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

Good morning, and welcome, everybody. Thanks for joining us. Today, I am thrilled to welcome the Estée Lauder Companies back to the conference, but with new faces. Stéphane de la Faverie, President and Chief Executive Officer. Welcome. And with us also is Roberto Canevari, Executive Vice President of Global Supply Chain. Thank you both for joining us.

Thank you for having us.

Before we engage in some Q&A, Estée Lauder has prepared for us a little video. So let's roll that tape. [Presentation]

Great. Thank you. That was uplifting, energizing.

[ Good thing to start with today ].

So Stefan, let's maybe start with you and your perspective over the last several months since you assumed the CEO position, not quite 6 months ago.

Not even.

It's been a busy, busy start to '25, calendar '25. I guess how would you sort of summarize the experience and your key learnings? And how has it informed the Beauty Reimagined strategy and your key priorities going forward?

Absolutely. Thank you, first of all. Steve, thank you for having me today and Roberto. We are very excited to be here. Yes, indeed, it's been like a bit more than 100 days since January 1. It's been like not touching ground. Flying pretty much everywhere around the world and being with our teams like on the ground, our partners, retailers, suppliers and et cetera. I have to say one thing, is I'm convinced more than ever, and Roberto will say to you the same thing, that the fundamentals of the company are strong. We have very strong brands. We have amazing teams around the world. Now that being said, we need to just move with a lot more agility and speed than we've ever done before. And I think this is somehow what has informed the strategy of Beauty Reimagined and what we're going to discuss this morning. I think the fundamental of the company, we are going to turn 80 years old as a company next year. We've been 80 years old strong, and we have to adapt. We have to adapt faster because the consumers, retailers are moving faster than ever. And I think in a way, Beauty Reimagined is here to address some of the challenges that we faced over the last few years. And Beauty Reimagined, in a way, has like 5 pillars. And you saw some of it, a glimpse of it, in the videos. And each of them are here to just address the agility, the speed to be able for us to become the best consumer-centric beauty prestige company in the world, but also to make sure that we reignite growth and rebuild solid double-digit operating margin in the next few years. And if you allow me like a few minutes for the team and for everybody here on the 5 pillars of Beauty Reimagined. The first one and certainly one that is going to redefine who we are as a company is the consumer coverage. Consumers are moving faster than ever. And I think in the post-COVID era, we've never seen consumers, regardless if you are like in the U.S., if you're in Europe, if you are in the emerging market in China, moving to new channel of distribution. And I think we, as a team, realized that we were not moving fast enough to new channels. And we made a conscious decision that wherever a prestige consumer moves, we move. There is no more debate as an organization going forward. But it has to be where the prestige consumer is, because we've remained a prestige beauty company as such, so we are moving to channels such as Amazon. In the U.S., you saw the move that we did now about a year ago. And now as of like last week, we have 12 brands on Amazon U.S., and it has allowed us to just reignite market share growth for the first time in many, many years in the U.S. And I could take more example in Shopee in Southeast Asia. TikTok Shop that we have signed a global agreement with globally, which allows us to expand our brands in the U.S., in the U.K., in Europe, in Southeast Asia, you name it. Now we have a global platform that allows us to just deploy our brands at the speed of light in a way that has never been done before. The second pillar is that when you have the right distribution, the risk is a bit of a fragmented distribution around the world when you think about it. So you need to tailor your innovation to what the distribution is. And so a much better understanding of what distribution is about. Is it trial? Is it replenishment? Or is it experience? That's the way you would define the 3 type of distribution that are at our tip of finger. I think when -- as a team, when we looked at Beauty Reimagined, what I know we were very good at is making the product that consumers love about us stronger. You think about the Advanced Night Repair of Estée Lauder, the Crème de La Mer from La Mer, or Moisture Surge from Clinique. We made these products stronger than ever. But Steve, you know it's -- this industry, there's anywhere between 20% to 30% of the sales in any given year that are coming from innovation. And I think we were a little bit on the lower side as a company. So one of the things that I'm absolutely committed with the team is to accelerate innovation. We've committed to triple innovation that comes to market in less than 12 months