Recovery Plan. It also is the area that I'm most excited about because a lot of the work that we -- work streams that we have going on under the Profit Recovery Plan certainly are to accelerate margin, but they're also to reduce some of the complexity that's built up over time in the company. And so we recognize that this is a real opportunity for us to take actions to become more agile. We are focused on, to your point, innovation and how do we speed to market more innovation, whether it's product innovation or commercial innovation. That's increasingly important in every market as the attractiveness of the category brings in lots of competitors. And so that ability to be more nimble in terms of bringing innovation to market or commercial innovation to market, we have a very broad array of brands and products within each of our brands. So commercial activation and innovation becomes critically important as well. So the conversations that we're having with our teams are very motivating and energetic in terms of how we're going to -- as we're now positioning ourselves for growth and creating more fuel for growth, how we're going to operate a bit differently to -- in a faster-paced way, in a faster-paced market.

Okay. In that commercial innovation, how backlogged or, I guess, how restrained were you from pushing forward with marketplace activation and innovation as you were trying to reduce inventory levels up until April 1? And how quickly can you turn on that spigot in terms of accelerating commercial activity?

Yes. One of the things that we're very much focused on, we're seeing increasingly consumers react to trends. And so our model from a marketing activation standpoint is very thoughtful and planful, as it should be. But one of the things that we're really focused on, and brands like The Ordinary in our portfolio, Too Faced has gotten much better at this as well, is not only seeing trends and being able to respond from a commercial activation standpoint and then bringing product to market if the trend actually is a longer-term trend, but also creating trends. And so the enhanced data that we have enabled over the last few years to really be able to read and react what's happening in social media that could mean a meaningful trend for our brands, it has been very important. So we have a lot of the elements there and making sure that our teams, in particular, our local markets because we are seeing trends more and more become local. There are global trends, certainly. But it's very important that our local markets are enabled with both the resources and the talent to actually activate trends and be able to capitalize on them when they happen. And so we're doing that really well in some markets, and we have opportunity in other markets. And our markets themselves are incredibly excited about that focus for them to be able to do that.

Great. Now you did hit the inflection. We are going to accelerate in the fourth quarter. But the guidance for the fourth quarter from a revenue standpoint was slightly below what had been implied based on where 3Q was supposed to land. Maybe you can just talk through some of the puts and takes there. What's sort of on or ahead of schedule? What's holding back versus your prior outlook? That would be helpful.

Yes, yes. The biggest reason that we were more muted on our fourth quarter was in the third quarter, we talked about this, obviously, on the third quarter call that China, the recovery has been slower, and that is China and China travel retail. Now obviously, we have a bit of a different situation because we're resuming some of the shipments in parts of China travel retail. So we're seeing shipment growth, but the acceleration in terms of traffic has been uneven. We've seen fits and starts as it relates to traffic and really the consumption of traffic along their travel journey. So that's the reason why, as we actually saw in Mainland China, a slowdown in prestige beauty in the third quarter that -- which was a surprise to us, and I think many, many others, that we pulled down the fourth quarter related to that softness. So -- and again, we remind ourselves that China is still in recovery. We're seeing consumers understandably similar to what we saw in Europe as well as in the Americas, when restrictions were lifted and people started resuming normal activities, the priority was on seeing family. It was on travel. It was on dining and entertainment and a bit less on goods. And so they're much, obviously, later in that cycle than our other markets that have been in recovery. APAC has been growing strongly all year outside of the China area. Europe, the markets of Europe outside of travel retail have been going quite nicely. And even within travel retail, European travel retail in the Americas have been growing nicely. So it really is this last pocket of recovery, if you will, that we have with China that has just been a bit flatter in terms of the recovery than what we had anticipated.

And we're coming up on what has or had become a very important shopping holiday in 618. Singles Day, 11.11 had been soft. Any early indications or -- embedded in that fourth quarter guidance, I'm assuming, is a relatively prudent assumption around 618 strength, but maybe you could elaborate it.

It was our assumption at the time in terms of 618, yes.

Yes. Okay. Very good. As we look forward, I guess, let's break this between Asia travel retail and Hainan and then Mainland China, but focusing on travel retail. As we look forward from here, so it's softer than hoped for, softer than expected. What's the kind of medium-term expectation in terms of recovery?

