Analysis of Solvency Ratios
Solvency ratios also known as long-term debt ratios measure a company ability to meet long-term obligations.
Solvency Ratios (Summary)
Debt Ratios
Coverage Ratios
Estée Lauder Cos. Inc., solvency ratios
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
An analysis of the solvency ratios reveals a pattern of cyclical volatility in leverage and debt coverage over the six-year period from 2018 to 2023. The most prominent fluctuations occurred in 2020 and 2023, characterized by increases in debt-related ratios and corresponding declines in the ability to cover fixed charges and interest payments.
- Leverage and Debt-to-Equity Trends
- The debt-to-equity ratio exhibits significant instability, rising from 0.76 in 2018 to a peak of 1.56 in 2020, before stabilizing and then increasing again to 1.45 by June 30, 2023. When operating lease liabilities are included, the impact on solvency is amplified, with the ratio peaking at 2.23 in 2020 and ending the period at 1.82. This indicates that lease obligations constitute a substantial portion of the overall liability structure.
- Capital and Asset Composition
- Debt to capital and debt to assets ratios follow a similar trajectory of intermittent spikes. Debt to capital rose from 0.43 in 2018 to 0.61 in 2020, followed by a period of relative stability, and ending at 0.59 in 2023. The debt-to-assets ratio remained relatively low throughout the period, ranging between 0.25 and 0.35, although the inclusion of lease liabilities increases this peak to 0.49 in 2020 and 0.43 in 2023, suggesting a higher reliance on debt to fund assets during those specific years.
- Financial Leverage and Risk
- Financial leverage has trended upward from 2.68 in 2018 to 4.19 in 2023. A significant jump to 4.52 was recorded in 2020. This general increase in leverage suggests a shift toward a more aggressive financing strategy or a decrease in the equity base relative to total assets.
- Coverage and Solvency Margins
- The company's ability to service its debt has shown marked deterioration in the most recent reporting period. Interest coverage ratios were robust between 2018 and 2022, peaking at 20.25 in 2021, but fell sharply to 6.48 by June 30, 2023. Similarly, the fixed charge coverage ratio, which peaked at 6.18 in 2021, declined to 3.00 in 2023. These trends indicate a contraction in the safety margin available to meet fixed financial obligations.
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Debt to Equity
Estée Lauder Cos. Inc., debt to equity calculation, comparison to benchmarks
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Current debt | 997) | 268) | 32) | 1,222) | 516) | 183) | |
| Long-term debt, excluding current maturities | 7,117) | 5,144) | 5,537) | 4,914) | 2,896) | 3,361) | |
| Total debt | 8,114) | 5,412) | 5,569) | 6,136) | 3,412) | 3,544) | |
| Stockholders’ equity, The Estée Lauder Companies Inc. | 5,585) | 5,590) | 6,057) | 3,935) | 4,386) | 4,688) | |
| Solvency Ratio | |||||||
| Debt to equity1 | 1.45 | 0.97 | 0.92 | 1.56 | 0.78 | 0.76 | |
| Benchmarks | |||||||
| Debt to Equity, Competitors2 | |||||||
| Procter & Gamble Co. | 0.74 | 0.68 | 0.69 | — | — | — | |
| Debt to Equity, Industry | |||||||
| Consumer Staples | 1.16 | 1.08 | 1.07 | — | — | — | |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
1 2023 Calculation
Debt to equity = Total debt ÷ Stockholders’ equity, The Estée Lauder Companies Inc.
= 8,114 ÷ 5,585 = 1.45
2 Click competitor name to see calculations.
The solvency profile of the organization over the six-year period from 2018 to 2023 is characterized by significant volatility in leverage, marked by two distinct peaks in the debt-to-equity ratio.
- Total Debt Trends
- Total debt exhibited a non-linear trajectory, remaining relatively stable between 2018 and 2019 before experiencing a sharp increase to US$ 6,136 million in 2020. Following a period of moderate decline through 2022, debt levels reached a six-year peak of US$ 8,114 million by June 30, 2023.