in the market across every single category, that is makeup, skin care, hair or perfume. So once you have the right distribution and once you have the right innovation, the right innovation, you need also to make sure it's at the right price point. I'm sure we'll talk about consumer sentiment in this moment in time. Having the right innovation at the right price point in the right channel is more critical than ever, and we've developed a lot of capabilities and insights and data that allow us to meet the consumers where they are. The third thing, when you have the right distribution and the right innovation, you need to make sure you boost your investment. In a subdued consumer economy these days, again, I'm sure we'll talk about it, the cost of acquisition is going up. And a lot of the work that we are doing is how every dollar we spend is becoming much more efficient. We need to just make sure we're not focused only on the top of the marketing funnel, about the retention of the consumer, which obviously we need to make sure that we become the best company at retaining consumer because this is what gives the future profitability, but at the same time, you need to make sure that we bring a wide range of consumers from every age, every [ new ] cities around the world. Now you would say, how do you do that at the moment where you need to rebuild margin for the Estée Lauder company? And that's the fourth pillar of Beauty Reimagined, which is how we create bold efficiency in the organization. And we've announced in November 2023, the PRGP, the Profit Recovery and Growth Plan. At the end of -- at the beginning, it was not even -- the G was not there, and we added the G, if you remember, about like really focusing on growth. And it is, in a way for everybody to understand a simple way is how we're flipping the P&L on its head to have way less fixed cost and more variable costs. More variable cost to be able to invest in the business, but also more variable cost to go through volatility that seems to be the norm these days in the world. So -- and we'll talk about it because the first year of the PRGP, which we are in today, it's a 2-year program, our fiscal '25 and fiscal '26. The first year was really about rebuilding our gross margin and making sure that we are starting to just like delayer the organization. From a gross margin, we've made massive progress. Every quarter for the last 3 quarters, we've improved by 300 basis points our gross margin. And we've committed to at least 73.5% gross margin and on our way to continuous improvement, but also delayering the organization for more agility and more speed. We've reduced the middle management by 20% already since the beginning of the fiscal year. And even my executive team, which is now 73% new in their position, has been reduced by 30%. So much more agile, and we are seeing, obviously, the benefit of that faster decision, much more agility and speed of decision. And the last part, certainly that I'm somehow -- I'm excited about every pillar of Beauty Reimagined, but the last one is how do we reinvent the ways of working for us internally. And I've heard it from many of you that I've met over the last -- even before I was officially in the position in the months of October, November, December, I spent a lot of time with everybody, saying, we need to clarify who does what within the Estée Lauder organization. And I think, today, we are very clear between the brand, the region/ the affiliate and the function, who does what. Let me make it very simple and very blunt, is the brands are focusing on the long-range vision, creating the best innovation. Once this is done, the regions are taking over and really are executing and scaling with the affiliate and executing with excellence. And the functions are here to really enable the vision. That's why at the last earnings call at the beginning of April, I announced that we were moving officially the responsibility of the P&L into the region. So there was like no misunderstanding of who takes the decision. And that was one of the reasons. But also the second reason, if you want to move with speed, you need to be close to the consumer. The P&L needs to be much closer to the consumer. So somehow, that's what the last 100-plus days has informed. And we are moving really fast. If you remember the Beauty Reimagined, we announced it, we have like -- maybe I was 35 days in the job officially working with the team and spent countless hours cascading that through the organization. And very confident that we are starting to see the beginning of some green shoots with market share gain in the U.S., in China, in Japan and some emerging markets. Our way to recovery and to growth is not a linear one because of the environment that we are in, but I'm really confident today with the team that we are going to rebuild growth and profitability.

Great. One quick follow-up on the affiliate versus the brand. How much leeway do the individual affiliates or individual geographies have in sculpting the brand message for the locality versus the global brand kind of framework? And where does that decision? How is that made?

