10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________________________________________________________

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2020

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                     to

Commission file number 1-14064

The Estée Lauder Companies Inc.

(Exact name of registrant as specified in its charter)

Delaware	11-2408943
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
767 Fifth Avenue, New York, New York	10153
(Address of principal executive offices)	(Zip Code)

212-572-4200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A Common Stock, $.01 par value	EL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐ No ☒

At January 29, 2021, 229,736,467 shares of the registrant’s Class A Common Stock, $.01 par value, and 133,023,029 shares of the registrant’s Class B Common Stock, $.01 par value, were outstanding.

THE ESTÉE LAUDER COMPANIES INC.

INDEX

	Page
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Consolidated Statements of Earnings — Three and Six Months Ended December 31, 2020 and 2019	2
Consolidated Statements of Comprehensive Income — Three and Six Months Ended December 31, 2020 and 2019	3
Consolidated Balance Sheets — December 31, 2020 and June 30, 2020 (Audited)	4
Consolidated Statements of Cash Flows — Six Months Ended December 31, 2020 and 2019	5
Notes to Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
Item 3. Quantitative and Qualitative Disclosures About Market Risk	65
Item 4. Controls and Procedures	65
Part II. Other Information
Item 1. Legal Proceedings	66
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 6. Exhibits	66
Signatures	67

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(Unaudited)

	Three Months Ended December 31				Six Months Ended December 31
(In millions, except per share data)	2020		2019		2020		2019
Net sales	$	4,853	$	4,624	$	8,415	$	8,519
Cost of sales	1,084		1,041		1,909		1,949
Gross profit	3,769		3,583		6,506		6,570
Operating expenses
Selling, general and administrative	2,590		2,538		4,616		4,723
Restructuring and other charges	35		7		41		30
Goodwill impairment	54		511		54		511
Impairment of other intangible assets	27		266		27		266
Total operating expenses	2,706		3,322		4,738		5,530
Operating income	1,063		261		1,768		1,040
Interest expense	43		38		88		70
Interest income and investment income, net	17		13		31		27
Other components of net periodic benefit cost	7		1		10		2
Other income	—		576		—		576
Earnings before income taxes	1,030		811		1,701		1,571
Provision for income taxes	153		250		299		412
Net earnings	877		561		1,402		1,159
Net earnings attributable to noncontrolling interests	(4)		(4)		(6)		(7)
Net earnings attributable to The Estée Lauder Companies Inc.	$	873	$	557	$	1,396	$	1,152
Net earnings attributable to The Estée Lauder Companies Inc. per common share
Basic	$	2.40	$	1.55	$	3.84	$	3.19
Diluted	$	2.37	$	1.52	$	3.79	$	3.13
Weighted-average common shares outstanding
Basic	363.0		360.2		363.4		360.8
Diluted	368.0		366.7		368.5		367.7

See notes to consolidated financial statements.

2

THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019
Net earnings	$	877	$	561	$	1,402	$	1,159
Other comprehensive income (loss):
Net cash flow hedge loss	(26)		(22)		(57)		(24)
Retirement plan and other retiree benefit adjustments	6		5		12		10
Translation adjustments	213		64		291		(6)
Benefit for deferred income taxes on components of other comprehensive income	20		10		38		13
Total other comprehensive income (loss), net of tax	213		57		284		(7)
Comprehensive income	1,090		618		1,686		1,152
Comprehensive income attributable to noncontrolling interests:
Net earnings	(4)		(4)		(6)		(7)
Translation adjustments	(2)		1		(2)		1
	(6)		(3)		(8)		(6)
Comprehensive income attributable to The Estée Lauder Companies Inc.	$	1,084	$	615	$	1,678	$	1,146

See notes to consolidated financial statements.

3

THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED BALANCE SHEETS

(In millions, except share data)	December 31 2020		June 30 2020
	(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	5,545	$	5,022
Accounts receivable, net	1,972		1,194
Inventory and promotional merchandise	2,116		2,062
Prepaid expenses and other current assets	658		614
Total current assets	10,291		8,892
Property, plant and equipment, net	2,142		2,055
Other assets
Operating lease right-of-use assets	2,325		2,282
Goodwill	1,401		1,401
Other intangible assets, net	2,424		2,338
Other assets	1,012		813
Total other assets	7,162		6,834
Total assets	$	19,595	$	17,781
LIABILITIES AND EQUITY
Current liabilities
Current debt	$	470	$	1,222
Accounts payable	1,299		1,177
Operating lease liabilities	387		375
Other accrued liabilities	3,264		2,405
Total current liabilities	5,420		5,179
Noncurrent liabilities
Long-term debt	4,913		4,914
Long-term operating lease liabilities	2,314		2,278
Other noncurrent liabilities	1,492		1,448
Total noncurrent liabilities	8,719		8,640
Contingencies
Equity
Common stock, $.01 par value; Class A shares authorized: 1,300,000,000 at December 31, 2020 and June 30, 2020; shares issued: 456,618,145 at December 31, 2020 and 451,927,441 at June 30, 2020; Class B shares authorized: 304,000,000 at December 31, 2020 and June 30, 2020; shares issued and outstanding: 133,023,029 at December 31, 2020 and 135,235,429 at June 30, 2020	6		6
Paid-in capital	5,068		4,790
Retained earnings	11,159		10,134
Accumulated other comprehensive loss	(383)		(665)
	15,850		14,265
Less: Treasury stock, at cost; 227,008,228 Class A shares at December 31, 2020 and 226,637,238 Class A shares at June 30, 2020	(10,429)		(10,330)
Total stockholders’ equity – The Estée Lauder Companies Inc.	5,421		3,935
Noncontrolling interests	35		27
Total equity	5,456		3,962
Total liabilities and equity	$	19,595	$	17,781

See notes to consolidated financial statements.

4

THE ESTÉE LAUDER COMPANIES INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Six Months Ended December 31
(In millions)	2020		2019
Cash flows from operating activities
Net earnings	$	1,402	$	1,159
Adjustments to reconcile net earnings to net cash flows from operating activities:
Depreciation and amortization	316		287
Deferred income taxes	(49)		7
Non-cash stock-based compensation	169		139
Net loss on disposal of property, plant and equipment	13		5
Non-cash restructuring and other charges	1		—
Pension and post-retirement benefit expense	52		41
Pension and post-retirement benefit contributions	(25)		(33)
Goodwill and other intangible asset impairments	81		777
Changes in fair value of contingent consideration	(2)		(7)
Gain on previously held equity method investment	—		(553)
Other non-cash items	(23)		(10)
Changes in operating assets and liabilities:
Increase in accounts receivable, net	(720)		(347)
Decrease in inventory and promotional merchandise	67		31
Increase in other assets, net	(110)		(120)
Increase (decrease) in accounts payable	63		(375)
Increase in other accrued and noncurrent liabilities	750		252
Increase (decrease) in operating lease assets and liabilities, net	(7)		2
Net cash flows provided by operating activities	1,978		1,255
Cash flows from investing activities
Capital expenditures	(250)		(291)
Proceeds from purchase price refund	32		—
Payments for acquired businesses, net of cash acquired	(6)		(1,040)
Purchases of investments	(40)		(5)
Settlement of net investment hedges	(133)		(14)
Net cash flows used for investing activities	(397)		(1,350)
Cash flows from financing activities
Proceeds (repayments) of current debt, net	(747)		8
Proceeds from issuance of long-term debt, net	—		1,783
Debt issuance costs	—		(14)
Repayments and redemptions of long-term debt	(4)		(8)
Net proceeds from stock-based compensation transactions	104		71
Payments to acquire treasury stock	(102)		(813)
Payments of contingent consideration	—		(3)
Dividends paid to stockholders	(368)		(330)
Payments to noncontrolling interest holders for dividends	(2)		(7)
Net cash flows provided by (used for) financing activities	(1,119)		687
Effect of exchange rate changes on Cash and cash equivalents	61		17
Net increase in Cash and cash equivalents	523		609
Cash and cash equivalents at beginning of period	5,022		2,987
Cash and cash equivalents at end of period	$	5,545	$	3,596

See notes to consolidated financial statements.

5

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements include the accounts of The Estée Lauder Companies Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated.

The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Certain amounts in the consolidated financial statements of prior years have been reclassified to conform to current year presentation.

Management Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020. Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, will be reflected in the consolidated financial statements in future periods.

Currency Translation and Transactions

All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at monthly average rates of exchange for the period. Unrealized translation gains, net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc. were $227 million and $75 million, net of tax, during the three months ended December 31, 2020 and 2019, respectively, and $318 million and $3 million, net of tax, during the six months ended December 31, 2020 and 2019, respectively. For the Company’s subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Remeasurement adjustments in financial statements in a highly inflationary economy and other transactional gains and losses are reflected in earnings. These subsidiaries are not material to the Company’s consolidated financial statements or liquidity.

The Company enters into foreign currency forward contracts and may enter into option contracts to hedge foreign currency transactions for periods consistent with its identified exposures. The Company also enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. See Note 5 – Derivative Financial Instruments for further discussion. The Company categorizes these instruments as entered into for purposes other than trading.

The accompanying consolidated statements of earnings include net exchange gains (losses) on foreign currency transactions of $27 million during the three months ended December 31, 2019, and $(2) million and $24 million during the six months ended December 31, 2020 and 2019, respectively. The net exchange loss on foreign currency transactions during the three months ended December 31, 2020 was not material.

6

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Concentration of Credit Risk

The Company is a worldwide manufacturer, marketer and distributor of skin care, makeup, fragrance and hair care products. The Company’s sales subject to credit risk are made primarily to department stores, perfumeries, specialty multi-brand retailers and retailers in its travel retail business. The Company grants credit to qualified customers. As a result of the COVID-19 pandemic, the Company has enhanced its assessment of its customers' abilities to pay with a greater focus on factors affecting their liquidity and less on historical payment performance. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor the extent of the impact of the COVID-19 pandemic on its customers' abilities, individually and collectively, to make timely payments.

The Company’s largest customer during the three and six months ended December 31, 2020 sells products primarily in China travel retail. This customer accounted for $654 million or 13%, and $296 million or 6% for the three months ended December 31, 2020 and 2019, respectively, and $1,208 million or 14% and $465 million or 5% for the six months ended December 31, 2020 and 2019, respectively, of the Company's consolidated net sales. This customer accounted for $404 million, or 20%, and $297 million, or 24%, of the Company's accounts receivable at December 31, 2020 and June 30, 2020, respectively.

Inventory and Promotional Merchandise

Inventory and promotional merchandise consists of the following:

(In millions)	December 31 2020		June 30 2020
Raw materials	$	550	$	542
Work in process	258		305
Finished goods	1,072		995
Promotional merchandise	236		220
	$	2,116	$	2,062

Property, Plant and Equipment

Property, plant and equipment consists of the following:

(In millions)	December 31 2020		June 30 2020
Assets (Useful Life)
Land	$	57	$	33
Buildings and improvements (10 to 40 years)	457		400
Machinery and equipment (3 to 10 years)	969		865
Computer hardware and software (4 to 10 years)	1,417		1,335
Furniture and fixtures (5 to 10 years)	126		120
Leasehold improvements	2,471		2,381
	5,497		5,134
Less accumulated depreciation and amortization	(3,355)		(3,079)
	$	2,142	$	2,055

The cost of assets related to projects in progress of $601 million and $501 million as of December 31, 2020 and June 30, 2020, respectively, is included in their respective asset categories above. Depreciation and amortization of property, plant and equipment was $126 million and $127 million during the three months ended December 31, 2020 and 2019, respectively, and $251 million and $252 million during the six months ended December 31, 2020 and 2019, respectively. Depreciation and amortization related to the Company’s manufacturing process is included in Cost of sales, and all other depreciation and amortization is included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings.

7

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Income Taxes

The effective rate for income taxes for the three and six months ended December 31, 2020 and 2019 are as follows:

	Three Months Ended December 31				Six Months Ended December 31
	2020		2019		2020		2019
Effective rate for income taxes	14.9	%	30.8	%	17.6	%	26.2	%
Basis-point change from the prior-year period	(1,590)				(860)

For the three and six months ended December 31, 2020, the decrease in the effective tax rate was primarily attributable to a lower effective tax rate on the Company's foreign operations and the impact of nondeductible goodwill charges recognized in the second quarter of fiscal 2020.

The effective tax rate for the three and six months ended December 31, 2020 included the impact of the U.S. government issuance of final global intangible low-taxed income (“GILTI”) tax regulations in July 2020 under the Tax Cuts and Jobs Act that provide for a high-tax exception to the GILTI tax. These regulations are retroactive to the original enactment of the GILTI tax provision, which includes the Company's 2019 and 2020 fiscal years. The Company has elected to apply the GILTI high-tax exception to fiscal 2021, 2020 and 2019. The election for fiscal 2021 resulted in reductions of 160 basis points and 150 basis points to the effective tax rates for the three and six months ended December 31, 2020, respectively. The impact of the elections with respect to fiscal 2020 and 2019 was recognized as a discrete item in the provision for income taxes in the second quarter of fiscal 2021 and resulted in reductions of 470 basis points and 280 basis points to the effective tax rates for the three and six months ended December 31, 2020, respectively.

As of December 31, 2020 and June 30, 2020, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $70 million. The total amount of unrecognized tax benefits at December 31, 2020 that, if recognized, would affect the effective tax rate was $55 million. The total gross interest and penalties accrued related to unrecognized tax benefits during the three and six months ended December 31, 2020 in the accompanying consolidated statements of earnings were not material. The total gross accrued interest and penalties in the accompanying consolidated balance sheets at December 31, 2020 and June 30, 2020, was $14 million and $13 million, respectively. On the basis of the information available as of December 31, 2020, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months.

Other Accrued Liabilities

Other accrued liabilities consist of the following:

(In millions)	December 31 2020		June 30 2020
Advertising, merchandising and sampling	$	353	$	256
Employee compensation	494		424
Deferred revenue	365		222
Payroll and other taxes	392		250
Accrued income taxes	319		208
Sales return accrual	285		212
Accrued general and administrative expenses	295		233
Other	761		600
	$	3,264	$	2,405

8

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Debt

In August 2020, the Company repaid the remaining $750 million borrowed under its $1,500 million revolving credit facility that was outstanding as of June 30, 2020.

Recently Adopted Accounting Standards

Measurement of Credit Losses on Financial Instruments (ASC Topic 326 – Financial Instruments – Credit Losses) (“ASC 326”)

In June 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that requires companies to utilize an impairment model for most financial assets measured at amortized cost and certain other financial instruments, which include trade and other receivables, loans and held-to-maturity debt securities, to record an allowance for credit risk based on expected losses rather than incurred losses. In addition, this guidance changes the recognition method for credit losses on available-for-sale debt securities, which can occur as a result of market and credit risk, and requires additional disclosures. In general, modified retrospective adoption will be required for all outstanding instruments that fall under this guidance.

In November 2019, the FASB issued authoritative guidance (ASU 2019-11 – Codification Improvements to Topic 326, Financial Instruments – Credit Losses) that amends ASC Topic 326 to clarify, improve and amend certain aspects of this guidance, such as disclosures related to accrued interest receivables and the estimation of credit losses associated with financial assets secured by collateral.

In February 2020, the FASB issued authoritative guidance (ASU 2020-02 – Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842)) that amends and clarifies Topic 326 and Topic 842. For Topic 326, the codification was updated to include the Securities and Exchange Commission staff interpretations associated with registrants engaged in lending activities.

Effective for the Company – Fiscal 2021 first quarter.

Impact on consolidated financial statements – On July 1, 2020, the Company adopted ASC 326. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. See Note 7 – Revenue Recognition for further discussion.

Goodwill and Other – Internal-Use Software (ASU 2018-15 – Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract)

In August 2018, the FASB issued authoritative guidance that permits companies to capitalize the costs incurred for setting up business systems that operate on cloud technology. The new guidance aligns the requirement for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance does not affect the accounting for the service element of a hosting arrangement that is a service contract. Capitalized costs associated with a hosting arrangement that is a service contract must be amortized over the term of the hosting arrangement to the same line item in the income statement as the expense for fees for the hosting arrangement.

Effective for the Company – Fiscal 2021 first quarter, with early adoption permitted in any interim period. This guidance can be adopted either retrospectively, or prospectively to all implementation costs incurred after the date of adoption.

Impact on consolidated financial statements – On July 1, 2020, the Company adopted this guidance prospectively to all implementation costs incurred after the date of adoption. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Standards

Reference Rate Reform (ASC Topic 848)

In March 2020, the FASB issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”), which is expected to be phased out at the end of calendar 2021, and applies to lease contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that have LIBOR as the benchmark rate.

9

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In January 2021, the FASB issued authoritative guidance that makes amendments to the new rules on accounting for reference rate reform. The amendments clarify that all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in ASC Topic 848.

Effective for the Company – This guidance can be applied for a limited time through December 31, 2022. The guidance will no longer be available to apply after December 31, 2022.

Impact on consolidated financial statements – The Company is currently assessing the impact of applying this guidance on its existing derivative contracts, leases and other arrangements, as well as when to adopt this guidance.

Income Taxes (ASU 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes)

In December 2019, the FASB issued authoritative guidance that simplifies the accounting for income taxes by removing certain exceptions and making simplifications in other areas.

Effective for the Company – Fiscal 2022 first quarter, with early adoption permitted in any interim period. If adopted early, the Company must adopt all the amendments in the same period. The amendments have differing adoption methods including retrospectively, prospectively and/or modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption, depending on the specific change.

Impact on consolidated financial statements – The Company is currently evaluating the impact of applying this guidance and believes that it has transactions that may fall under the scope.

No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements.

NOTE 2 – ACQUISITION OF BUSINESS

On December 18, 2019, the Company acquired the remaining 66.66% equity interest in Have&Be Co. Ltd. (“Have & Be”), the global skin care company behind Dr. Jart+ and men’s grooming brand Do The Right Thing, for $1,268 million in cash. Based on the final purchase price and working capital adjustments, the Company estimated a refund receivable of $32 million that was outstanding as of June 30, 2020 and was received in the first quarter of fiscal 2021. The Company originally acquired a minority interest in Have & Be in December 2015, and that investment structure included a formula-based call option for the remaining equity interest. The original minority interest was accounted for as an equity method investment, which had a carrying value of $133 million at the acquisition date. The acquisition of the remaining equity interest in Have & Be was considered a step acquisition, whereby the Company remeasured the previously held equity method investment to its fair value of $682 million, resulting in the recognition of a gain of $549 million. The acquisition of the remaining equity interest also resulted in the recognition of a previously unrealized foreign currency gain of $4 million, which was reclassified from accumulated OCI. The total gain on the Company’s previously held equity method investment of $553 million is included in Other income in the accompanying consolidated statements of earnings for the three and six months ended December 31, 2019. The fair value of the previously held equity method investment was determined based upon a valuation of the acquired business, as of the date of acquisition, using an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies. The accounting for the Have & Be business combination was finalized as of June 30, 2020.

The amount paid at closing was funded by cash on hand including the proceeds from the issuance of debt. In anticipation of the closing, the Company transferred cash to a foreign subsidiary for purposes of making the closing payment. As a result, the Company recognized a foreign currency gain of $23 million, which is also included in Other income in the accompanying consolidated statements of earnings for the three and six months ended December 31, 2019.

Further information is included in the notes to consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

10

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – GOODWILL AND OTHER INTANGIBLE ASSETS

The following table presents goodwill by product category and the related change in the carrying amount:

(In millions)	Skin Care		Makeup		Fragrance		Hair Care		Total
Balance as of June 30, 2020
Goodwill	$	519	$	1,210	$	254	$	389	$	2,372
Accumulated impairments	(95)		(817)		(26)		(33)		(971)
	424		393		228		356		1,401
Goodwill acquired during the period	—		6		—		4		10
Impairment charges	(54)		—		—		—		(54)
Translation adjustments, goodwill	36		—		9		3		48
Translation adjustments, accumulated impairments	(2)		—		—		(2)		(4)
	(20)		6		9		5		—
Balance as of December 31, 2020
Goodwill	555		1,216		263		396		2,430
Accumulated impairments	(151)		(817)		(26)		(35)		(1,029)
	$	404	$	399	$	237	$	361	$	1,401

Other intangible assets consist of the following:

	December 31, 2020						June 30, 2020
(In millions)	Gross Carrying Value		Accumulated Amortization		Total Net Book Value		Gross Carrying Value		Accumulated Amortization		Total Net Book Value
Amortizable intangible assets:
Customer lists and other	$	1,684	$	537	$	1,147	$	1,590	$	475	$	1,115
License agreements	43		43		—		43		43		—
	$	1,727	$	580	1,147		$	1,633	$	518	1,115
Non-amortizable intangible assets:
Trademarks and other					1,277						1,223
Total intangible assets					$	2,424					$	2,338

The aggregate amortization expense related to amortizable intangible assets was $27 million and $11 million for the three months ended December 31, 2020 and 2019, respectively, and $52 million and $22 million for the six months ended December 31, 2020 and 2019, respectively.

The estimated aggregate amortization expense for the remainder of fiscal 2021 and for each of the next four fiscal years is as follows:

	Fiscal
(In millions)	2021		2022		2023		2024		2025
Estimated aggregate amortization expense	$	52	$	105	$	104	$	104	$	104

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THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Impairment Testing During the Six Months Ended December 31, 2020

During November 2020, given the actual and the estimate of the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the Company and lower than expected results from geographic expansion, the Company made further revisions to the internal forecasts relating to its GLAMGLOW reporting unit. The Company concluded that the changes in circumstances in this reporting unit triggered the need for an interim impairment review of its trademark and goodwill. These changes in circumstances were also an indicator that the carrying amounts of GLAMGLOW's long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed an interim impairment test for the trademark and a recoverability test for the long-lived assets as of November 30, 2020. The Company concluded that the carrying value of the trademark for GLAMGLOW exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded an impairment charge of $21 million. In addition, the Company concluded that the carrying value of the GLAMGLOW customer lists intangible asset was fully impaired and recorded an impairment charge of $6 million. The fair value of all other long-lived assets of GLAMGLOW exceeded their carrying values and were not impaired as of November 30, 2020. After adjusting the carrying values of the trademark and customer lists intangible assets, the Company completed an interim quantitative impairment test for goodwill and recorded a goodwill impairment charge of $54 million, reducing the carrying value of goodwill for the GLAMGLOW reporting unit to zero. The fair value of the GLAMGLOW reporting unit was based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting unit. The impairment charges for the three and six months ended December 31, 2020 were reflected in the skin care product category and in the Americas region. As of December 31, 2020, the remaining carrying value of the trademark related to the GLAMGLOW reporting unit was $36 million.

Impairment Testing During the Six Months Ended December 31, 2019

During December 2019, given the continuing declines in prestige makeup, generally in North America, and the ongoing competitive activity, the Company’s Too Faced, BECCA and Smashbox reporting units made revisions to their internal forecasts concurrent with the Company's brand strategy review process. The Company concluded that the changes in circumstances in these reporting units triggered the need for an interim impairment review of their respective trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of their respective long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed interim impairment tests for the trademarks and recoverability tests for the long-lived assets as of December 31, 2019. The Company concluded that the carrying amounts of the long-lived assets were recoverable. The Company also concluded that the carrying values of the trademarks exceeded their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded impairment charges. After adjusting the carrying value of the trademarks, the Company completed interim quantitative impairment tests for goodwill and recorded goodwill impairment charges for each of these reporting units. The fair value of each reporting unit was based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting unit. A summary of the impairment charges for the three and six months ended December 31, 2019 and the remaining trademark and goodwill carrying values as of December 31, 2019, for each reporting unit, are as follows:

(In millions)	Impairment Charge				Carrying Value
Reporting Unit:	Trademark		Goodwill		Trademark		Goodwill
Too Faced	$	211	$	430	$	314	$	175
BECCA	33		35		65		63
Smashbox	22		46		33		26
Total	$	266	$	511	$	412	$	264

The impairment charges were recorded in the makeup product category and in the Americas region.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES

Charges associated with restructuring activities for the three months ended December 31, 2020 were as follows:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Leading Beauty Forward Program	$	—	$	2	$	(2)	$	3	$	3
Post-COVID Business Acceleration Program	—		—		34		—		34
Total	$	—	$	2	$	32	$	3	$	37

Charges associated with restructuring activities for the six months ended December 31, 2020 were as follows:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Leading Beauty Forward Program	$	—	$	5	$	(10)	$	5	$	—
Post-COVID Business Acceleration Program	—		—		46		—		46
Total	$	—	$	5	$	36	$	5	$	46

Charges 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 Company-wide initiatives to redesign, resize and reorganize select areas of the business.

Leading Beauty Forward Program

In May 2016, the Company announced a multi-year initiative (“Leading Beauty Forward Program” or “LBF Program”) to build on its strengths and better leverage its cost structure to free resources for investment to continue its growth momentum. The LBF Program is designed to enhance the Company’s go-to-market capabilities, reinforce its leadership in global prestige beauty and continue creating sustainable value. As of June 30, 2019, the Company concluded the approvals of all major initiatives under the LBF Program related to the optimization of select corporate functions, supply chain activities, and corporate and regional market support structures, as well as the exit of underperforming businesses, and expects to substantially complete those initiatives through fiscal 2021.

LBF Program Approvals

The LBF Program approved restructuring and other charges expected to be incurred were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges (Adjustments) Approved
Cumulative through June 30, 2020	$	13	$	85	$	511	$	358	$	967
Six months ended December 31, 2020	1		—		(7)		6		—
Cumulative through December 31, 2020	$	14	$	85	$	504	$	364	$	967

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THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Included in the above table, cumulative LBF Program restructuring initiatives approved by the Company by major cost type were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments) Approved
Cumulative through June 30, 2020	$	460	$	28	$	7	$	16	$	511
Six months ended December 31, 2020	(8)		—		1		—		(7)
Cumulative through December 31, 2020	$	452	$	28	$	8	$	16	$	504

The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met.

LBF Program Restructuring and Other Charges

Total cumulative charges recorded associated with restructuring and other activities for the LBF Program were:

(In millions)	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
					Restructuring Charges		Other Charges
Total Charges (Adjustments)
Cumulative through June 30, 2020	$	14	$	65	$	491	$	304	$	874
Six months ended December 31, 2020	—		5		(10)		5		—
Cumulative through December 31, 2020	$	14	$	70	$	481	$	309	$	874

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments)
Cumulative through June 30, 2020	$	451	$	27	$	6	$	7	$	491
Six months ended December 31, 2020	(12)		1		1		—		(10)
Cumulative through December 31, 2020	$	439	$	28	$	7	$	7	$	481

Employee-related costs reflect adjustments to the accrual estimate for certain employees who either resigned or transferred to other existing positions within the Company.

Changes in accrued restructuring charges for the six months ended December 31, 2020 relating to the LBF Program were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Balance at June 30, 2020	$	112	$	—	$	—	$	—	$	112
Charges (adjustments)	(12)		1		1		—		(10)
Cash payments	(36)		—		—		—		(36)
Translation adjustments	2		—		—		—		2
Balance at December 31, 2020	$	66	$	1	$	1	$	—	$	68

Accrued restructuring charges at December 31, 2020 relating to the LBF Program are expected to result in cash expenditures funded from cash provided by operations of approximately $46 million, $17 million and $5 million for the remainder of fiscal 2021 and for fiscal 2022 and 2023, respectively.

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THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Additional information about the LBF Program is included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Post-COVID Business Acceleration Program

On August 20, 2020, the Company announced a two-year restructuring program, Post-COVID Business Acceleration Program (the “PCBA Program”), designed to resize the Company's business against the dramatic shifts to its distribution landscape and consumer behaviors in the wake of the COVID-19 pandemic. The PCBA Program is designed to help improve efficiency and effectiveness by rebalancing resources to growth areas of prestige beauty. It is expected to further strengthen the Company by building upon the foundational capabilities in which the Company has invested.

The PCBA Program’s main areas of focus include accelerating the shift to online with the realignment of the Company’s distribution network reflecting freestanding store and certain department store closures, with a focus on North America and Europe, the Middle East & Africa; the reduction in brick-and-mortar point of sale employees and related support staff; and the redesign of the Company’s regional branded marketing organizations, plus select opportunities in global brands and functions. This program is expected to position the Company to better execute its long-term strategy while strengthening its financial flexibility.

In connection with the PCBA Program, at this time the Company estimates a net reduction in the range of approximately 1,500 to 2,000 positions globally, which is approximately 3% of its current workforce including temporary and part-time employees. This reduction takes into account the elimination of some positions, retraining and redeployment of certain employees and investment in new positions in key areas. The Company also estimates the closure of approximately 10% to 15% of its freestanding stores globally, primarily in Europe, the Middle East & Africa and in North America.

The Company plans to approve specific initiatives under the PCBA Program through fiscal 2022 and expects to complete those initiatives through fiscal 2023. The Company expects that the PCBA Program will result in related restructuring and other charges totaling between $400 million and $500 million, before taxes.

PCBA Program Approvals

The PCBA Program cumulative charges approved by the Company through December 31, 2020 were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges (Adjustments) Approved
Six months ended December 31, 2020	$	5	$	(1)	$	46	$	16	$	66

Included in the above table, cumulative PCBA Program restructuring initiatives approved by the Company through December 31, 2020 by major cost type were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments) Approved
Six months ended December 31, 2020	$	46	$	4	$	(7)	$	3	$	46

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THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Specific actions taken since the PCBA Program inception include:

•Optimize Distribution Network – To help restore profitability to pre-COVID-19 pandemic levels and, as part of a broader initiative to be completed in phases, the Company has approved initiatives to close a number of underperforming freestanding stores and counters, mainly in the United Kingdom and certain affiliates in Europe, the Middle East & Africa. These anticipated closures reflect changing consumer behavior including higher demand for online and omnichannel capabilities. These activities will result in product returns, inventory write-offs, reduction of workforce, and termination of contracts.

•Optimize Digital Organization – The Company approved initiatives to enhance its go-to-market support structures and align more resources to support online and digital activities. These initiatives are primarily intended to shift certain areas of focus from traditional brick-and-mortar to social and digital strategies to provide enhanced consumer experience, as well as to support expanded omnichannel opportunities. These actions will result in a net reduction of the workforce, which includes position eliminations, the re-leveling of certain positions and an investment in new capabilities.

•Optimize Select Global Functions – The Company has started to reduce its corporate office footprint and is moving toward the future of work in a post-COVID environment, by restructuring where and how its employees work and collaborate. These actions will result primarily in lease termination fees.

PCBA Program Restructuring and Other Charges

Restructuring charges are comprised of the following:

Employee-Related Costs – Employee-related costs are primarily comprised of severance and other post-employment benefit costs, calculated based on salary levels, prior service and other statutory minimum benefits, if applicable.

Asset-Related Costs – Asset-related costs primarily consist of asset write-offs or accelerated depreciation related to long-lived assets (including operating lease right-of-use assets) that will be taken out of service prior to their existing useful life as a direct result of a restructuring initiative.

Contract Terminations – Costs related to contract terminations include continuing payments to a third party after the Company has ceased benefiting from the rights conveyed in the contract, or a payment made to terminate a contract prior to its expiration.

Other Exit Costs – Other exit costs related to restructuring activities generally include costs to relocate facilities or employees, recruiting to fill positions as a result of relocation of operations, and employee outplacement for separated employees.

Other charges associated with restructuring activities are comprised of the following:

Sales Returns and Cost of Sales – Product returns (offset by the related cost of sales) and inventory write-offs or write-downs as a direct result of an approved restructuring initiative to exit certain businesses or locations will be recorded as a component of Net sales and/or Cost of sales when estimable and reasonably assured.

Other Charges – The Company approved other charges related to the design and implementation of approved initiatives, which are charged to Operating Expenses as incurred and primarily include the following:

•Consulting and other professional services for organizational design of the future structures and processes as well as the implementation thereof,

•Temporary labor backfill,

•Costs to establish and maintain a Project Management Office (“PMO”) for the duration of the PCBA Program, including internal costs for employees dedicated solely to project management activities, and other PMO-related expenses incremental to the Company’s ongoing operations (e.g., rent and utilities), and

•Recruitment and training costs for new and reskilled employees to acquire and apply the capabilities needed to perform responsibilities as a direct result of an approved restructuring initiative.

16

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met. Total cumulative charges recorded associated with restructuring and other activities for the PCBA Program were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges
Six months ended December 31, 2020	$	—	$	—	$	46	$	—	$	46

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges
Six months ended December 31, 2020	$	45	$	—	$	1	$	—	$	46

Changes in accrued restructuring charges for the six months ended December 31, 2020 relating to the PCBA Program were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Charges	$	45	$	—	$	1	$	—	$	46
Cash payments	(4)		—		(1)		—		(5)
Balance at December 31, 2020	$	41	$	—	$	—	$	—	$	41

Accrued restructuring charges at December 31, 2020 relating to the PCBA Program are expected to result in cash expenditures funded from cash provided by operations of approximately $35 million, $5 million, and $1 million for the remainder of fiscal 2021 and for fiscal 2022 and 2023, respectively.

NOTE 5 – DERIVATIVE FINANCIAL INSTRUMENTS

The Company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments. The Company enters into foreign currency forward contracts, and may enter into option contracts, to reduce the effects of fluctuating foreign currency exchange rates. In addition, the Company enters into interest rate derivatives to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances. The Company enters into the net investment hedges to offset the risk of changes in the U.S. dollar value of the Company’s investment in these foreign operations due to fluctuating foreign exchange rates. Time value is excluded from the effectiveness assessment and is recognized under a systematic and rational method over the life of the hedging instrument in Selling, general and administrative expenses. The net gain or loss on net investment hedges is recorded within translation adjustments, as a component of accumulated OCI (“AOCI”) on the Company’s consolidated balance sheets, until the sale or substantially complete liquidation of the underlying assets of the Company’s investment. The Company also enters into foreign currency forward contracts, and may use option contracts, not designated as hedging instruments, to mitigate the change in fair value of specific assets and liabilities on the consolidated balance sheets. At December 31, 2020, the notional amount of derivatives not designated as hedging instruments was $4,118 million. The Company does not utilize derivative financial instruments for trading or speculative purposes. Costs associated with entering into derivative financial instruments have not been material to the Company’s consolidated financial results.

17

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For each derivative contract entered into, where the Company looks to obtain hedge accounting treatment, the Company formally and contemporaneously documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking the hedge transaction, the nature of the risk being hedged, and how the hedging instruments’ effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively. This process includes linking all derivatives to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. At inception, the Company evaluates the effectiveness of hedge relationships quantitatively, and has elected to perform, after initial evaluation, qualitative effectiveness assessments of certain hedge relationships to support an ongoing expectation of high effectiveness, if effectiveness testing is required. If based on the qualitative assessment, it is determined that a derivative has ceased to be a highly effective hedge, the Company will perform a quantitative assessment to determine whether to discontinue hedge accounting with respect to that derivative prospectively.

The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are presented as follows:

	Asset Derivatives					Liability Derivatives
		Fair Value (1)					Fair Value (1)
(In millions)	Balance Sheet Location	December 31 2020		June 30 2020		Balance Sheet Location	December 31 2020		June 30 2020
Derivatives Designated as Hedging Instruments
Foreign currency cash flow hedges	Prepaid expenses and other current assets	$	—	$	26	Other accrued liabilities	$	37	$	3
Net investment hedges	Prepaid expenses and other current assets	21		21		Other accrued liabilities	71		62
Interest rate-related derivatives	Prepaid expenses and other current assets	11		15		Other accrued liabilities	—		3
Total Derivatives Designated as Hedging Instruments		32		62			108		68
Derivatives Not Designated as Hedging Instruments
Foreign currency forward contracts	Prepaid expenses and other current assets	52		40		Other accrued liabilities	29		15
Total derivatives		$	84	$	102		$	137	$	83

(1)See Note 6 – Fair Value Measurements for further information about how the fair value of derivative assets and liabilities are determined.

18

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments that are included in the assessment of effectiveness are as follows:

	Amount of Gain or (Loss) Recognized in OCI on Derivatives				Location of Gain or (Loss) Reclassified from AOCI into Earnings	Amount of Gain or (Loss) Reclassified from AOCI into Earnings(1)
	Three Months Ended December 31					Three Months Ended December 31
(In millions)	2020		2019			2020		2019
Derivatives in Cash Flow Hedging Relationships:
Foreign currency forward contracts	$	(34)	$	(21)	Net sales	$	(5)	$	6
Interest rate-related derivatives	3		5		Interest expense	—		—
	(31)		(16)			(5)		6
Derivatives in Net Investment Hedging Relationships(2):
Foreign currency forward contracts(3)	(79)		(37)			—		—
Total derivatives	$	(110)	$	(53)		$	(5)	$	6

(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material.

