EL 10-K & 10-Q changes, risk factors and insider trading

Our ability to compete also depends on the continued strength of our brands, our ability to attract and retain key talent and other personnel, the efficiency of our manufacturing facilities and distribution network, and our ability to maintain and protect our intellectual property and those other rights used in our business.

In certain key markets, such as the United States, we have seen a longer-term decline in retail traffic in our department store customers. ConsolidationConsolidation, liquidation or liquidationother changes in the retail trade, from these or other factors, may result in us becoming increasingly dependent on key retailers and could result in an increased risk related to the concentration of our customers. A severe, adverse impact on the business operations of our customerscustomers, including changes to the markets or channels in which our products are sold, could have a corresponding material adverse effect on us. If one or more of our largest customers change their strategies (including pricing or promotional activities), enter bankruptcy (or similar proceedings) or if our relationship with any large customer is changed or terminated for any reason, there could be a material adverse effect on our business.

Achieving our long-term strategy will require investment in new capabilities, brands, categories, distribution channels, supply chain facilities, technologiestechnologies, including AI and data analytics, and emerging and more mature geographic markets. These investments may result in short-term costs without any current sales and, therefore, may be dilutive to our earnings. In addition, we may dispose of or discontinue select brands or streamline operations and incur costs, inclusive of restructuring and other charges, in doing so. Although we believe our strategy will lead to long-term growth in sales and profitability, we may not realize the anticipated benefits. The failure to realize benefits, which may be due to our inability to execute plans, global or local economic conditions, competition, changes in the beauty industry and the other risks described herein, could have a material adverse effect on our business.

We continuously review acquisition and strategic opportunities that would expand our current product offerings, our distribution channels, increase the size and geographic scope of our operations or otherwise offer growth and operating efficiency opportunities. In addition, we periodically review our brand portfolio, and our strategy includes potential divestitures of certain brands as we rationalize product offerings. There can be no assurance we will be able to identify these strategic actions, be the successful bidder, and consummate such transactions on favorable terms, or otherwise realize the full intended benefit of such transactions. In addition, we periodically review our brand portfolio, and our strategy includes potential divestitures of certain brands as we rationalize product offerings.

Completed acquisitions typically result in additional goodwill and/or an increase in other intangible assets on our balance sheet. We are required at least annually, or as facts and circumstances exist, to test goodwill and other intangible assets with indefinite lives to determine if impairment has occurred, as well as assess the recoverability of other intangible assets, and have recorded goodwill and other intangible asset impairment charges inas each of the last few fiscal years.required. We cannot accurately predict the amount and timing of any impairment of assets. Should the value of goodwill or other intangible assets become impaired, there could be a material adverse effect on our business.

There continues to be a focus from certain investors, customers, consumers, regulators, employees, and other stakeholders concerningregarding social impactimpact, and sustainabilitysustainability, and other environmental, social and governance ("ESG") matters. From time to time, we announce certain initiatives, including goals and commitments, regarding our focus areas, which includeincluding environmental and climate matters; packaging; sourcing; product formulation; social investments; and inclusion. We could fail, or be perceived to fail, in our achievement of such initiatives, or in accurately reporting our progress on such initiatives. Such failures could be due to changes in our business (e.g., shifts in business among distribution channels or acquisitions). Moreover, the standards by which ESGthese efforts and related matters are measured are developing and evolving, often rely on methodologies, standards and data that are subject to varying interpretations, and certain areas are subject to assumptions that could change over time. In addition, we could be criticized for the scope of our initiatives or goals by stakeholders who support these initiatives or those that oppose them. In addition, we could be perceived as not acting responsibly in connection with these matters. Any such matters, or related ESG matters, could have a material adverse effect on our business.

We are using AI solutions, including machine learning and generative AI tools, to assist in the development of our products, engage with consumers, and in the use of internal tools that support our business. These applications mayare becomebecoming increasingly important in our operations over time. This emerging technology presents risks inherent in its use, including risks related to harmful content, inaccuracies, hallucinations, bias or discrimination, and intellectual property infringement. In addition, the use of AI may increase cybersecurity and data privacy risks, such as intended, unintended, or inadvertent access to, transmission, or leakage of proprietary or sensitive information. These risks may become more pronounced as organizational reliance on AI increases. No assurance can be made that the usage of AI will assist us in being more efficient in all cases. Our competitors or other third parties may incorporate AI into their business, services, and products more rapidly or more successfully than us, which could hinder our ability to compete effectively and adversely affect our business. The technologies underlying AI and their use cases are rapidly developing, and it is not possible to predict all the legal, reputational, operational or technological risks related to the use of AI. While new AI initiatives, laws, and regulations are emerging and evolving, uncertainty will remain, and our obligation to comply with the evolving regulatory landscape could entail significant costs, negatively affect our business, or limit our ability to incorporate certain AI capabilities into our business.

