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Total Expenses were $13.07 billion in 2019
Breakdown of Estee Lauder's Total Expenses in 2019:
Total = $13.07 Bil
Cost of Sales = $3.39 Bil
Operating Expenses = $9.16 Bil
Non-operating expenses = $10 Mil
Provision for income taxes = $510 Mil
Estee Lauder's total expenses have grown from $10.57 billion in 2017 to $13.07 billion in 2019. However, as a percentage of revenues, expenses dropped, going from 89.4% in 2017 to 87.9% in 2019.Selling, general & administrative (SG &A) expense is the biggest expense head for the company, with it being 63.1% of revenue in 2017, before dropping to around 59.6% of revenue in 2019. This drop has helped bring in an additional $1.50 in earnings per share between 2017 and 2019.Also, despite strong expected revenue growth going forward, SG &A expense as % of revenue is expected to stay the same, leading to a marginal rise in net income margin from 12.1% in 2019 to 12.4% in 2021.The company's efforts to cut costs over the past 2 years, and steady EPS growth, have helped drive a ~60% growth in share price since January 2018.Below, we take a look at the key drivers of Estee Lauder's expenses and net margins.
Estee Lauder's Total Expenses Have Gone From $10.57 Billion in 2017 to $13.07 Billion in 2019
% Change in total expenses
Estee Lauder's total expenses have grown steadily with a growth in revenue, going from $10.57 billion in 2017 to about $13.07 billion in 2019.
For 2020, we expect total expenses to stand at $14.02 billion, which comprises of
1) Cost of Sales: $3.61 billion
2) Operating Expenses: $9.75 billion
3) Non-Operating Expenses: $94 million
4) Income Taxes: $563 million
Below, we take a look at how the company's key expense components have trended and the key reasons for the change.
(A) SG &A Expense has risen gradually from $7.46 billion in 2017 to $8.86 billion in 2019, in line with the company's steady revenue growth. However, SG&A as a % of revenue, has dropped from 63.1% to 59.6% over the same period, on the back of the company's cost-cutting initiatives. Going forward, we expect this expense to rise steadily with revenue and cross $10 billion by 2021.
Selling, General and Administrative expenses
S,G & A as a % of revenue
(B) Restructuring and other charges have gone from $195 million in 2017 to about $216 million in 2019. As a % of Revenue, restructuring and other expenses dropped marginally from 1.6% to 1.5% during the same period. Going forward, we expect this metric to rise to 1.7% by 2021.
Restructuring and other charges
Restructuring and other charges as a % of revenue
(C) Impairment of goodwill and other intangibles went from $31 million in 2017 to about $90 million in 2019. We expect this metric to come in at around 0.1% of total revenue in 2020 and 2021.
Impairment of goodwill and other intangibles
Impairment of goodwill and other intangibles as a % of revenue
4) Income Tax Expense has increased from $361 million in 2017 to $513 million in 2019, with tax expense rising to $863 million for 2018, due to a one-time tax expense. Going forward, we expect effective tax rate to be around 22.5% in the near term.
Income Tax Expense
Effective Tax Rate
Our complete set of analyses on Estee Lauder
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