- Stockholders' Equity Evolution
- Equity levels fluctuated, reaching a period low of US$ 3,935 million in 2020. A substantial recovery was observed in 2021, with equity rising to US$ 6,057 million, before stabilizing at US$ 5,585 million by June 30, 2023.
- Debt to Equity Ratio Analysis
- The debt-to-equity ratio shifted from a conservative range of 0.76 to 0.78 in 2018-2019 to a peak of 1.56 in 2020, coinciding with the simultaneous increase in debt and decrease in equity. Although the ratio was reduced to 0.92 in 2021 and 0.97 in 2022, a second significant surge to 1.45 was recorded in 2023. This indicates an increased reliance on debt financing relative to shareholder equity at the conclusion of the analyzed period.
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Debt to Equity (including Operating Lease Liability)
Estée Lauder Cos. Inc., debt to equity (including operating lease liability) calculation, comparison to benchmarks
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Current debt | 997) | 268) | 32) | 1,222) | 516) | 183) | |
| Long-term debt, excluding current maturities | 7,117) | 5,144) | 5,537) | 4,914) | 2,896) | 3,361) | |
| Total debt | 8,114) | 5,412) | 5,569) | 6,136) | 3,412) | 3,544) | |
| Current operating lease liabilities | 357) | 365) | 379) | 375) | —) | —) | |
| Long-term operating lease liabilities | 1,698) | 1,868) | 2,151) | 2,278) | —) | —) | |
| Total debt (including operating lease liability) | 10,169) | 7,645) | 8,099) | 8,789) | 3,412) | 3,544) | |
| Stockholders’ equity, The Estée Lauder Companies Inc. | 5,585) | 5,590) | 6,057) | 3,935) | 4,386) | 4,688) | |
| Solvency Ratio | |||||||
| Debt to equity (including operating lease liability)1 | 1.82 | 1.37 | 1.34 | 2.23 | 0.78 | 0.76 | |
| Benchmarks | |||||||
| Debt to Equity (including Operating Lease Liability), Competitors2 | |||||||
| Procter & Gamble Co. | 0.76 | 0.69 | 0.71 | — | — | — | |
| Debt to Equity (including Operating Lease Liability), Industry | |||||||
| Consumer Staples | 1.28 | 1.20 | 1.19 | — | — | — | |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
1 2023 Calculation
Debt to equity (including operating lease liability) = Total debt (including operating lease liability) ÷ Stockholders’ equity, The Estée Lauder Companies Inc.
= 10,169 ÷ 5,585 = 1.82
2 Click competitor name to see calculations.
The solvency profile of the organization experienced significant volatility between 2018 and 2023, characterized by a substantial increase in leverage and fluctuating equity levels.
- Debt Accumulation Trends
- Total debt, including operating lease liabilities, remained stable between 2018 and 2019, ranging from US$ 3.412 billion to US$ 3.544 billion. A sharp increase occurred in 2020, with debt rising to US$ 8.789 billion. Following a period of gradual reduction to US$ 7.645 billion by 2022, a further surge was observed in 2023, reaching a period peak of US$ 10.169 billion.
- Stockholders' Equity Movements
- Equity exhibited a downward trend from 2018 to 2020, reaching a low of US$ 3.935 billion. A significant recovery occurred in 2021, with equity increasing to US$ 6.057 billion. From 2021 through 2023, equity levels remained relatively stagnant, concluding the period at US$ 5.585 billion.
- Debt to Equity Ratio Analysis
- The debt to equity ratio transitioned from a conservative position of 0.76 in 2018 to a peak of 2.23 in 2020, indicating a marked shift in the capital structure toward debt financing. While the ratio moderated to 1.34 and 1.37 in 2021 and 2022 respectively, it trended upward again to 1.82 by June 30, 2023. This trajectory suggests a heightened reliance on external borrowing relative to shareholder funding over the analyzed six-year period.