The general level of consumer spending is affected by many factors, including general economic conditions, inflation, interest rates, energy costs, and consumer confidence and sentiment generally, all of which are beyond our control. ConsumerMany of our products may be considered discretionary items for consumers, and consumer purchases of discretionary items tend to decline during recessionary periods, when disposable income is lower, and may impact sales of our products. A decline in consumer purchases of discretionary items also tends to impact our customers that are retailers. We generally extend credit to a retailer based on an evaluation of its financial condition, usually without requiring collateral. However, the financial difficulties of a retailer could cause us to curtail or eliminate business with that customer. We may also assume more credit risk relating to the receivables from that retailer. In the event of a retailer liquidation, we may incur additional costs if we choose to purchase the retailer’s inventory of our products to protect brand equity. Our inability to collect receivables from our largest customers or from a group of customers could have a material adverse effect on our business.

Our success depends, in part, on the quality, efficacy and safety of our products. If our products are found to be defective or unsafe, our product claims are found to be deceptive, or our products otherwise fail to meet our consumers’ expectations, our relationships with customers or consumers could suffer, the appeal of our brands could be diminished, and we could lose sales and become subject to liability or claims, any of which could result in a material adverse effect on our business. In addition, counterfeit versions of some of our products may be sold by third parties, which may pose safety risks, may fail to meet consumers’ expectations, and may have a negative impact on our business. While we may take action to identify and remove counterfeit versions of our products from the market, these actions may not be successful.

We operate on a global basis, with a substantial majority of our net sales and operating income generated outside the United States. We maintain offices inacross overour 50geographic countriesregions and have key operational facilities located inside and outside the United States that manufacture, warehouse or distribute goods for sale throughout the world. Our global operations are subject to many risks and uncertainties, including: (i) fluctuations in foreign currency exchange rates and the relative costs of operating in different places, which can affect our business, the value of our foreign assets, the relative prices at which we and competitors sell products in the same markets, the cost of certain inventory and non-inventory items required in our operations, and the relative prices at which we sell our products in different markets; (ii) foreign or U.S. laws, regulations and policies, including restrictions on trade, immigration and travel, operations, and investments; currency exchange controls; restrictions on imports and exports, including license requirements; tariffs; sanctions; and taxes; (iii) lack of well-established or reliable legal and administrative systems in certain countries in which we operate; (iv) adverse weather conditions and natural disasters; (v) concentration of sales growth or profitability in one or more countries; and (vi) social, economic and geopolitical conditions, such as a pandemic, terrorist attack, war or other military action. These risks could have a material adverse effect on our business.

As a company engaged in manufacturing and distribution on a global scale, we are subject to the risks inherent in such activities. Such risks include industrial accidents, environmental events, strikes and other labor disputes, capacity constraints, disruptions in ingredient, material or packaging supply or availability of natural resources (e.g., water), as well as global shortages, disruptions in supply chain or information technology, loss or impairment of key manufacturing or distribution sites or suppliers, product quality control, safety, increase in commodity prices and energy costs, licensing requirements and other regulatory issues, as well as natural disasters, outages due to fire, floods, power loss, telecommunications failures, break-ins and other events or external factors over which neither we nor our suppliers have no control. If such an event were to occur, it could have a material adverse effect on our business.

As we outsource functions,functions and consolidate service providers, we become more dependent on the entities performing those functions.functions and services.

As part of our long-term strategy, we are continually looking for opportunities to improve our essential business services, which includes finding ways to be more cost-effective and efficient. In some cases, this requires the outsourcing of functions or parts of functions that we believe can be performed more effectively by external service providers.providers, as well as the consolidation of service providers to drive efficiencies. The failure of one or more such providers to deliver the expected services, provide them on a timely basis or to provide them at the prices or service levels that we expect, the failure of one or more of such providers to meet our performance standards and expectations, including with respect to data security, compliance with laws, disruptions arising from the transition of functions to an outsourcing provider,provider or other service providers, or the costs incurred in returning these outsourced functions to being performed under our management and direct control, could have a material adverse effect on our business. In addition, when we transition to, from or between external service providers, we may experience challenges that could have a material adverse effect on our business.

We are, and may in the future become, party to litigation, other disputes or regulatory proceedings across a wide range of matters, including ones relating to product liability matters (including asbestos-related claims), advertising, regulatory, labor and employment, pensions and benefits, intellectual property, real estate, environmental, trade relations,relations (including tariffs and duties), securities, tax and privacy. In general, claims made by us or against us in litigation, disputes or other proceedings can be expensive and time consuming and could result in settlements, injunctions or damages that could significantly affect our business. We are mindful of the evolving litigation landscape related to asbestos-related claims, and continue to monitor trends in this area. It is not possible to predict the final resolution of the litigation, disputes or proceedings to which we currently are or may in the future become party to, and the impact of certain of these matters could have a material adverse effect on our business.