That's a very good question, Steve. And I think there's a lot more leeway these days, because I think AI allows you also to be and to tailor the communication. One thing as a company that I believe we are very strong is our ability to have a local relevant message, depending if you are in India, if you are in China, if you are in France, if you are in the U.S. I think the global brands define what you would call the top of the funnel, what is the desirability, what is the global message. Regardless of what capital of the world or city you sit in, there's a consistent message. But the way you would talk about skin care, take an example with a Chinese consumer, an American consumer or an Indian consumer, is very different. And the ability through insights and data, the consumer can and our affiliate can do it. Just to give you an example, a few weeks ago, we've announced a partnership with Microsoft. And we've created 2 proprietary tools, one that is called ConsumerIQ and the other one is called Trend Studio. Trend Studio in a way, allows us to sense any type of trends and conversation in real time happening around the world. That's a proprietary tool that we've developed. Now once you have the sensing, you would say, okay, many people can do that. But the beauty of it is you marry it with a consumer tool, which is ConsumerIQ, which is mining all the data of the Estée Lauder company over the last 79 years. And marrying the trend with our internal information allows us in real time to deploy new messages, and AI is going to be here to allow, frankly, the tailoring of messages, communication on the ground in a much faster fashion going forward.

Great. And then we've got to supply the product. Now you have to -- yes, please.

That's the beauty of AI and now we are working very closely on all those things. But what Stéphane is saying, we're working on an AI application, which is an automatic deployment of stock. So what happens? When we have those trends, the AI version that we're working on is looking at what is happening around the world and where it's better, depending on where we anticipate the trend, to position the inventory to follow the trend at real time, constantly and actually learning from itself. So the more we do it, the more it will become accurate. So it's all -- basically the demand side and the supply side and those actions are very, very connected. Just wanted to add.

All our factories have digital twins now. So we're able to just modelize in real time, depending on this trend, how we need to service inventory around the world. And then once we agree on what it is, it can be just deployed in real time for production and deployment.

Okay. I want to geek out in the supply chain a bit. But before I do -- so building these 5 pillars and unlocking the value of them, I think, would be, in some ways, easier if there was robust demand kind of at your back, which I don't think is the case right now. It's very dynamic and choppy. So I guess what is your sense of the current environment? What do you -- what are the key dynamics you're monitoring as you wrap up fiscal '25 and plan fiscal '26? But then stepping back, as you think longer term, what are the -- how are you positioning the company? What are the key drivers of demand as you think longer term? And how do you balance those 2 requirements?