So it's still a very important channel of distribution and growth for us. When you think about travel retail, and in particular, when you think about it relative to emerging market consumers, oftentimes, just given our lack of distribution in some of the emerging markets that have been growing double digit for us. But we have limited distribution. And so oftentimes, the first time a consumer will interact with any one of our brands physically is in an airport. And so travel retail remains in -- a very important distribution channel for us. And we expect travel retail to grow over the next few years. So one of the things that we're doing in travel retail, we have an opportunity to expand our fragrance portfolio in travel retail. Our fragrance portfolio has been doing quite well with Tom Ford and Jo Malone and Le Labo and Frédéric Malle and KILIAN. And so that's a big focus of ours as well, not only in travel retail, but also certainly in markets like Europe, where we have more opportunity for expansion. We are adding back some staff in travel retail that, obviously, when people weren't traveling, we didn't have the staff there. So selectively, as we conversion -- traffic and conversion pickup, we're adding back staff, and we've certainly done that in markets here in Europe as well as in the Americas and throughout selective markets in Asia. So -- and one of the things -- Asia travel retail is a bit different than Europe and the U.S. Eventing becomes very important in Asia travel retail. So we're starting to resume some of the big events that our brands have done to really draw attention to some of the new innovation that we've done. We've done some additional eventing in Hainan, which has gone well. And we'll do that in some of the airports in Asia as well as traffic resumes and really to help drive the conversion of the traffic in those markets.

Are you more optimistic about the recovery in global travel retail or Asia travel retailer? Or another way of saying it, if you think about the next 3, 4, 5 years, is there more growth to come on a global basis or in Asia travel retail?

It's a great question. I think in terms of travel, I think travel will pick up globally, as it has been. Conversion is very different by region. And so we see more shopping occasions in Asia travel retail than we do in Europe and in the Americas. I think we have more opportunity in Europe travel retail, and the expansion of our fragrance portfolio will help that. But I think Asia travel retail, we would expect traffic, but also more conversion. And that's just been the history of what we've experienced. And certainly, we will continue to fuel that with some of the activities that I spoke about in terms of eventing, et cetera.

Okay. Maybe a similar question on Mainland China and your outlook over the next 12, 24 months. My perception is that despite the volatility you've been operating through in the background, you've positioned the company in a lot of ways, in a much stronger position, right? There's the Tokyo manufacturing facility, the Shanghai R&D center, more distribution centers around the country, more diversified online presence.

Or brands. So we've launched -- during this period of time, we've launched Le Labo, which has been a tremendous success. We have a fantastic couple of stores in China, and more to come. We've launched our Aveda brand in China as well during this time frame. And a lot of the innovation that we focused on in the second half that we talked about on the last call and the call prior to that was in luxury skin care, which should resonate pretty strongly in China and other parts of Asia and Europe, where luxury skin care is more prevalent. So we have -- I would agree with you. We've positioned ourselves well from a commercial standpoint, and we've also positioned ourselves from a supply chain standpoint to have more agility. And so if there are further disruptions, which I would hope we wouldn't experience anything like the disruptions that we've experienced over the last couple of years, but we have more flexibility in our supply chain. We also have more R&D capability on the ground. And the focus there will be to get products faster to market that are locally relevant. And so yes, we still maintain a tremendous amount of optimism for the growth of Asia overall, China in addition to -- greater China in addition to markets like Japan and Korea and Southeast Asia, which are important focus areas for us as well.

Great. Okay. Let's maybe talk about trends from a product segment perspective. We'll start with skin care. Obviously, it's closely tied to China, closely tied to travel retail. But independent of that, how do you view the overall competitive position of the portfolio, thinking about contributions not only from brands like La Mer and Estee Lauder at the high end of prestige, but also the ordinary or in the use -- The Ordinary in the U.S. or Clinique in what you've now positioned in active derma? .