We rely on information technology that supports our business processes, including research and development, productmanufacturing development, production,and distribution, marketing, sales, order processing, consumer experiences, human resource management, finance and internal and external communications throughout the world. We have e-commerce and other Internet websites in the United States and many other countries. If our information technology does not function properly, or is not adequately supported or updated, it could adversely affect the Company’s business and operations.

Cybersecurity incidents at our Company have in the past resulted from, and may in the future result from, social engineering or impersonation of authorized users, and may also result from efforts to discover and exploit design flaws, bugs, security vulnerabilities or security weaknesses, intentional or unintentional acts by employees or other insiders with access privileges, intentional acts of vandalism or fraud by third parties and sabotage. In some instances, efforts to correct vulnerabilities or prevent incidents have in the past and may in the future reduce the functionality or performance of our information technology, which could negatively impact our business. Cybersecurity incidents can be caused by ransomware, distributed denial-of-service attacks, worms, and other malicious software programs or other attacks, including the covert introduction of malware to our information technology, and the use of techniques or processes that change frequently, may be disguised or difficult to detect, or are designed to remain dormant until a triggering event, and may continue undetected for an extended period of time. In addition, some of our suppliers, vendors, service providers, cloud solution providers and customers have in the past experienced, and may in the future experience, such incidents, which could in turn disrupt our business.business or compromise the security of our Company data. Our Company's continued expansion and reliance on third parties may further increase that risk. The evolution and adoption of emerging technologies, such as AI, may intensify cybersecurity risks as techniques used in cyberattacks and cybersecurity incidents continue to evolve and develop. Insurance policies that may provide coverage with regard to such events may not cover any or all of the resulting financial losses.

New product innovation includes the introduction of new products, as well as changes related to existing products or markets where they are sold, including reformulations, regional expansion, repackaging and sets. A product is considered "new innovation" for the twelve-month period following the initial shipment date. Our innovation is often launched at different price points than existing products and value derived from innovation may vary from year to year. We continually introduce new products, support new and established products through advertising, merchandising and sampling and phase out existing products that no longer meet the needs of our consumers or our objectives. The economics of developing, producing, launching, supporting and discontinuing products impact our sales and operating performance each period. The introduction of new products often has some cannibalizing effect on sales of existing products, inclusive of potential sales returns, which we take into account in our business planning. The impact of new product introductions, including timing compared to introductions in prior periods, also affects our results.

We operate on a global basis, with the majority of our net sales generated outside the United States. Accordingly, fluctuations in foreign currency exchange rates can affect our results of operations. Therefore, we present certain net sales, operating results, provision for income taxes and diluted net earnings (loss) earnings per common share information excluding the effect of foreign currency rate fluctuations to provide a framework for assessing the performance of our underlying business outside the United States. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We calculate constant currency information by translating current-period results using prior yearprior-year monthly average foreign currency exchange rates and adjusting for the period-over-period impact of foreign currency cash flow hedging activities.

We are continuing to monitor and assess the potential effects of newchanging andtariff existing tariffsconditions in the United States as well as in other markets in which we operate. These tariffs have led to significant volatility and uncertainty in global markets and difficulty in forecasting demand. We have implemented and are continuing to implement and consider additional mitigation measures. TheOur impactstrategy wasremains notoptimizing materialour global supply chain network, by sourcing and manufacturing in the geography of sale where feasible. We also continue to fiscalleverage 2025trade profitabilityprograms where available and cashmonitor flows,for however,additional evenopportunities ifas wecountries cancontinue minimizeto someupdate oftheir thesetrade impacts,programs. weWe anticipate higher tariff ratestariffs to have an adverse effect on fiscal 20262027 profitability and cash flows, and depending on actual rates and countries imposing tariffs such adverse impacts could be material.

We continue to believe that the best way to increase long-term stockholder value is to provide superior products and services in the most efficient and effective manner while recognizing shifts in consumers’ behaviors and shopping practices. Accordingly, our long-term strategy has numerous initiatives across product categories, brands, geographic regions, channels of distribution and functions designed to grow our sales, provide cost efficiencies, leverage our strengths, such as our history of outstanding creativity and innovation, high quality products and services, and engaging communications, and make us more productive and profitable. WithFollowing the transition of leadership in the second and third quarters of fiscal 2025, we haveare embarkedexecuting onagainst "Beauty Reimagined," aour previously announced strategic vision which focuses on accelerating best-in-class consumer coverage, creating transformative innovation, boosting consumer-facing investments, fueling sustainable growth through bold efficiencies and reimagining the way we work, including through the expansion of the Profit Recovery and Growth Plan ("PRGP"), during the fiscal 2025 third quarter, as discussed below.