I think it's on everybody's mind, so where the market is today and where is the market going. I have to say I've been blessed to be 25 years in the beauty industry, I've never seen so much volatility. But at same time, so much opportunity. And I think you need to differentiate the cyclical and the structural trends that are happening in the market. And obviously, the cyclical one in the short term are affecting consumer confidence. I think it is -- everybody knows it, like consumer confidence in China has been subdued now for more than 2 years because of the real estate situation and everything that has happened post COVID. The U.S. has been the surprise low consumer confidence because we all went into the calendar year thinking the U.S. was going to be the driver of the economy in so many consumer goods product, including beauty. And Europe has been also a little bit subdued for some time. But I think that is linked clearly to some macroeconomic and political instability or like volatility that happened. It can be like still fairly high interest rates, inflation that has been like ramping up for many years. But I think that, on the short term, I think shows that clearly, the market is in the low single-digit growth around the world. And I think it's rebalanced by the fact that China has [ anniversarized ] the worst. And I think China now is back into low positive territory, but still it helps mathematically to just maintain the world to this low single-digit growth. Now when you look at the more mid to long term, I think the structural changes that are happening are really positive for the industry. And I think we are going to see industry resume with what is more mid- to high single-digit growth in the mid to long term. And I just want to make sure that I'm not defining what mid to long term is because of the amount of volatility. But 2026 is going to be a very defining year for many reasons because you have political changes, you have midterm in the U.S. You have the next 15-year plan of China that will be announced in March 2026. So there's a lot of defining moments that could accelerate consumer confidence or just like anchor it into a little bit longer what it is. But on the structural changes, I see like a few things that are happening in positive. The first one is the emerging of -- the emergence of emerging middle class around the world. And I think we call it like well over 500 million consumers that will enter the middle class between now and 2030. Now when you think about beauty, prestige beauty, we're still fairly accessible luxury. So middle-class consumers is definitely the pool of consumers that we're going to. So well over 500 million new consumers, of which some are coming well over 100 million from China and then you have like India, and you have a lot also of emerging consumers in the U.S. and in Continental Europe that we are tapping into, I think, gives a lot of great new opportunity. And obviously, we need to adapt to these consumers. The second thing is -- and surprisingly, the maturing of China make China more predictable in the future. I think we went through, obviously, a downtrend post-COVID, but the maturing of China. Now part of the maturing of China is also the rise of the local brands. But there's still a balance between local and international that stays true. We've seen that in Japan. We've seen that in Korea. We've seen it in many markets. We are seeing it in India now. And we are adapting as a company to also being able to just win in this market. We have a new innovation center that we inaugurated at the beginning of 2023 that is ramping up fast. Now with like new innovation, we launched an innovation on Clinique, Clinique CX, that is on the post procedure that was 100% developed, but we have many others. And we also launched, in February, our 17 brand in China, The Ordinary, that is perfectly positioned from a price point to really compete with the local brands. So I think the maturing of the market and the more predictability of the market and the 17 brands that we have in the portfolio give us that we have a lot more to tap into. After, there is also many trends from the consumers that are very interesting, that are going to develop new opportunity. Think about the wellness in the post-COVID world, a lot of people are looking at wellness and we are all going to live younger longer. That's what we aim to. There's this amazing stat that I was looking at the other day that 50% of the kids below 5 years old in the U.S. will live over 100 years old. And that's actually true in Europe and in many other markets. So how obviously, beauty plays a role in wellness, in longevity and et cetera. The male consumer, also now because of the rise of social media and platform like Amazon, makes the accessibility of beauty much greater than it has been before. For the last 25 years, I've been hearing every year, it's the year of men. I'm like -- and it's not been until, obviously, platform like Amazon, TikTok Shop makes it more easy for this consumer to access beauty. And we are seeing already a fast acceleration. With Jo Malone, for instance, we've launched Cypress & Grapevine with the actor Tom Hardy, like the British brand and the actor. And we've seen tremendous growth in triple digit in some of the markets, being able to capture new consumer to the brand. So I would say from a consumer standpoint, from a channel standpoint, there's a big evolution. Channels, as I said that was the first pillar of Beauty Reimagined, allows us to just communicate with the consumers in a greater way than ever before. And from a communication standpoint also, more platform, there's more retailer networks that you can tap into, which makes with AI, every dollar you spend much more efficient and much more tailored to every single person that is in this room and around the world. So the ability to connect with your consumer in a deeper way now is much greater than what it was, and will only get better in the years to come. So I think when you look at all of that, I think in the midterm, it is true that the industry is under a lot of pressure before because of the consumer confidence. But I'm really confident because of the structural change that we are seeing and monitoring, and we are adapting every single of our brands and our ways of working to this new structural change to be able to just capture our fair share of the future growth.

Great. Okay. Great. So Roberto, the -- I'm very glad you're here because I think the supply chain at Estée Lauder has not got enough attention over the course of time. And I think it's very important to the future execution of everything that Stéphane just articulated. So maybe you can just ground us a bit on where the supply chain has come from and where it is today, and how you see it fit for need given the Beauty Reimagined strategy going forward?