(2)During the three months ended December 31, 2020 and December 31, 2019, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $5 million and $13 million, respectively.

(3)Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.

	Amount of Gain or (Loss) Recognized in OCI on Derivatives				Location of Gain or (Loss) Reclassified from AOCI into Earnings	Amount of Gain or (Loss) Reclassified from AOCI into Earnings(1)
	Six Months Ended December 31					Six Months Ended December 31
(In millions)	2020		2019			2020		2019
Derivatives in Cash Flow Hedging Relationships:
Foreign currency forward contracts	$	(65)	$	4	Net sales	$	(4)	$	19
Interest rate-related derivatives	3		(9)		Interest expense	(1)		—
	(62)		(5)			(5)		19
Derivatives in Net Investment Hedging Relationships(2):
Foreign currency forward contracts(3)	(142)		(34)			—		—
Total derivatives	$	(204)	$	(39)		$	(5)	$	19

(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material.

(2)During the six months ended December 31, 2020 and December 31, 2019, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $10 million and $25 million, respectively.

(3)Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.

19

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

		Amount of Gain or (Loss) Recognized in Earnings on Derivatives (1)
	Location of Gain or (Loss) Recognized in Earnings on Derivatives
		Three Months Ended December 31				Six Months Ended December 31
(In millions)		2020		2019		2020		2019
Derivatives in Fair Value Hedging Relationships:
Interest rate swap contracts	Interest expense	$	(3)	$	(1)	$	(5)	$	1

(1)Changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt.

Additional information regarding the cumulative amount of fair value hedging gain (loss) recognized in earnings for items designated and qualifying as hedged items in fair value hedges is as follows:

(In millions)
Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included	Carrying Amount of the Hedged Liabilities		Cumulative Amount of Fair Value Hedging Gain/(Loss) Included in the Carrying Amount of the Hedged Liability
	December 31, 2020		December 31, 2020
Current debt	$	452	$	2
Long-term debt	258		8
Total debt	$	710	$	10

20

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows:

	Three Months Ended December 31
	2020				2019
(In millions)	Net Sales		Interest Expense		Net Sales		Interest Expense
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	$	4,853	$	43	$	4,624	$	38
The effects of fair value and cash flow hedging relationships:
Gain (loss) on fair value hedge relationships – interest rate contracts:
Hedged item	Not applicable		3		Not applicable		1
Derivatives designated as hedging instruments	Not applicable		(3)		Not applicable		(1)
Gain (loss) on cash flow hedge relationships – interest rate contracts:
Amount of loss reclassified from AOCI into earnings	Not applicable		—		Not applicable		—
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings	(5)		Not applicable		6		Not applicable

21

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Six Months Ended December 31
	2020				2019
(In millions)	Net Sales		Interest Expense		Net Sales		Interest Expense
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	$	8,415	$	88	$	8,519	$	70
The effects of fair value and cash flow hedging relationships:
Gain (loss) on fair value hedge relationships – interest rate contracts:
Hedged item	Not applicable		5		Not applicable		(1)
Derivatives designated as hedging instruments	Not applicable		(5)		Not applicable		1
Gain (loss) on cash flow hedge relationships – interest rate contracts:
Amount of loss reclassified from AOCI into earnings	Not applicable		(1)		Not applicable		—
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings	(4)		Not applicable		19		Not applicable

The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows:

		Amount of Gain or (Loss) Recognized in Earnings on Derivatives
	Location of Gain or (Loss) Recognized in Earnings on Derivatives	Three Months Ended December 31				Six Months Ended December 31
(In millions)		2020		2019		2020		2019
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward contracts	Selling, general and administrative	$	42	$	30	$	63	$	3

22

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash Flow Hedges

The Company enters into foreign currency forward contracts, and may enter into foreign currency option contracts, to hedge anticipated transactions and receivables and payables denominated in foreign currencies, for periods consistent with the Company’s identified exposures. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the cash flows that the Company receives from foreign subsidiaries. The foreign currency forward contracts entered into to hedge anticipated transactions have been designated as cash flow hedges and have varying maturities through the end of September 2022. Hedge effectiveness of the foreign currency forward contracts is based on the forward method, which includes time value in the effectiveness assessment. At December 31, 2020, the Company had cash flow hedges outstanding with a notional amount totaling $1,195 million.

The Company may enter into interest rate forward contracts to hedge anticipated issuance of debt for periods consistent with the Company’s identified exposures. The purpose of the hedging activities is to minimize the effect of interest rate movements on the cost of debt issuance.

For hedge contracts that are no longer deemed highly effective, hedge accounting is discontinued, and gains and losses in AOCI are reclassified to sales when the underlying forecasted transaction occurs. If it is probable that the forecasted transaction will no longer occur, then any gains or losses in AOCI are reclassified to current-period sales. As of December 31, 2020, the Company’s foreign currency cash flow hedges were highly effective.

The estimated net loss on the Company’s derivative instruments designated as cash flow hedges as of December 31, 2020 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $25 million. The accumulated net gain (loss) on derivative instruments in AOCI was $(37) million and $20 million as of December 31, 2020 and June 30, 2020, respectively.

Fair Value Hedges

The Company enters into interest rate derivative contracts to manage the exposure to interest rate fluctuations on its funded indebtedness. The Company has interest rate swap agreements, with notional amounts totaling $450 million and $250 million to effectively convert the fixed rate interest on its 2021 Senior Notes and 2022 Senior Notes, respectively, to variable interest rates based on three-month LIBOR plus a margin. These interest rate swap agreements are designated as fair value hedges of the related long-term debt, and the changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt.

Net Investment Hedges

The Company enters into foreign currency forward contracts, designated as net investment hedges, to hedge a portion of its net investment in certain foreign operations. The net gain or loss on these contracts is recorded within translation adjustments, as a component of AOCI on the Company’s consolidated balance sheets. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the Company’s net investment in these foreign operations. The net investment hedge contracts have varying maturities through the end of January 2021. Hedge effectiveness of the net investment hedge contracts is based on the spot method. At December 31, 2020, the Company had net investment hedges outstanding with a notional amount totaling $1,879 million.

Credit Risk

As a matter of policy, the Company enters into derivative contracts only with counterparties that have a long-term credit rating of at least A- or higher by at least two nationally recognized rating agencies. The counterparties to these contracts are major financial institutions. Exposure to credit risk in the event of nonperformance by any of the counterparties is limited to the gross fair value of contracts in asset positions, which totaled $84 million at December 31, 2020. To manage this risk, the Company has strict counterparty credit guidelines that are continually monitored. Accordingly, management believes risk of loss under these hedging contracts is remote.

23

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6 – FAIR VALUE MEASUREMENTS

The Company records certain of its financial assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. The accounting for fair value measurements must be applied to nonfinancial assets and nonfinancial liabilities that require initial measurement or remeasurement at fair value, which principally consist of assets and liabilities acquired through business combinations and goodwill, indefinite-lived intangible assets and long-lived assets for the purposes of calculating potential impairment. The Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows:

Level 1:    Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

Level 2:    Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3:    Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2020:

(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	2,549	$	—	$	—	$	2,549
Foreign currency forward contracts	—		73		—		73
Interest rate-related derivatives	—		11		—		11
Total	$	2,549	$	84	$	—	$	2,633
Liabilities:
Foreign currency forward contracts	$	—	$	137	$	—	$	137
Contingent consideration	—		—		2		2
Total	$	—	$	137	$	2	$	139

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2020:

(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	2,810	$	—	$	—	$	2,810
Foreign currency forward contracts	—		87		—		87
Interest rate-related derivatives	—		15		—		15
Total	$	2,810	$	102	$	—	$	2,912
Liabilities:
Foreign currency forward contracts	$	—	$	80	$	—	$	80
Interest rate-related derivatives	—		3		—		3
Contingent consideration	—		—		4		4
Total	$	—	$	83	$	4	$	87

24

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The estimated fair values of the Company’s financial instruments are as follows:

	December 31 2020				June 30 2020
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Nonderivatives
Cash and cash equivalents	$	5,545	$	5,545	$	5,022	$	5,022
Current and long-term debt	5,383		6,315		6,136		6,902
Contingent consideration	2		2		4		4
Derivatives
Foreign currency forward contracts – asset (liability), net	(64)		(64)		7		7
Interest rate-related derivatives – asset (liability), net	11		11		12		12

The following table presents the Company’s impairment charges for the three and six months ended December 31, 2020 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test:

(In millions)	Impairment charges		Date of Fair Value Measurement	Fair Value
Goodwill	$	54	November 30, 2020	$	—
Other intangible assets, net (trademark and customer lists)	27		November 30, 2020	36
Total	$	81		$	36

(1)See Note 3 - Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.

The following table presents the Company’s impairment charges for the three and six months ended December 31, 2019 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test:

(In millions)	Impairment charges		Date of Fair Value Measurement	Fair Value
Goodwill	$	511	December 31, 2019	$	264
Other intangible assets, net (trademark)	266		December 31, 2019	412
Total	$	777		$	676

(1)See Note 3 - Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.

The following methods and assumptions were used to estimate the fair value of the Company’s financial instruments for which it is practicable to estimate that value:

Cash and cash equivalents – Cash and all highly-liquid securities with original maturities of three months or less are classified as cash and cash equivalents, primarily consisting of cash deposits in interest bearing accounts, time deposits and money market funds (classified within Level 1 of the valuation hierarchy). Cash deposits in interest bearing accounts and time deposits are carried at cost, which approximates fair value due to the short maturity of cash equivalent instruments.

25

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Foreign currency forward contracts – The fair values of the Company’s foreign currency forward contracts were determined using an industry-standard valuation model, which is based on an income approach. The significant observable inputs to the model, such as swap yield curves and currency spot and forward rates, were obtained from an independent pricing service. To determine the fair value of contracts under the model, the difference between the contract price and the current forward rate was discounted using LIBOR for contracts with maturities up to 12 months, and swap yield curves for contracts with maturities greater than 12 months.

Interest rate contracts – The fair values of the Company’s interest rate contracts were determined using an industry-standard valuation model, which is based on the income approach. The significant observable inputs to the model, such as treasury yield curves, swap yield curves and LIBOR forward rates, were obtained from independent pricing services.

Current and long-term debt – The fair value of the Company’s debt was estimated based on the current rates offered to the Company for debt with the same remaining maturities. To a lesser extent, debt also includes finance lease obligations for which the carrying amount approximates the fair value. The Company’s debt is classified within Level 2 of the valuation hierarchy.

Contingent consideration – Contingent consideration obligations consist of potential obligations related to the Company’s acquisitions in previous years. The amounts to be paid under these obligations are contingent upon the achievement of stipulated financial targets by the business subsequent to acquisition. At December 31, 2020, the fair values of the contingent consideration related to certain acquisition earn-outs were based on the Company’s estimate of the applicable financial targets as per the terms of the agreements. Significant changes in the projected future operating results would result in a significantly higher or lower fair value measurement. As these are unobservable inputs, the Company’s contingent consideration is classified within Level 3 of the valuation hierarchy.

Changes in the fair value of the contingent consideration obligations for six months ended December 31, 2020 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and were as follows:

(In millions)	Fair Value
Contingent consideration at June 30, 2020	$	4
Changes in fair value	(2)
Contingent consideration at December 31, 2020	$	2

NOTE 7 – REVENUE RECOGNITION

The Company’s revenue recognition accounting policies are described in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Accounts Receivable

Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions totaling $66 million and $63 million as of December 31, 2020 and June 30, 2020, respectively. During the first quarter of fiscal 2021, the Company adopted ASC 326 using the modified retrospective transition approach and, accordingly, the prior comparative period was not restated. Under this new standard, the Company is required to measure credit losses based on the Company’s estimate of expected losses rather than incurred losses, which generally results in earlier recognition of allowances for credit losses. In accordance with ASC 326, the Company evaluated certain criteria, including aging and historical write-offs, current economic condition of specific customers and future economic conditions of countries utilizing a consumption index to determine the appropriate allowance for credit losses. The Company writes-off receivables once it is determined that the receivables are no longer collectible and as allowed by local laws. Payment terms are short-term in nature and are generally less than one year.

26

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Changes in the allowance for credit losses are as follows:

(In millions)	December 31 2020
Balance at June 30, 2020	$	36
ASC 326 cumulative effect adjustment (pre-tax)	4
Provision for expected credit losses	7
Write-offs, net & other	(8)
Balance at December 31, 2020	$	39

As a result of the adoption of ASC 326, the Company recorded a cumulative adjustment of approximately $3 million, net of tax, as a reduction to its fiscal 2021 opening balance of retained earnings relating to its trade receivables.

The remaining balance of the allowance for doubtful accounts of $27 million, as of December 31, 2020, relates to non-credit losses, which are primarily due to customer deductions.

Deferred Revenue

Changes in deferred revenue during the period are as follows:

	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019
Deferred revenue, beginning of period	$	409	$	392	$	279	$	361
Revenue recognized that was included in the deferred revenue balance at the beginning of the period	(83)		(83)		(173)		(243)
Revenue deferred during the period	92		112		308		307
Other	2		4		6		—
Deferred revenue, end of period	$	420	$	425	$	420	$	425

Transaction Price Allocated to the Remaining Performance Obligations

At December 31, 2020, the combined estimated revenue expected to be recognized in the next twelve months related to performance obligations for customer loyalty programs, gift with purchase promotions, purchase with purchase promotions and gift card liabilities that are unsatisfied (or partially unsatisfied) is $365 million, and the remaining balance will be recognized beyond the next twelve months.

NOTE 8 – PENSION AND POST-RETIREMENT BENEFIT PLANS

The Company maintains pension plans covering substantially all of its full-time employees for its U.S. operations and a majority of its international operations. The Company also maintains post-retirement benefit plans that provide certain medical and dental benefits to eligible employees. Descriptions of these plans are included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

27

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The components of net periodic benefit cost for the three months ended December 31, 2020 and 2019 consisted of the following:

	Pension Plans								Other than Pension Plans
	U.S.				International				Post-retirement
(In millions)	2020		2019		2020		2019		2020		2019
Service cost	$	11	$	10	$	9	$	9	$	—	$	1
Interest cost	7		9		3		2		2		1
Expected return on plan assets	(13)		(13)		(3)		(4)		—		—
Amortization of:
Actuarial loss	5		3		1		2		—		—
Special termination benefits	—		—		7		—		—		—
Net periodic benefit cost	$	10	$	9	$	17	$	9	$	2	$	2

The components of net periodic benefit cost for the six months ended December 31, 2020 and 2019 consisted of the following:

	Pension Plans								Other than Pension Plans
	U.S.				International				Post-retirement
(In millions)	2020		2019		2020		2019		2020		2019
Service cost	$	22	$	20	$	18	$	18	$	—	$	2
Interest cost	15		17		5		5		3		3
Expected return on plan assets	(26)		(26)		(6)		(7)		—		(1)
Amortization of:
Actuarial loss	10		7		2		3		—		—
Special termination benefits	—		—		9		—		—		—
Net periodic benefit cost	$	21	$	18	$	28	$	19	$	3	$	4

During the six months ended December 31, 2020, the Company made contributions to its international pension plans totaling $18 million.

The amounts recognized in the consolidated balance sheets related to the Company’s pension and post-retirement benefit plans consist of the following:

(In millions)	December 31 2020		June 30 2020
Other assets	$	138	$	127
Other accrued liabilities	(27)		(27)
Other noncurrent liabilities	(472)		(440)
Funded status	(361)		(340)
Accumulated other comprehensive loss	314		324
Net amount recognized	$	(47)	$	(16)

28

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – CONTINGENCIES

Legal Proceedings

The Company is involved, from time to time, in litigation and other legal proceedings incidental to its business, including employment, intellectual property, real estate, environmental, regulatory, advertising, trade relations, tax, privacy, and product liability matters (including asbestos-related claims). Management believes that the outcome of current litigation and legal proceedings will not have a material adverse effect upon the Company’s business, results of operations, financial condition or cash flows. However, management’s assessment of the Company’s current litigation and other legal proceedings could change in light of the discovery of facts with respect to legal actions or other proceedings pending against the Company not presently known to the Company or determinations by judges, juries or other finders of fact which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or proceedings. Reasonably possible losses in addition to the amounts accrued for such litigation and legal proceedings are not material to the Company’s consolidated financial statements.

NOTE 10 – STOCK PROGRAMS

Total net stock-based compensation expense is attributable to the granting of, and the remaining requisite service periods of stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), long-term PSUs, and share units. Compensation expense attributable to net stock-based compensation was $105 million and $83 million for the three months ended December 31, 2020 and 2019, respectively, and was $169 million and $139 million for the six months ended December 31, 2020 and 2019, respectively.

Stock Options

During the six months ended December 31, 2020, the Company granted stock options in respect of approximately 1.5 million shares of Class A Common Stock with an exercise price per share of $218.40 and a weighted-average grant date fair value per share of $54.61. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The aggregate intrinsic value of stock options exercised during the six months ended December 31, 2020 was $209 million.

Restricted Stock Units

The Company granted RSUs in respect of approximately 0.9 million shares of Class A Common Stock during the six months ended December 31, 2020 with a weighted-average grant date fair value per share of $218.10 that, at the time of grant, are scheduled to vest at 0.3 million shares per year, in fiscal 2022, 2023 and 2024. Vesting of RSUs is generally subject to the continued employment or the retirement of the grantees. The RSUs are accompanied by dividend equivalent rights, payable upon settlement of the RSUs either in cash or shares (based on the terms of the particular award) and, as such, were valued at the closing market price of the Company’s Class A Common Stock on the date of grant.

Performance Share Units

During the six months ended December 31, 2020, the Company granted PSUs with a target payout of approximately 0.1 million shares of Class A Common Stock with a grant date fair value per share of $218.11, which will be settled in stock subject to the achievement of the Company’s net sales and diluted net earnings per common share for the three fiscal years ending June 30, 2023, all subject to continued employment or the retirement of the grantees. For PSUs granted, no settlement will occur for results below the applicable minimum threshold. PSUs are accompanied by dividend equivalent rights that will be payable in cash upon settlement of the PSUs and, as such, were valued at the closing market value of the Company’s Class A Common Stock on the date of grant.

In September 2020, approximately 0.2 million shares of the Company’s Class A Common Stock were issued, and related accrued dividends were paid, relative to the target goals set at the time of the issuance, in settlement of 0.5 million PSUs which vested as of June 30, 2020.

29

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC. PER COMMON SHARE

Net earnings attributable to The Estée Lauder Companies Inc. per common share (“basic EPS”) is computed by dividing net earnings attributable to The Estée Lauder Companies Inc. by the weighted-average number of common shares outstanding and shares underlying PSUs and RSUs where the vesting conditions have been met. Net earnings attributable to The Estée Lauder Companies Inc. per common share assuming dilution (“diluted EPS”) is computed by reflecting potential dilution from stock-based awards.

A reconciliation between the numerator and denominator of the basic and diluted EPS computations is as follows:

	Three Months Ended December 31				Six Months Ended December 31
(In millions, except per share data)	2020		2019		2020		2019
Numerator:
Net earnings attributable to The Estée Lauder Companies Inc.	$	873	$	557	$	1,396	$	1,152
Denominator:
Weighted-average common shares outstanding – Basic	363.0		360.2		363.4		360.8
Effect of dilutive stock options	3.8		4.7		3.8		4.8
Effect of PSUs	0.2		0.3		0.2		0.2
Effect of RSUs	1.0		1.5		1.1		1.9
Weighted-average common shares outstanding – Diluted	368.0		366.7		368.5		367.7
Net earnings attributable to The Estée Lauder Companies Inc. per common share:
Basic	$	2.40	$	1.55	$	3.84	$	3.19
Diluted	$	2.37	$	1.52	$	3.79	$	3.13

As of December 31, 2020 and 2019, the number of shares of Class A Common Stock underlying options that were excluded in the computation of diluted EPS because their inclusion would be anti-dilutive was 1.5 million and 1.3 million shares, respectively. As of December 31, 2020 and 2019, 0.8 million and 1.1 million shares, respectively, of Class A Common Stock underlying PSUs have been excluded from the calculation of diluted EPS because the number of shares ultimately issued is contingent on the achievement of certain performance targets of the Company, as discussed in Note 10 – Stock Programs.

30

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – EQUITY

Total Stockholders’ Equity – The Estée Lauder Companies Inc.

	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019
Common stock, beginning of the period	$	6	$	6	$	6	$	6
Stock-based compensation	—		—		—		—
Common stock, end of the period	6		6		6		6
Paid-in capital, beginning of the period	4,913		4,514		4,790		4,403
Common stock dividends	—		1		1		2
Stock-based compensation	155		100		277		210
Paid-in capital, end of the period	5,068		4,615		5,068		4,615
Retained earnings, beginning of the period	10,480		10,393		10,134		9,984
Common stock dividends	(194)		(175)		(368)		(332)
Net earnings attributable to The Estée Lauder Companies Inc.	873		557		1,396		1,152
Cumulative effect of adoption of new accounting standards	—		—		(3)		(29)
Retained earnings, end of the period	11,159		10,775		11,159		10,775
Accumulated other comprehensive loss, beginning of the period	(594)		(627)		(665)		(563)
Other comprehensive income (loss)	211		58		282		(6)
Accumulated other comprehensive loss, end of the period	(383)		(569)		(383)		(569)
Treasury stock, beginning of the period	(10,353)		(9,756)		(10,330)		(9,444)
Acquisition of treasury stock	—		(426)		—		(703)
Stock-based compensation	(76)		(71)		(99)		(106)
Treasury stock, end of the period	(10,429)		(10,253)		(10,429)		(10,253)
Total stockholders’ equity – The Estée Lauder Companies Inc.	5,421		4,574		5,421		4,574
Noncontrolling interests, beginning of the period	29		28		27		25
Net earnings attributable to noncontrolling interests	4		4		6		7
Distribution to noncontrolling interest holders	—		(4)		—		(4)
Other comprehensive (income) loss	2		(1)		2		(1)
Noncontrolling interests, end of the period	35		27		35		27
Total equity	$	5,456	$	4,601	$	5,456	$	4,601
Cash dividends declared per common share	$	.53	$	.48	$	1.01	$	.91

31

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of quarterly cash dividends declared per share on the Company’s Class A and Class B Common Stock during the six months ended December 31, 2020:

Date Declared	Record Date	Payable Date	Amount per Share
August 19, 2020	August 31, 2020	September 15, 2020	$	.48
October 30, 2020	November 30, 2020	December 15, 2020	$	.53

On February 4, 2021, a dividend was declared in the amount of $.53 per share on the Company’s Class A and Class B Common Stock. The dividend is payable in cash on March 15, 2021 to stockholders of record at the close of business on February 26, 2021.

Common Stock

Beginning in early February 2020, the Company temporarily suspended its repurchase of shares of the Company's Class A Common Stock. The Company may resume repurchases in the future.

During the six months ended December 31, 2020, approximately 2.2 million shares of the Company’s Class B Common Stock were converted into the same amount of shares of the Company’s Class A Common Stock.

Accumulated Other Comprehensive Income

The following table represents changes in AOCI, net of tax, by component for the six months ended December 31, 2020:

(In millions)	Net Cash Flow Hedge Gain (Loss)		Retirement Plan and Other Retiree Benefit Adjustments			Translation Adjustments			Total
Balance at June 30, 2020	$	14	$	(244)		$	(435)		$	(665)
OCI before reclassifications	(48)		(2)		(1)	318		(2)	268
Amounts reclassified to Net earnings	4		10			—			14
Net current-period OCI	(44)		8			318			282
Balance at December 31, 2020	$	(30)	$	(236)		$	(117)		$	(383)

(1)Consists of foreign currency translation losses.

(2)See Note 5 – Derivative Financial Instruments for gains (losses) relating to net investment hedges.

32

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table represents the effects of reclassification adjustments from AOCI into net earnings for the three and six months ended December 31, 2020 and 2019:

	Amount Reclassified from AOCI								Affected Line Item in Consolidated Statements of Earnings
	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019
Gain (Loss) on Cash Flow Hedges
Foreign currency forward contracts	$	(5)	$	6	$	(4)	$	19	Net sales
Interest rate-related derivatives	—		—		(1)		—		Interest expense
	(5)		6		(5)		19
Benefit (provision) for deferred taxes	1		(2)		1		(5)		Provision for income taxes
	$	(4)	$	4	(4)		$	14	Net earnings
Retirement Plan and Other Retiree Benefit Adjustments
Amortization of actuarial loss	$	(6)	$	(5)	$	(12)	$	(10)	Earnings before income taxes (1)
Benefit for deferred taxes	1		1		2		2		Provision for income taxes
	$	(5)	$	(4)	$	(10)	$	(8)	Net earnings
Cumulative Translation Adjustments
Gain on previously held equity method investment	$	—	$	4	$	—	$	4	Other income
Loss on liquidation of an investment in a foreign subsidiary	—		—		—		(6)		Restructuring and other charges
	$	—	$	4	—		$	(2)	Net earnings
Total reclassification adjustments, net	$	(9)	$	4	$	(14)	$	4	Net earnings

(1)See Note 8 – Pension and Post-Retirement Benefit Plans for additional information.

33

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – STATEMENT OF CASH FLOWS

Supplemental cash flow information for the six months ended December 31, 2020 and 2019 is as follows:

(In millions)	2020		2019
Cash:
Cash paid during the period for interest	$	84	$	63
Cash paid during the period for income taxes	$	320	$	314
Non-cash investing and financing activities:
Capitalized interest and asset retirement obligations incurred	$	1	$	—
Property, plant and equipment accrued but unpaid	$	63	$	53
Right-of-use assets obtained in exchange for new finance lease liabilities	$	1	$	—
Right-of-use assets obtained in exchange for new operating lease liabilities	$	148	$	110

NOTE 14 – SEGMENT DATA AND RELATED INFORMATION

Reportable operating segments include components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the “Chief Executive”) in deciding how to allocate resources and in assessing performance. Although the Company operates in one business segment, beauty products, management also evaluates performance on a product category basis. Product category performance is measured based upon net sales before returns associated with restructuring and other activities, and earnings before income taxes, other components of net periodic benefit cost, interest expense, interest income and investment income, net, other income, net, and charges associated with restructuring and other activities. Returns and charges 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 Company-wide initiatives to redesign, resize and reorganize select areas of the business.

The accounting policies for the Company’s reportable segments are substantially the same as those for the consolidated financial statements, as described in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020. The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; thus, no additional information is produced for the Chief Executive or included herein. There has been no significant variance in the total or long-lived asset values associated with the Company’s segment data since June 30, 2020.

34

THE ESTÉE LAUDER COMPANIES INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019
PRODUCT CATEGORY DATA
Net sales:
Skin Care	$	2,819	$	2,205	$	4,854	$	4,047
Makeup	1,247		1,660		2,225		3,103
Fragrance	618		581		1,024		1,043
Hair Care	154		162		290		298
Other	15		16		22		28
Net sales	$	4,853	$	4,624	$	8,415	$	8,519
Operating income (loss) before charges associated with restructuring and other activities:
Skin Care	$	928	$	772	$	1,649	$	1,404
Makeup	28		(611)		(43)		(507)
Fragrance	141		97		201		163
Hair Care	4		12		7		12
Other	(1)		4		—		6
	1,100		274		1,814		1,078
Reconciliation:
Charges associated with restructuring and other activities	(37)		(13)		(46)		(38)
Interest expense	(43)		(38)		(88)		(70)
Interest income and investment income, net	17		13		31		27
Other components of net periodic benefit cost	(7)		(1)		(10)		(2)
Other income	—		576		—		576
Earnings before income taxes	$	1,030	$	811	$	1,701	$	1,571
GEOGRAPHIC DATA(1)
Net sales:
The Americas	$	1,048	$	1,226	$	1,921	$	2,386
Europe, the Middle East & Africa	2,030		2,079		3,570		3,756
Asia/Pacific	1,775		1,319		2,924		2,377
Net sales	$	4,853	$	4,624	$	8,415	$	8,519
Operating income (loss):
The Americas	$	36	$	(529)	$	101	$	(354)
Europe, the Middle East & Africa	657		505		1,068		882
Asia/Pacific	407		298		645		550
	1,100		274		1,814		1,078
Charges associated with restructuring and other activities	(37)		(13)		(46)		(38)
Operating income	$	1,063	$	261	$	1,768	$	1,040

(1) The net sales from the Company’s travel retail business are included in the Europe, the Middle East & Africa region, with the exception of the net sales of Dr. Jart+ in the travel retail channel that are reflected in Korea in the Asia/Pacific region. Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.

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THE ESTÉE LAUDER COMPANIES INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

RESULTS OF OPERATIONS

We manufacture, market and sell beauty products including those in the skin care, makeup, fragrance and hair care categories, which are distributed in approximately 150 countries and territories. The following table is a comparative summary of operating results for the three and six months ended December 31, 2020 and 2019, and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies for all periods presented. Products and services that do not meet our definition of skin care, makeup, fragrance and hair care have been included in the “other” category.

	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019
NET SALES
By Product Category:
Skin Care	$	2,819	$	2,205	$	4,854	$	4,047
Makeup	1,247		1,660		2,225		3,103
Fragrance	618		581		1,024		1,043
Hair Care	154		162		290		298
Other	15		16		22		28
Net sales	$	4,853	$	4,624	$	8,415	$	8,519
By Region(1):
The Americas	$	1,048	$	1,226	$	1,921	$	2,386
Europe, the Middle East & Africa	2,030		2,079		3,570		3,756
Asia/Pacific	1,775		1,319		2,924		2,377
Net sales	$	4,853	$	4,624	$	8,415	$	8,519
OPERATING INCOME (LOSS)
By Product Category:
Skin Care	$	928	$	772	$	1,649	$	1,404
Makeup	28		(611)		(43)		(507)
Fragrance	141		97		201		163
Hair Care	4		12		7		12
Other	(1)		4		—		6
	1,100		274		1,814		1,078
Charges associated with restructuring and other activities	(37)		(13)		(46)		(38)
Operating income	$	1,063	$	261	$	1,768	$	1,040
By Region(1):
The Americas	$	36	$	(529)	$	101	$	(354)
Europe, the Middle East & Africa	657		505		1,068		882
Asia/Pacific	407		298		645		550
	1,100		274		1,814		1,078
Charges associated with restructuring and other activities	(37)		(13)		(46)		(38)
Operating income	$	1,063	$	261	$	1,768	$	1,040

(1) The net sales from our travel retail business are included in the Europe, the Middle East & Africa region, with the exception of the net sales of Dr. Jart+ in the travel retail channel that are reflected in Korea in the Asia/Pacific region. Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.

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THE ESTÉE LAUDER COMPANIES INC.

The following table presents certain consolidated earnings data as a percentage of net sales:

	Three Months Ended December 31				Six Months Ended December 31
	2020		2019		2020		2019
Net sales	100.0	%	100.0	%	100.0	%	100.0	%
Cost of sales	22.3		22.5		22.7		22.9
Gross profit	77.7		77.5		77.3		77.1
Operating expenses:
Selling, general and administrative	53.4		54.9		54.9		55.4
Restructuring and other charges	0.7		0.1		0.5		0.4
Goodwill impairment	1.1		11.0		0.6		6.0
Impairment of other intangible assets	0.6		5.8		0.3		3.1
Total operating expenses	55.8		71.8		56.3		64.9
Operating income	21.9		5.6		21.0		12.2
Interest expense	0.9		0.8		1.0		0.8
Interest income and investment income, net	0.4		0.3		0.4		0.3
Other components of net periodic benefit cost	0.1		—		0.1		—
Other income	—		12.5		—		6.8
Earnings before income taxes	21.2		17.5		20.2		18.4
Provision for income taxes	(3.2)		(5.4)		(3.6)		(4.8)
Net earnings	18.1		12.1		16.7		13.6
Net earnings attributable to noncontrolling interests	(0.1)		(0.1)		(0.1)		(0.1)
Net earnings attributable to The Estée Lauder Companies Inc.	18.0	%	12.0	%	16.6	%	13.5	%

Not adjusted for differences caused by rounding

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 may have some cannibalizing effect on sales of existing products, which we take into account in our business planning.

Non-GAAP Financial Measures

We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period helps investors and others compare operating performance between periods. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. See Reconciliations of Non-GAAP Financial Measures beginning on page 53 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

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THE ESTÉE LAUDER COMPANIES INC.

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 and diluted net 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-year period weighted-average foreign currency exchange rates and adjusting for the period-over-period impact of foreign currency cash flow hedging activities.

Overview

COVID-19 Business Update

The COVID-19 pandemic continues to cause significant disruption to our operating environment, temporarily impacting retail traffic and certain consumer preferences. During the three months ended December 31, 2020, countries around the world continued to be challenged by the pandemic with different levels of recovery from temporary business closures and other restrictions.

Retail impact

Most brick-and-mortar retail stores globally that sell our products, whether operated by us or our customers, were open during the second quarter of fiscal 2021, although consumer traffic was significantly reduced as compared to the prior-year period and some retail stores were temporarily closed due to the resurgence of COVID-19 cases. In addition, international travel has remained largely curtailed globally due to both government restrictions and consumer health concerns that continue to adversely impact consumer traffic in most travel retail locations.

Somewhat offsetting the significant declines in brick-and-mortar channels, net sales growth of our products online (through our own websites, third-party platforms and websites of our retailers) has remained strong in every region during the second quarter of fiscal 2021.

The resurgence of COVID-19 cases in various parts of the world, including the United States, the United Kingdom and other countries in Europe, and Japan, has caused the reimplementation of government restrictions to prevent further spread of the virus. These restrictions included the temporary closure of businesses deemed “non-essential,” travel bans and restrictions, social distancing and quarantines. We will continue to monitor the impacts of the COVID-19 pandemic and adjust our action plans accordingly as the situation progresses.

Consumer Preferences

The COVID-19 pandemic related closures of offices, retail stores and other businesses and the significant decline in social gatherings have also influenced consumer preferences and practices. Demand for skin care, fragrance and hair care products has generally been more resilient than the demand for makeup.

Manufacturing and Distribution

By the end of the first quarter of fiscal 2021, and throughout the second quarter of fiscal 2021, all of our manufacturing and distribution facilities were operating at sufficient levels.

Cost Controls

In response to the ongoing impacts from the COVID-19 pandemic, we continued to implement cost control actions to effectively manage the changing business environment. Areas where we took actions included advertising and promotion activities, travel, meetings, consulting, and certain employee costs, including implementing furloughs and similar unpaid temporary leaves of absence for many point of sale employees, temporary salary reductions for senior executives and other management employees, and a temporary elimination of cash retainers for the Board of Directors. Some of these cost control actions were lifted during the second quarter of fiscal 2021.

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THE ESTÉE LAUDER COMPANIES INC.

Business Update

We are a leader in prestige beauty, which combines the repeat purchase and relative affordability of consumer goods with the high quality products and services of luxury goods. Within prestige beauty, we are well diversified by brand, product category, product sub-category, geography, channel, consumer segment and price point. This diversity allows us to leverage consumer analytics and insights with agility by deploying our brands to fast growing and profitable opportunities. These analytics and insights, combined with our creativity, inform our innovation to provide a broad, locally-relevant and inclusive range of prestige products allowing us to compete effectively for a greater share of a consumer's beauty routine. Elements of our strategy are described in the Overview on pages 28-31 of our Annual Report on Form 10-K for the fiscal year ended June 30, 2020, as well as below.

During the second quarter of fiscal 2021, net sales increased 5% from the prior-year period, reflecting growth in our skin care product category and in our Asia/Pacific region, as well as strong growth online and the incremental net sales from our acquisition of Dr. Jart+ at the end of the fiscal 2020 second quarter.

•Our skin care net sales benefited from the launch of the new Estée Lauder Advanced Night Repair Synchronized Multi-Recovery Complex, the launch of the new The Concentrate from La Mer and strength in basic skin care from Clinique. The new products support high-loyalty hero franchises. Skin care net sales grew internationally, reflecting the renewed consumer focus on self-care during the COVID-19 pandemic.

•The COVID-19 pandemic limited social and business activities and consumers wore less makeup. Demand for lipstick and foundation were most acutely impacted, contributing to lower makeup net sales across the portfolio. Our brands continued to generate interest in makeup through virtual marketing efforts such as classes, virtual try on technology and greater emphasis on social media platforms, as well as a focus on subcategories that continue to resonate with consumers.