We continue to monitor the effects of the global macro environment, including the risk of recession; currency volatility; inflationary pressures; supply chain challenges; social and political issues; competitive pressures; legal and regulatory matters, including the imposition of tariffs and sanctions; geopolitical tensions; and global security issues. We are also mindful of inflationary pressures (including those caused by tariffs) on our cost base and are monitoring the impact on consumer preferences, the impact of changes being made in the organization, including those related to Beauty Reimagined and the PRGP, as well as the actual and potential impact of changes that have been made and are expected to be made as part of the PRGP on suppliers, retailers and others, and challenges relating to successfully outsourcing select services. In our outlook, we have made assumptions relating to these and other internal and external factors and challenges. Declines in net sales and profitability have, and may continue to, adversely impact the goodwill and other intangible assets associated with our brands, as well as long-lived assets, potentially resulting in impairments.

In December 2021, the Organization for Economic Cooperation and Development issued "Pillar Two" Global Anti-Base Erosion model rules for countries to enact into domestic law that would establish a 15% global minimum tax applied on a country-by-country basis for multinational companies. In certain countries that have enacted legislation incorporating the global minimum tax, it became effective for the Company at the beginning of fiscal 2025. The estimated tax impact of such legislation has been included in the provision for income taxes for the fiscal year ended June 30, 2025 and was not material. We are continuing to monitor and evaluate the potential impact of newly enacted legislation incorporating the global minimum tax in additional countries.countries that have yet to enact the legislation.

On July 4, 2025, new U.S tax legislation was enacted.enacted Knownknown as the One Big Beautiful Bill Act,Act. thisThis legislation includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of certain business tax provisions. The legislation has multiple effective dates, withand certain provisions becoming effective in fiscal 2026. Wewe are currentlycontinuing evaluatingto evaluate the potential impact of the newprovisions legislation.that are expected to be effective in future fiscal years.

As a component of the PRGP, on February 5, 2024, we announced a two-year restructuring program. The restructuring program’s main focus included the reorganization and rightsizing of certain areas of our business as well as simplification and acceleration of processes. We committed to this course of action on February 1, 2024.2024 and at that time, planned to substantially complete specific initiatives under the restructuring program through fiscal 2026.

The expansion of the overall PRGP is focused on three key areas.areas: First, we plan to(i) adopt a more competitive approach to procurement, a key pillar of savings, by further consolidating spending and strategically re-evaluating key supplier relationships.relationships; Second, we plan to(ii) further improve efficiencies within our supply chain network through a zero-waste approach, aiming to improve demand forecasting and innovation planning to minimize excess inventory and product destruction.destruction; Third,and we(iii) are outsourcingoutsource select services to proven global partners.

The expanded component of the restructuring programprogram, as noted above, began during our fiscal 2025 third quarter with all initiatives to be approved by the end of fiscal 2026. Specific initiatives under the expanded component of the restructuring program are expected to be substantially completed by the end of fiscal 2027. The focus of the nowoverall expanded restructuring program (now, collectively the “Restructuring Program”) includes (i) reorganization and rightsizing of certain areas andareas, (ii) simplification and acceleration of processes, along with the newly added focus on (iiii) outsourcing of select services and (iiiv) evolution of go-to-market footprint and selling models.models, all to help rebuild operating margin and also fuel reinvestment in consumer-facing areas to drive sustainable sales growth.

InBased connectionon withthe total approved initiatives under the Restructuring Program, as of June 30, 20252026 we estimate a final net reduction inof approximately 10,000 positions globally, at the high end of the previously announced range of approximately 5,8009,000 to 7,000 positions globally, which is about 9-11% of our positions including temporary and part-time employees as of June 30, 2023.10,000. This net reduction takes into account the elimination of positions after retraining and redeployment of certain employees in select areas.

WeThe expecttotal thatapproved initiatives under the Restructuring Program willare expected to result in restructuring and other charges totalingof between $1,200 million and $1,600$1,748 million, before taxes, slightly above the high end of the previously announced range of $1,500 million to $1,700 million, consisting of employee-related costs, asset-related costs, contract terminations and other costs associated with implementing these initiatives, which other than the non-cash charges, have been funded from cash provided by operations for initiatives implemented to date, and for the remaining initiatives are expected to result in future cash expenditures funded from cash provided by operations.

Once fully implemented, we expect the Restructuring Program to yield annual target gross benefits of approximately $1,200 million, at the high end of the previously announced range of between $800$1,000 million and $1,000$1,200 million, before taxes, a portion of which is expected to be reinvested in consumer-facing activities. The net benefits of the PRGP, which includes the Restructuring Program, are expected to enable a return to a double-digit operating margin over the next few years.

TalcumSecurities Class Action Litigation Settlement Agreements

NotPercentages not adjusted for differences caused by rounding

The following table is a comparative summary of operating results for the three and sixnine months ended DecemberMarch 31, 20252026 and 2024,2025, for our product categories and geographic regions and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies and Note 13 – Segment Data and Related Information, for our product categories that meet the definition of reportable segments, for all periods presented. Royalty revenue from license arrangements, and products and services that do not fit within our definitions of skin care, makeup, fragrance and hair care have been included in the “other” category.