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Debt to Capital
Estée Lauder Cos. Inc., debt to capital calculation, comparison to benchmarks
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Current debt | 997) | 268) | 32) | 1,222) | 516) | 183) | |
| Long-term debt, excluding current maturities | 7,117) | 5,144) | 5,537) | 4,914) | 2,896) | 3,361) | |
| Total debt | 8,114) | 5,412) | 5,569) | 6,136) | 3,412) | 3,544) | |
| Stockholders’ equity, The Estée Lauder Companies Inc. | 5,585) | 5,590) | 6,057) | 3,935) | 4,386) | 4,688) | |
| Total capital | 13,699) | 11,002) | 11,626) | 10,071) | 7,798) | 8,232) | |
| Solvency Ratio | |||||||
| Debt to capital1 | 0.59 | 0.49 | 0.48 | 0.61 | 0.44 | 0.43 | |
| Benchmarks | |||||||
| Debt to Capital, Competitors2 | |||||||
| Procter & Gamble Co. | 0.43 | 0.40 | 0.41 | — | — | — | |
| Debt to Capital, Industry | |||||||
| Consumer Staples | 0.54 | 0.52 | 0.52 | — | — | — | |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
1 2023 Calculation
Debt to capital = Total debt ÷ Total capital
= 8,114 ÷ 13,699 = 0.59
2 Click competitor name to see calculations.
The solvency profile from 2018 to 2023 is characterized by significant volatility in debt obligations and a steady expansion of the overall capital base. A pattern of cyclical debt accumulation is evident, with substantial increases in leverage occurring in 2020 and 2023, which directly influenced the organization's capital structure.
- Total Debt Trajectory
- Total debt exhibited sharp fluctuations, rising from 3,544 million USD in 2018 to a peak of 8,114 million USD in 2023. A notable surge occurred in 2020, where debt levels increased by approximately 79% over the previous year. Following this spike, a period of gradual reduction was observed through 2022, before debt reached its maximum recorded level in 2023.
- Total Capital Evolution
- Total capital grew from 8,232 million USD in 2018 to 13,699 million USD in 2023. The growth trend was not linear, mirroring the volatility of debt levels with a significant expansion in 2020 and a further increase in 2023, indicating a general increase in the scale of the company's financing base.
- Debt to Capital Ratio Dynamics
- The debt to capital ratio varied between a low of 0.43 in 2018 and a peak of 0.61 in 2020. After the 2020 peak, the ratio normalized to a range of 0.48 to 0.49 during 2021 and 2022. However, the ratio rose again to 0.59 in 2023, suggesting a renewed and increased reliance on debt financing relative to total capital, which aligns with the surge in total debt observed in the final year of the period.
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Debt to Capital (including Operating Lease Liability)
Estée Lauder Cos. Inc., debt to capital (including operating lease liability) calculation, comparison to benchmarks
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Current debt | 997) | 268) | 32) | 1,222) | 516) | 183) | |
| Long-term debt, excluding current maturities | 7,117) | 5,144) | 5,537) | 4,914) | 2,896) | 3,361) | |
| Total debt | 8,114) | 5,412) | 5,569) | 6,136) | 3,412) | 3,544) | |
| Current operating lease liabilities | 357) | 365) | 379) | 375) | —) | —) | |
| Long-term operating lease liabilities | 1,698) | 1,868) | 2,151) | 2,278) | —) | —) | |
| Total debt (including operating lease liability) | 10,169) | 7,645) | 8,099) | 8,789) | 3,412) | 3,544) | |
| Stockholders’ equity, The Estée Lauder Companies Inc. | 5,585) | 5,590) | 6,057) | 3,935) | 4,386) | 4,688) | |
| Total capital (including operating lease liability) | 15,754) | 13,235) | 14,156) | 12,724) | 7,798) | 8,232) | |
| Solvency Ratio | |||||||
| Debt to capital (including operating lease liability)1 | 0.65 | 0.58 | 0.57 | 0.69 | 0.44 | 0.43 | |
| Benchmarks | |||||||
| Debt to Capital (including Operating Lease Liability), Competitors2 | |||||||
| Procter & Gamble Co. | 0.43 | 0.41 | 0.41 | — | — | — | |
| Debt to Capital (including Operating Lease Liability), Industry | |||||||
| Consumer Staples | 0.56 | 0.54 | 0.54 | — | — | — | |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
1 2023 Calculation
Debt to capital (including operating lease liability) = Total debt (including operating lease liability) ÷ Total capital (including operating lease liability)
= 10,169 ÷ 15,754 = 0.65
2 Click competitor name to see calculations.
An analysis of the solvency metrics reveals a significant shift in the capital structure between 2018 and 2023, characterized by a substantial increase in leverage and total capital utilization.