Yes. We feel very good about the portfolio. And so to your point, luxury skin care, in particular, in our Eastern markets has been a big growth area. La Mer has done quite well. Estee Lauder has the Re-Nutriv franchise, which is their luxury positioned of their portfolio and a lot of our innovation. Some of our breakthrough innovation has come through in the Re-Nutriv franchise, which we've just launched in the latter part of this year. And so we expect to see full benefits of that next year. The Ordinary has been a phenomenal success for us. And we are so pleased now to be the full owners of that brand. And that is a brand that we've launched in India and the Middle East to much success. Practically pretty much every market that we've launched it in, it's taken the top 3 or 4 positions in the distribution channels that it's in, which is largely specialty multi and obviously online. So we're positioned well at entry price point in terms of skin care of prestige. Clinique was the original derm brand. And so reactivating the positioning of Clinique, repartnering with dermatologists, The Brand was actually developed with dermatologists initially. So many of the formulas of Clinique today that have been around for a number of years were actually developed and partnered with dermatologists. So recommunicating that and reminding consumers of that is certainly something that has been important for us to be able to do. And much of their innovation going forward will very much reinforce that derm positioning, not only for skin care, but also fragrance-free makeup and some of the sensitive positioning -- sensitive skin positioning that they have for makeup, in particular foundation. So both active derm as well as sensitive skin, the Clinique brand. We have -- actually, we don't talk about it as much, but Bobbi Brown is clearly a makeup artist brand, but they have a decent part of their portfolio. About 1/3 of their portfolio is skin care. And it resonates quite well, particularly in Asia, but also in many Western markets. And so that also is a focus for the Bobbi Brown brand. And so we are well represented across various price points within our portfolio for skin care and across various different segments of skin care to position free, younger consumers as well as our more mature population, I'll say.

On The Ordinary's geographic expansion, are there priority markets, white space that you see still? Or are you more focused on developing the footprint that you've currently established?

No, no. There's more white space, yes. The Ordinary is not fully distributed at all. So there's definitely more white space. Actually, Steve, for most of the brands in our portfolio, there's more white space opportunities. So the most broadly distributed brands that we have are Estee Lauder and Clinique. And even those brands, when you think about either emerging markets or even a market like China, where the Estee Lauder brand has around 145, it's our most broadly distributed brand in China, we -- it's in about 145 cities. But through online, we have sales represented in over 700 cities. So even for some of our more broadly distributed brands, it -- there's an opportunity for further distribution and expansion. And not just brick-and-mortar distribution. One of the benefits we have in emerging markets, oftentimes, we will launch on a pure-play platform or with our own brand site. We'll see how the distribution or how the demand builds, and that allows us to actually enter into the market in brick-and-mortar distribution in a very productive and profitable way. And that's been our emerging market focus that's worked quite well for us in many of our priority emerging markets.

Great. Maybe a similar question on makeup. MAC, Clinique, Estee Lauder, Bobbi Brown, those are the company anchor franchises. But I was particularly interested with the recent entry of Tom Ford into couture makeup, which I know has been a priority for you for a while. I'm just interested in what that move signals in terms of potential change for the company from positioning of that overall portfolio.

Yes. So makeup has been, since very early stages of our development of the Tom Ford brand along with Tom at the time, started as a fragrance brand, but very quickly moved in to makeup. So makeup is a big part of the Tom Ford brand strategy, and it is couture. We have some very exciting innovation coming in 2025 for makeup, recognizing that couture makeup in certain markets has been the fastest growing part of the makeup category. And Tom Ford is our brand right now that has couture makeup. And so that will be a big focus for the company. We've also announced that we have a licensing arrangement with BALMAIN. We will be launching, and we're very excited about that as well. When you think about the success that we've had with the Tom Ford brand to have success as well with the BALMAIN brand, which will start like we did with Tom Ford with fragrances, but will also eventually expand into makeup as well. So we're well positioned. We see the couture makeup trend to be a longer-term trend. It certainly has been a trend for the last few years. And we believe with those two brands, and perhaps others in the future, but for those two brands, we will be well positioned in that category.

See. That's what I love with M&A.

Yes. I see.

Okay. What about the core of the makeup franchise? What's your assessment of brands like MAC? Is there more work to do there? Or are you satisfied with the trajectory of that business?