•Our fragrance net sales increased in the second quarter of fiscal 2021, reflecting holiday gifting and continued strength in bath, body and home fragrances. Fragrance net sales growth was led by Tom Ford Beauty, Jo Malone London and Le Labo.

•Our hair care net sales declined, reflecting pandemic related salon closures and limited capacity re-openings, partially offset by strong double-digit online growth and Aveda's launch of Botanical Repair in August 2020.

Our net sales growth by geographic region in the second quarter of fiscal 2021 reflects, in part, the cadence of COVID-19 recovery and resurgence around the world.

•Net sales declined in The Americas, where COVID-19 cases continue to rise across much of the region and strong online net sales were not enough to offset the decline of brick-and-mortar distribution.

•The Europe, the Middle East & Africa region net sales declined overall, as the resurgence of COVID-19 cases led to the reimplementation of government restrictions and temporary store closures, while robust online net sales growth continued.

•The Asia/Pacific region grew, reflecting good momentum in mainland China, Korea, and several smaller markets.

Outlook

While we continue to face strong competition and economic challenges globally, the COVID-19 pandemic has caused a more significant disruption to our business and the retail industry generally. There have been restructurings and bankruptcies in the retail industry, including among our customers; destocking and tighter working capital management by retailers; challenges for suppliers; and an acceleration in the shifts in consumer preferences as to where and how they shop, as well as changes in their preferences for certain products. We are mindful that these trends may continue to impact the pace of recovery. The severe decline in international travel is also affecting our travel retail business in most of the world, which had been historically one of our most profitable channels. In addition to impacting net sales and profitability, these and other challenges may impact our ability to collect receivables and our operating cash flows generally and may adversely impact the goodwill, other intangibles and long-lived assets associated with our acquired brands.

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THE ESTÉE LAUDER COMPANIES INC.

We continue to monitor the geopolitical tensions between the United States and China and the uncertainties caused by the evolving trade policy dispute, which could increase our cost of sales and negatively impact our overall net sales, or otherwise have a material adverse effect on our business. The United Kingdom reached a trade agreement and completed its transition out of the European Union (“EU”) in December 2020 (i.e. “Brexit”). The trade agreement is being provisionally applied from January 1, 2021 until ratification by the EU, which is expected later in 2021. To date, there has been minimal interruption to our business relating to the end of the Brexit transition period. We will continue to monitor the potential political and economic uncertainties from Brexit for which we have developed risk mitigation strategies. These strategies include changes related to regulatory and legislative compliance, assessing alternatives to supply chain routing, revising customer arrangements and analyzing inventory levels. Additionally, we continue to monitor the effects of the global macroeconomic environment; social and political issues; regulatory matters, including the imposition of tariffs; geopolitical tensions; and global security issues.

The uncertainty around the timing, speed and duration of the recovery from the adverse impacts of the COVID-19 pandemic will continue to affect our ability to grow sales profitably. We believe we can, to some extent, offset the impact of more ordinary challenges by continually developing and pursuing a diversified strategy with multiple engines of growth and by accelerating initiatives focused on areas of strength, discipline and agility, and by implementing our Post-COVID Business Acceleration Program. As the current situation progresses, if economic and social conditions or the degree of uncertainty or volatility worsen, or the adverse conditions previously described are further prolonged, there could be a further negative effect on consumer confidence, demand, spending and willingness or ability to travel and, as a result, on our business. We are continuing to monitor these and other risks that may affect our business.

Leading Beauty Forward Program and Post-COVID Business Acceleration Program

Information about our restructuring initiatives, the Leading Beauty Forward Program and the Post-COVID Business Acceleration Program, are described in Notes to Consolidated Financial Statements, Note 4 – Charges Associated with Restructuring and Other Activities herein, as well as, in Notes to Consolidated Financial Statements, Note 9 – Charges Associated with Restructuring and Other Activities and in the Overview on page 30 of our Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Goodwill and Other Intangible Asset Impairments

During November 2020, given the actual and the estimate of the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting us and lower than expected results from geographic expansion, we made further revisions to the internal forecasts relating to our GLAMGLOW reporting unit. We concluded that the changes in circumstances in this reporting unit triggered the need for an interim impairment review of its trademark and goodwill. These changes in circumstances were also an indicator that the carrying amounts of GLAMGLOW's long-lived assets, including customer lists, may not be recoverable. Accordingly, we performed an interim impairment test for the trademark and a recoverability test for the long-lived assets as of November 30, 2020. We concluded that the carrying value of the trademark for GLAMGLOW exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded an impairment charge of $21 million. In addition, we concluded that the carrying value of the GLAMGLOW customer lists intangible asset was fully impaired and recorded an impairment charge of $6 million. The fair value of all other long-lived assets of GLAMGLOW exceeded their carrying values and were not impaired as of November 30, 2020. After adjusting the carrying values of the trademark and customer lists intangible assets, we completed an interim quantitative impairment test for goodwill and recorded a goodwill impairment charge of $54 million, reducing the carrying value of goodwill for the GLAMGLOW reporting unit to zero. The fair value of the GLAMGLOW reporting unit was based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting unit. The impairment charges for the three and six months ended December 31, 2020 were reflected in the skin care product category and in the Americas region. As of December 31, 2020, the remaining carrying value of the trademark related to the GLAMGLOW reporting unit were $36 million.

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THE ESTÉE LAUDER COMPANIES INC.

NET SALES

	Three Months Ended December 31					Six Months Ended December 31
($ in millions)	2020			2019		2020			2019
As Reported:
Net sales	$	4,853		$	4,624	$	8,415		$	8,519
$ Change from prior-year period	229					(104)
% Change from prior-year period	5		%			(1)		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	3		%			(3)		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 53 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported net sales increased for the three months ended December 31, 2020, primarily reflecting higher net sales in our skin care and fragrance product categories and in our Asia/Pacific region. The net sales increase in our skin care product category was primarily driven by Estée Lauder and La Mer, reflecting the success of hero product franchises, new product launches and successful holiday and promotional events. Fragrance net sales increased, benefiting from higher net sales from Tom Ford Beauty and Jo Malone London. Net sales in Asia/Pacific increased, primarily due to higher net sales in mainland China and Korea. The incremental net sales attributable to our acquisition of Dr. Jart+ at the end of the fiscal 2020 second quarter benefited our skin care category and Asia/Pacific. Direct-to-consumer online net sales continued to have strong growth, representing approximately 23% of fiscal 2021 second quarter net sales compared to approximately 15% in the prior-year period and benefiting from successful holiday and promotional events.

Reported net sales decreased for the six months ended December 31, 2020, primarily reflecting lower net sales in all product categories, except skin care, and all geographic regions, except for Asia/Pacific, due to the continued challenges of the COVID-19 pandemic, including temporary retail store closures and reduced consumer foot traffic in brick-and-mortar retail locations, the continued curtailment of international travel, and continued social distancing and quarantines. Despite the overall decrease, net sales continued to grow in our skin care category and in our Asia/Pacific region, both reflecting double-digit growth and the incremental net sales attributable to our acquisition of Dr. Jart+ at the end of the fiscal 2020 second quarter. Direct-to-consumer online net sales continued to have strong growth, representing approximately 19% of net sales for the six months ended December 31, 2020 compared to approximately 12% in the prior-year period.

The total net sales changes were impacted by approximately $102 million and $117 million of favorable foreign currency translation for the three and six months ended December 31, 2020, respectively.

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THE ESTÉE LAUDER COMPANIES INC.

Product Categories

Skin Care

	Three Months Ended December 31					Six Months Ended December 31
($ in millions)	2020			2019		2020			2019
As Reported:
Net sales	$	2,819		$	2,205	$	4,854		$	4,047
$ Change from prior-year period	614					807
% Change from prior-year period	28		%			20		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	25		%			18		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 53 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported skin care net sales increased for the three and six months ended December 31, 2020, reflecting higher net sales from Estée Lauder and La Mer, as well as incremental net sales attributable to our acquisition of Dr. Jart+ at the end of the fiscal 2020 second quarter, combined, of approximately $609 million and $944 million, respectively. For the three and six months ended December 31, 2020, net sales increased from Estée Lauder and La Mer, led by mainland China and our travel retail business (primarily in Hainan), reflecting high double-digit growth from direct-to-consumer online net sales of products from these brands primarily due to the successful holiday and promotional events. The continued success of existing product franchises, such as Advanced Night Repair, Nutritious, Micro Essence and Perfectionist, and new product launches, such as the new Advanced Night Repair Synchronized Multi-Recovery Complex, contributed to the increase in net sales from Estée Lauder in both periods. Net sales from La Mer increased for the three and six months ended December 31, 2020, benefiting from the continued success of existing product franchises, such as Créme de la Mer and Treatment Lotion, new product launches, such as the Genaissance de la Mer The Concentrated Night Balm and the fiscal 2021 first quarter launch of the new The Concentrate, and targeted expanded consumer reach.

The skin care net sales increases were impacted by approximately $70 million and $81 million of favorable foreign currency translation for the three and six months ended December 31, 2020, respectively.

Makeup

	Three Months Ended December 31					Six Months Ended December 31
($ in millions)	2020			2019		2020			2019
As Reported:
Net sales	$	1,247		$	1,660	$	2,225		$	3,103
$ Change from prior-year period	(413)					(878)
% Change from prior-year period	(25)		%			(28)		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	(26)		%			(29)		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 53 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

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THE ESTÉE LAUDER COMPANIES INC.

Reported makeup net sales decreased for the three and six months ended December 31, 2020, primarily driven by lower net sales from M·A·C, Estée Lauder, Bobbi Brown and Clinique, combined, of approximately $342 million and $706 million, respectively. For the three and six months ended December 31, 2020, net sales decreased from these brands, reflecting the challenging environment, especially in brick-and-mortar retail locations, and the continued consumer preference for skin care products due to the COVID-19 pandemic. The continued decline in prestige makeup and ongoing competitive activity in North America also contributed to the decline in net sales from these brands in both periods.

For the three and six months ended December 31, 2020, our direct-to-consumer online net sales of products from these brands grew double digits.

The makeup net sales decreases were impacted by approximately $20 million and $22 million of favorable foreign currency translation for the three and six months ended December 31, 2020, respectively.

Fragrance

	Three Months Ended December 31					Six Months Ended December 31
($ in millions)	2020			2019		2020			2019
As Reported:
Net sales	$	618		$	581	$	1,024		$	1,043
$ Change from prior-year period	37					(19)
% Change from prior-year period	6		%			(2)		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	5		%			(3)		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 53 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported fragrance net sales increased for the three months ended December 31, 2020, reflecting higher net sales primarily from Tom Ford Beauty and Jo Malone London, of approximately $38 million, combined. Net sales from Tom Ford Beauty increased, primarily due to the success of hero product franchises, such as Oud Wood and Ombre Leather, and new product launches, such as Bitter Peach. The increase in net sales from Jo Malone London, led by mainland China, benefited from successful holiday and promotional events, the success of certain hero product franchises, and new product launches, such as Scents for the Season.

Partially offsetting these increases for the three months ended December 31, 2020, were lower net sales from certain of our designer fragrances, led by our travel retail business and the United Kingdom, primarily due to the continued challenging environment as a result of the COVID-19 pandemic, including the continued curtailment of international travel and the resurgence of COVID-19 cases that caused the reimplementation of government restrictions.

Reported fragrance net sales decreased for the six months ended December 31, 2020, reflecting lower net sales primarily from certain of our designer fragrances and Estée Lauder of approximately $41 million, combined. Net sales declined from these brands, led by our travel retail business and the United Kingdom, primarily due to the continued challenging environment as a result of the COVID-19 pandemic, including the continued curtailment of international travel and the resurgence of COVID-19 cases that caused the reimplementation of government restrictions.

Partially offsetting these decreases for the six months ended December 31, 2020, were higher net sales from Tom Ford Beauty, primarily due to the success of hero product franchises and new product launches.

The changes in fragrance net sales were impacted by approximately $9 million and $11 million of favorable foreign currency translation for the three and six months ended December 31, 2020, respectively.

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THE ESTÉE LAUDER COMPANIES INC.

Hair Care

	Three Months Ended December 31					Six Months Ended December 31
($ in millions)	2020			2019		2020			2019
As Reported:
Net sales	$	154		$	162	$	290		$	298
$ Change from prior-year period	(8)					(8)
% Change from prior-year period	(5)		%			(3)		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	(6)		%			(3)		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 53 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported hair care net sales decreased for the three and six months ended December 31, 2020, reflecting lower net sales primarily from Bumble and bumble driven by the net sales decline in North America primarily due to temporary salon and freestanding store closures as a result of the COVID-19 pandemic and the shift in consumer preferences.

Partially offsetting the decreases in reported hair care net sales for the six months ended December 31, 2020, were higher net sales from Aveda. The increase in net sales from Aveda was driven by the success of existing product franchises, such as Nutriplenish, the launch of Botanical Repair, and successful holiday events, which led to growth in all geographic regions.

Geographic Regions

The Americas

	Three Months Ended December 31					Six Months Ended December 31
($ in millions)	2020			2019		2020			2019
As Reported:
Net sales	$	1,048		$	1,226	$	1,921		$	2,386
$ Change from prior-year period	(178)					(465)
% Change from prior-year period	(15)		%			(19)		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	(13)		%			(18)		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 53 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported net sales in The Americas decreased in virtually all countries for the three and six months ended December 31, 2020, led by the United States of approximately $157 million and $415 million, respectively. Net sales decreased in the United States for the three and six months ended December 31, 2020, reflecting lower net sales from M·A·C and Estée Lauder (primarily due to the declines in the makeup category) as a result of the continued challenging environment caused by the COVID-19 pandemic, including the resurgence of COVID-19 cases, reduced consumer traffic in brick-and-mortar retail locations, the continued consumer preference for skin care products, and continued social distancing. The decline in North America prestige beauty, primarily makeup, and the ongoing competitive activity also contributed to the decline in net sales. Despite the overall decrease in net sales, direct-to-consumer online net sales in The Americas grew double digits for the three and six months ended December 31, 2020, with growth from virtually all brands, and represented approximately 27% and 23% of total net sales in the region compared to approximately 18% and 14% in the prior-year periods, respectively.

Net sales in The Americas were impacted by approximately $15 million and $29 million of unfavorable foreign currency translation for the three and six months ended December 31, 2020, respectively.

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THE ESTÉE LAUDER COMPANIES INC.

Europe, the Middle East & Africa

	Three Months Ended December 31					Six Months Ended December 31
($ in millions)	2020			2019		2020			2019
As Reported:
Net sales	$	2,030		$	2,079	$	3,570		$	3,756
$ Change from prior-year period	(49)					(186)
% Change from prior-year period	(2)		%			(5)		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	(3)		%			(6)		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 53 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported net sales for the three and six months ended December 31, 2020 decreased in most markets in Europe, the Middle East & Africa, primarily driven by the United Kingdom, France and Iberia, reflecting the continued challenges across the region from the COVID-19 pandemic, including the resurgence of COVID-19 cases that caused the reimplementation of government restrictions, such as temporary store closures and quarantines, and reduced consumer traffic in brick-and-mortar retail. The adverse macroeconomic conditions and the liquidation of a key retailer also contributed to the decrease in net sales in the United Kingdom.

Partially offsetting these decreases for the three and six months ended December 31, 2020, were higher net sales from our travel retail business, primarily driven by the increases in net sales in China travel retail (primarily Hainan). These increases were led by Estée Lauder and La Mer, reflecting the continued success of certain hero franchises, such as the Advanced Night Repair line of products from Estée Lauder and La Mer Treatment Lotion, and the continued consumer preference for skin care products.

For the three and six months ended December 31, 2020, despite the challenges in brick-and-mortar retail locations, direct-to-consumer online net sales in Europe, the Middle East & Africa more than doubled, representing approximately 7% and 5% of total net sales in the region compared to approximately 3% and 2% in the prior-year periods, respectively.

Net sales in Europe, the Middle East & Africa were impacted by approximately $20 million and $30 million of favorable foreign currency translation for the three and six months ended December 31, 2020, respectively.

Asia/Pacific

	Three Months Ended December 31					Six Months Ended December 31
($ in millions)	2020			2019		2020			2019
As Reported:
Net sales	$	1,775		$	1,319	$	2,924		$	2,377
$ Change from prior-year period	456					547
% Change from prior-year period	35		%			23		%
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency	27		%			18		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 53 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

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THE ESTÉE LAUDER COMPANIES INC.

Reported net sales in Asia/Pacific increased for the three and six months ended December 31, 2020, reflecting higher net sales in mainland China and Korea, which included incremental net sales from our acquisition of Dr. Jart+ at the end of the fiscal 2020 second quarter, combined, of approximately $490 million and $672 million, respectively. For the three and six months ended December 31, 2020, net sales in mainland China increased primarily due to growth in our skin care product category, driven by Estée Lauder, La Mer and incremental net sales attributable to our acquisition of Dr. Jart+, and in our fragrance product category, led by Jo Malone London and Tom Ford Beauty. The success of holiday and promotional events in mainland China contributed to growth in virtually all channels in both periods, led by third-party platforms and department stores. For the three and six months ended December 31, 2020 net sales increased in Korea, reflecting growth in all product categories, except makeup, and benefited from the increase in net sales from Jo Malone London, Estée Lauder and La Mer, as well as incremental net sales from our acquisition of Dr. Jart+. For the three and six month ended December 31, 2020, direct-to-consumer online net sales of our products in Korea grew high double digits. Direct-to-consumer online net sales in Asia/Pacific for the three and six months ended December 31, 2020 grew high double digits, representing approximately 41% and 33% of total net sales in the region compared to approximately 31% and 25% in the prior-year periods, respectively.

Partially offsetting these increases for the three and six months ended December 31, 2020 were lower net sales in Hong Kong and Japan, combined, of approximately $39 million and $116 million, respectively. In both periods, the decline in net sales were primarily due to the ongoing challenges stemming from the COVID-19 pandemic, including reduced consumer traffic in brick-and-mortar retail locations, the continued curtailment of international travel, social distancing and quarantines, and border closures in Hong Kong.

Net sales in Asia/Pacific were impacted by approximately $97 million and $116 million of favorable foreign currency translation for the three and six months ended December 31, 2020, respectively.

We strategically stagger our new product launches by geographic market, which may account for differences in regional sales growth.

GROSS MARGIN

Gross margin increased to 77.7% and 77.3% for the three and six months ended December 31, 2020, respectively, as compared with 77.5% and 77.1% in the prior-year periods.

	Favorable (Unfavorable) Basis Points
	December 31, 2020
	Three Months Ended	Six Months Ended
Mix of business	105	100
Obsolescence charges	(50)	(15)
Manufacturing costs and other	(10)	(20)
Foreign exchange transactions	(35)	(45)
Subtotal	10	20
Charges associated with restructuring and other activities	10	—
Total	20	20

The favorable impact from our mix of business for the three and six months ended December 31, 2020 was primarily due to lower costs of testers as a result of reduced consumer traffic in brick-and-mortar retail locations, the favorable change in channel mix (i.e. from department stores to online), the favorable change in product category mix (i.e. a decline in our lower margin makeup category, primarily in North America and our travel retail business, and an increase in our higher margin skin care category, primarily within Asia/Pacific and our travel retail business), and favorable changes in strategic pricing. The favorable impact from our mix of business for the six months ended December 31, 2020 also reflected lower costs from product sets.

For the three and six months ended December 31, 2020, the factors causing favorability due to changes in our mix of business were partially offset by the impact of lower margin sales of Dr. Jart+, which we acquired at the end of the fiscal 2020 second quarter.

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THE ESTÉE LAUDER COMPANIES INC.

Partially offsetting the favorable impact from our mix of business for the three months ended December 31, 2020, were increases in obsolescence charges, driven by lower demand due to the impacts of the COVID-19 pandemic, that led to higher provisions for excess inventory.

OPERATING EXPENSES

Operating expenses as a percentage of net sales was 55.8% and 56.3% for the three and six months ended December 31, 2020, respectively, as compared with 71.8% and 64.9% in the prior-year periods.

	Favorable (Unfavorable) Basis Points
	December 31, 2020
	Three Months Ended	Six Months Ended
General and administrative expenses	(60)	(160)
Advertising, merchandising, sampling and product development	10	—
Selling	230	240
Stock-based compensation	(50)	(40)
Store operating costs	30	20
Shipping	(10)	(20)
Foreign exchange transactions	10	20
Subtotal	160	60
Charges associated with restructuring and other activities	(60)	(10)
Goodwill and other intangible asset impairments	1,510	820
Changes in fair value of contingent consideration	(10)	(10)
Total	1,600	860

For the three and six months ended December 31, 2020, the decreases in operating expense margin were driven by the year-over-year impact of goodwill and other intangible asset impairments of $696 million and a decrease in selling expense, due to the impacts of the COVID-19 pandemic on brick-and-mortar retail locations, including the decline in consumer traffic, temporary store closures, and the continued shift in consumer preference to online. Partially offsetting these favorable impacts were increases in general and administrative expenses, primarily due to an increase in employee incentive compensation and amortization expense relating to the acquired intangible assets of Dr. Jart+.

OPERATING RESULTS

	Three Months Ended December 31						Six Months Ended December 31
($ in millions)	2020			2019			2020			2019
As Reported:
Operating income	$	1,063		$	261		$	1,768		$	1,040
$ Change from prior-year period	802						728
% Change from prior-year period	100+%						70		%
Operating margin	21.9		%	5.6		%	21.0		%	12.2		%
Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year period adjusting for the impact of charges associated with restructuring and other activities, goodwill and other intangible asset impairments and changes in fair value of contingent consideration	13		%				2		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 53 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

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THE ESTÉE LAUDER COMPANIES INC.

The reported operating margin for the three and six months ended December 31, 2020 increased from the prior-year periods driven by the year-over-year impact of goodwill and other intangible asset impairments of $696 million and the decrease in selling expenses, as discussed above.

Charges 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 Company-wide initiatives to redesign, resize and reorganize select areas of the business. Accordingly, the following discussions of Operating income by Product Categories and Geographic Regions exclude the impact of charges associated with restructuring and other activities.

Product Categories

Skin Care

	Three Months Ended December 31					Six Months Ended December 31
($ in millions)	2020			2019		2020			2019
As Reported:
Operating income	$	928		$	772	$	1,649		$	1,404
$ Change from prior-year period	156					245
% Change from prior-year period	20		%			17		%
Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year period adjusting for the impact of goodwill and other intangible asset impairments and changes in fair value of contingent consideration	31		%			23		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 53 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported skin care operating income increased for the three and six months ended December 31, 2020, primarily driven by higher results from Estée Lauder and La Mer, combined, of approximately $306 million and $465 million, respectively. For the three and six month ended December 31, 2020, the increases in operating income from Estée Lauder and La Mer primarily reflected higher net sales, as well as lower selling expenses due to the impacts of the COVID-19 pandemic on brick-and-mortar retail locations, including the decline in consumer traffic, store closures, and the continued shift in consumer preference to online. In both periods, these changes from Estée Lauder and La Mer were partially offset by increased advertising and promotional activities primarily to support holiday and promotional events and new product launches.

Partially offsetting the increases in operating income for the three and six months ended December 31, 2020 were lower results from GLAMGLOW due to the current year goodwill and other intangible asset impairment charges of $81 million, as well as increases in general and administrative expenses, including employee incentive compensation.

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THE ESTÉE LAUDER COMPANIES INC.

Makeup

	Three Months Ended December 31					Six Months Ended December 31
($ in millions)	2020			2019		2020			2019
As Reported:
Operating income (loss)	$	28		$	(611)	$	(43)		$	(507)
$ Change from prior-year period	639					464
% Change from prior-year period	100+%					92		%
Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year period adjusting for the impact of goodwill and other intangible asset impairments	(83)		%			(100+)%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 53 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported makeup operating results increased for the three and six months ended December 31, 2020, driven by the favorable year-over-year impact of goodwill and other intangible asset impairments related to Too Faced, BECCA and Smashbox of approximately $777 million, combined.

Partially offsetting the increases in operating income for the three and six months ended December 31, 2020, were lower results from M·A·C due to the decrease in net sales, offset by lower selling expenses, due to the impacts of the COVID-19 pandemic on brick-and-mortar retail locations, including the decline in consumer traffic, temporary store closures, and the continued shift in consumer preference to online, and disciplined expense management. For the six months ended December 31, 2020, the higher results were also partially offset by an increase in general and administrative expenses, including employee incentive compensation.

Fragrance

	Three Months Ended December 31					Six Months Ended December 31
($ in millions)	2020			2019		2020			2019
As Reported:
Operating income	$	141		$	97	$	201		$	163
$ Change from prior-year period	44					38
% Change from prior-year period	45		%			23		%

Reported fragrance operating income increased for the three and six months ended December 31, 2020, reflecting higher results from Tom Ford Beauty and Jo Malone London primarily driven by the increase in net sales and disciplined expense management. Partially offsetting these increases for the three and six months ended December 31, 2020 were increases in general and administrative expenses, including employee incentive compensation.

Reported fragrance operating income for the six months ended December 31, 2020, also reflected higher results from certain of our designer fragrances due to disciplined expense management.

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THE ESTÉE LAUDER COMPANIES INC.

Hair Care

	Three Months Ended December 31					Six Months Ended December 31
($ in millions)	2020			2019		2020			2019
As Reported:
Operating income	$	4		$	12	$	7		$	12
$ Change from prior-year period	(8)					(5)
% Change from prior-year period	(67)		%			(42)		%

Reported hair care operating results decreased for the three and six months ended December 31, 2020, primarily driven by an increase in general and administrative expenses, including employee incentive compensation.

Partially offsetting the decreases in operating income for the three and six months ended December 31, 2020, were higher results from Aveda, primarily due to disciplined expense management. The increase in operating income from Aveda for the six months ended December 31, 2020 also benefited from the increase in net sales driven by the success of existing product franchises, such as Nutriplenish, the launch of Botanical Repair, and successful holiday events, as discussed above.

Geographic Regions

The Americas

	Three Months Ended December 31					Six Months Ended December 31
($ in millions)	2020			2019		2020			2019
As Reported:
Operating income (loss)	$	36		$	(529)	$	101		$	(354)
$ Change from prior-year period	565					455
% Change from prior-year period	100+%					100+%
Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year period adjusting for the impact of goodwill and other intangible asset impairments and changes in fair value of contingent consideration	(52)		%			(57)		%

(1)See “Reconciliations of Non-GAAP Financial Measures” beginning on page 53 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

Reported operating results increased in The Americas for the three and six months ended December 31, 2020, primarily due to the year-over-year impact of goodwill and other intangible asset impairments of $696 million and lower selling expenses, due to the impacts of the COVID-19 pandemic on brick-and-mortar retail locations, as discussed above.

Partially offsetting the increases in operating results for the three and six months ended December 31, 2020 were lower net sales, primarily in the United States.

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THE ESTÉE LAUDER COMPANIES INC.

Europe, the Middle East & Africa

	Three Months Ended December 31					Six Months Ended December 31
($ in millions)	2020			2019		2020			2019
As Reported:
Operating income	$	657		$	505	$	1,068		$	882
$ Change from prior-year period	152					186
% Change from prior-year period	30		%			21		%

Reported operating income increased in Europe, the Middle East & Africa for the three and six months ended December 31, 2020, primarily driven by higher results from our travel retail business, reflecting the increases in net sales and disciplined expense management.

Partially offsetting the increases in operating results for the three and six months ended December 31, 2020 were lower results from the United Kingdom, primarily driven by the declines in net sales.

Asia/Pacific

	Three Months Ended December 31					Six Months Ended December 31
($ in millions)	2020			2019		2020			2019
As Reported:
Operating income	$	407		$	298	$	645		$	550
$ Change from prior-year period	109					95
% Change from prior-year period	37		%			17		%

Reported operating income increased in Asia/Pacific for the three and six months ended December 31, 2020, primarily reflecting higher results from mainland China. In both periods, the increase in operating income from mainland China was primarily driven by the increase in net sales, partially offset by the increase in advertising and promotional activities to support holiday events and campaigns, new product launches, and digital advertising and social media spending.

Partially offsetting the increases in operating income for the three and six months ended December 31, 2020 were lower results from Japan, reflecting the decrease in net sales.

INTEREST AND INVESTMENT INCOME

	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019
Interest expense	$	43	$	38	$	88	$	70
Interest income and investment income, net	$	17	$	13	$	31	$	27

Interest expense increased for both periods, primarily due to the issuance of additional long-term debt in November 2019 and April 2020.

Interest income and investment income, net increased for both periods, reflecting higher equity method investment income from our minority investments, partially offset by decreases in investment income due to lower interest rates.

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THE ESTÉE LAUDER COMPANIES INC.

OTHER INCOME

On December 18, 2019, we acquired the remaining equity interest in Have&Be Co. Ltd. (“Have & Be”), the global skin care company behind Dr. Jart+ and men’s grooming brand Do The Right Thing, for $1,268 million in cash. Based on the final purchase price and working capital adjustments, we estimated a refund receivable of $32 million that was outstanding as of June 30, 2020 and was received in the first quarter of fiscal 2021. We originally acquired a minority interest in Have & Be in December 2015, which included a formula-based call option for the remaining equity interest. The original minority interest was accounted for as an equity method investment, which had a carrying value of $133 million at the acquisition date. The acquisition of the remaining equity interest in Have & Be was considered a step acquisition, whereby we remeasured the previously held equity method investment to its fair value of $682 million, resulting in the recognition of a gain of $549 million. The acquisition of the remaining equity interest also resulted in the recognition of a previously unrealized foreign currency gain of $4 million, which was reclassified from accumulated other comprehensive income. The total gain on our previously held equity method investment of $553 million is included in Other income in the accompanying consolidated statements of earnings for the three and six months ended December 31, 2019.

The amount paid at closing was funded by cash on hand including the proceeds from the issuance of debt. In anticipation of the closing, we transferred cash to a foreign subsidiary for purposes of making the closing payment. As a result, we recognized a foreign currency gain of $23 million, which is also included in Other income in the accompanying consolidated statements of earnings for the three and six months ended December 31, 2019. See Notes to Consolidated Financial Statements, Note 2 – Acquisition of Business for additional information.

PROVISION FOR INCOME TAXES

The provision for income taxes represents U.S. federal, foreign, state and local income taxes. The effective rate differs from the federal statutory rate primarily due to the effect of state and local income taxes, the tax impact of share-based compensation, the taxation of foreign income and income tax reserve adjustments, which represent changes in our net liability for unrecognized tax benefits including tax settlements and lapses of the applicable statutes of limitations. Our effective tax rate will change from quarter to quarter based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes, tax reserve adjustments, the tax impact of share-based compensation and the interaction of various global tax strategies. In addition, changes in judgment from the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of change.

	Three Months Ended December 31				Six Months Ended December 31
	2020		2019		2020		2019
Effective rate for income taxes	14.9	%	30.8	%	17.6	%	26.2	%
Basis-point change from the prior-year period	(1,590)				(860)

For the three and six months ended December 31, 2020, the decrease in the effective tax rate was primarily attributable to a lower effective tax rate on our foreign operations and the impact of nondeductible goodwill charges recognized in the second quarter of fiscal 2020.

The effective tax rate for the three and six months ended December 31, 2020 included the impact of the U.S. government issuance of final global intangible low-taxed income (“GILTI”) tax regulations in July 2020 under the Tax Cuts and Jobs Act (the “TCJA”) that provide for a high-tax exception to the GILTI tax. These regulations are retroactive to the original enactment of the GILTI tax provision, which includes our 2019 and 2020 fiscal years. We have elected to apply the GILTI high-tax exception to fiscal 2021, 2020 and 2019. The election for fiscal 2021 resulted in reductions of 160 basis points and 150 basis points to the effective tax rates for the three and six months ended December 31, 2020, respectively. The impact of the elections with respect to fiscal 2020 and 2019 was recognized as a discrete item in the provision for income taxes in the second quarter of fiscal 2021 and resulted in reductions of 470 basis points and 280 basis points to the effective tax rates for the three and six months ended December 31, 2020, respectively.

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THE ESTÉE LAUDER COMPANIES INC.

NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC.

	Three Months Ended December 31					Six Months Ended December 31
($ in millions, except per share data)	2020			2019		2020			2019
As Reported:
Net earnings attributable to The Estée Lauder Companies Inc.	$	873		$	557	$	1,396		$	1,152
$ Change from prior-year period	316					244
% Change from prior-year period	57		%			21		%
Diluted net earnings per common share	$	2.37		$	1.52	$	3.79		$	3.13
% Change from prior-year period	56		%			21		%
Non-GAAP Financial Measure(1):
% Change in diluted net earnings per common share from the prior-year period adjusting for the impact of charges associated with restructuring and other activities, goodwill and other intangible asset impairments, other income and changes in fair value of contingent consideration	24		%			7		%

(1)See “Reconciliations of Non-GAAP Financial Measures” below for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period, or do not reflect the Company’s underlying ongoing business, provides transparency for such items and helps investors and others compare and analyze our operating performance from period to period. In the future, we expect to incur charges or adjustments similar in nature to those presented below; however, the impact to the Company’s results in a given period may be highly variable and difficult to predict. Our non-GAAP financial measures may not be comparable to similarly titled measures used by, or determined in a manner consistent with, other companies. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. The following tables present Net sales, Operating income and Diluted net earnings per common share adjusted to exclude the impact of charges associated with restructuring and other activities; goodwill and other intangible assets impairments; other income; the changes in the fair value of contingent consideration.

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THE ESTÉE LAUDER COMPANIES INC.

The following tables provide reconciliations between these non-GAAP financial measures and the most directly comparable U.S. GAAP measures.

	Three Months Ended December 31				Variance		% Change		% Change in Constant Currency
($ in millions, except per share data)	2020		2019
Net sales, as reported	$	4,853	$	4,624	$	229	5	%	3	%
Returns associated with restructuring and other activities	—		—		—
Net sales, as adjusted	$	4,853	$	4,624	$	229	5	%	3	%
Operating income, as reported	$	1,063	$	261	$	802	100+%		100+%
Charges associated with restructuring and other activities	37		13		24
Goodwill and other intangible asset impairments	81		777		(696)
Changes in fair value of contingent consideration	(2)		(7)		5
Operating income, as adjusted	$	1,179	$	1,044	$	135	13	%	10	%
Diluted net earnings per common share, as reported	$	2.37	$	1.52	$	.85	56	%	52	%
Charges associated with restructuring and other activities	.08		.03		.05
Goodwill and other intangible asset impairments	.17		1.81		(1.64)
Other income	—		(1.23)		1.23
Changes in fair value of contingent consideration	(.01)		(.02)		.01
Diluted net earnings per common share, as adjusted	$	2.61	$	2.11	$	.50	24	%	21	%

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THE ESTÉE LAUDER COMPANIES INC.

($ in millions, except per share data)	Six Months Ended December 31				Variance		% Change		% Change in  constant currency
	2020		2019
Net sales, as reported	$	8,415	$	8,519	$	(104)	(1)	%	(3)	%
Returns associated with restructuring and other activities	—		—		—
Net sales, as adjusted	$	8,415	$	8,519	$	(104)	(1)	%	(3)	%
Operating income, as reported	$	1,768	$	1,040	$	728	70	%	67	%
Charges associated with restructuring and other activities	46		38		8
Goodwill and other intangible asset impairments	81		777		(696)
Changes in fair value of contingent consideration	(2)		(7)		5
Operating income, as adjusted	$	1,893	$	1,848	$	45	2	%	1	%
Diluted net earnings per common share, as reported	$	3.79	$	3.13	$	.66	21	%	19	%
Charges associated with restructuring and other activities	.09		.09		—
Goodwill and other intangible asset impairments	.17		1.80		(1.63)
Other income	—		(1.22)		1.22
Changes in fair value of contingent consideration	(.01)		(.02)		.01
Diluted net earnings per common share, as adjusted	$	4.04	$	3.78	$	.26	7	%	5	%

As diluted net earnings per common share, as adjusted, is used as a measure of the Company’s performance, we consider the impact of current and deferred income taxes when calculating the per-share impact of each of the reconciling items.

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THE ESTÉE LAUDER COMPANIES INC.