Yes. First of all, thanks a lot for having us on stage. I'm very happy to be here and talk about supply chain. So a few things. Where we come from, first, you're saying. Well, we come from a place of growth where actually the company was building, investing and building capabilities and capacity ahead of anticipated growth. That's where we were. And now we are really focusing on leveraging what we have and optimizing, strongly optimizing those capabilities. That's where we are today. That's what we have done. That's where we are today. So 3 or 4 things that I can mention on what we have -- the step change achievement we have done so far. I cannot start talking supply chain without mentioning, I think, what is the foundation of every supply chain program, which is the IBP, the integrated business planning. Why that? Well, essentially is we work on understanding the demand. So we demand plan. And then with the IBP, which is people, process, technology, basically, what we are trying to do, understanding the demand is synchronizing all the supply chain, all the ecosystem with our sites, our suppliers, all the ecosystem of our supply chain to better fulfill this demand. That has been a significant focus in the few years because without this, it's very difficult to optimize all the other capabilities in our supply chain. We have done this -- again, people process technology, but we've also built capabilities using this on scenario planning. Because as Stéphane was saying, the volatility is such that we can do a lot of effort to try to understand better the demand and then how do we synchronize. But we need scenarios because, it's such a volatility that it's very difficult to anticipate everything. So we are preparing -- we have prepared a lot of scenarios so that we can pivot quickly from one to the other when it's the case. So that's the IBP. How -- what have we really achieved with this? Well, we've improved quite a lot, almost 10 points, actually 10 points our forecast accuracy, which has led to keeping the service or actually improving our service to our customers to the consistently mid-90s, which is a solid performance. But we have done that while we have strongly impacted our inventory level. Actually, when we started, we were well above the 200 days of cover, significantly above the 200 days of cover, and we have taken out in excess of 80 days. So it has been a massive, of course, improvement in that cash opportunity. That's something that we have done. And as a base, this has also resulted into an opportunity to drive the gross margin journey that you have seen and that Stéphane was mentioning. Because with that, we've actually been able to bring the gross margin where it is today and we can see the journey of continuous improvement. A few other things in the gross margin that we have been working on in leveraging the capabilities, one, starts with a zero waste mindset. We had wastes and excess and obsoletes in our business. Well, we are closing the year cutting by half the amount of excess and obsolete. In the last 12 months, we actually reduced by 50% that part, which is, of course, a big contribution to the gross margin. The second big contribution has been our procurement activities. We're buying ingredients and materials and components for our products. It's not only a procurement strategy, which we've been working quite a lot with spend area management, all the technicalities that we have in procurement, that is all done, but it's a lot also from a value chain standpoint, creating platform to ensure that we have multiple components for same brands. Whatever is not consumer-facing can be leveraged, can be standardized so that we have -- we can scale up and, of course, leverage the volume in a different place. This has been -- this has allowed us to move from a low single-digit saving year-on-year on our procurement activities to more than 5%. So we're targeting a high single-digit savings. So it's really -- I mean, of course, a significant impact. That's the second part of the gross margin. And the third part, which personally I'm very proud of, is we've been working on a couple of programs in our manufacturing performance, manufacturing activities that have dramatically, I think, improved our manufacturing efficiencies. Actually, a large part of the -- a majority of the PRGP that we are delivering so far comes from the gross margin, so it comes from those contribution. And if I can, looking at the time, summarize what we have done is essentially 2 major program in manufacturing. One, really targeted at accelerating the performance improvement. So it's really a significant push on performance. But the other one in manufacturing, you need to make things sustainable. Otherwise, there is a risk that with the distributed network that we have that you accelerate, you improve, but 6 months after, if you are not sustaining it, it goes away. We have another program that is actually sustaining the performance that we achieved and strongly working on continuous improvement. So the journey is there to continuous improvement. So that's what we have done. Last that I like a lot to mention, even though quality has always been a significant attribute of the company, we have been focusing in leveraging capabilities there as well. And we actually improved 80% the in-market quality issue. Our consumer complaints are being -- are reducing 20% year-on-year. Last year it was 25%. So a significant contribution, even in an area where the company has always been very strong. And lastly, how are we prepared, as you're saying, to cope with the current business need? I mean we will never stop the continuous improvement. There is a lot ahead of us. AI is bringing a lot of opportunities. But I personally feel we're in a very solid place. Actually, everything that I just said, we have achieved in a volume deleveraged environment. So we have increased the gross margin to the level that Stéphane was mentioning in a volume deleveraged environment. We're very ready for volume leverage. By the way, we will not need any CapEx, any investment. Stéphane is insisting on we need to do consumer-facing. We need to free up. We will. We are freeing -- actually, we are now freeing up CapEx because we don't need investment for capacity and capabilities, we have them. We can actually focus on making sure that we do consumer-facing investment. And the volume leverage opportunity ahead of us, I think it will...