(1) The net sales and operating results from the Company’sour travel retail business are included in the Asia/Pacific region.

WeWhile we have experiencedseen challengesimprovements within our business andbusiness, we expectare mindful of areas of volatility and uncertainty that may impact our results. We continue to continue.face Although there are signs of stabilizationchallenges in Mainlandkey China,markets challengesin persistthe West, including in some markets in Western Europe,Europe includingand subduedthe sentiment.United States. Within our Asia travel retail business, we continue to experience volatility, including the incrementala transitory headwind from the change of duty-free retailers servicing the Beijing and Shanghai airports, including the related online businesses. Additionally,We withinare also monitoring the Unitedconflict Statesin wethe continueMiddle East as it relates to experienceour headwindsbusiness in the domestic markets and travel retail locations in the region. Net sales from challengeslocations impacted by the conflict in department stores, including the recentMiddle announcementEast accounted for approximately 2% of aconsolidated retailernet bankruptcy.sales in fiscal 2025. We continue to monitor and assess the impact that these challenges may have on net sales and profitability, including impacts to our effective tax rate from changes to our geographical mix of earnings.

We are continuing to monitor and assess the potential effects of newchanging andtariff existing tariffsconditions in the United States as well as in other markets in which we operate. These tariffs have led to significant volatility and uncertainty in global markets and difficulty in forecasting demand. We have implemented and are continuing to implement and consider additional mitigation measures. Our strategy remains optimizing our global supply chain network, by sourcing and manufacturing in the geography of sale where feasible. We also continue to leverage trade programs where available and monitor for additional opportunities as countries continue to update their trade programs. We continue to anticipate higher tariff rates to have an adverse effect on fiscal 2026 profitability and cash flows, and depending on actual rates and countries imposing tariffs such adverse impacts could be material.

We continue to believe that the best way to increase long-term stockholder value is to provide superior products and services in the most efficient and effective manner while recognizing shifts in consumers’ behaviors and shopping practices. Accordingly, our long-term strategy has numerous initiatives across product categories, brands, geographic regions, channels of distribution and functions designed to grow our sales, provide cost efficiencies, leverage our strengths, such as our history of outstanding creativity and innovation, high quality products and services, and engaging communications, and make us more productive and profitable. WithFollowing the transition of leadership in the second and third quarters of fiscal 2025, as previously announced we haveare embarkedexecuting onagainst "Beauty Reimagined," aour previously announced strategic vision which focuses on accelerating best-in-class consumer coverage, creating transformative innovation, boosting consumer-facing investments, fueling sustainable growth through bold efficiencies and reimagining the way we work, including through the expansion of the Profit Recovery and Growth Plan ("PRGP") during the fiscal 2025 third quarter, as discussed below.

The expanded component of the restructuring program began during our fiscal 2025 third quarter. The focus of the overall expanded restructuring program (collectively the “Restructuring Program”) includes (i) reorganization and rightsizing of certain areas, (ii) simplification and acceleration of processes, (iii) outsourcing of select services and (iv) evolution of go-to-market footprint and selling models.models, all to help rebuild operating margin and also fuel reinvestment in consumer-facing areas to drive sustainable sales growth. Specific initiatives under the Restructuring Program are expected to be approved by the end of fiscal 2026 and substantially completed by the end of fiscal 2027.

In connection with the Restructuring Program, aswe of December 31, 2025 wenow estimate a final net reduction in the range of approximately 5,8009,000 to 7,00010,000 positions globally, whichan increase from the previous range of 5,800 to 7,000. Over 70% of the increase is aboutattributable 9-11%to ofthe reduction in point-of-sale demonstration roles at select unproductive doors in our positionsdepartment including temporarystore and part-timefreestanding employeesstore channels, as ofwe Junecontinue 30,to 2023.evolve our focus towards high-growth channels. This net reduction takes into account the elimination of positions after retraining and redeployment of certain employees in select areas.

We now expect that the Restructuring Program will result in restructuring and other charges totaling between $1,500 million and $1,700 million, before taxes, an increase from the previous range of $1,200 million and $1,600 million, before taxes, consisting of employee-related costs, asset-related costs, contract terminations and other costs associated with implementing these initiatives, which other than the non-cash charges, are expected to result in future cash expenditures funded from cash provided by operations.

Once fully implemented, we now expect the Restructuring Program to yield annual target gross benefits of between $1,000 million and $1,200 million, before taxes, an increase from the previous range of $800 million and $1,000 million, before taxes, a portion of which is expected to be reinvested in consumer-facing activities. The net benefits of the PRGP, which includes the Restructuring Program, are expected to enable a return to a double-digit operating margin over the next few years.