The following tables reconcile the change in net sales by product category and geographic region, as reported, to the change in net sales excluding the effects of foreign currency translation:

	As Reported						Impact of foreign currency translation		Variance, in constant currency		% Change, as reported		% Change, in constant currency
($ in millions)	Three Months Ended December 31, 2020		Three Months Ended December 31, 2019		Variance
By Product Category:
Skin Care	$	2,819	$	2,205	$	614	$	(70)	$	544	28	%	25	%
Makeup	1,247		1,660		(413)		(20)		(433)		(25)		(26)
Fragrance	618		581		37		(9)		28		6		5
Hair Care	154		162		(8)		(1)		(9)		(5)		(6)
Other	15		16		(1)		(2)		(3)		(6)		(19)
	4,853		4,624		229		(102)		127		5		3
Returns associated with restructuring and other activities	—		—		—		—		—
Total	$	4,853	$	4,624	$	229	$	(102)	$	127	5	%	3	%
By Region:
The Americas	$	1,048	$	1,226	$	(178)	$	15	$	(163)	(15)	%	(13)	%
Europe, the Middle East & Africa	2,030		2,079		(49)		(20)		(69)		(2)		(3)
Asia/Pacific	1,775		1,319		456		(97)		359		35		27
	4,853		4,624		229		(102)		127		5		3
Returns associated with restructuring and other activities	—		—		—		—		—
Total	$	4,853	$	4,624	$	229	$	(102)	$	127	5	%	3	%

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THE ESTÉE LAUDER COMPANIES INC.

	As Reported						Impact of foreign currency translation		Variance, in constant currency		% Change, as reported		% Change, in constant currency
($ in millions)	Six Months Ended December 31, 2020		Six Months Ended December 31, 2019		Variance
By Product Category:
Skin Care	$	4,854	$	4,047	$	807	$	(81)	$	726	20	%	18	%
Makeup	2,225		3,103		(878)		(22)		(900)		(28)		(29)
Fragrance	1,024		1,043		(19)		(11)		(30)		(2)		(3)
Hair Care	290		298		(8)		(2)		(10)		(3)		(3)
Other	22		28		(6)		(1)		(7)		(21)		(25)
	8,415		8,519		(104)		(117)		(221)		(1)		(3)
Returns associated with restructuring and other activities	—		—		—		—		—
Total	$	8,415	$	8,519	$	(104)	$	(117)	$	(221)	(1)	%	(3)	%
By Region:
The Americas	$	1,921	$	2,386	$	(465)	$	29	$	(436)	(19)	%	(18)	%
Europe, the Middle East & Africa	3,570		3,756		(186)		(30)		(216)		(5)		(6)
Asia/Pacific	2,924		2,377		547		(116)		431		23		18
	8,415		8,519		(104)		(117)		(221)		(1)		(3)
Returns associated with restructuring and other activities	—		—		—		—		—
Total	$	8,415	$	8,519	$	(104)	$	(117)	$	(221)	(1)	%	(3)	%

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THE ESTÉE LAUDER COMPANIES INC.

The following table reconciles the change in operating results by product category and geographic region, as reported, to the change in operating income excluding the impact of goodwill and other intangible asset impairments and changes in fair value of contingent consideration:

	As Reported
($ in millions)	Three Months Ended December 31, 2020		Three Months Ended December 31, 2019		Variance		Add: Changes in Goodwill and other intangible asset impairments		Add: Changes in fair value of contingent consideration		Variance, as adjusted		% Change, as reported		% Change, as adjusted
By Product Category:
Skin Care	$	928	$	772	$	156	$	81	$	3	$	240	20	%	31	%
Makeup	28		(611)		639		(777)		—		(138)		100+		(83)
Fragrance	141		97		44		—		2		46		45		49
Hair Care	4		12		(8)		—		—		(8)		(67)		(67)
Other	(1)		4		(5)		—		—		(5)		(100+)		(100+)%
	1,100		274		826		$	(696)	$	5	$	135	100+%		13	%
Charges associated with restructuring and other activities	(37)		(13)		(24)
Total	$	1,063	$	261	$	802
By Region:
The Americas	$	36	$	(529)	$	565	$	(696)	$	3	$	(128)	100+%		(52)	%
Europe, the Middle East & Africa	657		505		152		—		2		154		30		31
Asia/Pacific	407		298		109		—		—		109		37		37
	1,100		274		826		$	(696)	$	5	$	135	100+%		13	%
Charges associated with restructuring and other activities	(37)		(13)		(24)
Total	$	1,063	$	261	$	802

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THE ESTÉE LAUDER COMPANIES INC.

	As Reported						Add: Changes in Goodwill and other intangible asset impairments		Add: Changes in fair value of contingent consideration		Variance, as adjusted		% Change, as reported		% Change, as adjusted
($ in millions)	Six Months Ended December 31, 2020		Six Months Ended December 31, 2019		Variance
By Product Category:
Skin Care	$	1,649	$	1,404	$	245	$	81	$	3	$	329	17	%	23	%
Makeup	(43)		(507)		464		(777)		—		(313)		92		(100+)%
Fragrance	201		163		38		—		2		40		23		25
Hair Care	7		12		(5)		—		—		(5)		(42)		(42)
Other	—		6		(6)		—		—		(6)		(100)		(100)
	1,814		1,078		736		$	(696)	$	5	$	45	68	%	2	%
Charges associated with restructuring and other activities	(46)		(38)		(8)
Total	$	1,768	$	1,040	$	728
By Region:
The Americas	$	101	$	(354)	$	455	$	(696)	$	3	$	(238)	100+%		(57)	%
Europe, the Middle East & Africa	1,068		882		186		—		2		188		21		21
Asia/Pacific	645		550		95		—		—		95		17		17
	1,814		1,078		736		$	(696)	$	5	$	45	68	%	2	%
Charges associated with restructuring and other activities	(46)		(38)		(8)
Total	$	1,768	$	1,040	$	728

FINANCIAL CONDITION

LIQUIDITY AND CAPITAL RESOURCES

Overview

Our principal sources of funds historically have been cash flows from operations, borrowings pursuant to our commercial paper program, borrowings from the issuance of long-term debt and committed and uncommitted credit lines provided by banks and other lenders in the United States and abroad. At December 31, 2020, we had cash and cash equivalents of $5,545 million compared with $5,022 million at June 30, 2020. Our cash and cash equivalents are maintained at a number of financial institutions. To mitigate the risk of uninsured balances, we select financial institutions based on their credit ratings and financial strength, and we perform ongoing evaluations of these institutions to limit our concentration risk exposure.

Based on past performance and current expectations, we believe that cash on hand, cash generated from operations, available credit lines and access to credit markets will be adequate to support seasonal working capital needs, currently planned business operations, information technology enhancements, capital expenditures, acquisitions, dividends, stock repurchases, restructuring initiatives, commitments and other contractual obligations on both a near-term and long-term basis. See Overview – COVID-19 Business Update for actions taken by us, in response to the impact of the COVID-19 pandemic on our business.

The TCJA resulted in the Transition Tax on unrepatriated earnings of our foreign subsidiaries and changed the tax law in ways that present opportunities to repatriate cash without additional U.S. federal income tax. As a result, we changed our indefinite reinvestment assertion related to certain foreign earnings, and we continue to analyze the indefinite reinvestment assertion on our remaining applicable foreign earnings. The issuance of guidance subsequent to the enactment of the TCJA has enabled us to access a substantial portion of the cash in offshore jurisdictions associated with our permanently reinvested earnings without significant cost. We do not believe that continuing to reinvest our foreign earnings impairs our ability to meet our domestic debt or working capital obligations. If these reinvested earnings were repatriated into the United States as dividends, we would be subject to state income taxes and applicable foreign taxes in certain jurisdictions.

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The effects of inflation have not been significant to our overall operating results in recent years. Generally, we have been able to introduce new products at higher prices, increase prices and implement other operating efficiencies to sufficiently offset cost increases, which have been moderate.

Credit Ratings

Changes in our credit ratings will likely result in changes in our borrowing costs. Our credit ratings also impact the cost of our revolving credit facility. Downgrades in our credit ratings may reduce our ability to issue commercial paper and/or long-term debt and would likely increase the relative costs of borrowing. A credit rating is not a recommendation to buy, sell, or hold securities, is subject to revision or withdrawal at any time by the assigning rating organization, and should be evaluated independently of any other rating. As of January 29, 2021, our long-term debt is rated A+ with a negative outlook by Standard & Poor’s and A1 with a stable outlook by Moody’s.

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THE ESTÉE LAUDER COMPANIES INC.

Debt

At December 31, 2020, our outstanding borrowings were as follows:

($ in millions)	Long-term Debt		Current Debt		Total Debt
3.125% Senior Notes, due December 1, 2049 (“2049 Senior Notes”) (1), (13)	$	635	$	—	$	635
4.15% Senior Notes, due March 15, 2047 (“2047 Senior Notes”) (2), (13)	494		—		494
4.375% Senior Notes, due June 15, 2045 (“2045 Senior Notes”) (3), (13)	456		—		456
3.70% Senior Notes, due August 15, 2042 (“2042 Senior Notes”) (4), (13)	247		—		247
6.00% Senior Notes, due May 15, 2037 (“2037 Senior Notes”) (5), (13)	294		—		294
5.75% Senior Notes, due October 15, 2033 (“2033 Senior Notes”) (6)	197		—		197
2.600% Senior Notes, due April 15, 2030 (“2030 Senior Notes”) (7)	694		—		694
2.375% Senior Notes, due December 1, 2029 (“2029 Senior Notes”) (8), (13)	640		—		640
3.15% Senior Notes, due March 15, 2027 (“2027 Senior Notes”) (9), (13)	498		—		498
2.00% Senior Notes, due December 1, 2024 (“2024 Senior Notes”) (10), (13)	496		—		496
2.35% Senior Notes, due August 15, 2022 (“2022 Senior Notes”) (11), (13)	258		—		258
1.70% Senior Notes, due May 10, 2021 (“2021 Senior Notes”) (12), (13)	—		452		452
Other long-term borrowings	4		—		4
Other current borrowings	—		18		18
	$	4,913	$	470	$	5,383

______________________________________________

(1)Consists of $650 million principal, unamortized debt discount of $8 million and debt issuance costs of $7 million.

(2)Consists of $500 million principal, unamortized debt discount of $1 million and debt issuance costs of $5 million.

(3)Consists of $450 million principal, net unamortized debt premium of $10 million and debt issuance costs of $4 million.

(4)Consists of $250 million principal, unamortized debt discount of $1 million and debt issuance costs of $2 million.

(5)Consists of $300 million principal, unamortized debt discount of $3 million and debt issuance costs of $3 million.

(6)Consists of $200 million principal, unamortized debt discount of $2 million and debt issuance costs of $1 million.

(7)Consists of $700 million principal, unamortized debt discount of $1 million and debt issuance costs of $5 million.

(8)Consists of $650 million principal, unamortized debt discount of $6 million and debt issuance costs of $4 million.

(9)Consists of $500 million principal and debt issuance costs of $2 million.

(10)Consists of $500 million principal, unamortized debt discount of $2 million and debt issuance costs of $2 million.

(11)Consists of $250 million principal and a $8 million adjustment to reflect the fair value of interest rate swaps.

(12)Consists of $450 million principal and a $2 million adjustment to reflect the fair value of interest rate swaps.

(13)The Senior Notes contain certain customary incurrence–based covenants, including limitations on indebtedness secured by liens.

In August 2020, we repaid the remaining $750 million borrowed under our $1,500 million revolving credit facility that was outstanding as of June 30, 2020.

Total debt as a percent of total capitalization (excluding noncontrolling interests) was 50% and 61% at December 31, 2020 and June 30, 2020, respectively.

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THE ESTÉE LAUDER COMPANIES INC.

Cash Flows

	Six Months Ended December 31
(In millions)	2020		2019
Net cash provided by operating activities	$	1,978	$	1,255
Net cash used for investing activities	$	(397)	$	(1,350)
Net cash provided by (used for) financing activities	$	(1,119)	$	687

The change in net cash flows from operations primarily reflected the improvement in working capital, primarily due to other accrued liabilities, including an increase in accrued employee incentive compensation and higher advertising and promotional accruals, and accounts payable, partially offset by the unfavorable change in accounts receivable due to the increase in net sales.

The change in net cash flows used for investing activities primarily reflected cash paid in fiscal 2020 relating to the second quarter acquisition of Have&Be Co. Ltd., partially offset by the settlement of net investment hedges.

The change in net cash flows from financing activities primarily reflected proceeds in fiscal 2020 from the November 2019 issuance of long term-debt, the fiscal 2021 repayment of borrowings under our revolving credit facility, partially offset by lower treasury stock repurchases.

Dividends

For a summary of quarterly cash dividends declared per share on our Class A and Class B Common Stock during the six months ended December 31, 2020, see Notes to Consolidated Financial Statements, Note 12 – Equity.

Pension and Post-retirement Plan Funding

There have been no significant changes to our pension and post-retirement funding as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Commitments, Contractual Obligations and Contingencies

There have been no significant changes to our commitments and contractual obligations as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020. For a discussion of contingencies, see Notes to Consolidated Financial Statements, Note 9 – Contingencies.

Derivative Financial Instruments and Hedging Activities

For a discussion of our derivative financial instruments and hedging activities, see Notes to Consolidated Financial Statements, Note 5 – Derivative Financial Instruments.

Foreign Exchange Risk Management

For a discussion of foreign exchange risk management, see Notes to Consolidated Financial Statements, Note 5 – Derivative Financial Instruments (Cash Flow Hedges, Net Investment Hedges).

Credit Risk

For a discussion of credit risk, see Notes to Consolidated Financial Statements, Note 5 – Derivative Financial Instruments (Credit Risk).

Market Risk

We address certain financial exposures through a controlled program of market risk management that includes the use of foreign currency forward contracts to reduce the effects of fluctuating foreign currency exchange rates and to mitigate the change in fair value of specific assets and liabilities on the balance sheet. To perform a sensitivity analysis of our foreign currency forward contracts, we assess the change in fair values from the impact of hypothetical changes in foreign currency exchange rates. A hypothetical 10% weakening of the U.S. dollar against the foreign exchange rates for the currencies in our portfolio would have resulted in a net decrease in the fair value of our portfolio of approximately $184 million and $222 million as of December 31, 2020 and June 30, 2020, respectively. This potential change does not consider our underlying foreign currency exposures.

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In addition, we enter into interest rate derivatives to manage the effects of interest rate movements on our aggregate liability portfolio, including future debt issuances. Based on a hypothetical 100 basis point increase in interest rates, the estimated fair value of our interest rate derivatives would increase by approximately $13 million and $9 million as of December 31, 2020 and June 30, 2020, respectively.

Our sensitivity analysis represents an estimate of reasonably possible net losses that would be recognized on our portfolio of derivative financial instruments assuming hypothetical movements in future market rates and is not necessarily indicative of actual results, which may or may not occur. It does not represent the maximum possible loss or any expected loss that may occur, since actual future gains and losses will differ from those estimated, based upon actual fluctuations in market rates, operating exposures, and the timing thereof, and changes in our portfolio of derivative financial instruments during the year. We believe, however, that any such loss incurred would be offset by the effects of market rate movements on the respective underlying transactions for which the derivative financial instrument was intended.

OFF-BALANCE SHEET ARRANGEMENTS

We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations.

CRITICAL ACCOUNTING POLICIES

As disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2020, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with U.S. generally accepted accounting principles. The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those financial statements. These estimates and assumptions can be subjective and complex, and consequently, actual results could differ from those estimates. Our most critical accounting policies relate to goodwill, other intangible assets and long-lived assets, income taxes and business combinations. Since June 30, 2020, there have been no significant changes to the assumptions and estimates related to our critical accounting policies.

RECENTLY ISSUED ACCOUNTING STANDARDS

For a discussion regarding the impact of accounting standards that were recently issued but not yet effective, on the Company’s consolidated financial statements, see Notes to Consolidated Financial Statements, Note 1 – Summary of Significant Accounting Policies.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

We and our representatives from time to time make written or oral forward-looking statements, including in this and other filings with the Securities and Exchange Commission, in our press releases and in our reports to stockholders, which may constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may address our expectations regarding sales, earnings or other future financial performance and liquidity, other performance measures, product introductions, entry into new geographic regions, information technology initiatives, new methods of sale, our long-term strategy, restructuring and other charges and resulting cost savings, and future operations or operating results. These statements may contain words like “expect,” “will,” “will likely result,” “would,” “believe,” “estimate,” “planned,” “plans,” “intends,” “may,” “should,” “could,” “anticipate,” “estimate,” “project,” “projected,” “forecast,” and “forecasted” or similar expressions. Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, actual results may differ materially from our expectations. Factors that could cause actual results to differ from expectations include, without limitation:

(1)increased competitive activity from companies in the skin care, makeup, fragrance and hair care businesses;

(2)our ability to develop, produce and market new products on which future operating results may depend and to successfully address challenges in our business;

(3)consolidations, restructurings, bankruptcies and reorganizations in the retail industry causing a decrease in the number of stores that sell our products, an increase in the ownership concentration within the retail industry, ownership of retailers by our competitors or ownership of competitors by our customers that are retailers and our inability to collect receivables;

(4)destocking and tighter working capital management by retailers;

(5)the success, or changes in timing or scope, of new product launches and the success, or changes in timing or scope, of advertising, sampling and merchandising programs;

(6)shifts in the preferences of consumers as to where and how they shop;

(7)social, political and economic risks to our foreign or domestic manufacturing, distribution and retail operations, including changes in foreign investment and trade policies and regulations of the host countries and of the United States;

(8)changes in the laws, regulations and policies (including the interpretations and enforcement thereof) that affect, or will affect, our business, including those relating to our products or distribution networks, changes in accounting standards, tax laws and regulations, environmental or climate change laws, regulations or accords, trade rules and customs regulations, and the outcome and expense of legal or regulatory proceedings, and any action we may take as a result;

(9)foreign currency fluctuations affecting our results of operations and the value of our foreign assets, the relative prices at which we and our foreign competitors sell products in the same markets and our operating and manufacturing costs outside of the United States;

(10)changes in global or local conditions, including those due to the volatility in the global credit and equity markets, natural or man-made disasters, real or perceived epidemics, or energy costs, that could affect consumer purchasing, the willingness or ability of consumers to travel and/or purchase our products while traveling, the financial strength of our customers, suppliers or other contract counterparties, our operations, the cost and availability of capital which we may need for new equipment, facilities or acquisitions, the returns that we are able to generate on our pension assets and the resulting impact on funding obligations, the cost and availability of raw materials and the assumptions underlying our critical accounting estimates;

(11)impacts attributable to the COVID-19 pandemic, including disruptions to our global business;

(12)shipment delays, commodity pricing, depletion of inventory and increased production costs resulting from disruptions of operations at any of the facilities that manufacture our products or at our distribution or inventory centers, including disruptions that may be caused by the implementation of information technology initiatives, or by restructurings;

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THE ESTÉE LAUDER COMPANIES INC.

(13)real estate rates and availability, which may affect our ability to increase or maintain the number of retail locations at which we sell our products and the costs associated with our other facilities;

(14)changes in product mix to products which are less profitable;

(15)our ability to acquire, develop or implement new information and distribution technologies and initiatives on a timely basis and within our cost estimates and our ability to maintain continuous operations of such systems and the security of data and other information that may be stored in such systems or other systems or media;

(16)our ability to capitalize on opportunities for improved efficiency, such as publicly-announced strategies and restructuring and cost-savings initiatives, and to integrate acquired businesses and realize value therefrom;

(17)consequences attributable to local or international conflicts around the world, as well as from any terrorist action, retaliation and the threat of further action or retaliation;

(18)the timing and impact of acquisitions, investments and divestitures; and

(19)additional factors as described in our filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

We assume no responsibility to update forward-looking statements made herein or otherwise.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

The information required by this item is set forth in Item 2 of this Quarterly Report on Form 10-Q under the caption Liquidity and Capital Resources - Market Risk and is incorporated herein by reference.

Item 4. Controls and Procedures.

Our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and to ensure that information required to be disclosed is accumulated and communicated to management, including our principal executive and financial officers, to allow timely decisions regarding disclosure. The Chief Executive Officer and the Chief Financial Officer, with assistance from other members of management, have reviewed the effectiveness of our disclosure controls and procedures, including impacts of COVID-19, as of December 31, 2020 and, based on their evaluation, have concluded that the disclosure controls and procedures were effective as of such date.

As part of our review of internal control over financial reporting, we make changes to systems and processes to improve such controls and increase efficiencies, while ensuring that we maintain an effective internal control environment. There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) that occurred during the second quarter of fiscal 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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THE ESTÉE LAUDER COMPANIES INC.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

For a discussion of legal proceedings, see Notes to Consolidated Financial Statements, Note 9 – Contingencies.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Share Repurchase Program

We are authorized by the Board of Directors to repurchase shares of our Class A Common Stock in the open market or in privately negotiated transactions, depending on market conditions and other factors. The following table provides information relating to our repurchase of Class A Common Stock during the referenced periods:

Period	Total Number of Shares Purchased(1)	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Program	Maximum Number of Shares that May Yet Be Purchased Under the Program(2)
October 2020	—	$	—	—	34,741,624
November 2020	335,124	229.12		—	34,741,624
December 2020	9	229.12		—	34,741,624
	335,133	229.12		—

(1)Relates to shares that were repurchased by the Company to satisfy tax withholding obligations upon the payout of certain stock-based compensation arrangements.

(2)The Board of Directors has authorized the current repurchase program for up to 80.0 million shares. The total amount was last increased by the Board on October 31, 2018. Our repurchase program does not have an expiration date.

Beginning in early February 2020, we temporarily suspended the repurchase of shares of our Class A Common Stock. We may resume repurchases in the future.

Item 6. Exhibits.

Exhibit Number	Description
31.1	Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CEO).
31.2	Certification pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (CFO).
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CEO). (furnished)
32.2	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (CFO). (furnished)
101.1	The following materials from The Estée Lauder Companies Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2020 are formatted in iXBRL (Inline eXtensible Business Reporting Language): (i) the Consolidated Statements of Earnings, (ii) the Consolidated Statements of Comprehensive Income, (iii) the Consolidated Balance Sheets, (iv) the Consolidated Statements of Cash Flows and (v) Notes to Consolidated Financial Statements
104	The cover page from The Estée Lauder Companies Inc.’s Quarterly Report on Form 10-Q for the quarterly period ended December 31, 2020 is formatted in iXBRL

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	THE ESTÉE LAUDER COMPANIES INC.
	By:	/s/TRACEY T. TRAVIS
Date: February 5, 2021		Tracey T. Travis
		Executive Vice President and Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EX-31.1

Exhibit 31.1

Certification

I, Fabrizio Freda certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of The Estée Lauder Companies Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 5, 2021
	/s/ Fabrizio Freda
	Fabrizio Freda President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Certification

I, Tracey T. Travis certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of The Estée Lauder Companies Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 5, 2021
	/s/ Tracey T. Travis
	Tracey T. Travis Executive Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification

Pursuant to 18 U.S.C. Section 1350

(as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002)

Pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), the undersigned officer of The Estée Lauder Companies Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended December 31, 2020 (the “10-Q”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m or 78o(d)), and the information contained in the 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 5, 2021
	/s/ Fabrizio Freda
	Fabrizio Freda President and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) and for no other purpose.

EX-32.2

Exhibit 32.2

Certification

Pursuant to 18 U.S.C. Section 1350

(as adopted pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002)

Pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002), the undersigned officer of The Estée Lauder Companies Inc., a Delaware corporation (the “Company”), does hereby certify, to such officer’s knowledge, that:

The Quarterly Report on Form 10-Q for the quarter ended December 31, 2020 (the “10-Q”) of the Company fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (15 U.S.C. 78m or 78o(d)), and the information contained in the 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: February 5, 2021
	/s/ Tracey T. Travis
	Tracey T. Travis Executive Vice President and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. Section 1350 (as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) and for no other purpose.

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COVER PAGE - shares	6 Months Ended
	Dec. 31, 2020	Jan. 29, 2021
Entity Information [Line Items]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Dec. 31, 2020
Document Transition Report	false
Entity File Number	1-14064
Entity Registrant Name	Estée Lauder Companies Inc
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	11-2408943
Entity Address, Address Line One	767 Fifth Avenue
Entity Address, City or Town	New York
Entity Address, State or Province	NY
Entity Address, Postal Zip Code	10153
City Area Code	212
Local Phone Number	572-4200
Title of 12(b) Security	Class A Common Stock, $.01 par value
Trading Symbol	EL
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Current Fiscal Year End Date	--06-30
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q2
Entity Central Index Key	0001001250
Amendment Flag	false
Common Class A
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		229,736,467
Common Class B
Entity Information [Line Items]
Entity Common Stock, Shares Outstanding		133,023,029

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CONSOLIDATED STATEMENTS OF EARNINGS - USD ($) shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Income Statement [Abstract]
Net sales	$ 4,853	$ 4,624	$ 8,415	$ 8,519
Cost of sales	1,084	1,041	1,909	1,949
Gross profit	3,769	3,583	6,506	6,570
Operating expenses
Selling, general and administrative	2,590	2,538	4,616	4,723
Restructuring and other charges	35	7	41	30
Goodwill impairment	54	511	54	511
Impairment of other intangible assets	27	266	27	266
Total operating expenses	2,706	3,322	4,738	5,530
Operating income	1,063	261	1,768	1,040
Interest expense	43	38	88	70
Interest income and investment income, net	17	13	31	27
Other components of net periodic benefit cost	7	1	10	2
Other income	0	576	0	576
Earnings before income taxes	1,030	811	1,701	1,571
Provision for income taxes	153	250	299	412
Net earnings	877	561	1,402	1,159
Net earnings attributable to noncontrolling interests	(4)	(4)	(6)	(7)
Net earnings attributable to The Estée Lauder Companies Inc.	$ 873	$ 557	$ 1,396	$ 1,152
Net earnings attributable to The Estée Lauder Companies Inc. per common share
Basic (in dollars per share)	$ 2.40	$ 1.55	$ 3.84	$ 3.19
Diluted (in dollars per share)	$ 2.37	$ 1.52	$ 3.79	$ 3.13
Weighted-average common shares outstanding
Basic (in shares)	363.0	360.2	363.4	360.8
Diluted (in shares)	368.0	366.7	368.5	367.7

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Statement of Comprehensive Income [Abstract]
Net earnings	$ 877	$ 561	$ 1,402	$ 1,159
Other comprehensive income (loss):
Net cash flow hedge loss	(26)	(22)	(57)	(24)
Retirement plan and other retiree benefit adjustments	6	5	12	10
Translation adjustments	213	64	291	(6)
Benefit for deferred income taxes on components of other comprehensive income	20	10	38	13
Total other comprehensive income (loss), net of tax	213	57	284	(7)
Comprehensive income	1,090	618	1,686	1,152
Comprehensive income attributable to noncontrolling interests:
Net earnings	(4)	(4)	(6)	(7)
Translation adjustments	(2)	1	(2)	1
Comprehensive income attributable to noncontrolling interests	(6)	(3)	(8)	(6)
Comprehensive income attributable to The Estée Lauder Companies Inc.	$ 1,084	$ 615	$ 1,678	$ 1,146

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CONSOLIDATED BALANCE SHEETS - USD ($) $ in Millions	Dec. 31, 2020	Jun. 30, 2020
Current assets
Cash and cash equivalents	$ 5,545	$ 5,022
Accounts receivable, net	1,972	1,194
Inventory and promotional merchandise	2,116	2,062
Prepaid expenses and other current assets	658	614
Total current assets	10,291	8,892
Property, plant and equipment, net	2,142	2,055
Other assets
Operating lease right-of-use assets	2,325	2,282
Goodwill	1,401	1,401
Other intangible assets, net	2,424	2,338
Other assets	1,012	813
Total other assets	7,162	6,834
Total assets	19,595	17,781
Current liabilities
Current debt	470	1,222
Accounts payable	1,299	1,177
Operating lease liabilities	387	375
Other accrued liabilities	3,264	2,405
Total current liabilities	5,420	5,179
Noncurrent liabilities
Long-term debt	4,913	4,914
Long-term operating lease liabilities	2,314	2,278
Other noncurrent liabilities	1,492	1,448
Total noncurrent liabilities	8,719	8,640
Contingencies
Equity
Common stock, $.01 par value; Class A shares authorized: 1,300,000,000 at December 31, 2020 and June 30, 2020; shares issued: 456,618,145 at December 31, 2020 and 451,927,441 at June 30, 2020; Class B shares authorized: 304,000,000 at December 31, 2020 and June 30, 2020; shares issued and outstanding: 133,023,029 at December 31, 2020 and 135,235,429 at June 30, 2020	6	6
Paid-in capital	5,068	4,790
Retained earnings	11,159	10,134
Accumulated other comprehensive loss	(383)	(665)
Stockholders' equity before treasury stock	15,850	14,265
Less: Treasury stock, at cost; 227,008,228 Class A shares at December 31, 2020 and 226,637,238 Class A shares at June 30, 2020	(10,429)	(10,330)
Total stockholders’ equity – The Estée Lauder Companies Inc.	5,421	3,935
Noncontrolling interests	35	27
Total equity	5,456	3,962
Total liabilities and equity	$ 19,595	$ 17,781

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Dec. 31, 2020	Jun. 30, 2020
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Treasury stock, shares	227,008,228	226,637,238
Common Class A
Common stock, shares authorized	1,300,000,000	1,300,000,000
Common stock, shares issued	456,618,145	451,927,441
Common Class B
Common stock, shares authorized	304,000,000	304,000,000
Common stock, shares issued	133,023,029	135,235,429
Common stock, shares outstanding	133,023,029	135,235,429

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Millions	6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Cash flows from operating activities
Net earnings	$ 1,402	$ 1,159
Adjustments to reconcile net earnings to net cash flows from operating activities:
Depreciation and amortization	316	287
Deferred income taxes	(49)	7
Non-cash stock-based compensation	169	139
Net loss on disposal of property, plant and equipment	13	5
Non-cash restructuring and other charges	1	0
Pension and post-retirement benefit expense	52	41
Pension and post-retirement benefit contributions	(25)	(33)
Goodwill and other intangible asset impairments	81	777
Changes in fair value of contingent consideration	(2)	(7)
Gain on previously held equity method investment	0	(553)
Other non-cash items	(23)	(10)
Changes in operating assets and liabilities:
Increase in accounts receivable, net	(720)	(347)
Decrease in inventory and promotional merchandise	67	31
Increase in other assets, net	(110)	(120)
Increase (decrease) in accounts payable	63	(375)
Increase in other accrued and noncurrent liabilities	750	252
Increase (decrease) in operating lease assets and liabilities, net	(7)	2
Net cash flows provided by operating activities	1,978	1,255
Cash flows from investing activities
Capital expenditures	(250)	(291)
Proceeds from purchase price refund	32	0
Payments for acquired businesses, net of cash acquired	(6)	(1,040)
Purchases of investments	(40)	(5)
Settlement of net investment hedges	(133)	(14)
Net cash flows used for investing activities	(397)	(1,350)
Cash flows from financing activities
Proceeds (repayments) of current debt, net	(747)	8
Proceeds from issuance of long-term debt, net	0	1,783
Debt issuance costs	0	(14)
Repayments and redemptions of long-term debt	(4)	(8)
Net proceeds from stock-based compensation transactions	104	71
Payments to acquire treasury stock	(102)	(813)
Payments of contingent consideration	0	(3)
Dividends paid to stockholders	(368)	(330)
Payments to noncontrolling interest holders for dividends	(2)	(7)
Net cash flows provided by (used for) financing activities	(1,119)	687
Effect of exchange rate changes on Cash and cash equivalents	61	17
Net increase in Cash and cash equivalents	523	609
Cash and cash equivalents at beginning of period	5,022	2,987
Cash and cash equivalents at end of period	$ 5,545	$ 3,596

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

6 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements include the accounts of The Estée Lauder Companies Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated.

The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Certain amounts in the consolidated financial statements of prior years have been reclassified to conform to current year presentation.

Management Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020. Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, will be reflected in the consolidated financial statements in future periods.

Currency Translation and Transactions

All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at monthly average rates of exchange for the period. Unrealized translation gains, net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc. were $227 million and $75 million, net of tax, during the three months ended December 31, 2020 and 2019, respectively, and $318 million and $3 million, net of tax, during the six months ended December 31, 2020 and 2019, respectively. For the Company’s subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Remeasurement adjustments in financial statements in a highly inflationary economy and other transactional gains and losses are reflected in earnings. These subsidiaries are not material to the Company’s consolidated financial statements or liquidity.

The Company enters into foreign currency forward contracts and may enter into option contracts to hedge foreign currency transactions for periods consistent with its identified exposures. The Company also enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. See Note 5 – Derivative Financial Instruments for further discussion. The Company categorizes these instruments as entered into for purposes other than trading.

The accompanying consolidated statements of earnings include net exchange gains (losses) on foreign currency transactions of $27 million during the three months ended December 31, 2019, and $(2) million and $24 million during the six months ended December 31, 2020 and 2019, respectively. The net exchange loss on foreign currency transactions during the three months ended December 31, 2020 was not material.

Concentration of Credit Risk

The Company is a worldwide manufacturer, marketer and distributor of skin care, makeup, fragrance and hair care products. The Company’s sales subject to credit risk are made primarily to department stores, perfumeries, specialty multi-brand retailers and retailers in its travel retail business. The Company grants credit to qualified customers. As a result of the COVID-19 pandemic, the Company has enhanced its assessment of its customers' abilities to pay with a greater focus on factors affecting their liquidity and less on historical payment performance. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor the extent of the impact of the COVID-19 pandemic on its customers' abilities, individually and collectively, to make timely payments.

The Company’s largest customer during the three and six months ended December 31, 2020 sells products primarily in China travel retail. This customer accounted for $654 million or 13%, and $296 million or 6% for the three months ended December 31, 2020 and 2019, respectively, and $1,208 million or 14% and $465 million or 5% for the six months ended December 31, 2020 and 2019, respectively, of the Company's consolidated net sales. This customer accounted for $404 million, or 20%, and $297 million, or 24%, of the Company's accounts receivable at December 31, 2020 and June 30, 2020, respectively.

Inventory and Promotional Merchandise

Inventory and promotional merchandise consists of the following:

(In millions)	December 31 2020		June 30 2020
Raw materials	$	550	$	542
Work in process	258		305
Finished goods	1,072		995
Promotional merchandise	236		220
	$	2,116	$	2,062

Property, Plant and Equipment

Property, plant and equipment consists of the following:

(In millions)	December 31 2020		June 30 2020
Assets (Useful Life)
Land	$	57	$	33
Buildings and improvements (10 to 40 years)	457		400
Machinery and equipment (3 to 10 years)	969		865
Computer hardware and software (4 to 10 years)	1,417		1,335
Furniture and fixtures (5 to 10 years)	126		120
Leasehold improvements	2,471		2,381
	5,497		5,134
Less accumulated depreciation and amortization	(3,355)		(3,079)
	$	2,142	$	2,055

The cost of assets related to projects in progress of $601 million and $501 million as of December 31, 2020 and June 30, 2020, respectively, is included in their respective asset categories above. Depreciation and amortization of property, plant and equipment was $126 million and $127 million during the three months ended December 31, 2020 and 2019, respectively, and $251 million and $252 million during the six months ended December 31, 2020 and 2019, respectively. Depreciation and amortization related to the Company’s manufacturing process is included in Cost of sales, and all other depreciation and amortization is included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings.

Income Taxes

The effective rate for income taxes for the three and six months ended December 31, 2020 and 2019 are as follows:

	Three Months Ended December 31				Six Months Ended December 31
	2020		2019		2020		2019
Effective rate for income taxes	14.9	%	30.8	%	17.6	%	26.2	%
Basis-point change from the prior-year period	(1,590)				(860)

For the three and six months ended December 31, 2020, the decrease in the effective tax rate was primarily attributable to a lower effective tax rate on the Company's foreign operations and the impact of nondeductible goodwill charges recognized in the second quarter of fiscal 2020.

The effective tax rate for the three and six months ended December 31, 2020 included the impact of the U.S. government issuance of final global intangible low-taxed income (“GILTI”) tax regulations in July 2020 under the Tax Cuts and Jobs Act that provide for a high-tax exception to the GILTI tax. These regulations are retroactive to the original enactment of the GILTI tax provision, which includes the Company's 2019 and 2020 fiscal years. The Company has elected to apply the GILTI high-tax exception to fiscal 2021, 2020 and 2019. The election for fiscal 2021 resulted in reductions of 160 basis points and 150 basis points to the effective tax rates for the three and six months ended December 31, 2020, respectively. The impact of the elections with respect to fiscal 2020 and 2019 was recognized as a discrete item in the provision for income taxes in the second quarter of fiscal 2021 and resulted in reductions of 470 basis points and 280 basis points to the effective tax rates for the three and six months ended December 31, 2020, respectively.