- Debt Accumulation Trends
- Total debt, including operating lease liabilities, remained relatively stable between 2018 and 2019. However, a sharp increase occurred in 2020, where debt rose from 3,412 million USD to 8,789 million USD. Following a period of slight contraction through 2022, debt levels reached a peak of 10,169 million USD by June 30, 2023.
- Capital Base Expansion
- Total capital followed a similar trajectory, growing from 8,232 million USD in 2018 to 15,754 million USD in 2023. The most pronounced expansion occurred in 2020, coinciding with the surge in total debt, indicating that the increase in the capital base was heavily driven by borrowed funds.
- Debt to Capital Ratio Analysis
- The debt-to-capital ratio exhibited a baseline of approximately 0.43 to 0.44 during the 2018-2019 period. A spike to 0.69 was observed in 2020, representing a significant increase in financial leverage. Although the ratio moderated to 0.57 and 0.58 in 2021 and 2022, it climbed again to 0.65 by 2023, signaling a sustained trend toward a more debt-heavy capital structure.
In summary, the data indicates a transition from a conservative solvency position to a more leveraged state. The volatility observed between 2020 and 2023 suggests periods of aggressive financing followed by attempts at stabilization, culminating in a high overall debt-to-capital ratio by the end of the analyzed period.
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Debt to Assets
Estée Lauder Cos. Inc., debt to assets calculation, comparison to benchmarks
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Current debt | 997) | 268) | 32) | 1,222) | 516) | 183) | |
| Long-term debt, excluding current maturities | 7,117) | 5,144) | 5,537) | 4,914) | 2,896) | 3,361) | |
| Total debt | 8,114) | 5,412) | 5,569) | 6,136) | 3,412) | 3,544) | |
| Total assets | 23,415) | 20,910) | 21,971) | 17,781) | 13,156) | 12,567) | |
| Solvency Ratio | |||||||
| Debt to assets1 | 0.35 | 0.26 | 0.25 | 0.35 | 0.26 | 0.28 | |
| Benchmarks | |||||||
| Debt to Assets, Competitors2 | |||||||
| Procter & Gamble Co. | 0.29 | 0.27 | 0.27 | — | — | — | |
| Debt to Assets, Industry | |||||||
| Consumer Staples | 0.31 | 0.30 | 0.30 | — | — | — | |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
1 2023 Calculation
Debt to assets = Total debt ÷ Total assets
= 8,114 ÷ 23,415 = 0.35
2 Click competitor name to see calculations.
The solvency profile between 2018 and 2023 is characterized by fluctuations in leverage, with the debt-to-assets ratio oscillating between a minimum of 0.25 and a maximum of 0.35. While total assets have exhibited a strong overall growth trajectory, the debt levels have experienced two distinct periods of significant expansion, impacting the overall solvency position.
- Total Debt Trends
- Total debt remained relatively stable between 2018 and 2019 before increasing sharply to 6,136 million US$ in 2020. Following a period of gradual reduction in 2021 and 2022, debt levels surged to a peak of 8,114 million US$ by June 30, 2023, representing the highest level of indebtedness within the analyzed period.
- Total Asset Growth
- A consistent upward trend in total assets is observed, rising from 12,567 million US$ in 2018 to 23,415 million US$ in 2023. The most substantial increase occurred between 2019 and 2021, where assets grew from 13,156 million US$ to 21,971 million US$, suggesting significant capital expansion or acquisition activity during this timeframe.