That's true. That's a very important point, what Roberto is saying, is like we are shifting from a company where we built -- we used a lot of CapEx in terms of building capabilities, to really now shifting CapEx into consumer-facing, which is going to be one of the areas which allow us to grow. Also one of the benefit of all of it -- and it's well known in the prestige industry. Because in different areas of beauty, people are used to have different manufacturing network around the world. But in prestige, usually, it's very concentrated in one location. The Estée company has 9 sites around the world, 5 in North America, 3 in Europe and 1 in Japan. That allows us with now all, what Roberto say in terms of agility, to move production in different places around the world. And we've been able to mitigate a lot of the tariff impact on finished goods. Today, you look at Europe, where we are today, 75% of what we sell on a given day in Europe will come from Europe or outside of the U.S. 75%-plus of what we sell in the U.S. comes from the U.S. or Canada and are protected under the USMCA agreement. And we have a line of sight that less than 10% of what we'll sell in China will come from the U.S. That has basically been made possible because of this very agile and diverse manufacturing network that we have around the world.

Yes. And just one question, because it was an issue during COVID, was the lack of robustness in terms of distribution centers. Is that remedied?

It's totally different. We have actually -- one of the investments in the past the company have done is also in the distribution center. Galgenen was one of the main investment in a distribution center for travel retail. We've been doing this. But we've also been working, aligned with what Stéphane was saying, on variable costs. We have opened, actually replaced, all most of the places where we were having our distribution centers, especially in Asia Pacific with third-party distribution centers. So we are completely covered. We have been investing in China. China was having only one distribution center, and that was one of the challenge in terms of resilience that we had when the Shanghai lockdown started. We were only in Shanghai. Now we are actually multiplying multiple distribution centers in China as well. It's already today live with the second one and the third one. So we are in a very different place. I personally believe that the fulfillment -- the multichannel fulfillment capability is absolutely there, 100% globally.

It's both agility and business continuity. So...

Absolutely. And that's what you need today in today's environment, because you need to just be agile to just move between one geography to the other.

And I mentioned multichannel because, as Stéphane was saying and as Beauty Reimagined, we're going where the customer -- where the consumer is. And we can shift to a different channel, we are actually having a multichannel fulfillment capabilities for that one. So wherever we go, I think the capability is there to fulfill, not [indiscernible] at all.

I know one thing investors then ask about, okay, the strategy is great. We believe in the execution. Here we go. Is the brand portfolio fit for purpose today? So what's your assessment, Stéphane, of the current brands you have, the ability to meet current needs, future needs? And how do you think about portfolio evolution, brand incubation, brand acquisition, even brand divestments?

I think it's -- obviously, the question is on everybody's mind. And one of the things we do and I've said it publicly, every brand goes through a very thorough strategy review every year. And this year, we've done it a little bit more in depth than usual, obviously, being new in the position with the new executive team. And we have -- there's some -- because of Beauty Reimagined, there's a possibility for us to just be able to reposition some of our brands where we have areas of improvement into new channels. But like I said it at the beginning, I really believe that the portfolio of brands that we have that allows us from all the way to La Mer, Le Labo in terms of luxury, all the way down to Clinique and The Ordinary, be able to tap into a very wide range of consumers. And one of the things that I've said to the brand and asked the brand is really to just make sure that they have the right innovation for the right channel and the right consumer. Let me just like, very simply -- because you think about from the Estée Lauder brand all the way to like smaller brand, the Estée Lauder brand this year, with a very fast turnaround, has been able to just like launch a new consider under the very famous Double Wear franchise, which is #1 foundation in the world, and has now been the #1 makeup launch in the U.S. in 2025. Then you take Clinique has launched the Glow Moisture Surge at $45, EUR 39 in Europe, and it's been the #1 launch in serums around the world. Then you take Too Faced, one of our makeup brands, have launched what we call the Ribbon Lash mascara that has been -- the entire campaign has been developed in less than 6 weeks through AI and has allowed us to tap into new consumers. And Bumble and bumble has been our most well-overplanned brand on Amazon. If you know like on Amazon, hair is one of the largest category. So now all of a sudden, you can look at these brands and saying, how am I going to position them in the new channels and making sure that they have the right innovation at the right price point, launched at the right speed. So we are always looking and reevaluating our brands. But I think today, the focus is about reevaluating our brand to just make sure that they have the right innovation, right price point, right channel, right communication. Because it's also one thing in the third pillar of Beauty Reimagined, we are reinventing our ways of communicating to make sure that we are flipping also the funnel of communication on its head and just getting more efficiency behind each of our brands. And the last thing I would say, we have internally an incubator. When we purchased DECIEM, of which The Ordinary was part like in 2023, where we became finally the full owner of like DECIEM, DECIEM was created as an incubator. That was the original idea. Today, beside The Ordinary, we have 3 other brands. We have NIOD. We have Avestan. And we just launched a new brand in bath and body, LOoPHA, that we've launched on like TikTok and some other brands and our brand.com, which allows us to test in rapid fashion brands that we can develop in less than a year, and there's going to be more to come. So there is the organic, but there's also the inorganic growth that we can create from internally.