As of December 31, 2020 and June 30, 2020, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $70 million. The total amount of unrecognized tax benefits at December 31, 2020 that, if recognized, would affect the effective tax rate was $55 million. The total gross interest and penalties accrued related to unrecognized tax benefits during the three and six months ended December 31, 2020 in the accompanying consolidated statements of earnings were not material. The total gross accrued interest and penalties in the accompanying consolidated balance sheets at December 31, 2020 and June 30, 2020, was $14 million and $13 million, respectively. On the basis of the information available as of December 31, 2020, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months.

Other Accrued Liabilities

Other accrued liabilities consist of the following:

(In millions)	December 31 2020		June 30 2020
Advertising, merchandising and sampling	$	353	$	256
Employee compensation	494		424
Deferred revenue	365		222
Payroll and other taxes	392		250
Accrued income taxes	319		208
Sales return accrual	285		212
Accrued general and administrative expenses	295		233
Other	761		600
	$	3,264	$	2,405

Debt

In August 2020, the Company repaid the remaining $750 million borrowed under its $1,500 million revolving credit facility that was outstanding as of June 30, 2020.

Recently Adopted Accounting Standards

Measurement of Credit Losses on Financial Instruments (ASC Topic 326 – Financial Instruments – Credit Losses) (“ASC 326”)

In June 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that requires companies to utilize an impairment model for most financial assets measured at amortized cost and certain other financial instruments, which include trade and other receivables, loans and held-to-maturity debt securities, to record an allowance for credit risk based on expected losses rather than incurred losses. In addition, this guidance changes the recognition method for credit losses on available-for-sale debt securities, which can occur as a result of market and credit risk, and requires additional disclosures. In general, modified retrospective adoption will be required for all outstanding instruments that fall under this guidance.

In November 2019, the FASB issued authoritative guidance (ASU 2019-11 – Codification Improvements to Topic 326, Financial Instruments – Credit Losses) that amends ASC Topic 326 to clarify, improve and amend certain aspects of this guidance, such as disclosures related to accrued interest receivables and the estimation of credit losses associated with financial assets secured by collateral.

In February 2020, the FASB issued authoritative guidance (ASU 2020-02 – Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842)) that amends and clarifies Topic 326 and Topic 842. For Topic 326, the codification was updated to include the Securities and Exchange Commission staff interpretations associated with registrants engaged in lending activities.

Effective for the Company – Fiscal 2021 first quarter.

Impact on consolidated financial statements – On July 1, 2020, the Company adopted ASC 326. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. See Note 7 – Revenue Recognition for further discussion.

Goodwill and Other – Internal-Use Software (ASU 2018-15 – Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract)

In August 2018, the FASB issued authoritative guidance that permits companies to capitalize the costs incurred for setting up business systems that operate on cloud technology. The new guidance aligns the requirement for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance does not affect the accounting for the service element of a hosting arrangement that is a service contract. Capitalized costs associated with a hosting arrangement that is a service contract must be amortized over the term of the hosting arrangement to the same line item in the income statement as the expense for fees for the hosting arrangement.

Effective for the Company – Fiscal 2021 first quarter, with early adoption permitted in any interim period. This guidance can be adopted either retrospectively, or prospectively to all implementation costs incurred after the date of adoption.

Impact on consolidated financial statements – On July 1, 2020, the Company adopted this guidance prospectively to all implementation costs incurred after the date of adoption. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Standards

Reference Rate Reform (ASC Topic 848)

In March 2020, the FASB issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”), which is expected to be phased out at the end of calendar 2021, and applies to lease contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that have LIBOR as the benchmark rate.

In January 2021, the FASB issued authoritative guidance that makes amendments to the new rules on accounting for reference rate reform. The amendments clarify that all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in ASC Topic 848.

Effective for the Company – This guidance can be applied for a limited time through December 31, 2022. The guidance will no longer be available to apply after December 31, 2022.

Impact on consolidated financial statements – The Company is currently assessing the impact of applying this guidance on its existing derivative contracts, leases and other arrangements, as well as when to adopt this guidance.

Income Taxes (ASU 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes)

In December 2019, the FASB issued authoritative guidance that simplifies the accounting for income taxes by removing certain exceptions and making simplifications in other areas.

Effective for the Company – Fiscal 2022 first quarter, with early adoption permitted in any interim period. If adopted early, the Company must adopt all the amendments in the same period. The amendments have differing adoption methods including retrospectively, prospectively and/or modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption, depending on the specific change.

Impact on consolidated financial statements – The Company is currently evaluating the impact of applying this guidance and believes that it has transactions that may fall under the scope.

No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements.

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ACQUISITION OF BUSINESS

6 Months Ended

Dec. 31, 2020

Business Combinations [Abstract]

ACQUISITION OF BUSINESS

ACQUISITION OF BUSINESS

On December 18, 2019, the Company acquired the remaining 66.66% equity interest in Have&Be Co. Ltd. (“Have & Be”), the global skin care company behind Dr. Jart+ and men’s grooming brand Do The Right Thing, for $1,268 million in cash. Based on the final purchase price and working capital adjustments, the Company estimated a refund receivable of $32 million that was outstanding as of June 30, 2020 and was received in the first quarter of fiscal 2021. The Company originally acquired a minority interest in Have & Be in December 2015, and that investment structure included a formula-based call option for the remaining equity interest. The original minority interest was accounted for as an equity method investment, which had a carrying value of $133 million at the acquisition date. The acquisition of the remaining equity interest in Have & Be was considered a step acquisition, whereby the Company remeasured the previously held equity method investment to its fair value of $682 million, resulting in the recognition of a gain of $549 million. The acquisition of the remaining equity interest also resulted in the recognition of a previously unrealized foreign currency gain of $4 million, which was reclassified from accumulated OCI. The total gain on the Company’s previously held equity method investment of $553 million is included in Other income in the accompanying consolidated statements of earnings for the three and six months ended December 31, 2019. The fair value of the previously held equity method investment was determined based upon a valuation of the acquired business, as of the date of acquisition, using an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies. The accounting for the Have & Be business combination was finalized as of June 30, 2020.

The amount paid at closing was funded by cash on hand including the proceeds from the issuance of debt. In anticipation of the closing, the Company transferred cash to a foreign subsidiary for purposes of making the closing payment. As a result, the Company recognized a foreign currency gain of $23 million, which is also included in Other income in the accompanying consolidated statements of earnings for the three and six months ended December 31, 2019.

Further information is included in the notes to consolidated financial statements in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

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GOODWILL AND OTHER INTANGIBLE ASSETS

6 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

GOODWILL AND OTHER INTANGIBLE ASSETS

GOODWILL AND OTHER INTANGIBLE ASSETS

The following table presents goodwill by product category and the related change in the carrying amount:

(In millions)	Skin Care		Makeup		Fragrance		Hair Care		Total
Balance as of June 30, 2020
Goodwill	$	519	$	1,210	$	254	$	389	$	2,372
Accumulated impairments	(95)		(817)		(26)		(33)		(971)
	424		393		228		356		1,401
Goodwill acquired during the period	—		6		—		4		10
Impairment charges	(54)		—		—		—		(54)
Translation adjustments, goodwill	36		—		9		3		48
Translation adjustments, accumulated impairments	(2)		—		—		(2)		(4)
	(20)		6		9		5		—
Balance as of December 31, 2020
Goodwill	555		1,216		263		396		2,430
Accumulated impairments	(151)		(817)		(26)		(35)		(1,029)
	$	404	$	399	$	237	$	361	$	1,401

Other intangible assets consist of the following:

	December 31, 2020						June 30, 2020
(In millions)	Gross Carrying Value		Accumulated Amortization		Total Net Book Value		Gross Carrying Value		Accumulated Amortization		Total Net Book Value
Amortizable intangible assets:
Customer lists and other	$	1,684	$	537	$	1,147	$	1,590	$	475	$	1,115
License agreements	43		43		—		43		43		—
	$	1,727	$	580	1,147		$	1,633	$	518	1,115
Non-amortizable intangible assets:
Trademarks and other					1,277						1,223
Total intangible assets					$	2,424					$	2,338

The aggregate amortization expense related to amortizable intangible assets was $27 million and $11 million for the three months ended December 31, 2020 and 2019, respectively, and $52 million and $22 million for the six months ended December 31, 2020 and 2019, respectively.

The estimated aggregate amortization expense for the remainder of fiscal 2021 and for each of the next four fiscal years is as follows:

	Fiscal
(In millions)	2021		2022		2023		2024		2025
Estimated aggregate amortization expense	$	52	$	105	$	104	$	104	$	104

Impairment Testing During the Six Months Ended December 31, 2020

During November 2020, given the actual and the estimate of the potential future impacts relating to the uncertainty of the duration and severity of COVID-19 impacting the Company and lower than expected results from geographic expansion, the Company made further revisions to the internal forecasts relating to its GLAMGLOW reporting unit. The Company concluded that the changes in circumstances in this reporting unit triggered the need for an interim impairment review of its trademark and goodwill. These changes in circumstances were also an indicator that the carrying amounts of GLAMGLOW's long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed an interim impairment test for the trademark and a recoverability test for the long-lived assets as of November 30, 2020. The Company concluded that the carrying value of the trademark for GLAMGLOW exceeded its estimated fair value, which was determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded an impairment charge of $21 million. In addition, the Company concluded that the carrying value of the GLAMGLOW customer lists intangible asset was fully impaired and recorded an impairment charge of $6 million. The fair value of all other long-lived assets of GLAMGLOW exceeded their carrying values and were not impaired as of November 30, 2020. After adjusting the carrying values of the trademark and customer lists intangible assets, the Company completed an interim quantitative impairment test for goodwill and recorded a goodwill impairment charge of $54 million, reducing the carrying value of goodwill for the GLAMGLOW reporting unit to zero. The fair value of the GLAMGLOW reporting unit was based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting unit. The impairment charges for the three and six months ended December 31, 2020 were reflected in the skin care product category and in the Americas region. As of December 31, 2020, the remaining carrying value of the trademark related to the GLAMGLOW reporting unit was $36 million.

Impairment Testing During the Six Months Ended December 31, 2019

During December 2019, given the continuing declines in prestige makeup, generally in North America, and the ongoing competitive activity, the Company’s Too Faced, BECCA and Smashbox reporting units made revisions to their internal forecasts concurrent with the Company's brand strategy review process. The Company concluded that the changes in circumstances in these reporting units triggered the need for an interim impairment review of their respective trademarks and goodwill. These changes in circumstances were also an indicator that the carrying amounts of their respective long-lived assets, including customer lists, may not be recoverable. Accordingly, the Company performed interim impairment tests for the trademarks and recoverability tests for the long-lived assets as of December 31, 2019. The Company concluded that the carrying amounts of the long-lived assets were recoverable. The Company also concluded that the carrying values of the trademarks exceeded their estimated fair values, which were determined utilizing the relief-from-royalty method to determine discounted projected future cash flows, and recorded impairment charges. After adjusting the carrying value of the trademarks, the Company completed interim quantitative impairment tests for goodwill and recorded goodwill impairment charges for each of these reporting units. The fair value of each reporting unit was based upon an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies that are applied to operating performance of the reporting unit. A summary of the impairment charges for the three and six months ended December 31, 2019 and the remaining trademark and goodwill carrying values as of December 31, 2019, for each reporting unit, are as follows:

(In millions)	Impairment Charge				Carrying Value
Reporting Unit:	Trademark		Goodwill		Trademark		Goodwill
Too Faced	$	211	$	430	$	314	$	175
BECCA	33		35		65		63
Smashbox	22		46		33		26
Total	$	266	$	511	$	412	$	264

The impairment charges were recorded in the makeup product category and in the Americas region.

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CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES

6 Months Ended

Dec. 31, 2020

Restructuring and Related Activities [Abstract]

CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES

CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES

Charges associated with restructuring activities for the three months ended December 31, 2020 were as follows:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Leading Beauty Forward Program	$	—	$	2	$	(2)	$	3	$	3
Post-COVID Business Acceleration Program	—		—		34		—		34
Total	$	—	$	2	$	32	$	3	$	37

Charges associated with restructuring activities for the six months ended December 31, 2020 were as follows:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Leading Beauty Forward Program	$	—	$	5	$	(10)	$	5	$	—
Post-COVID Business Acceleration Program	—		—		46		—		46
Total	$	—	$	5	$	36	$	5	$	46

Charges 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 Company-wide initiatives to redesign, resize and reorganize select areas of the business.

Leading Beauty Forward Program

In May 2016, the Company announced a multi-year initiative (“Leading Beauty Forward Program” or “LBF Program”) to build on its strengths and better leverage its cost structure to free resources for investment to continue its growth momentum. The LBF Program is designed to enhance the Company’s go-to-market capabilities, reinforce its leadership in global prestige beauty and continue creating sustainable value. As of June 30, 2019, the Company concluded the approvals of all major initiatives under the LBF Program related to the optimization of select corporate functions, supply chain activities, and corporate and regional market support structures, as well as the exit of underperforming businesses, and expects to substantially complete those initiatives through fiscal 2021.

LBF Program Approvals

The LBF Program approved restructuring and other charges expected to be incurred were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges (Adjustments) Approved
Cumulative through June 30, 2020	$	13	$	85	$	511	$	358	$	967
Six months ended December 31, 2020	1		—		(7)		6		—
Cumulative through December 31, 2020	$	14	$	85	$	504	$	364	$	967

Included in the above table, cumulative LBF Program restructuring initiatives approved by the Company by major cost type were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments) Approved
Cumulative through June 30, 2020	$	460	$	28	$	7	$	16	$	511
Six months ended December 31, 2020	(8)		—		1		—		(7)
Cumulative through December 31, 2020	$	452	$	28	$	8	$	16	$	504

The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met.

LBF Program Restructuring and Other Charges

Total cumulative charges recorded associated with restructuring and other activities for the LBF Program were:

(In millions)	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
					Restructuring Charges		Other Charges
Total Charges (Adjustments)
Cumulative through June 30, 2020	$	14	$	65	$	491	$	304	$	874
Six months ended December 31, 2020	—		5		(10)		5		—
Cumulative through December 31, 2020	$	14	$	70	$	481	$	309	$	874

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments)
Cumulative through June 30, 2020	$	451	$	27	$	6	$	7	$	491
Six months ended December 31, 2020	(12)		1		1		—		(10)
Cumulative through December 31, 2020	$	439	$	28	$	7	$	7	$	481

Employee-related costs reflect adjustments to the accrual estimate for certain employees who either resigned or transferred to other existing positions within the Company.

Changes in accrued restructuring charges for the six months ended December 31, 2020 relating to the LBF Program were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Balance at June 30, 2020	$	112	$	—	$	—	$	—	$	112
Charges (adjustments)	(12)		1		1		—		(10)
Cash payments	(36)		—		—		—		(36)
Translation adjustments	2		—		—		—		2
Balance at December 31, 2020	$	66	$	1	$	1	$	—	$	68

Accrued restructuring charges at December 31, 2020 relating to the LBF Program are expected to result in cash expenditures funded from cash provided by operations of approximately $46 million, $17 million and $5 million for the remainder of fiscal 2021 and for fiscal 2022 and 2023, respectively.

Additional information about the LBF Program is included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Post-COVID Business Acceleration Program

On August 20, 2020, the Company announced a two-year restructuring program, Post-COVID Business Acceleration Program (the “PCBA Program”), designed to resize the Company's business against the dramatic shifts to its distribution landscape and consumer behaviors in the wake of the COVID-19 pandemic. The PCBA Program is designed to help improve efficiency and effectiveness by rebalancing resources to growth areas of prestige beauty. It is expected to further strengthen the Company by building upon the foundational capabilities in which the Company has invested.

The PCBA Program’s main areas of focus include accelerating the shift to online with the realignment of the Company’s distribution network reflecting freestanding store and certain department store closures, with a focus on North America and Europe, the Middle East & Africa; the reduction in brick-and-mortar point of sale employees and related support staff; and the redesign of the Company’s regional branded marketing organizations, plus select opportunities in global brands and functions. This program is expected to position the Company to better execute its long-term strategy while strengthening its financial flexibility.

In connection with the PCBA Program, at this time the Company estimates a net reduction in the range of approximately 1,500 to 2,000 positions globally, which is approximately 3% of its current workforce including temporary and part-time employees. This reduction takes into account the elimination of some positions, retraining and redeployment of certain employees and investment in new positions in key areas. The Company also estimates the closure of approximately 10% to 15% of its freestanding stores globally, primarily in Europe, the Middle East & Africa and in North America.

The Company plans to approve specific initiatives under the PCBA Program through fiscal 2022 and expects to complete those initiatives through fiscal 2023. The Company expects that the PCBA Program will result in related restructuring and other charges totaling between $400 million and $500 million, before taxes.

PCBA Program Approvals

The PCBA Program cumulative charges approved by the Company through December 31, 2020 were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges (Adjustments) Approved
Six months ended December 31, 2020	$	5	$	(1)	$	46	$	16	$	66

Included in the above table, cumulative PCBA Program restructuring initiatives approved by the Company through December 31, 2020 by major cost type were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments) Approved
Six months ended December 31, 2020	$	46	$	4	$	(7)	$	3	$	46

Specific actions taken since the PCBA Program inception include:

•Optimize Distribution Network – To help restore profitability to pre-COVID-19 pandemic levels and, as part of a broader initiative to be completed in phases, the Company has approved initiatives to close a number of underperforming freestanding stores and counters, mainly in the United Kingdom and certain affiliates in Europe, the Middle East & Africa. These anticipated closures reflect changing consumer behavior including higher demand for online and omnichannel capabilities. These activities will result in product returns, inventory write-offs, reduction of workforce, and termination of contracts.

•Optimize Digital Organization – The Company approved initiatives to enhance its go-to-market support structures and align more resources to support online and digital activities. These initiatives are primarily intended to shift certain areas of focus from traditional brick-and-mortar to social and digital strategies to provide enhanced consumer experience, as well as to support expanded omnichannel opportunities. These actions will result in a net reduction of the workforce, which includes position eliminations, the re-leveling of certain positions and an investment in new capabilities.

•Optimize Select Global Functions – The Company has started to reduce its corporate office footprint and is moving toward the future of work in a post-COVID environment, by restructuring where and how its employees work and collaborate. These actions will result primarily in lease termination fees.

PCBA Program Restructuring and Other Charges

Restructuring charges are comprised of the following:

Employee-Related Costs – Employee-related costs are primarily comprised of severance and other post-employment benefit costs, calculated based on salary levels, prior service and other statutory minimum benefits, if applicable.

Asset-Related Costs – Asset-related costs primarily consist of asset write-offs or accelerated depreciation related to long-lived assets (including operating lease right-of-use assets) that will be taken out of service prior to their existing useful life as a direct result of a restructuring initiative.

Contract Terminations – Costs related to contract terminations include continuing payments to a third party after the Company has ceased benefiting from the rights conveyed in the contract, or a payment made to terminate a contract prior to its expiration.

Other Exit Costs – Other exit costs related to restructuring activities generally include costs to relocate facilities or employees, recruiting to fill positions as a result of relocation of operations, and employee outplacement for separated employees.

Other charges associated with restructuring activities are comprised of the following:

Sales Returns and Cost of Sales – Product returns (offset by the related cost of sales) and inventory write-offs or write-downs as a direct result of an approved restructuring initiative to exit certain businesses or locations will be recorded as a component of Net sales and/or Cost of sales when estimable and reasonably assured.

Other Charges – The Company approved other charges related to the design and implementation of approved initiatives, which are charged to Operating Expenses as incurred and primarily include the following:

•Consulting and other professional services for organizational design of the future structures and processes as well as the implementation thereof,

•Temporary labor backfill,

•Costs to establish and maintain a Project Management Office (“PMO”) for the duration of the PCBA Program, including internal costs for employees dedicated solely to project management activities, and other PMO-related expenses incremental to the Company’s ongoing operations (e.g., rent and utilities), and

•Recruitment and training costs for new and reskilled employees to acquire and apply the capabilities needed to perform responsibilities as a direct result of an approved restructuring initiative.

The Company records approved charges associated with restructuring and other activities once the relevant accounting criteria have been met. Total cumulative charges recorded associated with restructuring and other activities for the PCBA Program were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges
Six months ended December 31, 2020	$	—	$	—	$	46	$	—	$	46

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges
Six months ended December 31, 2020	$	45	$	—	$	1	$	—	$	46

Changes in accrued restructuring charges for the six months ended December 31, 2020 relating to the PCBA Program were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Charges	$	45	$	—	$	1	$	—	$	46
Cash payments	(4)		—		(1)		—		(5)
Balance at December 31, 2020	$	41	$	—	$	—	$	—	$	41

Accrued restructuring charges at December 31, 2020 relating to the PCBA Program are expected to result in cash expenditures funded from cash provided by operations of approximately $35 million, $5 million, and $1 million for the remainder of fiscal 2021 and for fiscal 2022 and 2023, respectively.

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DERIVATIVE FINANCIAL INSTRUMENTS

6 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

DERIVATIVE FINANCIAL INSTRUMENTSThe Company addresses certain financial exposures through a controlled program of risk management that includes the use of derivative financial instruments. The Company enters into foreign currency forward contracts, and may enter into option contracts, to reduce the effects of fluctuating foreign currency exchange rates. In addition, the Company enters into interest rate derivatives to manage the effects of interest rate movements on the Company’s aggregate liability portfolio, including potential future debt issuances. The Company enters into the net investment hedges to offset the risk of changes in the U.S. dollar value of the Company’s investment in these foreign operations due to fluctuating foreign exchange rates. Time value is excluded from the effectiveness assessment and is recognized under a systematic and rational method over the life of the hedging instrument in Selling, general and administrative expenses. The net gain or loss on net investment hedges is recorded within translation adjustments, as a component of accumulated OCI (“AOCI”) on the Company’s consolidated balance sheets, until the sale or substantially complete liquidation of the underlying assets of the Company’s investment. The Company also enters into foreign currency forward contracts, and may use option contracts, not designated as hedging instruments, to mitigate the change in fair value of specific assets and liabilities on the consolidated balance sheets. At December 31, 2020, the notional amount of derivatives not designated as hedging instruments was $4,118 million. The Company does not utilize derivative financial instruments for trading or speculative purposes. Costs associated with entering into derivative financial instruments have not been material to the Company’s consolidated financial results.

For each derivative contract entered into, where the Company looks to obtain hedge accounting treatment, the Company formally and contemporaneously documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking the hedge transaction, the nature of the risk being hedged, and how the hedging instruments’ effectiveness in offsetting the hedged risk will be assessed prospectively and retrospectively. This process includes linking all derivatives to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. At inception, the Company evaluates the effectiveness of hedge relationships quantitatively, and has elected to perform, after initial evaluation, qualitative effectiveness assessments of certain hedge relationships to support an ongoing expectation of high effectiveness, if effectiveness testing is required. If based on the qualitative assessment, it is determined that a derivative has ceased to be a highly effective hedge, the Company will perform a quantitative assessment to determine whether to discontinue hedge accounting with respect to that derivative prospectively.

The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are presented as follows:

	Asset Derivatives					Liability Derivatives
		Fair Value (1)					Fair Value (1)
(In millions)	Balance Sheet Location	December 31 2020		June 30 2020		Balance Sheet Location	December 31 2020		June 30 2020
Derivatives Designated as Hedging Instruments
Foreign currency cash flow hedges	Prepaid expenses and other current assets	$	—	$	26	Other accrued liabilities	$	37	$	3
Net investment hedges	Prepaid expenses and other current assets	21		21		Other accrued liabilities	71		62
Interest rate-related derivatives	Prepaid expenses and other current assets	11		15		Other accrued liabilities	—		3
Total Derivatives Designated as Hedging Instruments		32		62			108		68
Derivatives Not Designated as Hedging Instruments
Foreign currency forward contracts	Prepaid expenses and other current assets	52		40		Other accrued liabilities	29		15
Total derivatives		$	84	$	102		$	137	$	83

(1)See Note 6 – Fair Value Measurements for further information about how the fair value of derivative assets and liabilities are determined.

The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments that are included in the assessment of effectiveness are as follows:

	Amount of Gain or (Loss) Recognized in OCI on Derivatives				Location of Gain or (Loss) Reclassified from AOCI into Earnings	Amount of Gain or (Loss) Reclassified from AOCI into Earnings(1)
	Three Months Ended December 31					Three Months Ended December 31
(In millions)	2020		2019			2020		2019
Derivatives in Cash Flow Hedging Relationships:
Foreign currency forward contracts	$	(34)	$	(21)	Net sales	$	(5)	$	6
Interest rate-related derivatives	3		5		Interest expense	—		—
	(31)		(16)			(5)		6
Derivatives in Net Investment Hedging Relationships(2):
Foreign currency forward contracts(3)	(79)		(37)			—		—
Total derivatives	$	(110)	$	(53)		$	(5)	$	6

(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material.

(2)During the three months ended December 31, 2020 and December 31, 2019, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $5 million and $13 million, respectively.

(3)Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.

	Amount of Gain or (Loss) Recognized in OCI on Derivatives				Location of Gain or (Loss) Reclassified from AOCI into Earnings	Amount of Gain or (Loss) Reclassified from AOCI into Earnings(1)
	Six Months Ended December 31					Six Months Ended December 31
(In millions)	2020		2019			2020		2019
Derivatives in Cash Flow Hedging Relationships:
Foreign currency forward contracts	$	(65)	$	4	Net sales	$	(4)	$	19
Interest rate-related derivatives	3		(9)		Interest expense	(1)		—
	(62)		(5)			(5)		19
Derivatives in Net Investment Hedging Relationships(2):
Foreign currency forward contracts(3)	(142)		(34)			—		—
Total derivatives	$	(204)	$	(39)		$	(5)	$	19

(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material.

(2)During the six months ended December 31, 2020 and December 31, 2019, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $10 million and $25 million, respectively.

(3)Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.

		Amount of Gain or (Loss) Recognized in Earnings on Derivatives (1)
	Location of Gain or (Loss) Recognized in Earnings on Derivatives
		Three Months Ended December 31				Six Months Ended December 31
(In millions)		2020		2019		2020		2019
Derivatives in Fair Value Hedging Relationships:
Interest rate swap contracts	Interest expense	$	(3)	$	(1)	$	(5)	$	1

(1)Changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt.

Additional information regarding the cumulative amount of fair value hedging gain (loss) recognized in earnings for items designated and qualifying as hedged items in fair value hedges is as follows:

(In millions)
Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included	Carrying Amount of the Hedged Liabilities		Cumulative Amount of Fair Value Hedging Gain/(Loss) Included in the Carrying Amount of the Hedged Liability
	December 31, 2020		December 31, 2020
Current debt	$	452	$	2
Long-term debt	258		8
Total debt	$	710	$	10

Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows:

	Three Months Ended December 31
	2020				2019
(In millions)	Net Sales		Interest Expense		Net Sales		Interest Expense
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	$	4,853	$	43	$	4,624	$	38
The effects of fair value and cash flow hedging relationships:
Gain (loss) on fair value hedge relationships – interest rate contracts:
Hedged item	Not applicable		3		Not applicable		1
Derivatives designated as hedging instruments	Not applicable		(3)		Not applicable		(1)
Gain (loss) on cash flow hedge relationships – interest rate contracts:
Amount of loss reclassified from AOCI into earnings	Not applicable		—		Not applicable		—
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings	(5)		Not applicable		6		Not applicable

	Six Months Ended December 31
	2020				2019
(In millions)	Net Sales		Interest Expense		Net Sales		Interest Expense
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	$	8,415	$	88	$	8,519	$	70
The effects of fair value and cash flow hedging relationships:
Gain (loss) on fair value hedge relationships – interest rate contracts:
Hedged item	Not applicable		5		Not applicable		(1)
Derivatives designated as hedging instruments	Not applicable		(5)		Not applicable		1
Gain (loss) on cash flow hedge relationships – interest rate contracts:
Amount of loss reclassified from AOCI into earnings	Not applicable		(1)		Not applicable		—
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings	(4)		Not applicable		19		Not applicable

The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows:

		Amount of Gain or (Loss) Recognized in Earnings on Derivatives
	Location of Gain or (Loss) Recognized in Earnings on Derivatives	Three Months Ended December 31				Six Months Ended December 31
(In millions)		2020		2019		2020		2019
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward contracts	Selling, general and administrative	$	42	$	30	$	63	$	3

Cash Flow Hedges

The Company enters into foreign currency forward contracts, and may enter into foreign currency option contracts, to hedge anticipated transactions and receivables and payables denominated in foreign currencies, for periods consistent with the Company’s identified exposures. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the cash flows that the Company receives from foreign subsidiaries. The foreign currency forward contracts entered into to hedge anticipated transactions have been designated as cash flow hedges and have varying maturities through the end of September 2022. Hedge effectiveness of the foreign currency forward contracts is based on the forward method, which includes time value in the effectiveness assessment. At December 31, 2020, the Company had cash flow hedges outstanding with a notional amount totaling $1,195 million.

The Company may enter into interest rate forward contracts to hedge anticipated issuance of debt for periods consistent with the Company’s identified exposures. The purpose of the hedging activities is to minimize the effect of interest rate movements on the cost of debt issuance.

For hedge contracts that are no longer deemed highly effective, hedge accounting is discontinued, and gains and losses in AOCI are reclassified to sales when the underlying forecasted transaction occurs. If it is probable that the forecasted transaction will no longer occur, then any gains or losses in AOCI are reclassified to current-period sales. As of December 31, 2020, the Company’s foreign currency cash flow hedges were highly effective.

The estimated net loss on the Company’s derivative instruments designated as cash flow hedges as of December 31, 2020 that is expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months is $25 million. The accumulated net gain (loss) on derivative instruments in AOCI was $(37) million and $20 million as of December 31, 2020 and June 30, 2020, respectively.

Fair Value Hedges

The Company enters into interest rate derivative contracts to manage the exposure to interest rate fluctuations on its funded indebtedness. The Company has interest rate swap agreements, with notional amounts totaling $450 million and $250 million to effectively convert the fixed rate interest on its 2021 Senior Notes and 2022 Senior Notes, respectively, to variable interest rates based on three-month LIBOR plus a margin. These interest rate swap agreements are designated as fair value hedges of the related long-term debt, and the changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt.

Net Investment Hedges

The Company enters into foreign currency forward contracts, designated as net investment hedges, to hedge a portion of its net investment in certain foreign operations. The net gain or loss on these contracts is recorded within translation adjustments, as a component of AOCI on the Company’s consolidated balance sheets. The purpose of the hedging activities is to minimize the effect of foreign exchange rate movements on the Company’s net investment in these foreign operations. The net investment hedge contracts have varying maturities through the end of January 2021. Hedge effectiveness of the net investment hedge contracts is based on the spot method. At December 31, 2020, the Company had net investment hedges outstanding with a notional amount totaling $1,879 million.

Credit Risk

As a matter of policy, the Company enters into derivative contracts only with counterparties that have a long-term credit rating of at least A- or higher by at least two nationally recognized rating agencies. The counterparties to these contracts are major financial institutions. Exposure to credit risk in the event of nonperformance by any of the counterparties is limited to the gross fair value of contracts in asset positions, which totaled $84 million at December 31, 2020. To manage this risk, the Company has strict counterparty credit guidelines that are continually monitored. Accordingly, management believes risk of loss under these hedging contracts is remote.

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FAIR VALUE MEASUREMENTS

6 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS

The Company records certain of its financial assets and liabilities at fair value, which is defined as the price that would be received to sell an asset or paid to transfer a liability, in the principal or most advantageous market for the asset or liability, in an orderly transaction between market participants at the measurement date. The accounting for fair value measurements must be applied to nonfinancial assets and nonfinancial liabilities that require initial measurement or remeasurement at fair value, which principally consist of assets and liabilities acquired through business combinations and goodwill, indefinite-lived intangible assets and long-lived assets for the purposes of calculating potential impairment. The Company is required to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of inputs that may be used to measure fair value are as follows:

Level 1:    Inputs based on quoted market prices for identical assets or liabilities in active markets at the measurement date.

Level 2:    Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3:    Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. The inputs are unobservable in the market and significant to the instrument’s valuation.

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2020:

(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	2,549	$	—	$	—	$	2,549
Foreign currency forward contracts	—		73		—		73
Interest rate-related derivatives	—		11		—		11
Total	$	2,549	$	84	$	—	$	2,633
Liabilities:
Foreign currency forward contracts	$	—	$	137	$	—	$	137
Contingent consideration	—		—		2		2
Total	$	—	$	137	$	2	$	139

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2020:

(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	2,810	$	—	$	—	$	2,810
Foreign currency forward contracts	—		87		—		87
Interest rate-related derivatives	—		15		—		15
Total	$	2,810	$	102	$	—	$	2,912
Liabilities:
Foreign currency forward contracts	$	—	$	80	$	—	$	80
Interest rate-related derivatives	—		3		—		3
Contingent consideration	—		—		4		4
Total	$	—	$	83	$	4	$	87

The estimated fair values of the Company’s financial instruments are as follows:

	December 31 2020				June 30 2020
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Nonderivatives
Cash and cash equivalents	$	5,545	$	5,545	$	5,022	$	5,022
Current and long-term debt	5,383		6,315		6,136		6,902
Contingent consideration	2		2		4		4
Derivatives
Foreign currency forward contracts – asset (liability), net	(64)		(64)		7		7
Interest rate-related derivatives – asset (liability), net	11		11		12		12

The following table presents the Company’s impairment charges for the three and six months ended December 31, 2020 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test:

(In millions)	Impairment charges		Date of Fair Value Measurement	Fair Value
Goodwill	$	54	November 30, 2020	$	—
Other intangible assets, net (trademark and customer lists)	27		November 30, 2020	36
Total	$	81		$	36

(1)See Note 3 - Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.

The following table presents the Company’s impairment charges for the three and six months ended December 31, 2019 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test:

(In millions)	Impairment charges		Date of Fair Value Measurement	Fair Value
Goodwill	$	511	December 31, 2019	$	264
Other intangible assets, net (trademark)	266		December 31, 2019	412
Total	$	777		$	676

(1)See Note 3 - Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.

The following methods and assumptions were used to estimate the fair value of the Company’s financial instruments for which it is practicable to estimate that value:

Cash and cash equivalents – Cash and all highly-liquid securities with original maturities of three months or less are classified as cash and cash equivalents, primarily consisting of cash deposits in interest bearing accounts, time deposits and money market funds (classified within Level 1 of the valuation hierarchy). Cash deposits in interest bearing accounts and time deposits are carried at cost, which approximates fair value due to the short maturity of cash equivalent instruments.

Foreign currency forward contracts – The fair values of the Company’s foreign currency forward contracts were determined using an industry-standard valuation model, which is based on an income approach. The significant observable inputs to the model, such as swap yield curves and currency spot and forward rates, were obtained from an independent pricing service. To determine the fair value of contracts under the model, the difference between the contract price and the current forward rate was discounted using LIBOR for contracts with maturities up to 12 months, and swap yield curves for contracts with maturities greater than 12 months.

Interest rate contracts – The fair values of the Company’s interest rate contracts were determined using an industry-standard valuation model, which is based on the income approach. The significant observable inputs to the model, such as treasury yield curves, swap yield curves and LIBOR forward rates, were obtained from independent pricing services.

Current and long-term debt – The fair value of the Company’s debt was estimated based on the current rates offered to the Company for debt with the same remaining maturities. To a lesser extent, debt also includes finance lease obligations for which the carrying amount approximates the fair value. The Company’s debt is classified within Level 2 of the valuation hierarchy.

Contingent consideration – Contingent consideration obligations consist of potential obligations related to the Company’s acquisitions in previous years. The amounts to be paid under these obligations are contingent upon the achievement of stipulated financial targets by the business subsequent to acquisition. At December 31, 2020, the fair values of the contingent consideration related to certain acquisition earn-outs were based on the Company’s estimate of the applicable financial targets as per the terms of the agreements. Significant changes in the projected future operating results would result in a significantly higher or lower fair value measurement. As these are unobservable inputs, the Company’s contingent consideration is classified within Level 3 of the valuation hierarchy.