- Debt to Assets Ratio Analysis
- The debt-to-assets ratio reflects a volatile pattern of leverage. An initial decline to 0.26 in 2019 was followed by a spike to 0.35 in 2020, coinciding with the sharp rise in total debt. The ratio improved to its lowest point of 0.25 in 2021 as asset growth outpaced debt accumulation. However, by 2023, the ratio returned to its peak of 0.35, driven by the substantial increase in total debt despite the continued growth of the asset base.
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Debt to Assets (including Operating Lease Liability)
Estée Lauder Cos. Inc., debt to assets (including operating lease liability) calculation, comparison to benchmarks
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Current debt | 997) | 268) | 32) | 1,222) | 516) | 183) | |
| Long-term debt, excluding current maturities | 7,117) | 5,144) | 5,537) | 4,914) | 2,896) | 3,361) | |
| Total debt | 8,114) | 5,412) | 5,569) | 6,136) | 3,412) | 3,544) | |
| Current operating lease liabilities | 357) | 365) | 379) | 375) | —) | —) | |
| Long-term operating lease liabilities | 1,698) | 1,868) | 2,151) | 2,278) | —) | —) | |
| Total debt (including operating lease liability) | 10,169) | 7,645) | 8,099) | 8,789) | 3,412) | 3,544) | |
| Total assets | 23,415) | 20,910) | 21,971) | 17,781) | 13,156) | 12,567) | |
| Solvency Ratio | |||||||
| Debt to assets (including operating lease liability)1 | 0.43 | 0.37 | 0.37 | 0.49 | 0.26 | 0.28 | |
| Benchmarks | |||||||
| Debt to Assets (including Operating Lease Liability), Competitors2 | |||||||
| Procter & Gamble Co. | 0.29 | 0.28 | 0.28 | — | — | — | |
| Debt to Assets (including Operating Lease Liability), Industry | |||||||
| Consumer Staples | 0.34 | 0.33 | 0.33 | — | — | — | |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
1 2023 Calculation
Debt to assets (including operating lease liability) = Total debt (including operating lease liability) ÷ Total assets
= 10,169 ÷ 23,415 = 0.43
2 Click competitor name to see calculations.
The solvency profile of the organization exhibits significant volatility between 2018 and 2023, characterized by substantial increases in both total assets and total debt obligations. While the asset base has expanded consistently over the six-year period, the debt-to-assets ratio has fluctuated, reflecting varying levels of financial leverage.
- Total Asset Growth
- A consistent upward trajectory in total assets is observed, rising from 12,567 million US dollars in 2018 to 23,415 million US dollars by June 30, 2023. Despite a slight contraction in 2022, the overall expansion indicates a significant growth in the company's resource base over the analyzed period.
- Debt Accumulation Patterns
- Total debt, including operating lease liabilities, remained relatively stable between 2018 and 2019 before experiencing a sharp increase in 2020, where it rose to 8,789 million US dollars. Following a period of gradual reduction through 2022, debt reached its highest recorded level in 2023 at 10,169 million US dollars.
- Debt to Assets Ratio Analysis
- The debt-to-assets ratio provides a clear view of the shifting solvency position. The ratio was at its lowest in 2019 at 0.26, suggesting a conservative leverage position. A significant spike occurred in 2020, reaching 0.49, indicating that nearly half of the assets were financed through debt. This ratio subsequently stabilized at 0.37 for both 2021 and 2022, before increasing again to 0.43 in 2023, signaling a renewed increase in financial leverage.
The overall trend suggests a strategic shift toward higher leverage to support asset growth, particularly evident in the peaks observed in 2020 and 2023. The increase in the debt-to-assets ratio toward the end of the period indicates a higher reliance on borrowed funds relative to the total asset base compared to the baseline established in 2018.
