Estee Lauder P&L ratios presentation
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FinanceforMarketingDecisions.pptxFinance for
Marketing Decisions
Foreign Exchange. Jenny’s case
Jenny is a student at NYU and runs a high-end shoe business on the side. A friend of hers produces high quality, made to order shoes in China which are then sold to wealthy shoppers in NYC for $2,000 each. The cost to produce each pair of shoes is RMB 1,800.
Once per month, after taking the Finance for Marketing Decisions class, Jenny goes to Newark airport and gets on an Air China flight. She visits her mom, collects 10 pair of shoes and flies back to NYC. This is Jenny’s P&L:
George Benaroya
Finance for Marketing Decisions
G Benaroya Lecture
‹#›
Jenny’s case updated
While the exchange rate was close to 6 RMB per dollar back in 2014, it has now increased to 7.
Thus, Jenny has updated her P&L as follows:
Before, 2014
Now, 2019
George Benaroya
Finance for Marketing Decisions
G Benaroya Lecture
‹#›
Jenny’s luxury watches business
One of Jenny’s uncles knows that Jenny is travelling back and forth to NYC and asked her is she could buy him a Rolex watch which is hard to find in China. She bought it for $5,000 and gave it to her Uncle, who was very thankful. He also told her that many of his friends would like her to bring a watch and they would pay her RMB42,000 (they don’t speak English, and want to save the hassle and expense to come to NYC). So she started doing that as well. This is her P&L
George Benaroya
Finance for Marketing Decisions
G Benaroya Lecture
‹#›
Jenny’s luxury watches business updated
While the exchange rate was close to 6 RMB per dollar back in 2014, it has now increased to 7.
The friends of her uncle wont pay more than 42,000 RMB, she cannot increase prices.
Thus, Jenny has updated her P&L as follows:
Before, 2014
Now, 2019
George Benaroya
Finance for Marketing Decisions
G Benaroya Lecture
‹#›
Inflation, pricing & wage changes, last 15 years
Prices increase 2% /year. The currencies of Russia, Turkey, decline by 5X as much
8%
-5%
3.4%
1.5%
3.8%
-0.3%
-37%
-21%
20%
-6%
2003-2017 compounded annual % changes
Inflation, Wages & Prices
Exchange rates to the Dollar
Source: Bureau of Labor Statistics
Source IMF (exl Turkey)
5%
-6%
15%
3%
Inflation, pricing & cost changes, last 15 years
On the left hand side, you can see that over the last 15 years, inflation, pricing and wages rose 2% per year, with small variations up and down.
6
Inflation Wages Pricing 1.9271507229360565E-2 2.165244658231515E-2 2.1321526028943667E-2
CAGR
Euro China Russia Turkey 1.8340048782740093E-2 7.2013045845571444E-3 -7.6975489365252558E-2 -0.10876202711894645
Currency change. Europe, Asia & Africa. 10 years
Exchange rate change to the $
Source: IMF, except Turkey
| $ Rate | 2008 | 2018 | Change |
| Russia | 25 | 60 | -59% |
| Turkey | 1.30 | 4.63 | -72% |
| India | 43 | 66 | -34% |
| China | 6.95 | 6.42 | 8% |
| Euro | 1.47 | 1.20 | 22% |
In 1 year, Russia’s currency depreciated 37%, Turkey’s 28%
Rates are average for full year, Jul 31st for‘18
8
09 10 11 12 13 14 15 16 17 18 -0.16056503276613054 3.1210307662788095E-2 -0.10210472327687603 -6.7566066089700616E-2 -4.7401531895349125E-2 -0.14058419942279332 -0.19252913644836367 -9.9327542265660984E-2 -0.17085002884289291 -0.21238786400321974 Russia
09 10 11 12 13 14 15 16 17 18 -0.21744664770566957 4.6431361688251016E-2 3.4208835783245961E-2 -5.5026781599734176E-2 -2.4576377296780305E-2 -0.17467211561663809 -0.37061020996470229 -8.2580110014537689E-2 0.14685918181451929 -2.8874416735468755E-2 India
