Estee Lauder Companies Inc (EL)

Return on total capital

		Jun 30, 2025	Jun 30, 2024	Jun 30, 2023	Jun 30, 2022	Jun 30, 2021
Earnings before interest and tax (EBIT)	US$ in thousands	-1,614,000	1,155,000	1,617,000	3,072,000	3,504,000
Long-term debt	US$ in thousands	—	—	—	—	—
Total stockholders’ equity	US$ in thousands	3,865,000	5,314,000	5,585,000	5,590,000	6,057,000
Return on total capital		-41.76%	21.74%	28.95%	54.96%	57.85%

June 30, 2025 calculation

Return on total capital = EBIT ÷ (Long-term debt + Total stockholders’ equity)
= $-1,614,000K ÷ ($—K + $3,865,000K)
= -41.76%

The analysis of Estee Lauder Companies Inc.'s return on total capital (ROTC) over the period from June 30, 2021, to June 30, 2025, reveals significant fluctuations indicative of evolving operational efficiency and capital management effectiveness.

In June 2021, the ROTC was substantial at 57.85%, reflecting a high level of efficiency in generating profits from the company's total capital base. This figure suggests that at this time, the company was effectively utilizing its capital to produce strong returns.

By June 30, 2022, the ROTC experienced a slight decline to 54.96%, indicating a minor reduction in capital efficiency, possibly due to changes in operational conditions, market dynamics, or investment strategies, but still maintaining a robust performance.

The decline steepens considerably by June 30, 2023, with the ROTC decreasing to 28.95%. This sharp reduction signifies a notable deterioration in the company's ability to generate returns from its total capital, which could be attributed to increased costs, decreased profit margins, strategic adjustments, or external market pressures.

The downward trend continued into June 30, 2024, with the ROTC further decreasing to 21.74%. The ongoing decline emphasizes persistent challenges affecting the company's profitability relative to its capital base.

By June 30, 2025, the ROTC turns negative at -41.76%, indicating that the company’s operations are now resulting in overall losses when measured against its total capital. Such a negative return suggests severe operational difficulties, potential asset impairments, or extraordinary expenses that outweigh the generated earnings, marking a fundamental shift in financial health and efficiency.

Overall, the trajectory of Estee Lauder’s ROTC demonstrates a significant decline over the four-year span, transitioning from a highly efficient six-figure return to substantial negative territory, which warrants a detailed investigation into underlying causes such as market conditions, strategic missteps, or financial restructuring issues.