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Financial Leverage
Estée Lauder Cos. Inc., financial leverage calculation, comparison to benchmarks
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Total assets | 23,415) | 20,910) | 21,971) | 17,781) | 13,156) | 12,567) | |
| Stockholders’ equity, The Estée Lauder Companies Inc. | 5,585) | 5,590) | 6,057) | 3,935) | 4,386) | 4,688) | |
| Solvency Ratio | |||||||
| Financial leverage1 | 4.19 | 3.74 | 3.63 | 4.52 | 3.00 | 2.68 | |
| Benchmarks | |||||||
| Financial Leverage, Competitors2 | |||||||
| Procter & Gamble Co. | 2.58 | 2.52 | 2.57 | — | — | — | |
| Financial Leverage, Industry | |||||||
| Consumer Staples | 3.71 | 3.59 | 3.59 | — | — | — | |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
1 2023 Calculation
Financial leverage = Total assets ÷ Stockholders’ equity, The Estée Lauder Companies Inc.
= 23,415 ÷ 5,585 = 4.19
2 Click competitor name to see calculations.
The financial structure between 2018 and 2023 is characterized by a substantial expansion of the total asset base and fluctuating levels of equity, resulting in an overall increase in financial leverage.
- Total Asset Expansion
- A consistent upward trend in total assets is observed, increasing from US$ 12,567 million in 2018 to US$ 23,415 million in 2023. The most significant growth occurred between 2019 and 2021, during which assets rose from US$ 13,156 million to US$ 21,971 million, representing a rapid scaling of the balance sheet.
- Equity Volatility
- Stockholders' equity exhibited a non-linear trend, decreasing from US$ 4,688 million in 2018 to a low of US$ 3,935 million in 2020. A sharp recovery followed in 2021, with equity reaching US$ 6,057 million, before experiencing a slight decline and stabilizing at US$ 5,585 million by June 30, 2023.
- Financial Leverage Ratio Analysis
- The financial leverage ratio rose from 2.68 in 2018 to a peak of 4.52 in 2020, indicating a period of increased reliance on debt or external liabilities to finance asset growth. While the ratio corrected to 3.63 in 2021—corresponding with the peak in stockholders' equity—it trended upward again to 4.19 by 2023. This trajectory suggests that the growth in assets has outpaced the growth in equity, leading to a more leveraged capital position over the five-year period.
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Interest Coverage
Estée Lauder Cos. Inc., interest coverage calculation, comparison to benchmarks
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net earnings attributable to The Estée Lauder Companies Inc. | 1,006) | 2,390) | 2,870) | 684) | 1,785) | 1,108) | |
| Add: Net income attributable to noncontrolling interest | 4) | 18) | 5) | 12) | 9) | 9) | |
| Add: Income tax expense | 387) | 628) | 456) | 350) | 513) | 863) | |
| Add: Interest expense | 255) | 167) | 173) | 161) | 133) | 128) | |
| Earnings before interest and tax (EBIT) | 1,652) | 3,203) | 3,504) | 1,207) | 2,440) | 2,108) | |
| Solvency Ratio | |||||||
| Interest coverage1 | 6.48 | 19.18 | 20.25 | 7.50 | 18.35 | 16.47 | |
| Benchmarks | |||||||
| Interest Coverage, Competitors2 | |||||||
| Procter & Gamble Co. | 25.28 | 41.99 | 36.09 | — | — | — | |
| Interest Coverage, Industry | |||||||
| Consumer Staples | 11.37 | 15.69 | 11.46 | — | — | — | |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
1 2023 Calculation
Interest coverage = EBIT ÷ Interest expense
= 1,652 ÷ 255 = 6.48
2 Click competitor name to see calculations.
An analysis of the solvency position from 2018 to 2023 reveals significant volatility in the ability to service interest obligations, primarily driven by fluctuations in operating earnings. While a strong cushion was maintained for the majority of the period, the most recent fiscal year indicates a marked deterioration in coverage capacity.
- Earnings Before Interest and Tax (EBIT) Trends
- Operating earnings exhibited substantial volatility, peaking in 2021 at US$ 3,504 million before declining to US$ 1,652 million by 2023. A notable contraction occurred in 2020, where EBIT dropped to US$ 1,207 million, representing a significant temporary reduction in profitability.
- Interest Expense Trajectory
- Interest obligations remained relatively stable between 2018 and 2022, fluctuating within a range of US$ 128 million to US$ 173 million. However, a sharp increase is observed in 2023, with expenses rising to US$ 255 million, the highest level recorded over the six-year period.