Yes. MAC has -- makeup now is on an upward trend. And MAC has come out with some very strong innovation in the second half of this year. When you think about our MAC brand, it's still the top -#1 prestige makeup globally. So it's -- there are a lot of consumers that use MAC. MAC represents a lot of different things from a brand standpoint, but the breadth of their makeup assortment is unmatched in terms of the color range for color cosmetics, for foundation. You know when consumers know when they go in -- if they're looking for a particular shade, you're going to find it in MAC. And so that is very important from a MAC standpoint. So MAC is really focused on -- as we see the importance of trends picking up in the market is very much focused on their trend program. MAC has historically led trends in makeup, and that is still a focus area for theirs going forward. So I think we're expecting to see some exciting innovation come out of the MAC brand in 2025 and 2026.

Great. And last but not least, fragrances. Think about the last 10 years and the transformation of Estee Lauder's fragrance portfolio, it has been truly pretty incredible. It used to be viewed as a clear weak spot. Now I think it's an area of agreed-upon strength. Are there other ways to further round out that portfolio? Or are you happy with the way it stands today?

We're very happy with our fragrance portfolio. We took the decision, Steve, as you know, a few years ago to really reposition our fragrance portfolio. We had historically Estee Lauder and Clinique. Obviously, the company with Estee Lauder fragrances was a big part of the original launch of the company in terms of the fragrance portfolio. So Estee Lauder and Clinique have had -- have a heritage line of fragrances. We had a designer fragrance portfolio. It was largely a U.S.-centric fragrance portfolio. And where we were seeing growth and profitable growth for our portfolio was in the luxury and artisanal fragrances. So Jo Malone is a fantastic grower profitably for us and very sizable. It is one of our top brands in terms of size. Tom Ford is a pretty close second. Obviously, it's fragrance and cosmetics. And so when we look at those brands, it's very different because we've seen a trend in fragrances, where historically, and still to a certain extent, consumers want their signature fragrance. And they have one fragrance, and they buy that fragrance and they stick with that fragrance, and that's their signature scent. What we've seen more trend, and particularly with younger consumers, but not just, is people want a collection of fragrances. And so I have my day fragrance, my evening fragrance, my weekend fragrance. And a collection of fragrances like Tom Ford and Jo Malone allow us to keep consumers within the franchise as they are broadening their array of fragrance interests. Le Labo, Frédéric Malle, KILIAN, now, all of the fragrances that we've acquired in recent years and have expanded are in that category of a collection of fragrances. And so it's very much the trend that we see in fragrances -- the fragrance category in general has grown. We expect that it will continue to grow. It was one of the big surprises during the pandemic that people were actually using fragrance at home. It represents pampering. It represents signature and individuality. And so we're very pleased. There's still a lot of runway for our fragrance portfolio. Jo Malone still has opportunity even -- given its size. Tom Ford has opportunity as well. And then Frédéric Malle, Le Labo and KILIAN are very -- have much more opportunity from a distribution standpoint. So we have a lot of runway within our fragrance portfolio. And there are some exciting things happening with the Estee Lauder and Clinique fragrances in the upcoming months that we'll share at the appropriate time.

Great. We're almost at time. I want to give you the last word. What should investors keep most top of mind as they think about, and I know many in this room and outside this room are thinking about Estee Lauder is an incremental investment opportunity, what might those on the outside currently be missing or not fully understanding?

Well, first of all, we want to thank our investors for hanging in there with us. Obviously, it's been a challenging time. I think the one thing I would love for investors to understand is we've taken some actions this year that have been toughen and, obviously, starting at the end of our last fiscal year to really position ourselves, to be at the inflection point that we talked about on the third quarter call for growth. The Profit Recovery Plan allows us to accelerate margin growth. Our focus is and has always been on long-term, sustainable, profitable growth, and that is the model that we are very much committed to getting back to. And so that's really what I would leave investors with that. The things that we've experienced over the last couple of quarters have really positioned us in terms of bringing our inventory levels down, some of the acceleration and focus on innovation that we've had to expand our portfolio and to grow. So the next couple of years should be quite exciting.

Very good. We will leave it with that. Tracey, Estee Lauder, thank you very much for joining us, and thank you all for joining us as well. I wish everyone a great conference.

Thank you.