Reported net sales increased across all product categories for the three and sixnine months ended DecemberMarch 31, 2025, with the exception of hair care, which remained virtually flat, for the six months ended December 31, 2025.2026. The increase in net sales in both periods was primarily driven by thefragrance, skin care and makeup for the three months ended March 31, 2026, and primarily driven by fragrance productand categories.skin care for the nine months ended March 31, 2026.

By geographic region, reported net sales increased across all geographic regions for the three and sixnine months ended DecemberMarch 31, 2025,2026, with the exception of The Americas,Asia/Pacific for the sixthree months ended DecemberMarch 31, 2025.2026, and The Americas for the nine months ended March 31, 2026, with each remaining virtually flat. The increase in net sales for the three and sixnine months ended DecemberMarch 31, 20252026 was primarily driven by Mainland China and EUKEM, and the increase in net sales for the six months ended December 31, 2025 was also driven by Asia/Pacific.EUKEM.

Reported net sales were impacted by approximately $74$101 million and $99$200 million of favorable foreign currency translation for the three and sixnine months ended DecemberMarch 31, 2025,2026, respectively.

Reported net sales increased 6%5% for the three months ended DecemberMarch 31, 2025,2026, driven by the increase from volume of 3%, the favorable impact from foreign currency translation of 2%3%, the increase from volume of 1% and the increase from pricing of 1%, reflecting the favorable impact from strategic price actions, partially offset by changes in mix.

Reported net sales increased 5% for the sixnine months ended DecemberMarch 31, 2025,2026, driven by the favorable impact from foreign currency translation of 2%, the increase from volume of 2%,2% and the increase from pricing of 1%, reflecting the favorable impact from strategic price actionsactions, andpartially offset by changes in mix, and the favorable impact from foreign currency translation of 1%.mix.

Returns associated with restructuring and other activities are not allocated to our product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select areas of the business. Accordingly, the following discussions of Net sales by Product Categories and Geographic Regions exclude the impacts of return adjustments associated with restructuring and other activities of $1 million for the sixnine months ended DecemberMarch 31, 2025.2026. There were no returns associated with restructuring and other activities for the three months ended DecemberMarch 31, 20252026 and the three and sixnine months ended DecemberMarch 31, 2024.2025.

Reported net sales for our product categories for the three and sixnine months ended DecemberMarch 31, 20252026 and 20242025 were as follows:

Reported skin care net sales increased $133$228 million, or 7%, and $179 million, or 5%,4% for the three and sixnine months ended DecemberMarch 31, 2025, respectively,2026, reflecting higher net sales from La Mer, Estée Lauder and The Ordinary, combined, of approximately $153$301 millionmillion. Net sales from La Mer increased, reflecting growth in hero product franchises, as well as the benefit from new product launches. The increase in net sales from Estée Lauder reflected growth attributable to new product launches and $214key million,campaigns, forbenefitting thefrom respectivekey periods.shopping moments and holiday. Net sales from The Ordinary increased, primarily reflecting targeted expanded consumer reach.

Skin care net sales were impacted by approximately $27$46 million and $34$80 million of favorable foreign currency translation for the three and sixnine months ended DecemberMarch 31, 2025,2026, respectively.

Reported skin care net sales increased 7%3% for the three months ended DecemberMarch 31, 2025,2026, driven by the increase from volumepricing of 4%, thereflecting increasechanges fromin pricingmix of 2%, reflectingand the favorable impact from strategic pricing actions and changes in mix,actions, and the favorable impact from foreign currency translation of 1%.3%, partially offset by the decrease from volume of 4%.

Reported skin care net sales increased 5%4% for the sixnine months ended DecemberMarch 31, 2025,2026, driven by the increase from pricing of 2%,3%, reflecting changes in mix and the favorable impact from strategic pricing actions and changes in mix, the increase from volume of 2%actions, and the favorable impact from foreign currency translation of 1%.2%. The impact from volume was flat period-over-period.

Reported makeup net sales increased slightly$37 million, or 4% for the three and six months ended DecemberMarch 31, 2025, increasing by $14 million, or 1%, and $6 million, or less than 1%, respectively,2026, including the favorable impact of foreign currency translation of 2%3%. inIncluding boththe periods.favorable Theimpact of foreign currency translation, the increase in makeup net sales reflectedwas primarily driven by higher net sales from M·A·CEstée andLauder, Cliniquereflecting inthe both periods, combined,launch of approximatelyits $50next-generation millionof andDouble $53Wear million,Stay-in-Place respectively.Longwear Matte Foundation during the fiscal 2026 third quarter.

Makeup net sales were impacted by approximately $26$35 million and $36$71 million of favorable foreign currency translation for the three and sixnine months ended DecemberMarch 31, 2025,2026, respectively.

Reported makeup net sales increased 1%4% for the three months ended DecemberMarch 31, 2025,2026, driven by the increase from volume of 4%5% and the favorable impact from foreign currency translation of 2%.3%. Partially offsetting these increases was the decrease from pricing of 5%, reflecting changes in mixmix, partially offset by the favorable impact from strategic pricing actions.