- Interest Coverage Ratio Analysis
- The interest coverage ratio followed the trajectory of EBIT, reaching a peak of 20.25 in 2021. Significant declines are evident in 2020 (7.50) and 2023 (6.48). The 2023 figure represents the lowest coverage ratio in the observed period, resulting from the simultaneous impact of declining operating profits and increasing interest costs.
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Fixed Charge Coverage
Estée Lauder Cos. Inc., fixed charge coverage calculation, comparison to benchmarks
| Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | Jun 30, 2019 | Jun 30, 2018 | ||
|---|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | |||||||
| Net earnings attributable to The Estée Lauder Companies Inc. | 1,006) | 2,390) | 2,870) | 684) | 1,785) | 1,108) | |
| Add: Net income attributable to noncontrolling interest | 4) | 18) | 5) | 12) | 9) | 9) | |
| Add: Income tax expense | 387) | 628) | 456) | 350) | 513) | 863) | |
| Add: Interest expense | 255) | 167) | 173) | 161) | 133) | 128) | |
| Earnings before interest and tax (EBIT) | 1,652) | 3,203) | 3,504) | 1,207) | 2,440) | 2,108) | |
| Add: Operating lease cost | 444) | 465) | 470) | 625) | 583) | 489) | |
| Earnings before fixed charges and tax | 2,096) | 3,668) | 3,974) | 1,832) | 3,023) | 2,597) | |
| Interest expense | 255) | 167) | 173) | 161) | 133) | 128) | |
| Operating lease cost | 444) | 465) | 470) | 625) | 583) | 489) | |
| Fixed charges | 699) | 632) | 643) | 786) | 716) | 617) | |
| Solvency Ratio | |||||||
| Fixed charge coverage1 | 3.00 | 5.80 | 6.18 | 2.33 | 4.22 | 4.21 | |
| Benchmarks | |||||||
| Fixed Charge Coverage, Competitors2 | |||||||
| Procter & Gamble Co. | 14.41 | 18.38 | 16.85 | — | — | — | |
| Fixed Charge Coverage, Industry | |||||||
| Consumer Staples | 7.41 | 9.12 | 7.50 | — | — | — | |
Based on: 10-K (reporting date: 2023-06-30), 10-K (reporting date: 2022-06-30), 10-K (reporting date: 2021-06-30), 10-K (reporting date: 2020-06-30), 10-K (reporting date: 2019-06-30), 10-K (reporting date: 2018-06-30).
1 2023 Calculation
Fixed charge coverage = Earnings before fixed charges and tax ÷ Fixed charges
= 2,096 ÷ 699 = 3.00
2 Click competitor name to see calculations.
The solvency profile exhibits significant volatility between 2018 and 2023, characterized by fluctuations in earnings capacity relative to fixed obligations. While a positive coverage margin was maintained throughout the period, the ratio experienced sharp contractions and expansions, reflecting high sensitivity to operational performance.
- Earnings Before Fixed Charges and Tax
- A non-linear trend is observed, with earnings peaking at US$ 3,974 million in 2021. Significant contractions occurred in 2020, with a decrease to US$ 1,832 million, and again in 2023, falling to US$ 2,096 million. These fluctuations indicate substantial variability in the primary funds available to service debt and other fixed commitments.
- Fixed Charges
- Fixed obligations remained relatively stable compared to the volatility of earnings, ranging from a low of US$ 617 million in 2018 to a peak of US$ 786 million in 2020. The increase in charges during 2020 coincided with the period of lowest earnings, which intensified the pressure on solvency margins.
- Fixed Charge Coverage Ratio
- The coverage ratio demonstrated instability over the six-year horizon. Following a stable period of approximately 4.2x in 2018 and 2019, the ratio dropped to 2.33x in 2020. A strong recovery was noted in 2021 and 2022, with the ratio peaking at 6.18x. However, a significant downward trend returned by June 30, 2023, with the ratio declining to 3.00x, indicating a reduced safety buffer for meeting fixed obligations compared to the preceding two years.
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