Changes in the fair value of the contingent consideration obligations for six months ended December 31, 2020 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and were as follows:

(In millions)	Fair Value
Contingent consideration at June 30, 2020	$	4
Changes in fair value	(2)
Contingent consideration at December 31, 2020	$	2

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REVENUE RECOGNITION

6 Months Ended

Dec. 31, 2020

Revenue from Contract with Customer [Abstract]

REVENUE RECOGNITION

REVENUE RECOGNITION

The Company’s revenue recognition accounting policies are described in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Accounts Receivable

Accounts receivable, net is stated net of the allowance for doubtful accounts and customer deductions totaling $66 million and $63 million as of December 31, 2020 and June 30, 2020, respectively. During the first quarter of fiscal 2021, the Company adopted ASC 326 using the modified retrospective transition approach and, accordingly, the prior comparative period was not restated. Under this new standard, the Company is required to measure credit losses based on the Company’s estimate of expected losses rather than incurred losses, which generally results in earlier recognition of allowances for credit losses. In accordance with ASC 326, the Company evaluated certain criteria, including aging and historical write-offs, current economic condition of specific customers and future economic conditions of countries utilizing a consumption index to determine the appropriate allowance for credit losses. The Company writes-off receivables once it is determined that the receivables are no longer collectible and as allowed by local laws. Payment terms are short-term in nature and are generally less than one year.

Changes in the allowance for credit losses are as follows:

(In millions)	December 31 2020
Balance at June 30, 2020	$	36
ASC 326 cumulative effect adjustment (pre-tax)	4
Provision for expected credit losses	7
Write-offs, net & other	(8)
Balance at December 31, 2020	$	39

As a result of the adoption of ASC 326, the Company recorded a cumulative adjustment of approximately $3 million, net of tax, as a reduction to its fiscal 2021 opening balance of retained earnings relating to its trade receivables.

The remaining balance of the allowance for doubtful accounts of $27 million, as of December 31, 2020, relates to non-credit losses, which are primarily due to customer deductions.

Deferred Revenue

Changes in deferred revenue during the period are as follows:

	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019
Deferred revenue, beginning of period	$	409	$	392	$	279	$	361
Revenue recognized that was included in the deferred revenue balance at the beginning of the period	(83)		(83)		(173)		(243)
Revenue deferred during the period	92		112		308		307
Other	2		4		6		—
Deferred revenue, end of period	$	420	$	425	$	420	$	425

Transaction Price Allocated to the Remaining Performance Obligations

At December 31, 2020, the combined estimated revenue expected to be recognized in the next twelve months related to performance obligations for customer loyalty programs, gift with purchase promotions, purchase with purchase promotions and gift card liabilities that are unsatisfied (or partially unsatisfied) is $365 million, and the remaining balance will be recognized beyond the next twelve months.

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PENSION AND POST-RETIREMENT BENEFIT PLANS

6 Months Ended

Dec. 31, 2020

Retirement Benefits [Abstract]

PENSION AND POST-RETIREMENT BENEFIT PLANS

PENSION AND POST-RETIREMENT BENEFIT PLANSThe Company maintains pension plans covering substantially all of its full-time employees for its U.S. operations and a majority of its international operations. The Company also maintains post-retirement benefit plans that provide certain medical and dental benefits to eligible employees. Descriptions of these plans are included in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

The components of net periodic benefit cost for the three months ended December 31, 2020 and 2019 consisted of the following:

	Pension Plans								Other than Pension Plans
	U.S.				International				Post-retirement
(In millions)	2020		2019		2020		2019		2020		2019
Service cost	$	11	$	10	$	9	$	9	$	—	$	1
Interest cost	7		9		3		2		2		1
Expected return on plan assets	(13)		(13)		(3)		(4)		—		—
Amortization of:
Actuarial loss	5		3		1		2		—		—
Special termination benefits	—		—		7		—		—		—
Net periodic benefit cost	$	10	$	9	$	17	$	9	$	2	$	2

The components of net periodic benefit cost for the six months ended December 31, 2020 and 2019 consisted of the following:

	Pension Plans								Other than Pension Plans
	U.S.				International				Post-retirement
(In millions)	2020		2019		2020		2019		2020		2019
Service cost	$	22	$	20	$	18	$	18	$	—	$	2
Interest cost	15		17		5		5		3		3
Expected return on plan assets	(26)		(26)		(6)		(7)		—		(1)
Amortization of:
Actuarial loss	10		7		2		3		—		—
Special termination benefits	—		—		9		—		—		—
Net periodic benefit cost	$	21	$	18	$	28	$	19	$	3	$	4

During the six months ended December 31, 2020, the Company made contributions to its international pension plans totaling $18 million.

The amounts recognized in the consolidated balance sheets related to the Company’s pension and post-retirement benefit plans consist of the following:

(In millions)	December 31 2020		June 30 2020
Other assets	$	138	$	127
Other accrued liabilities	(27)		(27)
Other noncurrent liabilities	(472)		(440)
Funded status	(361)		(340)
Accumulated other comprehensive loss	314		324
Net amount recognized	$	(47)	$	(16)

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CONTINGENCIES

6 Months Ended

Dec. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

CONTINGENCIES

CONTINGENCIES

Legal Proceedings

The Company is involved, from time to time, in litigation and other legal proceedings incidental to its business, including employment, intellectual property, real estate, environmental, regulatory, advertising, trade relations, tax, privacy, and product liability matters (including asbestos-related claims). Management believes that the outcome of current litigation and legal proceedings will not have a material adverse effect upon the Company’s business, results of operations, financial condition or cash flows. However, management’s assessment of the Company’s current litigation and other legal proceedings could change in light of the discovery of facts with respect to legal actions or other proceedings pending against the Company not presently known to the Company or determinations by judges, juries or other finders of fact which are not in accord with management’s evaluation of the possible liability or outcome of such litigation or proceedings. Reasonably possible losses in addition to the amounts accrued for such litigation and legal proceedings are not material to the Company’s consolidated financial statements.

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STOCK PROGRAMS

6 Months Ended

Dec. 31, 2020

Share-based Payment Arrangement [Abstract]

STOCK PROGRAMS

STOCK PROGRAMS

Total net stock-based compensation expense is attributable to the granting of, and the remaining requisite service periods of stock options, restricted stock units (“RSUs”), performance share units (“PSUs”), long-term PSUs, and share units. Compensation expense attributable to net stock-based compensation was $105 million and $83 million for the three months ended December 31, 2020 and 2019, respectively, and was $169 million and $139 million for the six months ended December 31, 2020 and 2019, respectively.

Stock Options

During the six months ended December 31, 2020, the Company granted stock options in respect of approximately 1.5 million shares of Class A Common Stock with an exercise price per share of $218.40 and a weighted-average grant date fair value per share of $54.61. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model. The aggregate intrinsic value of stock options exercised during the six months ended December 31, 2020 was $209 million.

Restricted Stock Units

The Company granted RSUs in respect of approximately 0.9 million shares of Class A Common Stock during the six months ended December 31, 2020 with a weighted-average grant date fair value per share of $218.10 that, at the time of grant, are scheduled to vest at 0.3 million shares per year, in fiscal 2022, 2023 and 2024. Vesting of RSUs is generally subject to the continued employment or the retirement of the grantees. The RSUs are accompanied by dividend equivalent rights, payable upon settlement of the RSUs either in cash or shares (based on the terms of the particular award) and, as such, were valued at the closing market price of the Company’s Class A Common Stock on the date of grant.

Performance Share Units

During the six months ended December 31, 2020, the Company granted PSUs with a target payout of approximately 0.1 million shares of Class A Common Stock with a grant date fair value per share of $218.11, which will be settled in stock subject to the achievement of the Company’s net sales and diluted net earnings per common share for the three fiscal years ending June 30, 2023, all subject to continued employment or the retirement of the grantees. For PSUs granted, no settlement will occur for results below the applicable minimum threshold. PSUs are accompanied by dividend equivalent rights that will be payable in cash upon settlement of the PSUs and, as such, were valued at the closing market value of the Company’s Class A Common Stock on the date of grant.

In September 2020, approximately 0.2 million shares of the Company’s Class A Common Stock were issued, and related accrued dividends were paid, relative to the target goals set at the time of the issuance, in settlement of 0.5 million PSUs which vested as of June 30, 2020.

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NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE

6 Months Ended

Dec. 31, 2020

Earnings Per Share [Abstract]

NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE

NET EARNINGS ATTRIBUTABLE TO THE ESTÉE LAUDER COMPANIES INC. PER COMMON SHARE

Net earnings attributable to The Estée Lauder Companies Inc. per common share (“basic EPS”) is computed by dividing net earnings attributable to The Estée Lauder Companies Inc. by the weighted-average number of common shares outstanding and shares underlying PSUs and RSUs where the vesting conditions have been met. Net earnings attributable to The Estée Lauder Companies Inc. per common share assuming dilution (“diluted EPS”) is computed by reflecting potential dilution from stock-based awards.

A reconciliation between the numerator and denominator of the basic and diluted EPS computations is as follows:

	Three Months Ended December 31				Six Months Ended December 31
(In millions, except per share data)	2020		2019		2020		2019
Numerator:
Net earnings attributable to The Estée Lauder Companies Inc.	$	873	$	557	$	1,396	$	1,152
Denominator:
Weighted-average common shares outstanding – Basic	363.0		360.2		363.4		360.8
Effect of dilutive stock options	3.8		4.7		3.8		4.8
Effect of PSUs	0.2		0.3		0.2		0.2
Effect of RSUs	1.0		1.5		1.1		1.9
Weighted-average common shares outstanding – Diluted	368.0		366.7		368.5		367.7
Net earnings attributable to The Estée Lauder Companies Inc. per common share:
Basic	$	2.40	$	1.55	$	3.84	$	3.19
Diluted	$	2.37	$	1.52	$	3.79	$	3.13

As of December 31, 2020 and 2019, the number of shares of Class A Common Stock underlying options that were excluded in the computation of diluted EPS because their inclusion would be anti-dilutive was 1.5 million and 1.3 million shares, respectively. As of December 31, 2020 and 2019, 0.8 million and 1.1 million shares, respectively, of Class A Common Stock underlying PSUs have been excluded from the calculation of diluted EPS because the number of shares ultimately issued is contingent on the achievement of certain performance targets of the Company, as discussed in Note 10 – Stock Programs.

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EQUITY

6 Months Ended

Dec. 31, 2020

Equity [Abstract]

EQUITY

EQUITY

Total Stockholders’ Equity – The Estée Lauder Companies Inc.

	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019
Common stock, beginning of the period	$	6	$	6	$	6	$	6
Stock-based compensation	—		—		—		—
Common stock, end of the period	6		6		6		6
Paid-in capital, beginning of the period	4,913		4,514		4,790		4,403
Common stock dividends	—		1		1		2
Stock-based compensation	155		100		277		210
Paid-in capital, end of the period	5,068		4,615		5,068		4,615
Retained earnings, beginning of the period	10,480		10,393		10,134		9,984
Common stock dividends	(194)		(175)		(368)		(332)
Net earnings attributable to The Estée Lauder Companies Inc.	873		557		1,396		1,152
Cumulative effect of adoption of new accounting standards	—		—		(3)		(29)
Retained earnings, end of the period	11,159		10,775		11,159		10,775
Accumulated other comprehensive loss, beginning of the period	(594)		(627)		(665)		(563)
Other comprehensive income (loss)	211		58		282		(6)
Accumulated other comprehensive loss, end of the period	(383)		(569)		(383)		(569)
Treasury stock, beginning of the period	(10,353)		(9,756)		(10,330)		(9,444)
Acquisition of treasury stock	—		(426)		—		(703)
Stock-based compensation	(76)		(71)		(99)		(106)
Treasury stock, end of the period	(10,429)		(10,253)		(10,429)		(10,253)
Total stockholders’ equity – The Estée Lauder Companies Inc.	5,421		4,574		5,421		4,574
Noncontrolling interests, beginning of the period	29		28		27		25
Net earnings attributable to noncontrolling interests	4		4		6		7
Distribution to noncontrolling interest holders	—		(4)		—		(4)
Other comprehensive (income) loss	2		(1)		2		(1)
Noncontrolling interests, end of the period	35		27		35		27
Total equity	$	5,456	$	4,601	$	5,456	$	4,601
Cash dividends declared per common share	$	.53	$	.48	$	1.01	$	.91

The following is a summary of quarterly cash dividends declared per share on the Company’s Class A and Class B Common Stock during the six months ended December 31, 2020:

Date Declared	Record Date	Payable Date	Amount per Share
August 19, 2020	August 31, 2020	September 15, 2020	$	.48
October 30, 2020	November 30, 2020	December 15, 2020	$	.53

On February 4, 2021, a dividend was declared in the amount of $.53 per share on the Company’s Class A and Class B Common Stock. The dividend is payable in cash on March 15, 2021 to stockholders of record at the close of business on February 26, 2021.

Common Stock

Beginning in early February 2020, the Company temporarily suspended its repurchase of shares of the Company's Class A Common Stock. The Company may resume repurchases in the future.

During the six months ended December 31, 2020, approximately 2.2 million shares of the Company’s Class B Common Stock were converted into the same amount of shares of the Company’s Class A Common Stock.

Accumulated Other Comprehensive Income

The following table represents changes in AOCI, net of tax, by component for the six months ended December 31, 2020:

(In millions)	Net Cash Flow Hedge Gain (Loss)		Retirement Plan and Other Retiree Benefit Adjustments			Translation Adjustments			Total
Balance at June 30, 2020	$	14	$	(244)		$	(435)		$	(665)
OCI before reclassifications	(48)		(2)		(1)	318		(2)	268
Amounts reclassified to Net earnings	4		10			—			14
Net current-period OCI	(44)		8			318			282
Balance at December 31, 2020	$	(30)	$	(236)		$	(117)		$	(383)

(1)Consists of foreign currency translation losses.

(2)See Note 5 – Derivative Financial Instruments for gains (losses) relating to net investment hedges.

The following table represents the effects of reclassification adjustments from AOCI into net earnings for the three and six months ended December 31, 2020 and 2019:

	Amount Reclassified from AOCI								Affected Line Item in Consolidated Statements of Earnings
	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019
Gain (Loss) on Cash Flow Hedges
Foreign currency forward contracts	$	(5)	$	6	$	(4)	$	19	Net sales
Interest rate-related derivatives	—		—		(1)		—		Interest expense
	(5)		6		(5)		19
Benefit (provision) for deferred taxes	1		(2)		1		(5)		Provision for income taxes
	$	(4)	$	4	(4)		$	14	Net earnings
Retirement Plan and Other Retiree Benefit Adjustments
Amortization of actuarial loss	$	(6)	$	(5)	$	(12)	$	(10)	Earnings before income taxes (1)
Benefit for deferred taxes	1		1		2		2		Provision for income taxes
	$	(5)	$	(4)	$	(10)	$	(8)	Net earnings
Cumulative Translation Adjustments
Gain on previously held equity method investment	$	—	$	4	$	—	$	4	Other income
Loss on liquidation of an investment in a foreign subsidiary	—		—		—		(6)		Restructuring and other charges
	$	—	$	4	—		$	(2)	Net earnings
Total reclassification adjustments, net	$	(9)	$	4	$	(14)	$	4	Net earnings

(1)See Note 8 – Pension and Post-Retirement Benefit Plans for additional information.

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STATEMENT OF CASH FLOWS

6 Months Ended

Dec. 31, 2020

Supplemental Cash Flow Elements [Abstract]

STATEMENT OF CASH FLOWS

STATEMENT OF CASH FLOWS

Supplemental cash flow information for the six months ended December 31, 2020 and 2019 is as follows:

(In millions)	2020		2019
Cash:
Cash paid during the period for interest	$	84	$	63
Cash paid during the period for income taxes	$	320	$	314
Non-cash investing and financing activities:
Capitalized interest and asset retirement obligations incurred	$	1	$	—
Property, plant and equipment accrued but unpaid	$	63	$	53
Right-of-use assets obtained in exchange for new finance lease liabilities	$	1	$	—
Right-of-use assets obtained in exchange for new operating lease liabilities	$	148	$	110

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SEGMENT DATA AND RELATED INFORMATION

6 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

SEGMENT DATA AND RELATED INFORMATION

SEGMENT DATA AND RELATED INFORMATION

Reportable operating segments include components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (the “Chief Executive”) in deciding how to allocate resources and in assessing performance. Although the Company operates in one business segment, beauty products, management also evaluates performance on a product category basis. Product category performance is measured based upon net sales before returns associated with restructuring and other activities, and earnings before income taxes, other components of net periodic benefit cost, interest expense, interest income and investment income, net, other income, net, and charges associated with restructuring and other activities. Returns and charges 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 Company-wide initiatives to redesign, resize and reorganize select areas of the business.

The accounting policies for the Company’s reportable segments are substantially the same as those for the consolidated financial statements, as described in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020. The assets and liabilities of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements; thus, no additional information is produced for the Chief Executive or included herein. There has been no significant variance in the total or long-lived asset values associated with the Company’s segment data since June 30, 2020.

	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019
PRODUCT CATEGORY DATA
Net sales:
Skin Care	$	2,819	$	2,205	$	4,854	$	4,047
Makeup	1,247		1,660		2,225		3,103
Fragrance	618		581		1,024		1,043
Hair Care	154		162		290		298
Other	15		16		22		28
Net sales	$	4,853	$	4,624	$	8,415	$	8,519
Operating income (loss) before charges associated with restructuring and other activities:
Skin Care	$	928	$	772	$	1,649	$	1,404
Makeup	28		(611)		(43)		(507)
Fragrance	141		97		201		163
Hair Care	4		12		7		12
Other	(1)		4		—		6
	1,100		274		1,814		1,078
Reconciliation:
Charges associated with restructuring and other activities	(37)		(13)		(46)		(38)
Interest expense	(43)		(38)		(88)		(70)
Interest income and investment income, net	17		13		31		27
Other components of net periodic benefit cost	(7)		(1)		(10)		(2)
Other income	—		576		—		576
Earnings before income taxes	$	1,030	$	811	$	1,701	$	1,571
GEOGRAPHIC DATA(1)
Net sales:
The Americas	$	1,048	$	1,226	$	1,921	$	2,386
Europe, the Middle East & Africa	2,030		2,079		3,570		3,756
Asia/Pacific	1,775		1,319		2,924		2,377
Net sales	$	4,853	$	4,624	$	8,415	$	8,519
Operating income (loss):
The Americas	$	36	$	(529)	$	101	$	(354)
Europe, the Middle East & Africa	657		505		1,068		882
Asia/Pacific	407		298		645		550
	1,100		274		1,814		1,078
Charges associated with restructuring and other activities	(37)		(13)		(46)		(38)
Operating income	$	1,063	$	261	$	1,768	$	1,040

(1) The net sales from the Company’s travel retail business are included in the Europe, the Middle East & Africa region, with the exception of the net sales of Dr. Jart+ in the travel retail channel that are reflected in Korea in the Asia/Pacific region. Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

6 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The accompanying consolidated financial statements include the accounts of The Estée Lauder Companies Inc. and its subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated.

The unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim consolidated financial statements furnished reflect all adjustments which are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. The results of operations of any interim period are not necessarily indicative of the results of operations to be expected for the full fiscal year. The interim consolidated financial statements should be read in conjunction with the consolidated financial statements and accompanying footnotes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020.

Certain amounts in the consolidated financial statements of prior years have been reclassified to conform to current year presentation.

Management Estimates

Management Estimates

The preparation of financial statements and related disclosures in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses reported in those financial statements. Descriptions of the Company’s significant accounting policies are discussed in the notes to consolidated financial statements in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2020. Management evaluates the related estimates and assumptions on an ongoing basis using historical experience and other factors, including the current economic environment, and makes adjustments when facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ significantly from those estimates and assumptions. Significant changes, if any, in those estimates and assumptions resulting from continuing changes in the economic environment, including those related to the impacts of the COVID-19 pandemic, will be reflected in the consolidated financial statements in future periods.

Currency Translation and Transactions

Currency Translation and Transactions

All assets and liabilities of foreign subsidiaries and affiliates are translated at period-end rates of exchange, while revenue and expenses are translated at monthly average rates of exchange for the period. Unrealized translation gains, net of tax, reported as translation adjustments through other comprehensive income (loss) (“OCI”) attributable to The Estée Lauder Companies Inc. were $227 million and $75 million, net of tax, during the three months ended December 31, 2020 and 2019, respectively, and $318 million and $3 million, net of tax, during the six months ended December 31, 2020 and 2019, respectively. For the Company’s subsidiaries operating in highly inflationary economies, the U.S. dollar is the functional currency. Remeasurement adjustments in financial statements in a highly inflationary economy and other transactional gains and losses are reflected in earnings. These subsidiaries are not material to the Company’s consolidated financial statements or liquidity.

The Company enters into foreign currency forward contracts and may enter into option contracts to hedge foreign currency transactions for periods consistent with its identified exposures. The Company also enters into foreign currency forward contracts to hedge a portion of its net investment in certain foreign operations, which are designated as net investment hedges. See Note 5 – Derivative Financial Instruments for further discussion. The Company categorizes these instruments as entered into for purposes other than trading.

The accompanying consolidated statements of earnings include net exchange gains (losses) on foreign currency transactions of $27 million during the three months ended December 31, 2019, and $(2) million and $24 million during the six months ended December 31, 2020 and 2019, respectively. The net exchange loss on foreign currency transactions during the three months ended December 31, 2020 was not material.

Concentration of Credit Risk

Concentration of Credit RiskThe Company is a worldwide manufacturer, marketer and distributor of skin care, makeup, fragrance and hair care products. The Company’s sales subject to credit risk are made primarily to department stores, perfumeries, specialty multi-brand retailers and retailers in its travel retail business. The Company grants credit to qualified customers. As a result of the COVID-19 pandemic, the Company has enhanced its assessment of its customers' abilities to pay with a greater focus on factors affecting their liquidity and less on historical payment performance. While the Company does not believe it is exposed significantly to any undue concentration of credit risk at this time, it continues to monitor the extent of the impact of the COVID-19 pandemic on its customers' abilities, individually and collectively, to make timely payments.

Property, Plant and Equipment

Property, Plant and Equipment

Property, plant and equipment consists of the following:

(In millions)	December 31 2020		June 30 2020
Assets (Useful Life)
Land	$	57	$	33
Buildings and improvements (10 to 40 years)	457		400
Machinery and equipment (3 to 10 years)	969		865
Computer hardware and software (4 to 10 years)	1,417		1,335
Furniture and fixtures (5 to 10 years)	126		120
Leasehold improvements	2,471		2,381
	5,497		5,134
Less accumulated depreciation and amortization	(3,355)		(3,079)
	$	2,142	$	2,055

The cost of assets related to projects in progress of $601 million and $501 million as of December 31, 2020 and June 30, 2020, respectively, is included in their respective asset categories above. Depreciation and amortization of property, plant and equipment was $126 million and $127 million during the three months ended December 31, 2020 and 2019, respectively, and $251 million and $252 million during the six months ended December 31, 2020 and 2019, respectively. Depreciation and amortization related to the Company’s manufacturing process is included in Cost of sales, and all other depreciation and amortization is included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings.

Income Taxes

Income Taxes

The effective rate for income taxes for the three and six months ended December 31, 2020 and 2019 are as follows:

	Three Months Ended December 31				Six Months Ended December 31
	2020		2019		2020		2019
Effective rate for income taxes	14.9	%	30.8	%	17.6	%	26.2	%
Basis-point change from the prior-year period	(1,590)				(860)

For the three and six months ended December 31, 2020, the decrease in the effective tax rate was primarily attributable to a lower effective tax rate on the Company's foreign operations and the impact of nondeductible goodwill charges recognized in the second quarter of fiscal 2020.

The effective tax rate for the three and six months ended December 31, 2020 included the impact of the U.S. government issuance of final global intangible low-taxed income (“GILTI”) tax regulations in July 2020 under the Tax Cuts and Jobs Act that provide for a high-tax exception to the GILTI tax. These regulations are retroactive to the original enactment of the GILTI tax provision, which includes the Company's 2019 and 2020 fiscal years. The Company has elected to apply the GILTI high-tax exception to fiscal 2021, 2020 and 2019. The election for fiscal 2021 resulted in reductions of 160 basis points and 150 basis points to the effective tax rates for the three and six months ended December 31, 2020, respectively. The impact of the elections with respect to fiscal 2020 and 2019 was recognized as a discrete item in the provision for income taxes in the second quarter of fiscal 2021 and resulted in reductions of 470 basis points and 280 basis points to the effective tax rates for the three and six months ended December 31, 2020, respectively.

As of December 31, 2020 and June 30, 2020, the gross amount of unrecognized tax benefits, exclusive of interest and penalties, totaled $70 million. The total amount of unrecognized tax benefits at December 31, 2020 that, if recognized, would affect the effective tax rate was $55 million. The total gross interest and penalties accrued related to unrecognized tax benefits during the three and six months ended December 31, 2020 in the accompanying consolidated statements of earnings were not material. The total gross accrued interest and penalties in the accompanying consolidated balance sheets at December 31, 2020 and June 30, 2020, was $14 million and $13 million, respectively. On the basis of the information available as of December 31, 2020, the Company does not expect significant changes to the total amount of unrecognized tax benefits within the next twelve months.

Recently Adopted and Issued Accounting Standards

Recently Adopted Accounting Standards

Measurement of Credit Losses on Financial Instruments (ASC Topic 326 – Financial Instruments – Credit Losses) (“ASC 326”)

In June 2016, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that requires companies to utilize an impairment model for most financial assets measured at amortized cost and certain other financial instruments, which include trade and other receivables, loans and held-to-maturity debt securities, to record an allowance for credit risk based on expected losses rather than incurred losses. In addition, this guidance changes the recognition method for credit losses on available-for-sale debt securities, which can occur as a result of market and credit risk, and requires additional disclosures. In general, modified retrospective adoption will be required for all outstanding instruments that fall under this guidance.

In November 2019, the FASB issued authoritative guidance (ASU 2019-11 – Codification Improvements to Topic 326, Financial Instruments – Credit Losses) that amends ASC Topic 326 to clarify, improve and amend certain aspects of this guidance, such as disclosures related to accrued interest receivables and the estimation of credit losses associated with financial assets secured by collateral.

In February 2020, the FASB issued authoritative guidance (ASU 2020-02 – Financial Instruments – Credit Losses (Topic 326) and Leases (Topic 842)) that amends and clarifies Topic 326 and Topic 842. For Topic 326, the codification was updated to include the Securities and Exchange Commission staff interpretations associated with registrants engaged in lending activities.

Effective for the Company – Fiscal 2021 first quarter.

Impact on consolidated financial statements – On July 1, 2020, the Company adopted ASC 326. The adoption of this standard did not have a material impact on the Company’s consolidated financial statements. See Note 7 – Revenue Recognition for further discussion.

Goodwill and Other – Internal-Use Software (ASU 2018-15 – Intangibles – Goodwill and Other – Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract)

In August 2018, the FASB issued authoritative guidance that permits companies to capitalize the costs incurred for setting up business systems that operate on cloud technology. The new guidance aligns the requirement for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The guidance does not affect the accounting for the service element of a hosting arrangement that is a service contract. Capitalized costs associated with a hosting arrangement that is a service contract must be amortized over the term of the hosting arrangement to the same line item in the income statement as the expense for fees for the hosting arrangement.

Effective for the Company – Fiscal 2021 first quarter, with early adoption permitted in any interim period. This guidance can be adopted either retrospectively, or prospectively to all implementation costs incurred after the date of adoption.

Impact on consolidated financial statements – On July 1, 2020, the Company adopted this guidance prospectively to all implementation costs incurred after the date of adoption. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

Recently Issued Accounting Standards

Reference Rate Reform (ASC Topic 848)

In March 2020, the FASB issued authoritative guidance to provide optional relief for companies preparing for the discontinuation of interest rates such as the London Interbank Offered Rate (“LIBOR”), which is expected to be phased out at the end of calendar 2021, and applies to lease contracts, hedging instruments, held-to-maturity debt securities and debt arrangements that have LIBOR as the benchmark rate.

In January 2021, the FASB issued authoritative guidance that makes amendments to the new rules on accounting for reference rate reform. The amendments clarify that all derivative instruments affected by the changes to interest rates used for discounting, margining or contract price alignment, regardless of whether they reference LIBOR or another rate expected to be discontinued as a result of reference rate reform, an entity may apply certain practical expedients in ASC Topic 848.

Effective for the Company – This guidance can be applied for a limited time through December 31, 2022. The guidance will no longer be available to apply after December 31, 2022.

Impact on consolidated financial statements – The Company is currently assessing the impact of applying this guidance on its existing derivative contracts, leases and other arrangements, as well as when to adopt this guidance.

Income Taxes (ASU 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes)

In December 2019, the FASB issued authoritative guidance that simplifies the accounting for income taxes by removing certain exceptions and making simplifications in other areas.

Effective for the Company – Fiscal 2022 first quarter, with early adoption permitted in any interim period. If adopted early, the Company must adopt all the amendments in the same period. The amendments have differing adoption methods including retrospectively, prospectively and/or modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year of adoption, depending on the specific change.

Impact on consolidated financial statements – The Company is currently evaluating the impact of applying this guidance and believes that it has transactions that may fall under the scope.

No other recently issued accounting pronouncements are expected to have a material impact on the Company’s consolidated financial statements.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Tables)

6 Months Ended

Dec. 31, 2020

Accounting Policies [Abstract]

Schedule of inventory and promotional merchandise

Inventory and promotional merchandise consists of the following:

(In millions)	December 31 2020		June 30 2020
Raw materials	$	550	$	542
Work in process	258		305
Finished goods	1,072		995
Promotional merchandise	236		220
	$	2,116	$	2,062

Schedule of property, plant and equipment

Property, plant and equipment consists of the following:

(In millions)	December 31 2020		June 30 2020
Assets (Useful Life)
Land	$	57	$	33
Buildings and improvements (10 to 40 years)	457		400
Machinery and equipment (3 to 10 years)	969		865
Computer hardware and software (4 to 10 years)	1,417		1,335
Furniture and fixtures (5 to 10 years)	126		120
Leasehold improvements	2,471		2,381
	5,497		5,134
Less accumulated depreciation and amortization	(3,355)		(3,079)
	$	2,142	$	2,055

Schedule of effective rate for income taxes

The effective rate for income taxes for the three and six months ended December 31, 2020 and 2019 are as follows:

	Three Months Ended December 31				Six Months Ended December 31
	2020		2019		2020		2019
Effective rate for income taxes	14.9	%	30.8	%	17.6	%	26.2	%
Basis-point change from the prior-year period	(1,590)				(860)

Schedule of other accrued liabilities

Other accrued liabilities consist of the following:

(In millions)	December 31 2020		June 30 2020
Advertising, merchandising and sampling	$	353	$	256
Employee compensation	494		424
Deferred revenue	365		222
Payroll and other taxes	392		250
Accrued income taxes	319		208
Sales return accrual	285		212
Accrued general and administrative expenses	295		233
Other	761		600
	$	3,264	$	2,405

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GOODWILL AND OTHER INTANGIBLE ASSETS (Tables)

6 Months Ended

Dec. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of goodwill by product category and related change in the carrying amount

The following table presents goodwill by product category and the related change in the carrying amount:

(In millions)	Skin Care		Makeup		Fragrance		Hair Care		Total
Balance as of June 30, 2020
Goodwill	$	519	$	1,210	$	254	$	389	$	2,372
Accumulated impairments	(95)		(817)		(26)		(33)		(971)
	424		393		228		356		1,401
Goodwill acquired during the period	—		6		—		4		10
Impairment charges	(54)		—		—		—		(54)
Translation adjustments, goodwill	36		—		9		3		48
Translation adjustments, accumulated impairments	(2)		—		—		(2)		(4)
	(20)		6		9		5		—
Balance as of December 31, 2020
Goodwill	555		1,216		263		396		2,430
Accumulated impairments	(151)		(817)		(26)		(35)		(1,029)
	$	404	$	399	$	237	$	361	$	1,401

Schedule of other intangible assets, by type

Other intangible assets consist of the following:

	December 31, 2020						June 30, 2020
(In millions)	Gross Carrying Value		Accumulated Amortization		Total Net Book Value		Gross Carrying Value		Accumulated Amortization		Total Net Book Value
Amortizable intangible assets:
Customer lists and other	$	1,684	$	537	$	1,147	$	1,590	$	475	$	1,115
License agreements	43		43		—		43		43		—
	$	1,727	$	580	1,147		$	1,633	$	518	1,115
Non-amortizable intangible assets:
Trademarks and other					1,277						1,223
Total intangible assets					$	2,424					$	2,338

Estimated aggregate amortization expense for the remainder of the current fiscal year and the next four years

The estimated aggregate amortization expense for the remainder of fiscal 2021 and for each of the next four fiscal years is as follows:

	Fiscal
(In millions)	2021		2022		2023		2024		2025
Estimated aggregate amortization expense	$	52	$	105	$	104	$	104	$	104

Summary of impairment charges and carrying value of intangible assets

A summary of the impairment charges for the three and six months ended December 31, 2019 and the remaining trademark and goodwill carrying values as of December 31, 2019, for each reporting unit, are as follows:

(In millions)	Impairment Charge				Carrying Value
Reporting Unit:	Trademark		Goodwill		Trademark		Goodwill
Too Faced	$	211	$	430	$	314	$	175
BECCA	33		35		65		63
Smashbox	22		46		33		26
Total	$	266	$	511	$	412	$	264

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CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES (Tables)

6 Months Ended

Dec. 31, 2020

Restructuring and Related Activities [Abstract]

Schedule of aggregate restructuring and other activities

Charges associated with restructuring activities for the three months ended December 31, 2020 were as follows:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Leading Beauty Forward Program	$	—	$	2	$	(2)	$	3	$	3
Post-COVID Business Acceleration Program	—		—		34		—		34
Total	$	—	$	2	$	32	$	3	$	37

Charges associated with restructuring activities for the six months ended December 31, 2020 were as follows:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Leading Beauty Forward Program	$	—	$	5	$	(10)	$	5	$	—
Post-COVID Business Acceleration Program	—		—		46		—		46
Total	$	—	$	5	$	36	$	5	$	46

Schedule of total cumulative charges expected to be incurred associated with restructuring and other activities

The LBF Program approved restructuring and other charges expected to be incurred were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges (Adjustments) Approved
Cumulative through June 30, 2020	$	13	$	85	$	511	$	358	$	967
Six months ended December 31, 2020	1		—		(7)		6		—
Cumulative through December 31, 2020	$	14	$	85	$	504	$	364	$	967

PCBA Program cumulative charges approved by the Company through December 31, 2020 were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges (Adjustments) Approved
Six months ended December 31, 2020	$	5	$	(1)	$	46	$	16	$	66

Schedule of total cumulative charges by type approved associated with restructuring initiatives

Included in the above table, cumulative LBF Program restructuring initiatives approved by the Company by major cost type were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments) Approved
Cumulative through June 30, 2020	$	460	$	28	$	7	$	16	$	511
Six months ended December 31, 2020	(8)		—		1		—		(7)
Cumulative through December 31, 2020	$	452	$	28	$	8	$	16	$	504

Included in the above table, cumulative PCBA Program restructuring initiatives approved by the Company through December 31, 2020 by major cost type were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments) Approved
Six months ended December 31, 2020	$	46	$	4	$	(7)	$	3	$	46

Schedule of total cumulative charges recorded associated with restructuring and other activities

Total cumulative charges recorded associated with restructuring and other activities for the LBF Program were:

(In millions)	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
					Restructuring Charges		Other Charges
Total Charges (Adjustments)
Cumulative through June 30, 2020	$	14	$	65	$	491	$	304	$	874
Six months ended December 31, 2020	—		5		(10)		5		—
Cumulative through December 31, 2020	$	14	$	70	$	481	$	309	$	874

Total cumulative charges recorded associated with restructuring and other activities for the PCBA Program were:

	Sales Returns (included in Net Sales)		Cost of Sales		Operating Expenses				Total
(In millions)					Restructuring Charges		Other Charges
Total Charges
Six months ended December 31, 2020	$	—	$	—	$	46	$	—	$	46

Schedule of total cumulative charges by type recorded associated with restructuring and other activities

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges (Adjustments)
Cumulative through June 30, 2020	$	451	$	27	$	6	$	7	$	491
Six months ended December 31, 2020	(12)		1		1		—		(10)
Cumulative through December 31, 2020	$	439	$	28	$	7	$	7	$	481

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Restructuring Charges
Six months ended December 31, 2020	$	45	$	—	$	1	$	—	$	46

Schedule of changes in accrued restructuring charges

Changes in accrued restructuring charges for the six months ended December 31, 2020 relating to the LBF Program were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Balance at June 30, 2020	$	112	$	—	$	—	$	—	$	112
Charges (adjustments)	(12)		1		1		—		(10)
Cash payments	(36)		—		—		—		(36)
Translation adjustments	2		—		—		—		2
Balance at December 31, 2020	$	66	$	1	$	1	$	—	$	68

Changes in accrued restructuring charges for the six months ended December 31, 2020 relating to the PCBA Program were:

(In millions)	Employee- Related Costs		Asset- Related Costs		Contract Terminations		Other Exit Costs		Total
Charges	$	45	$	—	$	1	$	—	$	46
Cash payments	(4)		—		(1)		—		(5)
Balance at December 31, 2020	$	41	$	—	$	—	$	—	$	41

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DERIVATIVE FINANCIAL INSTRUMENTS (Tables)

6 Months Ended

Dec. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of fair values of the derivative financial instruments included in the consolidated balance sheets

The fair values of the Company’s derivative financial instruments included in the consolidated balance sheets are presented as follows:

	Asset Derivatives					Liability Derivatives
		Fair Value (1)					Fair Value (1)
(In millions)	Balance Sheet Location	December 31 2020		June 30 2020		Balance Sheet Location	December 31 2020		June 30 2020
Derivatives Designated as Hedging Instruments
Foreign currency cash flow hedges	Prepaid expenses and other current assets	$	—	$	26	Other accrued liabilities	$	37	$	3
Net investment hedges	Prepaid expenses and other current assets	21		21		Other accrued liabilities	71		62
Interest rate-related derivatives	Prepaid expenses and other current assets	11		15		Other accrued liabilities	—		3
Total Derivatives Designated as Hedging Instruments		32		62			108		68
Derivatives Not Designated as Hedging Instruments
Foreign currency forward contracts	Prepaid expenses and other current assets	52		40		Other accrued liabilities	29		15
Total derivatives		$	84	$	102		$	137	$	83

(1)See Note 6 – Fair Value Measurements for further information about how the fair value of derivative assets and liabilities are determined.