Reported makeup net sales increased slightly, less than 1%,1% for the sixnine months ended DecemberMarch 31, 2025,2026, driven by the increase from volume of 2%3% and the favorable impact from foreign currency translation of 2%. LargelyPartially offsetting these increases was the decrease from pricing of 3%,4%, reflecting changes in mixmix, partially offset by the favorable impact from strategic pricing actions.

Reported fragrance net sales increased $68$71 million, or 9%,13%, and $159$230 million, or 12%, for the three and sixnine months ended DecemberMarch 31, 2025,2026, respectively, primarily driven byreflecting higher net sales from Le Labo, TOM FORD and LeKilian Labo,Paris, combined, of approximately $55$51 million and $112$185 million, for the respective periods. Net sales from TOM FORD increased in both periods, primarily driven by growth in the Private Blend and Signature franchises, reflecting the benefit from new product launches which created halo benefits on existing products. Le Labo net sales increased in both periods, led by the Classic Collection, reflecting growth from targeted expanded consumer reach and new product launches.

Fragrance net sales were impacted by approximately $20$18 million and $28$46 million of favorable foreign currency translation for the three and sixnine months ended DecemberMarch 31, 2025,2026, respectively.

Reported fragrance net sales increased 9%13% for the three months ended DecemberMarch 31, 2025,2026, driven by the increase from pricingvolume of 5%, reflecting changes in mix and the favorable impact from strategic pricing actions,7%, the favorable impact from foreign currency translation of 3%3%, and the increase from volumepricing of 1%.2%, reflecting the favorable impact from strategic pricing actions, partially offset by changes in mix.

Reported fragrance net sales increased 12% for the sixnine months ended DecemberMarch 31, 2025,2026, driven by the increase from pricingvolume of 5%, the increase from pricing of 4%, reflecting changes in mix and the favorable impact from strategic pricing actions,actions theand increasechanges fromin volume of 4%mix, and the favorable impact from foreign currency translation of 2%.

ReportedPartially offsetting the hair care net sales decreased slightly, $1 million, or less than 1%,increase for the sixnine months ended DecemberMarch 31, 2025,2026 primarily reflectingwere lower net sales from AvedaAveda, and higher net sales from The Ordinary. The decrease in net sales from Aveda reflectedreflecting the brand’s strategies to improve long-term performance, including (i) planned reductions in online promotional activity and (ii) the exit from underperforming doors, including freestanding stores. These declines were partially offset by the impact from its launch in Amazon's U.S. Premium Beauty store during the fiscal 2025 fourth quarter. The increase in net sales from The Ordinary reflected the aforementioned growth as discussed above.

Hair care net sales were impacted by approximately $1$2 million and $3 million of favorable foreign currency translation for each of the three and sixnine months ended DecemberMarch 31, 2025.2026, respectively.

Reported hair care net sales increased 6%2% for the three months ended DecemberMarch 31, 2025,2026, driven by the increase from pricing of 8%,2%, reflecting changes in mix and the favorable impact from strategic pricing actions,actions and changes in mix, and the favorable impact from foreign currency translation of 1%.2%. These increases were partially offset by the decrease from volume of 3%.2%.

Reported hair care net sales decreasedwere slightly,virtually less than 1%,flat for the sixnine months ended DecemberMarch 31, 2025,2026, driven by the decrease from volume of 8%, largely offset by the increase from pricing of 7%,6%, reflecting changes in mix and the favorable impact from strategic pricing actions.actions, and the favorable impact from foreign currency translation of 1%. These increases were offset by the decrease from volume of 6%.

Reported net sales by geographic region for the three and sixnine months ended DecemberMarch 31, 20252026 and 20242025 were as follows:

(1)The net sales from the Company’sour travel retail business are included in the Asia/Pacific region.

Reported net sales increased for the three months ended DecemberMarch 31, 2025,2026, primarily driven by higher net sales in Mainland China,China and our Priority Emerging Markets and the United Kingdom,Markets, combined, of approximately $181$121 million. The increase in net sales in Mainland China was primarily driven byreflected growth attributable to key shopping momentsmoments, and holiday, reflectingincluding the benefits from key campaigns to drive sales and new product launches. Net sales in our Priority Emerging Markets within EUKEM and The Americas and EUKEM increased collectively, reflecting growth in all product categories, supported by targeted expanded consumer reach, successful campaigns and new product launches. The increase in net sales in the United Kingdom reflected the favorable impact from foreign currency translation and growth from The Ordinary, reflecting targeted expanded consumer reach.