Great. When we -- I think when investors look back, especially at the last 5, 6, 7 years, China was so central to Estée Lauder's growth for that period of time. I think as we listen to you today, as we turn the page, look forward, the future is much more balanced. How do you think about the balance of growth and making sure that you are not just in the right channel, but the right geography and you -- both from a brand and product but also a supply perspective?

Yes. And I think the best way to put it is I think about the world as the world, as one geography, one consumer. And I think the company has built tremendous strength with the Chinese consumer. And I want to be very clear, the future of China is still very strong because of the emerging middle class that will continue to come. And I think we have a position of strength in this market. We have 2 of the top 3 brands in the market, and we intend to just build on 30-plus years of investment in China. But the very strong thing for us is the rebalancing of the growth. And I would say the first thing is North America. And we're very excited to -- in the last quarter to announce that after many, many years, we were returning in growth. We have 10 brands that have maintained or grown market share in the last quarter, which was very strong. And we had growth in 3 of the 4 categories, mainly skin care, makeup and hair, where we had some growth. So a big focus on investment and obviously, Amazon, TikTok Shop, but also our historical partners in specialty-multi, like Ulta and Sephora. And the department stores obviously is -- obviously on everybody's mind, is reducing dramatically in terms of penetration to the total. And there is a natural attrition because of numbers of stores and more investment in the top department stores where there's a lot of traffic. The second area is emerging markets. As part of my new organization, I've announced the creation of the emerging market regions. We didn't have one. It was separated within different geography. And now the responsibility of Nadine Graf, who is now the Head of [ EUKEM. EUKEM ] is Europe, U.K. and all emerging markets, that span from Turkey to India to Southeast Asia, Middle East and so on, we have a real clear focus of acceleration. I'm not happy yet on the result that we're having in emerging markets. We believe that there's a much stronger potential and often brands like M·A·C or The Ordinary are perfectly positioned in terms of price point to be able to win in this market. And then I don't want to forget like in a market like the U.K. and Korea. Korea, we are the leader in this market. We've had some a little bit market share gain over the past few years, but we're not there yet. So we have new leadership in both of this market in the U.K. and in Korea, and we are really deploying Beauty Reimagined to just make sure that once we can consolidate our leadership position and start regaining market share. But -- so you saw in the results, we have like the U.S., we have China, we have Japan. We still have a lot of work to do in other markets, but I think it's just a matter of like deploying Beauty Reimagined and, again, putting the right leaders in the right places. And what is on everybody's mind is also travel retail. Travel retail has been a big source of growth for the Estée Lauder company for many years. We've reduced significantly the dependency on travel retail. And I've announced it at the last call where we went from the mid-20s to like mid-teens now in terms of penetration to the total business, which reduced the volatility to the channel. Now like travel retail has still a very strategic role to play. Many of you are traveling through the world. Airports are more beautiful places where you can express your brand in a way that is quite unique, and consumers are often buying for the first time product in travel retail. But the volatility linked to the channel is here to stay, frankly, but -- and also for us just to bring it back to a level that is more reasonable and having a much balanced growth around the world. So we don't depend on one geography or one consumer, the way that we've had it in the past.

Great. We are out of time. So I will respect the conference and not add another question.

Okay.

Thank you very much.

Thank you so much, Steve. Appreciate it.

Thank you.

Thank you.