Schedule of gains and losses related to derivative financial instruments designated as hedging instruments that are included in the assessment of effectiveness

The amounts of the gains and losses related to the Company’s derivative financial instruments designated as hedging instruments that are included in the assessment of effectiveness are as follows:

	Amount of Gain or (Loss) Recognized in OCI on Derivatives				Location of Gain or (Loss) Reclassified from AOCI into Earnings	Amount of Gain or (Loss) Reclassified from AOCI into Earnings(1)
	Three Months Ended December 31					Three Months Ended December 31
(In millions)	2020		2019			2020		2019
Derivatives in Cash Flow Hedging Relationships:
Foreign currency forward contracts	$	(34)	$	(21)	Net sales	$	(5)	$	6
Interest rate-related derivatives	3		5		Interest expense	—		—
	(31)		(16)			(5)		6
Derivatives in Net Investment Hedging Relationships(2):
Foreign currency forward contracts(3)	(79)		(37)			—		—
Total derivatives	$	(110)	$	(53)		$	(5)	$	6

(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material.

(2)During the three months ended December 31, 2020 and December 31, 2019, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $5 million and $13 million, respectively.

(3)Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.

	Amount of Gain or (Loss) Recognized in OCI on Derivatives				Location of Gain or (Loss) Reclassified from AOCI into Earnings	Amount of Gain or (Loss) Reclassified from AOCI into Earnings(1)
	Six Months Ended December 31					Six Months Ended December 31
(In millions)	2020		2019			2020		2019
Derivatives in Cash Flow Hedging Relationships:
Foreign currency forward contracts	$	(65)	$	4	Net sales	$	(4)	$	19
Interest rate-related derivatives	3		(9)		Interest expense	(1)		—
	(62)		(5)			(5)		19
Derivatives in Net Investment Hedging Relationships(2):
Foreign currency forward contracts(3)	(142)		(34)			—		—
Total derivatives	$	(204)	$	(39)		$	(5)	$	19

(1)The amount reclassified into earnings as a result of the discontinuance of cash flow hedges because probable forecasted transactions will no longer occur by the end of the original time period was not material.

(2)During the six months ended December 31, 2020 and December 31, 2019, the gain recognized in earnings from net investment hedges related to the amount excluded from effectiveness testing was $10 million and $25 million, respectively.

(3)Included within translation adjustments as a component of AOCI on the Company’s consolidated balance sheets.

		Amount of Gain or (Loss) Recognized in Earnings on Derivatives (1)
	Location of Gain or (Loss) Recognized in Earnings on Derivatives
		Three Months Ended December 31				Six Months Ended December 31
(In millions)		2020		2019		2020		2019
Derivatives in Fair Value Hedging Relationships:
Interest rate swap contracts	Interest expense	$	(3)	$	(1)	$	(5)	$	1

(1)Changes in the fair value of the interest rate swap agreements are exactly offset by the change in the fair value of the underlying long-term debt.

Schedule of cumulative amount of fair value hedging adjustments for designated and qualifying hedged items

Additional information regarding the cumulative amount of fair value hedging gain (loss) recognized in earnings for items designated and qualifying as hedged items in fair value hedges is as follows:

(In millions)
Line Item in the Consolidated Balance Sheets in Which the Hedged Item is Included	Carrying Amount of the Hedged Liabilities		Cumulative Amount of Fair Value Hedging Gain/(Loss) Included in the Carrying Amount of the Hedged Liability
	December 31, 2020		December 31, 2020
Current debt	$	452	$	2
Long-term debt	258		8
Total debt	$	710	$	10

Schedule of effects of fair value and cash flow hedging relationships for designated and qualified hedging instruments

Additional information regarding the effects of fair value and cash flow hedging relationships for derivatives designated and qualifying as hedging instruments is as follows:

	Three Months Ended December 31
	2020				2019
(In millions)	Net Sales		Interest Expense		Net Sales		Interest Expense
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	$	4,853	$	43	$	4,624	$	38
The effects of fair value and cash flow hedging relationships:
Gain (loss) on fair value hedge relationships – interest rate contracts:
Hedged item	Not applicable		3		Not applicable		1
Derivatives designated as hedging instruments	Not applicable		(3)		Not applicable		(1)
Gain (loss) on cash flow hedge relationships – interest rate contracts:
Amount of loss reclassified from AOCI into earnings	Not applicable		—		Not applicable		—
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings	(5)		Not applicable		6		Not applicable

	Six Months Ended December 31
	2020				2019
(In millions)	Net Sales		Interest Expense		Net Sales		Interest Expense
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	$	8,415	$	88	$	8,519	$	70
The effects of fair value and cash flow hedging relationships:
Gain (loss) on fair value hedge relationships – interest rate contracts:
Hedged item	Not applicable		5		Not applicable		(1)
Derivatives designated as hedging instruments	Not applicable		(5)		Not applicable		1
Gain (loss) on cash flow hedge relationships – interest rate contracts:
Amount of loss reclassified from AOCI into earnings	Not applicable		(1)		Not applicable		—
Gain (loss) on cash flow hedge relationships – foreign currency forward contracts:
Amount of gain reclassified from AOCI into earnings	(4)		Not applicable		19		Not applicable

Schedule of gains and losses related to derivative financial instruments not designated as hedging instruments

The amount of gains and losses related to the Company’s derivative financial instruments not designated as hedging instruments are presented as follows:

		Amount of Gain or (Loss) Recognized in Earnings on Derivatives
	Location of Gain or (Loss) Recognized in Earnings on Derivatives	Three Months Ended December 31				Six Months Ended December 31
(In millions)		2020		2019		2020		2019
Derivatives Not Designated as Hedging Instruments:
Foreign currency forward contracts	Selling, general and administrative	$	42	$	30	$	63	$	3

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FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Dec. 31, 2020

Fair Value Disclosures [Abstract]

Schedule of financial assets and liabilities measured at fair value on a recurring basis

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2020:

(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	2,549	$	—	$	—	$	2,549
Foreign currency forward contracts	—		73		—		73
Interest rate-related derivatives	—		11		—		11
Total	$	2,549	$	84	$	—	$	2,633
Liabilities:
Foreign currency forward contracts	$	—	$	137	$	—	$	137
Contingent consideration	—		—		2		2
Total	$	—	$	137	$	2	$	139

The following table presents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2020:

(In millions)	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	2,810	$	—	$	—	$	2,810
Foreign currency forward contracts	—		87		—		87
Interest rate-related derivatives	—		15		—		15
Total	$	2,810	$	102	$	—	$	2,912
Liabilities:
Foreign currency forward contracts	$	—	$	80	$	—	$	80
Interest rate-related derivatives	—		3		—		3
Contingent consideration	—		—		4		4
Total	$	—	$	83	$	4	$	87

Schedule of estimated fair values of financial instruments

The estimated fair values of the Company’s financial instruments are as follows:

	December 31 2020				June 30 2020
(In millions)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Nonderivatives
Cash and cash equivalents	$	5,545	$	5,545	$	5,022	$	5,022
Current and long-term debt	5,383		6,315		6,136		6,902
Contingent consideration	2		2		4		4
Derivatives
Foreign currency forward contracts – asset (liability), net	(64)		(64)		7		7
Interest rate-related derivatives – asset (liability), net	11		11		12		12

Impairment charges measured at fair value on a nonrecurring basis, classified as Level 3

The following table presents the Company’s impairment charges for the three and six months ended December 31, 2020 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test:

(In millions)	Impairment charges		Date of Fair Value Measurement	Fair Value
Goodwill	$	54	November 30, 2020	$	—
Other intangible assets, net (trademark and customer lists)	27		November 30, 2020	36
Total	$	81		$	36

(1)See Note 3 - Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.

The following table presents the Company’s impairment charges for the three and six months ended December 31, 2019 for certain of its nonfinancial assets measured at fair value on a nonrecurring basis, classified as Level 3, due to a change in circumstances that triggered an interim impairment test:

(In millions)	Impairment charges		Date of Fair Value Measurement	Fair Value
Goodwill	$	511	December 31, 2019	$	264
Other intangible assets, net (trademark)	266		December 31, 2019	412
Total	$	777		$	676

(1)See Note 3 - Goodwill and Other Intangible Assets for discussion of the valuation techniques used to measure fair value, the description of the inputs and information used to develop those inputs.

Changes in the fair value of the contingent consideration obligations

Changes in the fair value of the contingent consideration obligations for six months ended December 31, 2020 are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings and were as follows:

(In millions)	Fair Value
Contingent consideration at June 30, 2020	$	4
Changes in fair value	(2)
Contingent consideration at December 31, 2020	$	2

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REVENUE RECOGNITION (Tables)

6 Months Ended

Dec. 31, 2020

Revenue from Contract with Customer [Abstract]

Schedule of changes in allowance for credit losses

Changes in the allowance for credit losses are as follows:

(In millions)	December 31 2020
Balance at June 30, 2020	$	36
ASC 326 cumulative effect adjustment (pre-tax)	4
Provision for expected credit losses	7
Write-offs, net & other	(8)
Balance at December 31, 2020	$	39

Schedule of significant changes in deferred revenue

Changes in deferred revenue during the period are as follows:

	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019
Deferred revenue, beginning of period	$	409	$	392	$	279	$	361
Revenue recognized that was included in the deferred revenue balance at the beginning of the period	(83)		(83)		(173)		(243)
Revenue deferred during the period	92		112		308		307
Other	2		4		6		—
Deferred revenue, end of period	$	420	$	425	$	420	$	425

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PENSION AND POST-RETIREMENT BENEFIT PLANS (Tables)

6 Months Ended

Dec. 31, 2020

Retirement Benefits [Abstract]

Schedule of components of net periodic benefit cost for pension and other post-retirement benefit plans

The components of net periodic benefit cost for the three months ended December 31, 2020 and 2019 consisted of the following:

	Pension Plans								Other than Pension Plans
	U.S.				International				Post-retirement
(In millions)	2020		2019		2020		2019		2020		2019
Service cost	$	11	$	10	$	9	$	9	$	—	$	1
Interest cost	7		9		3		2		2		1
Expected return on plan assets	(13)		(13)		(3)		(4)		—		—
Amortization of:
Actuarial loss	5		3		1		2		—		—
Special termination benefits	—		—		7		—		—		—
Net periodic benefit cost	$	10	$	9	$	17	$	9	$	2	$	2

The components of net periodic benefit cost for the six months ended December 31, 2020 and 2019 consisted of the following:

	Pension Plans								Other than Pension Plans
	U.S.				International				Post-retirement
(In millions)	2020		2019		2020		2019		2020		2019
Service cost	$	22	$	20	$	18	$	18	$	—	$	2
Interest cost	15		17		5		5		3		3
Expected return on plan assets	(26)		(26)		(6)		(7)		—		(1)
Amortization of:
Actuarial loss	10		7		2		3		—		—
Special termination benefits	—		—		9		—		—		—
Net periodic benefit cost	$	21	$	18	$	28	$	19	$	3	$	4

Schedule of amounts recognized in the consolidated balance sheets related to the Company's pension and post-retirement benefit plans

The amounts recognized in the consolidated balance sheets related to the Company’s pension and post-retirement benefit plans consist of the following:

(In millions)	December 31 2020		June 30 2020
Other assets	$	138	$	127
Other accrued liabilities	(27)		(27)
Other noncurrent liabilities	(472)		(440)
Funded status	(361)		(340)
Accumulated other comprehensive loss	314		324
Net amount recognized	$	(47)	$	(16)

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NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE (Tables)

6 Months Ended

Dec. 31, 2020

Earnings Per Share [Abstract]

Schedule of reconciliation between the numerator and denominator of the basic and diluted EPS computations

A reconciliation between the numerator and denominator of the basic and diluted EPS computations is as follows:

	Three Months Ended December 31				Six Months Ended December 31
(In millions, except per share data)	2020		2019		2020		2019
Numerator:
Net earnings attributable to The Estée Lauder Companies Inc.	$	873	$	557	$	1,396	$	1,152
Denominator:
Weighted-average common shares outstanding – Basic	363.0		360.2		363.4		360.8
Effect of dilutive stock options	3.8		4.7		3.8		4.8
Effect of PSUs	0.2		0.3		0.2		0.2
Effect of RSUs	1.0		1.5		1.1		1.9
Weighted-average common shares outstanding – Diluted	368.0		366.7		368.5		367.7
Net earnings attributable to The Estée Lauder Companies Inc. per common share:
Basic	$	2.40	$	1.55	$	3.84	$	3.19
Diluted	$	2.37	$	1.52	$	3.79	$	3.13

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EQUITY (Tables)

6 Months Ended

Dec. 31, 2020

Equity [Abstract]

Schedule of equity

Total Stockholders’ Equity – The Estée Lauder Companies Inc.

	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019
Common stock, beginning of the period	$	6	$	6	$	6	$	6
Stock-based compensation	—		—		—		—
Common stock, end of the period	6		6		6		6
Paid-in capital, beginning of the period	4,913		4,514		4,790		4,403
Common stock dividends	—		1		1		2
Stock-based compensation	155		100		277		210
Paid-in capital, end of the period	5,068		4,615		5,068		4,615
Retained earnings, beginning of the period	10,480		10,393		10,134		9,984
Common stock dividends	(194)		(175)		(368)		(332)
Net earnings attributable to The Estée Lauder Companies Inc.	873		557		1,396		1,152
Cumulative effect of adoption of new accounting standards	—		—		(3)		(29)
Retained earnings, end of the period	11,159		10,775		11,159		10,775
Accumulated other comprehensive loss, beginning of the period	(594)		(627)		(665)		(563)
Other comprehensive income (loss)	211		58		282		(6)
Accumulated other comprehensive loss, end of the period	(383)		(569)		(383)		(569)
Treasury stock, beginning of the period	(10,353)		(9,756)		(10,330)		(9,444)
Acquisition of treasury stock	—		(426)		—		(703)
Stock-based compensation	(76)		(71)		(99)		(106)
Treasury stock, end of the period	(10,429)		(10,253)		(10,429)		(10,253)
Total stockholders’ equity – The Estée Lauder Companies Inc.	5,421		4,574		5,421		4,574
Noncontrolling interests, beginning of the period	29		28		27		25
Net earnings attributable to noncontrolling interests	4		4		6		7
Distribution to noncontrolling interest holders	—		(4)		—		(4)
Other comprehensive (income) loss	2		(1)		2		(1)
Noncontrolling interests, end of the period	35		27		35		27
Total equity	$	5,456	$	4,601	$	5,456	$	4,601
Cash dividends declared per common share	$	.53	$	.48	$	1.01	$	.91

Summary of cash dividends declared per share on the Company's Class A and Class B Common Stock

The following is a summary of quarterly cash dividends declared per share on the Company’s Class A and Class B Common Stock during the six months ended December 31, 2020:

Date Declared	Record Date	Payable Date	Amount per Share
August 19, 2020	August 31, 2020	September 15, 2020	$	.48
October 30, 2020	November 30, 2020	December 15, 2020	$	.53

Schedule of components of AOCI, net of tax

The following table represents changes in AOCI, net of tax, by component for the six months ended December 31, 2020:

(In millions)	Net Cash Flow Hedge Gain (Loss)		Retirement Plan and Other Retiree Benefit Adjustments			Translation Adjustments			Total
Balance at June 30, 2020	$	14	$	(244)		$	(435)		$	(665)
OCI before reclassifications	(48)		(2)		(1)	318		(2)	268
Amounts reclassified to Net earnings	4		10			—			14
Net current-period OCI	(44)		8			318			282
Balance at December 31, 2020	$	(30)	$	(236)		$	(117)		$	(383)

(1)Consists of foreign currency translation losses.

(2)See Note 5 – Derivative Financial Instruments for gains (losses) relating to net investment hedges.

Schedule of effects of reclassification adjustments from AOCI into net earnings

The following table represents the effects of reclassification adjustments from AOCI into net earnings for the three and six months ended December 31, 2020 and 2019:

	Amount Reclassified from AOCI								Affected Line Item in Consolidated Statements of Earnings
	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019
Gain (Loss) on Cash Flow Hedges
Foreign currency forward contracts	$	(5)	$	6	$	(4)	$	19	Net sales
Interest rate-related derivatives	—		—		(1)		—		Interest expense
	(5)		6		(5)		19
Benefit (provision) for deferred taxes	1		(2)		1		(5)		Provision for income taxes
	$	(4)	$	4	(4)		$	14	Net earnings
Retirement Plan and Other Retiree Benefit Adjustments
Amortization of actuarial loss	$	(6)	$	(5)	$	(12)	$	(10)	Earnings before income taxes (1)
Benefit for deferred taxes	1		1		2		2		Provision for income taxes
	$	(5)	$	(4)	$	(10)	$	(8)	Net earnings
Cumulative Translation Adjustments
Gain on previously held equity method investment	$	—	$	4	$	—	$	4	Other income
Loss on liquidation of an investment in a foreign subsidiary	—		—		—		(6)		Restructuring and other charges
	$	—	$	4	—		$	(2)	Net earnings
Total reclassification adjustments, net	$	(9)	$	4	$	(14)	$	4	Net earnings

(1)See Note 8 – Pension and Post-Retirement Benefit Plans for additional information.

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STATEMENT OF CASH FLOWS (Tables)

6 Months Ended

Dec. 31, 2020

Supplemental Cash Flow Elements [Abstract]

Supplemental cash flow information

Supplemental cash flow information for the six months ended December 31, 2020 and 2019 is as follows:

(In millions)	2020		2019
Cash:
Cash paid during the period for interest	$	84	$	63
Cash paid during the period for income taxes	$	320	$	314
Non-cash investing and financing activities:
Capitalized interest and asset retirement obligations incurred	$	1	$	—
Property, plant and equipment accrued but unpaid	$	63	$	53
Right-of-use assets obtained in exchange for new finance lease liabilities	$	1	$	—
Right-of-use assets obtained in exchange for new operating lease liabilities	$	148	$	110

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SEGMENT DATA AND RELATED INFORMATION (Tables)

6 Months Ended

Dec. 31, 2020

Segment Reporting [Abstract]

Schedule of segment data and related information

	Three Months Ended December 31				Six Months Ended December 31
(In millions)	2020		2019		2020		2019
PRODUCT CATEGORY DATA
Net sales:
Skin Care	$	2,819	$	2,205	$	4,854	$	4,047
Makeup	1,247		1,660		2,225		3,103
Fragrance	618		581		1,024		1,043
Hair Care	154		162		290		298
Other	15		16		22		28
Net sales	$	4,853	$	4,624	$	8,415	$	8,519
Operating income (loss) before charges associated with restructuring and other activities:
Skin Care	$	928	$	772	$	1,649	$	1,404
Makeup	28		(611)		(43)		(507)
Fragrance	141		97		201		163
Hair Care	4		12		7		12
Other	(1)		4		—		6
	1,100		274		1,814		1,078
Reconciliation:
Charges associated with restructuring and other activities	(37)		(13)		(46)		(38)
Interest expense	(43)		(38)		(88)		(70)
Interest income and investment income, net	17		13		31		27
Other components of net periodic benefit cost	(7)		(1)		(10)		(2)
Other income	—		576		—		576
Earnings before income taxes	$	1,030	$	811	$	1,701	$	1,571
GEOGRAPHIC DATA(1)
Net sales:
The Americas	$	1,048	$	1,226	$	1,921	$	2,386
Europe, the Middle East & Africa	2,030		2,079		3,570		3,756
Asia/Pacific	1,775		1,319		2,924		2,377
Net sales	$	4,853	$	4,624	$	8,415	$	8,519
Operating income (loss):
The Americas	$	36	$	(529)	$	101	$	(354)
Europe, the Middle East & Africa	657		505		1,068		882
Asia/Pacific	407		298		645		550
	1,100		274		1,814		1,078
Charges associated with restructuring and other activities	(37)		(13)		(46)		(38)
Operating income	$	1,063	$	261	$	1,768	$	1,040

(1) The net sales from the Company’s travel retail business are included in the Europe, the Middle East & Africa region, with the exception of the net sales of Dr. Jart+ in the travel retail channel that are reflected in Korea in the Asia/Pacific region. Operating income attributable to the travel retail sales included in Europe, the Middle East & Africa is included in that region and in The Americas.

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Currency Translation and Transactions (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Currency Translation and Transactions
Unrealized translation gains (losses), net of tax	$ 227	$ 75	$ 318	$ 3
Net exchange gains (losses) on foreign currency transactions		$ 27	$ (2)	$ 24

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Concentration of Credit Risk (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Jun. 30, 2020
Concentration Risk [Line Items]
Net sales	$ 4,853	$ 4,624	$ 8,415	$ 8,519
Accounts receivable, net	1,972		1,972		$ 1,194
Largest Customer | Revenue Benchmark | Customer Concentration Risk
Concentration Risk [Line Items]
Net sales	$ 654	$ 296	$ 1,208	$ 465
Concentration risk (as a percent)	13.00%	6.00%	14.00%	5.00%
Largest Customer | Accounts Receivable | Customer Concentration Risk
Concentration Risk [Line Items]
Accounts receivable, net	$ 404		$ 404		$ 297
Concentration risk (as a percent)			20.00%		24.00%

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Inventory and Promotional Merchandise (Details) - USD ($) $ in Millions	Dec. 31, 2020	Jun. 30, 2020
Accounting Policies [Abstract]
Raw materials	$ 550	$ 542
Work in process	258	305
Finished goods	1,072	995
Promotional merchandise	236	220
Inventory and promotional merchandise	$ 2,116	$ 2,062

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Property, Plant and Equipment (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Jun. 30, 2020
Property, Plant and Equipment
Property, plant and equipment, gross	$ 5,497		$ 5,497		$ 5,134
Less accumulated depreciation and amortization	(3,355)		(3,355)		(3,079)
Property, plant and equipment, net	2,142		2,142		2,055
Cost of assets related to projects in progress	601		601		501
Depreciation and amortization of property, plant and equipment	126	$ 127	251	$ 252
Land
Property, Plant and Equipment
Property, plant and equipment, gross	57		57		33
Buildings and improvements
Property, Plant and Equipment
Property, plant and equipment, gross	457		$ 457		400
Buildings and improvements | Minimum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			10 years
Buildings and improvements | Maximum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			40 years
Machinery and equipment
Property, Plant and Equipment
Property, plant and equipment, gross	969		$ 969		865
Machinery and equipment | Minimum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			3 years
Machinery and equipment | Maximum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			10 years
Computer hardware and software
Property, Plant and Equipment
Property, plant and equipment, gross	1,417		$ 1,417		1,335
Computer hardware and software | Minimum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			4 years
Computer hardware and software | Maximum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			10 years
Furniture and fixtures
Property, Plant and Equipment
Property, plant and equipment, gross	126		$ 126		120
Furniture and fixtures | Minimum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			5 years
Furniture and fixtures | Maximum
Property, Plant and Equipment
Property, plant and equipment, useful life (in years)			10 years
Leasehold improvements
Property, Plant and Equipment
Property, plant and equipment, gross	$ 2,471		$ 2,471		$ 2,381

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Income Taxes (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Jun. 30, 2020
Income Tax Examination [Line Items]
Effective tax rate (as a percent)	14.90%	30.80%	17.60%	26.20%
Increase (decrease) in effective tax rate (as a percent)	(15.90%)		(8.60%)
Gross unrecognized tax benefits	$ 70		$ 70		$ 70
Total amount of unrecognized tax benefits that, if recognized, would affect the effective tax rate	55		55
Total gross accrued interest and penalties related to unrecognized tax benefits	$ 14		$ 14		$ 13
Internal Revenue Service (IRS) | Fiscal Year 2021
Income Tax Examination [Line Items]
Tax cuts and jobs act, change in enacted rate after application of GILTI (as a percent)	(1.60%)		(1.50%)
Internal Revenue Service (IRS) | Fiscal Year 2020 and 2019
Income Tax Examination [Line Items]
Tax cuts and jobs act, change in enacted rate after application of GILTI (as a percent)	(4.70%)		(2.80%)

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Other Accrued Liabilities (Details) - USD ($) $ in Millions	Dec. 31, 2020	Jun. 30, 2020
Accounting Policies [Abstract]
Advertising, merchandising and sampling	$ 353	$ 256
Employee compensation	494	424
Deferred revenue	365	222
Payroll and other taxes	392	250
Accrued income taxes	319	208
Sales return accrual	285	212
Accrued general and administrative expenses	295	233
Other	761	600
Other accrued liabilities	$ 3,264	$ 2,405

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Debt (Details) - Revolving Credit Facility - USD ($)	1 Months Ended
	Aug. 31, 2020	Jun. 30, 2020
Debt
Repayments of lines of credit	$ 750,000,000
Line of credit facility, maximum borrowing capacity		$ 1,500,000,000

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ACQUISITION OF BUSINESS (Details) - USD ($) $ in Millions		3 Months Ended	6 Months Ended	12 Months Ended
	Dec. 18, 2019	Dec. 31, 2019	Dec. 31, 2019	Jun. 30, 2020
Acquisition of Business
Purchase price refund receivable				$ 32
Have & Be
Acquisition of Business
Interest acquired (as a percent)	66.66%
Cash consideration	$ 1,268
Carrying value	133
Fair value	682
Gain on remeasurement of previously held equity method investments	549
Recognition of previously unrealized foreign currency gain	$ 4
Have & Be | Other income
Acquisition of Business
Gain on remeasurement of equity method investment		$ 553	$ 553
Foreign currency gain		$ 23	$ 23

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GOODWILL AND OTHER INTANGIBLE ASSETS - Narrative (Details) - USD ($) $ in Millions	1 Months Ended	3 Months Ended		6 Months Ended
	Nov. 30, 2020	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Jun. 30, 2020
Goodwill and Other Intangible Assets
Aggregate amortization expense for amortizable intangible assets		$ 27	$ 11	$ 52	$ 22
Goodwill impairment		54	$ 511	54	$ 511
Trademarks and other
Goodwill and Other Intangible Assets
Carrying value		1,277		1,277		$ 1,223
GLAMGLOW
Goodwill and Other Intangible Assets
Goodwill impairment	$ 54
GLAMGLOW | Trademarks and other
Goodwill and Other Intangible Assets
Impairment charges of indefinite-lived intangible assets	21
Carrying value		$ 36		$ 36
GLAMGLOW | Customer lists
Goodwill and Other Intangible Assets
Impairment charges of finite-lived intangible assets	$ 6

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GOODWILL AND OTHER INTANGIBLE ASSETS - Goodwill (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Jun. 30, 2020
Changes in goodwill
Goodwill, gross, beginning balance			$ 2,372
Accumulated impairments	$ (1,029)		(1,029)		$ (971)
Goodwill, beginning balance			1,401
Goodwill acquired during the period			10
Goodwill impairment	(54)	$ (511)	(54)	$ (511)
Translation adjustments, goodwill			48
Translation adjustments, accumulated impairments			(4)
Goodwill, period increase (decrease)			0
Goodwill, gross, ending balance	2,430		2,430
Goodwill, ending balance	1,401		1,401
Skin Care
Changes in goodwill
Goodwill, gross, beginning balance			519
Accumulated impairments	(151)		(151)		(95)
Goodwill, beginning balance			424
Goodwill acquired during the period			0
Goodwill impairment			(54)
Translation adjustments, goodwill			36
Translation adjustments, accumulated impairments			(2)
Goodwill, period increase (decrease)			(20)
Goodwill, gross, ending balance	555		555
Goodwill, ending balance	404		404
Makeup
Changes in goodwill
Goodwill, gross, beginning balance			1,210
Accumulated impairments	(817)		(817)		(817)
Goodwill, beginning balance			393
Goodwill acquired during the period			6
Goodwill impairment			0
Translation adjustments, goodwill			0
Translation adjustments, accumulated impairments			0
Goodwill, period increase (decrease)			6
Goodwill, gross, ending balance	1,216		1,216
Goodwill, ending balance	399		399
Fragrance
Changes in goodwill
Goodwill, gross, beginning balance			254
Accumulated impairments	(26)		(26)		(26)
Goodwill, beginning balance			228
Goodwill acquired during the period			0
Goodwill impairment			0
Translation adjustments, goodwill			9
Translation adjustments, accumulated impairments			0
Goodwill, period increase (decrease)			9
Goodwill, gross, ending balance	263		263
Goodwill, ending balance	237		237
Hair Care
Changes in goodwill
Goodwill, gross, beginning balance			389
Accumulated impairments	(35)		(35)		$ (33)
Goodwill, beginning balance			356
Goodwill acquired during the period			4
Goodwill impairment			0
Translation adjustments, goodwill			3
Translation adjustments, accumulated impairments			(2)
Goodwill, period increase (decrease)			5
Goodwill, gross, ending balance	396		396
Goodwill, ending balance	$ 361		$ 361

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GOODWILL AND OTHER INTANGIBLE ASSETS - Other Intangible Assets (Details) - USD ($) $ in Millions	Dec. 31, 2020	Jun. 30, 2020
Amortizable intangible assets:
Gross Carrying Value	$ 1,727	$ 1,633
Accumulated Amortization	580	518
Total Net Book Value	1,147	1,115
Non-amortizable intangible assets:
Total intangible assets	2,424	2,338
Estimated aggregate amortization expense
Estimated aggregate amortization expense for remainder of fiscal year 2021	52
Estimated aggregate amortization expense for fiscal year 2022	105
Estimated aggregate amortization expense for fiscal year 2023	104
Estimated aggregate amortization expense for fiscal year 2024	104
Estimated aggregate amortization expense for fiscal year 2025	104
Trademarks and other
Non-amortizable intangible assets:
Trademarks and other	1,277	1,223
Customer lists and other
Amortizable intangible assets:
Gross Carrying Value	1,684	1,590
Accumulated Amortization	537	475
Total Net Book Value	1,147	1,115
License Agreements
Amortizable intangible assets:
Gross Carrying Value	43	43
Accumulated Amortization	43	43
Total Net Book Value	$ 0	$ 0

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GOODWILL AND OTHER INTANGIBLE ASSETS - Impairment (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Jun. 30, 2020
Intangible assets
Impairment Charge, Goodwill	$ 54	$ 511	$ 54	$ 511
Carrying Value, Goodwill	$ 1,401		$ 1,401		$ 1,401
Too Faced
Intangible assets
Impairment Charge, Trademark		211		211
Impairment Charge, Goodwill		430		430
Carrying Value, Trademark		314		314
Carrying Value, Goodwill		175		175
BECCA
Intangible assets
Impairment Charge, Trademark		33		33
Impairment Charge, Goodwill		35		35
Carrying Value, Trademark		65		65
Carrying Value, Goodwill		63		63
Smashbox
Intangible assets
Impairment Charge, Trademark		22		22
Impairment Charge, Goodwill		46		46
Carrying Value, Trademark		33		33
Carrying Value, Goodwill		26		26
Too Faced, BECCA, and Smashbox
Intangible assets
Impairment Charge, Trademark		266		266
Impairment Charge, Goodwill		511		511
Carrying Value, Trademark		412		412
Carrying Value, Goodwill		$ 264		$ 264

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CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Charges Associated With Restructuring Activities (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Restructuring and Other Costs
Restructuring charges	$ 37	$ 13	$ 46	$ 38
Leading Beauty Forward
Restructuring and Other Costs
Restructuring charges	3		0
PCBA Program
Restructuring and Other Costs
Restructuring charges	34		46
Sales Returns (included in Net Sales)
Restructuring and Other Costs
Restructuring charges	0		0
Sales Returns (included in Net Sales) | Leading Beauty Forward
Restructuring and Other Costs
Restructuring charges	0		0
Sales Returns (included in Net Sales) | PCBA Program
Restructuring and Other Costs
Restructuring charges	0		0
Cost of Sales
Restructuring and Other Costs
Restructuring charges	2		5
Cost of Sales | Leading Beauty Forward
Restructuring and Other Costs
Restructuring charges	2		5
Cost of Sales | PCBA Program
Restructuring and Other Costs
Restructuring charges	0		0
Restructuring Charges
Restructuring and Other Costs
Restructuring charges	32		36
Restructuring Charges | Leading Beauty Forward
Restructuring and Other Costs
Restructuring charges	(2)		(10)
Restructuring Charges | PCBA Program
Restructuring and Other Costs
Restructuring charges	34		46
Other Charges
Restructuring and Other Costs
Restructuring charges	3		5
Other Charges | Leading Beauty Forward
Restructuring and Other Costs
Restructuring charges	3		5
Other Charges | PCBA Program
Restructuring and Other Costs
Restructuring charges	$ 0		$ 0

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CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Approved Restructuring Activities by Major Cost Type (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Restructuring and related costs
Restructuring and other charges	$ 35	$ 7	$ 41	$ 30
Leading Beauty Forward
Restructuring and related costs
Cumulative through June 30, 2020			967
Restructuring and other charges			0
Cumulative through December 31, 2020	967		967
Leading Beauty Forward | Sales Returns (included in Net Sales)
Restructuring and related costs
Cumulative through June 30, 2020			13
Restructuring and other charges			1
Cumulative through December 31, 2020	14		14
Leading Beauty Forward | Cost of Sales
Restructuring and related costs
Cumulative through June 30, 2020			85
Restructuring and other charges			0
Cumulative through December 31, 2020	85		85
Leading Beauty Forward | Restructuring Charges
Restructuring and related costs
Cumulative through June 30, 2020			511
Restructuring and other charges			(7)
Cumulative through December 31, 2020	504		504
Leading Beauty Forward | Restructuring Charges | Employee- Related Costs
Restructuring and related costs
Cumulative through June 30, 2020			460
Restructuring and other charges			(8)
Cumulative through December 31, 2020	452		452
Leading Beauty Forward | Restructuring Charges | Asset- Related Costs
Restructuring and related costs
Cumulative through June 30, 2020			28
Restructuring and other charges			0
Cumulative through December 31, 2020	28		28
Leading Beauty Forward | Restructuring Charges | Contract Terminations
Restructuring and related costs
Cumulative through June 30, 2020			7
Restructuring and other charges			1
Cumulative through December 31, 2020	8		8
Leading Beauty Forward | Restructuring Charges | Other Exit Costs
Restructuring and related costs
Cumulative through June 30, 2020			16
Restructuring and other charges			0
Cumulative through December 31, 2020	16		16
Leading Beauty Forward | Other Charges
Restructuring and related costs
Cumulative through June 30, 2020			358
Restructuring and other charges			6
Cumulative through December 31, 2020	$ 364		364
PCBA Program
Restructuring and related costs
Restructuring and other charges			66
PCBA Program | Sales Returns (included in Net Sales)
Restructuring and related costs
Restructuring and other charges			5
PCBA Program | Cost of Sales
Restructuring and related costs
Restructuring and other charges			(1)
PCBA Program | Restructuring Charges
Restructuring and related costs
Restructuring and other charges			46
PCBA Program | Restructuring Charges | Employee- Related Costs
Restructuring and related costs
Restructuring and other charges			46
PCBA Program | Restructuring Charges | Asset- Related Costs
Restructuring and related costs
Restructuring and other charges			4
PCBA Program | Restructuring Charges | Contract Terminations
Restructuring and related costs
Restructuring and other charges			(7)
PCBA Program | Restructuring Charges | Other Exit Costs
Restructuring and related costs
Restructuring and other charges			3
PCBA Program | Other Charges
Restructuring and related costs
Restructuring and other charges			$ 16