Reported net sales increased for the sixnine months ended DecemberMarch 31, 2025,2026, reflectingprimarily driven by higher net sales in Mainland China,China primarilyand drivenour byPriority Emerging Markets, reflecting the aforementioned growth as discussed above, and higher net sales in our travel retail business, combined, of approximately $244$443 million. The increase in net sales in our travel retail business was driven by Asia travel retail, reflecting favorability attributable to the low prior-year period net sales base which reflected (i) the challenging retail environment, including low consumer sentiment and conversion from Chinese consumers, as well as (ii) our prior-year efforts to improve in-trade inventory levels. Also contributing to the growth in Asia travel retail was the favorable impact of higher traffic in certain areas of the business, including during key shopping moments, supported by key campaigns to drive growth. These increases were partially offset by impacts associated with the transitory headwind from the change of duty-free retailers servicing the Beijing and Shanghai airports, including the related online businesses. Also contributing to the increase in net sales in our travel retail business were higher net sales from our Europe, the Middle East & Africa travel retail business, primarily driven by growth in fragrance.

Reported net sales in The Americas increased 1% for the three months ended DecemberMarch 31, 2025,2026, driven by the increase from volume of 6%,4% and the favorable impact from foreign currency translation of 1%. These increases were partially offset by the decrease from pricing of 6%,3%, reflecting changes in mix, partially offset by the favorable impact from strategic pricing actions. Reported net sales in EUKEM increased 9% for the three months ended DecemberMarch 31, 2025,2026, driven by the increase from volume of 7% and the favorable impact of foreign currency translation of 7%. These increases were partially offset by the decrease from pricing of 4%,5%, reflecting changes in mix, partially offset by the favorable impact from strategic pricing actions. Reported net sales in Asia/Pacific increasedwere 1%virtually flat for the three months ended DecemberMarch 31, 2025,2026, driven by the decrease from volume of 4%, offset by the increase from pricing of 9%,3%, reflecting changes in mix and the favorable impact from strategic pricing actions, partially offset by the decrease from volume of 8%actions and thechanges unfavorablein impact from foreign currency translation of 1%.mix. Reported net sales in Mainland China increased 13%11% for the three months ended DecemberMarch 31, 2025,2026, driven by thean increase from pricing of 9%,10%, reflecting changes in mix and the favorable impact from strategic pricing actions, and the increasefavorable impact from foreign currency translation of 5%. These increases were partially offset by the decrease from volume of 4%.

Reported net sales in The Americas decreasedwere 1%virtually flat for the sixnine months ended DecemberMarch 31, 2025,2026, driven by the decrease from pricing of 2%, reflecting changes in mix, partially offset by the favorable impact offrom strategic pricing actions. This decrease was partially offset by the increase from volume of 2%. Reported net sales in EUKEM increased 7% for the sixnine months ended DecemberMarch 31, 2025,2026, driven by the favorable impact of foreign currency translation of 5%6% and the increase from volume of 2%.4%. These increases were partially offset by the decrease from pricing of 1%,2%, reflecting changes in mix, partially offset by the favorable impact from strategic pricing actions. Reported net sales in Asia/Pacific increased 5%3% for the sixnine months ended DecemberMarch 31, 2025,2026, driven by an increase from pricing of 7%,6%, reflecting changes in mix and the favorable impact from strategic pricing actions, partially offset by the decrease from volume of 2% and the unfavorable impact of foreign currency translation of 1%.3%. Reported net sales in Mainland China increased 11% for the sixnine months ended DecemberMarch 31, 2025,2026, driven by the increase from volume of 7% and the increase from pricing of 4%,6%, reflecting changes in mix and the favorable impact from strategic pricing actions.actions, the increase from volume of 3% and the favorable impact from foreign currency translation of 2%.

Gross margin increased to 76.5%76.4% and 75.1%75.5% for the three and sixnine months ended DecemberMarch 31, 2025,2026, as compared with 76.1%75.0% and 74.4%74.6% in the prior-year periods.

Operating expenses as a percentage of net sales waswere 67.0%69.7% and 67.7%68.3% for the three and sixnine months ended DecemberMarch 31, 2025,2026, as compared with 90.6%66.3% and 83.9%78.2% in the prior-year periods.

The favorabilityincrease in our operating expense margin for the three and six months ended DecemberMarch 31, 20252026 reflected the year-over-year unfavorable impact of restructuring and other activities and the securities class action litigation settlement. Partially offsetting these increases was favorability reflecting the impact of the increase in net sales, as well as lowerthe expensesfavorable year-over-year impact within non-consumer-facing areas of the business collectively, primarily within marketing, product development and general and administrative expenses, reflecting lower employee-related costs realized through initiatives as part of the PRGP. The decrease in general and administrative expenses alsoassociated includeswith the favorable year-over-year impacttiming of arecognition change in policy related toof local government subsidies in China,China which negatively impactedin the fiscal 20252026 secondthird quarter,quarter. partiallyAdditionally, offset by higher employee incentive costs. Partially offsetting these expense reductions werewe increased investments in consumer-facing areas of the business to drive sales, including selling, advertising, store operating costs, sellingcosts and promotion expenses.expenses, offsetting a portion of the favorability from the increase in net sales.