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CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Cumulative Restructuring Charges by Major Cost Type (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Restructuring and related costs
Charges (adjustments)	$ 37	$ 13	$ 46	$ 38
Sales Returns (included in Net Sales)
Restructuring and related costs
Charges (adjustments)	0		0
Cost of Sales
Restructuring and related costs
Charges (adjustments)	2		5
Restructuring Charges
Restructuring and related costs
Charges (adjustments)	32		36
Other Charges
Restructuring and related costs
Charges (adjustments)	3		5
Leading Beauty Forward
Restructuring and related costs
Cumulative through June 30, 2020			874
Charges (adjustments)	3		0
Cumulative through December 31, 2020	874		874
Leading Beauty Forward | Sales Returns (included in Net Sales)
Restructuring and related costs
Cumulative through June 30, 2020			14
Charges (adjustments)	0		0
Cumulative through December 31, 2020	14		14
Leading Beauty Forward | Cost of Sales
Restructuring and related costs
Cumulative through June 30, 2020			65
Charges (adjustments)	2		5
Cumulative through December 31, 2020	70		70
Leading Beauty Forward | Restructuring Charges
Restructuring and related costs
Cumulative through June 30, 2020			491
Charges (adjustments)	(2)		(10)
Cumulative through December 31, 2020	481		481
Leading Beauty Forward | Restructuring Charges | Employee- Related Costs
Restructuring and related costs
Cumulative through June 30, 2020			451
Charges (adjustments)			(12)
Cumulative through December 31, 2020	439		439
Leading Beauty Forward | Restructuring Charges | Asset- Related Costs
Restructuring and related costs
Cumulative through June 30, 2020			27
Charges (adjustments)			1
Cumulative through December 31, 2020	28		28
Leading Beauty Forward | Restructuring Charges | Contract Terminations
Restructuring and related costs
Cumulative through June 30, 2020			6
Charges (adjustments)			1
Cumulative through December 31, 2020	7		7
Leading Beauty Forward | Restructuring Charges | Other Exit Costs
Restructuring and related costs
Cumulative through June 30, 2020			7
Charges (adjustments)			0
Cumulative through December 31, 2020	7		7
Leading Beauty Forward | Other Charges
Restructuring and related costs
Cumulative through June 30, 2020			304
Charges (adjustments)	3		5
Cumulative through December 31, 2020	309		309
PCBA Program
Restructuring and related costs
Charges (adjustments)	34		46
Cumulative through December 31, 2020	46		46
PCBA Program | Sales Returns (included in Net Sales)
Restructuring and related costs
Charges (adjustments)	0		0
Cumulative through December 31, 2020	0		0
PCBA Program | Cost of Sales
Restructuring and related costs
Charges (adjustments)	0		0
Cumulative through December 31, 2020	0		0
PCBA Program | Restructuring Charges
Restructuring and related costs
Charges (adjustments)	34		46
Cumulative through December 31, 2020	46		46
PCBA Program | Restructuring Charges | Employee- Related Costs
Restructuring and related costs
Charges (adjustments)			45
Cumulative through December 31, 2020	45		45
PCBA Program | Restructuring Charges | Asset- Related Costs
Restructuring and related costs
Charges (adjustments)			0
Cumulative through December 31, 2020	0		0
PCBA Program | Restructuring Charges | Contract Terminations
Restructuring and related costs
Charges (adjustments)			1
Cumulative through December 31, 2020	1		1
PCBA Program | Restructuring Charges | Other Exit Costs
Restructuring and related costs
Charges (adjustments)			0
Cumulative through December 31, 2020	0		0
PCBA Program | Other Charges
Restructuring and related costs
Charges (adjustments)	0		0
Cumulative through December 31, 2020	$ 0		$ 0

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CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Accrued Restructuring Charges (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended		12 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019	Jun. 30, 2023	Jun. 30, 2022	Jun. 30, 2021
Restructuring Reserve [Roll Forward]
Charges (adjustments)	$ 37	$ 13	$ 46	$ 38
Restructuring Charges
Restructuring Reserve [Roll Forward]
Charges (adjustments)	32		36
Leading Beauty Forward
Restructuring Reserve [Roll Forward]
Charges (adjustments)	3		0
Leading Beauty Forward | Restructuring Charges
Restructuring Reserve [Roll Forward]
Beginning balance			112				$ 112
Charges (adjustments)	(2)		(10)
Cash payments			(36)
Translation adjustments			2
Ending balance	68		68
PCBA Program
Restructuring Reserve [Roll Forward]
Charges (adjustments)	34		46
PCBA Program | Restructuring Charges
Restructuring Reserve [Roll Forward]
Charges (adjustments)	34		46
Cash payments			(5)
Ending balance	41		41
Employee- Related Costs | Leading Beauty Forward | Restructuring Charges
Restructuring Reserve [Roll Forward]
Beginning balance			112				112
Charges (adjustments)			(12)
Cash payments			(36)
Translation adjustments			2
Ending balance	66		66
Employee- Related Costs | PCBA Program | Restructuring Charges
Restructuring Reserve [Roll Forward]
Charges (adjustments)			45
Cash payments			(4)
Ending balance	41		41
Asset- Related Costs | Leading Beauty Forward | Restructuring Charges
Restructuring Reserve [Roll Forward]
Beginning balance			0				0
Charges (adjustments)			1
Cash payments			0
Translation adjustments			0
Ending balance	1		1
Asset- Related Costs | PCBA Program | Restructuring Charges
Restructuring Reserve [Roll Forward]
Charges (adjustments)			0
Cash payments			0
Ending balance	0		0
Contract Terminations | Leading Beauty Forward | Restructuring Charges
Restructuring Reserve [Roll Forward]
Beginning balance			0				0
Charges (adjustments)			1
Cash payments			0
Translation adjustments			0
Ending balance	1		1
Contract Terminations | PCBA Program | Restructuring Charges
Restructuring Reserve [Roll Forward]
Charges (adjustments)			1
Cash payments			(1)
Ending balance	0		0
Other Exit Costs | Leading Beauty Forward | Restructuring Charges
Restructuring Reserve [Roll Forward]
Beginning balance			0				0
Charges (adjustments)			0
Cash payments			0
Translation adjustments			0
Ending balance	0		0
Other Exit Costs | PCBA Program | Restructuring Charges
Restructuring Reserve [Roll Forward]
Charges (adjustments)			0
Cash payments			0
Ending balance	$ 0		$ 0
Forecast | Leading Beauty Forward
Restructuring Reserve [Roll Forward]
Accrued restructuring charges expected to result in cash expenditures funded from cash provided by operations					$ 5	$ 17	46
Forecast | PCBA Program
Restructuring Reserve [Roll Forward]
Accrued restructuring charges expected to result in cash expenditures funded from cash provided by operations					$ 1	$ 5	$ 35

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CHARGES ASSOCIATED WITH RESTRUCTURING AND OTHER ACTIVITIES - Narrative (Details) - PCBA Program $ in Millions	Aug. 20, 2020 USD ($) position
Restructuring and Other Costs
Restructuring program, period	2 years
Net reduction of current workforce (as a percent)	3.00%
Minimum
Restructuring and Other Costs
Net reduction in global positions | position	1,500
Closure of freestanding stores (as a percent)	10.00%
Restructuring and related costs, expected costs | $	$ 400
Maximum
Restructuring and Other Costs
Net reduction in global positions | position	2,000
Closure of freestanding stores (as a percent)	15.00%
Restructuring and related costs, expected costs | $	$ 500

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DERIVATIVE FINANCIAL INSTRUMENTS - Derivative Instruments Included in the Consolidated Balance Sheets (Details) - USD ($) $ in Millions	Dec. 31, 2020	Jun. 30, 2020
Derivatives, Fair Value
Derivative asset, total	$ 84	$ 102
Derivative liability, total	137	83
Derivatives Designated as Hedging Instruments | Prepaid expenses and other current assets
Derivatives, Fair Value
Derivative asset, fair value	32	62
Derivatives Designated as Hedging Instruments | Other accrued liabilities
Derivatives, Fair Value
Derivative liability, fair value	108	68
Derivatives Designated as Hedging Instruments | Foreign currency cash flow hedges | Prepaid expenses and other current assets
Derivatives, Fair Value
Derivative asset, fair value	0	26
Derivatives Designated as Hedging Instruments | Foreign currency cash flow hedges | Other accrued liabilities
Derivatives, Fair Value
Derivative liability, fair value	37	3
Derivatives Designated as Hedging Instruments | Net investment hedges | Prepaid expenses and other current assets
Derivatives, Fair Value
Derivative asset, fair value	21	21
Derivatives Designated as Hedging Instruments | Net investment hedges | Other accrued liabilities
Derivatives, Fair Value
Derivative liability, fair value	71	62
Derivatives Designated as Hedging Instruments | Interest rate-related derivatives | Prepaid expenses and other current assets
Derivatives, Fair Value
Derivative asset, fair value	11	15
Derivatives Designated as Hedging Instruments | Interest rate-related derivatives | Other accrued liabilities
Derivatives, Fair Value
Derivative liability, fair value	0	3
Derivatives Not Designated as Hedging Instruments | Foreign currency forward contracts | Prepaid expenses and other current assets
Derivatives, Fair Value
Derivative asset, fair value	52	40
Derivatives Not Designated as Hedging Instruments | Foreign currency forward contracts | Other accrued liabilities
Derivatives, Fair Value
Derivative liability, fair value	$ 29	$ 15

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DERIVATIVE FINANCIAL INSTRUMENTS - Gain (Loss) on Derivative Financial Instruments (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Gain (loss) on derivative financial instruments
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging	$ (110)	$ (53)	$ (204)	$ (39)
Amounts reclassified to earnings during the year	(5)	6	(5)	19
Cash flow hedges
Gain (loss) on derivative financial instruments
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging	(31)	(16)	(62)	(5)
Amounts reclassified to earnings during the year	(5)	6	(5)	19
Current debt
Gain (loss) on derivative financial instruments
Cumulative Amount of Fair Value Hedging Gain/(Loss) Included in the Carrying Amount of the Hedged Liability			2
Current debt | Derivatives in fair value hedging relationships
Gain (loss) on derivative financial instruments
Carrying Amount of the Hedged Liabilities	452		452
Long-term debt
Gain (loss) on derivative financial instruments
Cumulative Amount of Fair Value Hedging Gain/(Loss) Included in the Carrying Amount of the Hedged Liability			8
Long-term debt | Derivatives in fair value hedging relationships
Gain (loss) on derivative financial instruments
Carrying Amount of the Hedged Liabilities	258		258
Total debt
Gain (loss) on derivative financial instruments
Cumulative Amount of Fair Value Hedging Gain/(Loss) Included in the Carrying Amount of the Hedged Liability			10
Total debt | Derivatives in fair value hedging relationships
Gain (loss) on derivative financial instruments
Carrying Amount of the Hedged Liabilities	710		710
Net sales
Gain (loss) on derivative financial instruments
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	4,853	4,624	8,415	8,519
Interest expense
Gain (loss) on derivative financial instruments
Total amounts of income and expense line items presented in the consolidated statements of earnings in which the effects of fair value and cash flow hedges are recorded	43	38	88	70
Foreign currency forward contracts | Cash flow hedges
Gain (loss) on derivative financial instruments
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging	(34)	(21)	(65)	4
Foreign currency forward contracts | Net investment hedges
Gain (loss) on derivative financial instruments
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging	(79)	(37)	(142)	(34)
Amounts reclassified to earnings during the year	0	0	0	0
Foreign currency forward contracts | Net sales | Cash flow hedges
Gain (loss) on derivative financial instruments
Amounts reclassified to earnings during the year	(5)	6	(4)	19
Interest rate-related derivatives | Cash flow hedges
Gain (loss) on derivative financial instruments
Amount of Gain or (Loss) Recognized in OCI on Derivatives, Cash Flow Hedging	3	5	3	(9)
Interest rate-related derivatives | Interest expense | Cash flow hedges
Gain (loss) on derivative financial instruments
Amounts reclassified to earnings during the year	0	0	(1)	0
Interest rate-related derivatives | Interest expense | Derivatives in fair value hedging relationships
Gain (loss) on derivative financial instruments
Amount of gain (loss) reclassified from AOCI to earnings	3	1	5	(1)
Net investment hedges
Gain (loss) on derivative financial instruments
Gain recognized in earnings related to the amount excluded from effectiveness testing	5	13	10	25
Derivatives Designated as Hedging Instruments | Interest rate-related derivatives | Interest expense | Derivatives in fair value hedging relationships
Gain (loss) on derivative financial instruments
Amount of gain (loss) reclassified from AOCI to earnings	(3)	(1)	(5)	1
Amount of gain (loss) reclassified from AOCI to earnings	(3)	(1)	(5)	1
Derivatives Not Designated as Hedging Instruments | Foreign currency forward contracts | Selling, general and administrative
Gain (loss) on derivative financial instruments
Amount of gain (loss) reclassified from AOCI to earnings	$ 42	$ 30	$ 63	$ 3

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DERIVATIVE FINANCIAL INSTRUMENTS - Cash Flow Hedges, Fair Value Hedges, Credit Risk (Details)	Dec. 31, 2020 USD ($) item	Jun. 30, 2020 USD ($)
Derivatives Not Designated as Hedging Instruments
Derivative instruments
Notional amount	$ 4,118,000,000
Foreign Currency Cash-Flow Hedges
Notional amount	$ 4,118,000,000
Derivative
Credit Risk
Minimum number of nationally recognized rating agencies | item	2
Maximum exposure to credit risk in the event of non performance by counterparties, gross fair value of contracts in asset positions	$ 84,000,000
Cash flow hedges
Foreign Currency Cash-Flow Hedges
Amount expected to be reclassified from AOCI into earnings, net of tax, within the next twelve months	25,000,000
Accumulated net gain on derivative instruments in AOCI, before tax	(37,000,000)	$ 20,000,000
Cash flow hedges | Foreign currency forward contracts
Derivative instruments
Notional amount	1,195,000,000
Foreign Currency Cash-Flow Hedges
Notional amount	1,195,000,000
Derivatives in fair value hedging relationships | Interest rate swap contracts | 1.70% Senior Notes, due May 10, 2021 ("2021 Senior Notes")
Fair Value Hedges
Notional amount	450,000,000
Derivatives in fair value hedging relationships | Interest rate swap contracts | 2.35% Senior Notes due August 15, 2022 ("2022 Senior Notes")
Fair Value Hedges
Notional amount	250,000,000
Net investment hedges | Foreign currency forward contracts
Fair Value Hedges
Notional amount	$ 1,879,000,000

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FAIR VALUE MEASUREMENTS - Hierarchy For Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - Recurring basis - USD ($) $ in Millions	Dec. 31, 2020	Jun. 30, 2020
Assets:
Foreign currency forward contracts	$ 73	$ 87
Interest rate-related derivatives	11	15
Total	2,633	2,912
Liabilities:
Foreign currency forward contracts	137	80
Interest rate-related derivatives		3
Contingent consideration	2	4
Total	139	87
Money market funds
Assets:
Money market funds	2,549	2,810
Level 1
Assets:
Foreign currency forward contracts	0	0
Interest rate-related derivatives	0	0
Total	2,549	2,810
Liabilities:
Foreign currency forward contracts	0	0
Interest rate-related derivatives		0
Contingent consideration	0	0
Total	0	0
Level 1 | Money market funds
Assets:
Money market funds	2,549	2,810
Level 2
Assets:
Foreign currency forward contracts	73	87
Interest rate-related derivatives	11	15
Total	84	102
Liabilities:
Foreign currency forward contracts	137	80
Interest rate-related derivatives		3
Contingent consideration	0	0
Total	137	83
Level 2 | Money market funds
Assets:
Money market funds	0	0
Level 3
Assets:
Foreign currency forward contracts	0	0
Interest rate-related derivatives	0	0
Total	0	0
Liabilities:
Foreign currency forward contracts	0	0
Interest rate-related derivatives		0
Contingent consideration	2	4
Total	2	4
Level 3 | Money market funds
Assets:
Money market funds	$ 0	$ 0

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FAIR VALUE MEASUREMENTS - Estimated Fair Values of Financial Instruments (Details) - USD ($) $ in Millions	Dec. 31, 2020	Jun. 30, 2020
Derivatives
Derivative asset	$ 84	$ 102
Derivative liability	(137)	(83)
Carrying Amount
Nonderivatives
Cash and cash equivalents	5,545	5,022
Current and long-term debt	5,383	6,136
Contingent consideration	2	4
Carrying Amount | Foreign currency forward contracts
Derivatives
Derivative asset		7
Derivative liability	64
Carrying Amount | Interest rate-related derivatives
Derivatives
Derivative asset	11	12
Fair Value
Nonderivatives
Cash and cash equivalents	5,545	5,022
Current and long-term debt	6,315	6,902
Contingent consideration	2	4
Fair Value | Foreign currency forward contracts
Derivatives
Derivative asset		7
Derivative liability	64
Fair Value | Interest rate-related derivatives
Derivatives
Derivative asset	$ 11	$ 12

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FAIR VALUE MEASUREMENTS - Impairment Charges (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Estimated fair values of financial instruments
Goodwill impairment	$ 54	$ 511	$ 54	$ 511
Level 3 | Fair Value, Nonrecurring
Estimated fair values of financial instruments
Goodwill impairment	54	511	54	511
Impairment charges	81	777	81	777
Level 3 | Fair Value, Nonrecurring | Trademarks and other
Estimated fair values of financial instruments
Impairment Charge, Trademark	27	266	27	266
Level 3 | Fair Value, Nonrecurring | Fair Value
Estimated fair values of financial instruments
Goodwill, fair value	0	264	0	264
Fair Value	36	676	36	676
Level 3 | Fair Value, Nonrecurring | Fair Value | Trademarks and other
Estimated fair values of financial instruments
Trademark, fair value	$ 36	$ 412	$ 36	$ 412

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FAIR VALUE MEASUREMENTS - Foreign Currency Forward Contracts Maturity and Additional Purchase Price Payable - Narrative (Details) - Foreign currency forward contracts	6 Months Ended
	Dec. 31, 2020
Maximum | LIBOR
Foreign currency forward contracts
Contract maturities	12 months
Minimum | Swap yield curve
Foreign currency forward contracts
Contract maturities	12 months

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FAIR VALUE MEASUREMENTS - Contingent Consideration Roll forward (Details) - USD ($) $ in Millions	6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Business Combination, Contingent Consideration [Roll Forward]
Changes in fair value of contingent consideration	$ (2)	$ (7)
Selling, general and administrative expenses
Business Combination, Contingent Consideration [Roll Forward]
Contingent consideration at June 30, 2020	4
Changes in fair value of contingent consideration	(2)
Contingent consideration at December 31, 2020	$ 2

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REVENUE RECOGNITION - Narrative (Details) - USD ($) $ in Millions	Dec. 31, 2020	Sep. 30, 2020	Jun. 30, 2020	Dec. 31, 2019	Sep. 30, 2019	Jun. 30, 2019
REVENUE RECOGNITION
Allowance for doubtful accounts and customer deductions	$ 66		$ 63
Adjustment to retained earnings	5,456		3,962	$ 4,601
Allowance for non-credit losses	27
Retained Earnings
REVENUE RECOGNITION
Adjustment to retained earnings	$ 11,159	$ 10,480	10,134	$ 10,775	$ 10,393	$ 9,984
Cumulative Effect, Period of Adoption, Adjustment | Retained Earnings
REVENUE RECOGNITION
Adjustment to retained earnings		$ 0	(3)		$ 0	$ (29)
Cumulative Effect, Period of Adoption, Adjustment | Retained Earnings | Accounting Standards Update 2016-13
REVENUE RECOGNITION
Adjustment to retained earnings			$ (3)

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REVENUE RECOGNITION - Changes in Allowance for Credit Losses (Details) $ in Millions	6 Months Ended
	Dec. 31, 2020 USD ($)
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Balance at June 30, 2020	$ 36
Provision for expected credit losses	7
Write-offs, net & other	(8)
Balance at December 31, 2020	39
Cumulative Effect, Period of Adoption, Adjustment
Accounts Receivable, Allowance for Credit Loss [Roll Forward]
Balance at June 30, 2020	$ 4

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REVENUE RECOGNITION - Changes in Deferred Revenue (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Change in Contract with Customer, Liability [Abstract]
Balance at the beginning of the period	$ 409	$ 392	$ 279	$ 361
Revenue recognized that was included in the deferred revenue balance at the beginning of the period	(83)	(83)	(173)	(243)
Revenue deferred during the period	92	112	308	307
Other	2	4	6	0
Balance at the end of the period	$ 420	$ 425	$ 420	$ 425

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REVENUE RECOGNITION - Transaction Price Allocated to the Remaining Performance Obligations (Details) - Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2021-01-01 $ in Millions	Dec. 31, 2020 USD ($)
REVENUE RECOGNITION
Expected timing of revenue recognition	12 months
Estimated recognition of deferred revenue	$ 365

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PENSION AND POST-RETIREMENT BENEFIT PLANS - Components of Net Periodic Benefit Cost (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Pension Plans | U.S.
Components of net periodic benefit cost:
Service cost	$ 11	$ 10	$ 22	$ 20
Interest cost	7	9	15	17
Expected return on plan assets	(13)	(13)	(26)	(26)
Amortization of:
Actuarial loss	5	3	10	7
Special termination benefits	0	0	0	0
Net periodic benefit cost	10	9	21	18
Pension Plans | International
Components of net periodic benefit cost:
Service cost	9	9	18	18
Interest cost	3	2	5	5
Expected return on plan assets	(3)	(4)	(6)	(7)
Amortization of:
Actuarial loss	1	2	2	3
Special termination benefits	7	0	9	0
Net periodic benefit cost	17	9	28	19
Employer contributions			18
Other than Pension Plans Post-retirement
Components of net periodic benefit cost:
Service cost	0	1	0	2
Interest cost	2	1	3	3
Expected return on plan assets	0	0	0	(1)
Amortization of:
Actuarial loss	0	0	0	0
Special termination benefits	0	0	0	0
Net periodic benefit cost	$ 2	$ 2	$ 3	$ 4

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PENSION AND POST-RETIREMENT BENEFIT PLANS - Amounts Recognized in the Consolidated Balance Sheets (Details) - USD ($) $ in Millions	Dec. 31, 2020	Jun. 30, 2020
Amounts recognized in the consolidated balance sheets consist of:
Other assets	$ 138	$ 127
Other accrued liabilities	(27)	(27)
Other noncurrent liabilities	(472)	(440)
Funded status	(361)	(340)
Accumulated other comprehensive loss	314	324
Net amount recognized	$ (47)	$ (16)

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STOCK PROGRAMS - Compensation Expense and Stock Options (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award
Non-cash stock-based compensation	$ 105	$ 83	$ 169	$ 139
Stock Options | Common Class A
Share-based Compensation Arrangement by Share-based Payment Award
Grant at fair value (in shares)			1.5
Exercise price (in dollars per share)			$ 218.40
Weighted-average grant date fair value (in dollars per share)			$ 54.61
Additional General Disclosures
Intrinsic value of stock options exercised (in dollars)			$ 209

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STOCK PROGRAMS - Restricted Stock Units (Details) - Restricted Stock Units - Employee - Common Class A shares in Millions	6 Months Ended
	Dec. 31, 2020 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award
Granted (in shares)	0.9
Weighted-average grant date fair value (in dollars per share) | $ / shares	$ 218.10
RSU grants scheduled to vest in fiscal 2022
Share-based Compensation Arrangement by Share-based Payment Award
RSU grants scheduled to vest (in shares)	0.3
RSU grants scheduled to vest in fiscal 2023
Share-based Compensation Arrangement by Share-based Payment Award
RSU grants scheduled to vest (in shares)	0.3
RSU grants scheduled to vest in fiscal 2024
Share-based Compensation Arrangement by Share-based Payment Award
RSU grants scheduled to vest (in shares)	0.3

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STOCK PROGRAMS - Performance Share Units (Details) - Performance Share Units - Employee - $ / shares shares in Millions	1 Months Ended	6 Months Ended	12 Months Ended
	Sep. 30, 2020	Dec. 31, 2020	Jun. 30, 2020
Share-based Compensation Arrangement by Share-based Payment Award
Vested (in shares)			0.5
Common Class A
Share-based Compensation Arrangement by Share-based Payment Award
Granted (in shares)		0.1
Weighted-average grant date fair value (in dollars per share)		$ 218.11
Common Stock issued (in shares)	0.2

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NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE - Reconciliation Between Numerator and Denominator of Basic and Diluted EPS Computations (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Numerator:
Net earnings attributable to The Estée Lauder Companies Inc.	$ 873	$ 557	$ 1,396	$ 1,152
Denominator:
Weighted-average common shares outstanding - Basic (in shares)	363.0	360.2	363.4	360.8
Weighted-average common shares outstanding - Diluted (in shares)	368.0	366.7	368.5	367.7
Net earnings attributable to The Estée Lauder Companies Inc. per common share:
Basic (in dollars per share)	$ 2.40	$ 1.55	$ 3.84	$ 3.19
Diluted (in dollars per share)	$ 2.37	$ 1.52	$ 3.79	$ 3.13
Stock Options
Denominator:
Incremental common shares attributable to share-based payment arrangements (in shares)	3.8	4.7	3.8	4.8
Performance Share Units
Denominator:
Incremental common shares attributable to share-based payment arrangements (in shares)	0.2	0.3	0.2	0.2
Restricted Stock Units
Denominator:
Incremental common shares attributable to share-based payment arrangements (in shares)	1.0	1.5	1.1	1.9

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NET EARNINGS ATTRIBUTABLE TO THE ESTEE LAUDER COMPANIES INC. PER COMMON SHARE - Antidilutive Securities Excluded from Computation of Earnings, Per Share (Details) - shares shares in Millions	6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Stock Options
Antidilutive Securities Excluded from Computation of Earnings, Per Share
Antidilutive shares excluded from the calculation of diluted earnings per share	1.5	1.3
Contingently Issuable Shares
Antidilutive Securities Excluded from Computation of Earnings, Per Share
Antidilutive shares excluded from the calculation of diluted earnings per share	0.8	1.1

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EQUITY - Equity Roll forward (Details) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Increase (Decrease) in Stockholders' Equity
Beginning of the period			$ 3,962
Net earnings attributable to The Estée Lauder Companies Inc.	$ 873	$ 557	1,396	$ 1,152
Other comprehensive income (loss)	213	57	284	(7)
Net earnings attributable to noncontrolling interests	(4)	(4)	(6)	(7)
End of the period	$ 5,456	$ 4,601	$ 5,456	$ 4,601
Cash dividends declared per common share	$ 0.53	$ 0.48	$ 1.01	$ 0.91
Total Stockholders' equity - The Estee Lauder Companies Inc.
Increase (Decrease) in Stockholders' Equity
End of the period	$ 5,421	$ 4,574	$ 5,421	$ 4,574
Common Stock
Increase (Decrease) in Stockholders' Equity
Beginning of the period	6	6	6	6
Stock-based compensation	0	0	0	0
End of the period	6	6	6	6
Paid-in Capital
Increase (Decrease) in Stockholders' Equity
Beginning of the period	4,913	4,514	4,790	4,403
Stock-based compensation	155	100	277	210
Common stock dividends	0	1	1	2
End of the period	5,068	4,615	5,068	4,615
Retained Earnings
Increase (Decrease) in Stockholders' Equity
Beginning of the period	10,480	10,393	10,134	9,984
Common stock dividends	(194)	(175)	(368)	(332)
Net earnings attributable to The Estée Lauder Companies Inc.	873	557	1,396	1,152
End of the period	11,159	10,775	11,159	10,775
Retained Earnings | Cumulative Effect, Period of Adoption, Adjustment
Increase (Decrease) in Stockholders' Equity
Beginning of the period	0	0	(3)	(29)
Accumulated Other Comprehensive Loss
Increase (Decrease) in Stockholders' Equity
Beginning of the period	(594)	(627)	(665)	(563)
Other comprehensive income (loss)	211	58	282	(6)
End of the period	(383)	(569)	(383)	(569)
Treasury Stock
Increase (Decrease) in Stockholders' Equity
Beginning of the period	(10,353)	(9,756)	(10,330)	(9,444)
Stock-based compensation	(76)	(71)	(99)	(106)
Acquisition of treasury stock	0	(426)	0	(703)
End of the period	(10,429)	(10,253)	(10,429)	(10,253)
Non-controlling Interests
Increase (Decrease) in Stockholders' Equity
Beginning of the period	29	28	27	25
Other comprehensive income (loss)	2	(1)	2	(1)
Net earnings attributable to noncontrolling interests	4	4	6	7
Distribution to noncontrolling interest holders	0	(4)	0	(4)
End of the period	$ 35	$ 27	$ 35	$ 27

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EQUITY - Class of Stock and Dividend Information (Details) - $ / shares shares in Millions						3 Months Ended		6 Months Ended
	Feb. 04, 2021	Dec. 15, 2020	Oct. 30, 2020	Sep. 15, 2020	Aug. 19, 2020	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Class of Stock
Cash dividends declared per common share (in dollars per share)						$ 0.53	$ 0.48	$ 1.01	$ 0.91
Conversion of Class B to Class A (in shares)								2.2
Common Class A
Class of Stock
Cash dividends declared per common share (in dollars per share)			$ 0.53		$ 0.48
Cash dividends paid per common share (in dollars per share)		$ 0.53		$ 0.48
Common Class A | Subsequent Event
Class of Stock
Cash dividends declared per common share (in dollars per share)	$ 0.53
Common Class B
Class of Stock
Cash dividends declared per common share (in dollars per share)			$ 0.53		$ 0.48
Cash dividends paid per common share (in dollars per share)		$ 0.53		$ 0.48
Common Class B | Subsequent Event
Class of Stock
Cash dividends declared per common share (in dollars per share)	$ 0.53

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EQUITY - Changes in Accumulated Other Comprehensive Income (Loss) (Details) $ in Millions	6 Months Ended
	Dec. 31, 2020 USD ($)
Changes in AOCI, net of tax, by component
Balance, beginning of the period	$ 3,935
Balance, end of the period	5,421
Accumulated Other Comprehensive Loss
Changes in AOCI, net of tax, by component
Balance, beginning of the period	(665)
OCI before reclassifications	268
Amounts reclassified to Net earnings	14
Net current-period OCI	282
Balance, end of the period	(383)
Net Cash Flow Hedge Gain (Loss)
Changes in AOCI, net of tax, by component
Balance, beginning of the period	14
OCI before reclassifications	(48)
Amounts reclassified to Net earnings	4
Net current-period OCI	(44)
Balance, end of the period	(30)
Retirement Plan and Other Retiree Benefit Adjustments
Changes in AOCI, net of tax, by component
Balance, beginning of the period	(244)
OCI before reclassifications	(2)
Amounts reclassified to Net earnings	10
Net current-period OCI	8
Balance, end of the period	(236)
Translation Adjustments
Changes in AOCI, net of tax, by component
Balance, beginning of the period	(435)
OCI before reclassifications	318
Amounts reclassified to Net earnings	0
Net current-period OCI	318
Balance, end of the period	$ (117)

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EQUITY - Reclassification Adjustments From Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019	Dec. 31, 2020	Dec. 31, 2019
Reclassification adjustments from accumulated other comprehensive income (loss)
Net sales	$ 4,853	$ 4,624	$ 8,415	$ 8,519
Interest expense	43	38	88	70
Earnings before income taxes	1,030	811	1,701	1,571
Benefit (provision) for deferred taxes	(153)	(250)	(299)	(412)
Net earnings	877	561	1,402	1,159
Amount Reclassified from AOCI
Reclassification adjustments from accumulated other comprehensive income (loss)
Net earnings	(9)	4	(14)	4
Gain (Loss) on Cash Flow Hedges | Amount Reclassified from AOCI
Reclassification adjustments from accumulated other comprehensive income (loss)
Earnings before income taxes	(5)	6	(5)	19
Benefit (provision) for deferred taxes	1	(2)	1	(5)
Net earnings	(4)	4	(4)	14
Gain (Loss) on Cash Flow Hedges | Foreign currency forward contracts | Amount Reclassified from AOCI
Reclassification adjustments from accumulated other comprehensive income (loss)
Net sales	(5)	6	(4)	19
Gain (Loss) on Cash Flow Hedges | Interest rate-related derivatives | Amount Reclassified from AOCI
Reclassification adjustments from accumulated other comprehensive income (loss)
Interest expense	0	0	(1)	0
Retirement Plan and Other Retiree Benefit Adjustments | Amount Reclassified from AOCI
Reclassification adjustments from accumulated other comprehensive income (loss)
Amortization of actuarial loss	(6)	(5)	(12)	(10)
Benefit (provision) for deferred taxes	1	1	2	2
Net earnings	(5)	(4)	(10)	(8)
Cumulative Translation Adjustments | Amount Reclassified from AOCI
Reclassification adjustments from accumulated other comprehensive income (loss)
Gain on previously held equity method investment	0	4	0	4
Net earnings	0	4	0	(2)
Cumulative Translation Adjustments | Amount Reclassified from AOCI | Restructuring and other charges
Reclassification adjustments from accumulated other comprehensive income (loss)
Loss on liquidation of an investment in a foreign subsidiary	$ 0	$ 0	$ 0	$ (6)

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STATEMENT OF CASH FLOWS (Details) - USD ($) $ in Millions	6 Months Ended
	Dec. 31, 2020	Dec. 31, 2019
Cash:
Cash paid during the period for interest	$ 84	$ 63
Cash paid during the period for income taxes	320	314
Non-cash investing and financing activities:
Capitalized interest and asset retirement obligations incurred	1	0
Property, plant and equipment accrued but unpaid	63	53
Right-of-use assets obtained in exchange for new finance lease liabilities	1	0
Right-of-use assets obtained in exchange for new operating lease liabilities	$ 148	$ 110

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SEGMENT DATA AND RELATED INFORMATION (Details) $ in Millions	3 Months Ended		6 Months Ended
	Dec. 31, 2020 USD ($)	Dec. 31, 2019 USD ($)	Dec. 31, 2020 USD ($) segment	Dec. 31, 2019 USD ($)
SEGMENT DATA AND RELATED INFORMATION
Number of operating segments | segment			1
Net sales	$ 4,853	$ 4,624	$ 8,415	$ 8,519
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	1,100	274	1,814	1,078
Operating income	1,063	261	1,768	1,040
Reconciliation:
Charges associated with restructuring and other activities	(37)	(13)	(46)	(38)
Interest expense	(43)	(38)	(88)	(70)
Interest income and investment income, net	17	13	31	27
Other components of net periodic benefit cost	(7)	(1)	(10)	(2)
Other income	0	576	0	576
Earnings before income taxes	1,030	811	1,701	1,571
The Americas
SEGMENT DATA AND RELATED INFORMATION
Net sales	1,048	1,226	1,921	2,386
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	36	(529)	101	(354)
Europe, the Middle East & Africa
SEGMENT DATA AND RELATED INFORMATION
Net sales	2,030	2,079	3,570	3,756
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	657	505	1,068	882
Asia/Pacific
SEGMENT DATA AND RELATED INFORMATION
Net sales	1,775	1,319	2,924	2,377
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	407	298	645	550
Skin Care
SEGMENT DATA AND RELATED INFORMATION
Net sales	2,819	2,205	4,854	4,047
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	928	772	1,649	1,404
Makeup
SEGMENT DATA AND RELATED INFORMATION
Net sales	1,247	1,660	2,225	3,103
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	28	(611)	(43)	(507)
Fragrance
SEGMENT DATA AND RELATED INFORMATION
Net sales	618	581	1,024	1,043
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	141	97	201	163
Hair Care
SEGMENT DATA AND RELATED INFORMATION
Net sales	154	162	290	298
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	4	12	7	12
Other
SEGMENT DATA AND RELATED INFORMATION
Net sales	15	16	22	28
Operating income (loss) before charges associated with restructuring and other activities:
Operating income (loss) before charges associated with restructuring activities	$ (1)	$ 4	$ 0	$ 6