09 10 11 12 13 14 15 16 17 18 -0.10165623860614825 5.7260764778938711E-2 -1.8594942959195393E-2 -0.12815146695560509 -8.7877128222250911E-2 -3.9623473146405019E-2 -4.8895371188175329E-2 -4.5359790665029043E-2 3.2677362948242195E-2 -1.6809106852898714E-2 Euro 09 10 11 12 13 14 15 16 17 18 5.4469461102664818E-2 5.1651948185657881E-2 -4.7536702974948386E-2 8.3954254655942417E-2 -3.262132102641635E-2 -7.3122515120482845E-4 0.19817471140845466 1.7259317593190104E-3 -2.016105272638824E-2 -6.1675125430994848E-2 China
09 10 11 12 13 14 15 16 17 18 1.7384763655322377E-2 8.8018966715643909E-3 4.8278316725711479E-2 2.3252675484962904E-2 1.9240774746529521E-2 8.1755616578782497E-3 -1.365542045908974E-2 -6.2537371980953216E-2 -1.6764680414935729E-2 5.2144557678424741E-2
Average annual rate
Currency change. North & Latin America. 10 years
Exchange rate change to the $
Source: IMF, except Argentina
| $ Rate | 2008 | 2018 | Change |
| Argentina | 3.16 | 24.92 | -87% |
| Brazil | 1.81 | 3.48 | -48% |
| Mexico | 11.14 | 19.09 | -42% |
| Canada | 1.07 | 1.28 | -17% |
In 1 year, Argentina’s currency depreciated 37%, Brazil’s 30%
Rates are average for full year, Jul 31st in ‘18
9
09 10 11 12 13 14 15 16 17 18 -0.15172003208880758 -4.6491661863236278E-2 -5.2777620671266567E-2 -9.24130405769088E-2 -0.15697575284884902 -0.33730692235241322 -0.11988384427178433 -0.3733363949664944 -0.10834239951647018 -0.336144999966563 Brazil
09 10 11 12 13 14 15 16 17 18 -9.0385145644187759E-2 0.12850560456070492 5.4953486861000878E-2 -0.14471964356405809 -9.4364194523524292E-2 -8.3149880982034241E-2 -0.29537648037969588 -4.3543588407042422E-2 9.3361602066 344584E-2 -8.4568143289373676E-2 Mexico
09 10 11 12 13 14 15 16 17 18 -0.17449573070143454 6.8276587819991352E-2 1.5342880741106679E-2 -5.4868945945162895E-2 3.1261812681507628E-2 -4.018913703569893E-2 -0.16285218682661273 -0.14938810987956708 -9.8022820454384263E-3 -1.1829061614541225E-2 Canada 09 10 11 12 13 14 15 16 17 18 -6.6789573542718861E-2 0.10840320577543383 4.1704637121599886E-2 -1.0604994827859593E-2 -2.8899293974179008E-2 -6.8106159505590957E-2 -0.13663222502108729 -3.3951976399920203E-2 1.9927370589256643E-2 1.2337035663081419E-2
Average annual rate
Johnson & Johnson. P&L 2018
| FY 2018 | FY 2017 | FY 2016 | |
| Volume growth | 8.5% | 8.0% | 3.2% |
| Price Change | -2.2% | -2.0% | 0.7% |
| Net Sales Growth | 6.7% | 6.3% | 2.6% |
| International Sales (%) | 49% | 48% | 47% |
| Net Margin | 66.8% | 66.7% | 69.7% |
| SG&A | 27.6% | 28.1% | 27.9% |
| Other Expenses | 20.4% | 36.9% | 18.8% |
| Net Earnings | 18.8% | 1.7% | 23.0% |
George Benaroya
Finance for Marketing Decisions
G Benaroya Lecture
‹#›
Disney what we did in class
| FY 2018 | FY 2017 | FY 2016 | |
| Net Sales Growth | 59,434 | 55,137 | 8% |
| Cost & expenses | 44,597 | 41,264 | 8% |
George Benaroya
Finance for Marketing Decisions
G Benaroya Lecture
‹#›
Apple’s P&L
George Benaroya
Finance for Marketing Decisions
G Benaroya Lecture
‹#›
Disney’s P&L
George Benaroya
Finance for Marketing Decisions
G Benaroya Lecture
‹#›
Estee Lauder’s P&L
George Benaroya
Finance for Marketing Decisions
G Benaroya Lecture
‹#›
RMB @ 6Units$Total% Sales
Revenue102,00020,000100%
Cost of Shoes10(300)(3,000)-15%
USD = 6 RMB, RMB 1,800 each
Cost of Sales(3,000)
Gross Profit17,00085%
SG&A (Travel)1(500)(500)-3%
Net Income16,50083%
RMB @ 7Units$Total% Sales
Revenue102,00020,000100%
Cost of Shoes10(257)(2,571)-13%
USD = 7 RMB, RMB 1,800 each
Cost of Sales(2,571)
Gross Profit17,42987%
SG&A (Travel)1(500)(500)-3%
Net Income16,92985%
In RMBIn $
RMB @ 6
Revenue42,0007,000
Cost of Rolex(30,000)(5,000)
USD = 6 RMB, USD 5,000
Cost of Sales(30,000)(5,000)
Gross Profit12,0002,000
SG&A (Travel)(3,000)(500)
Net Income9,0001,500
In RMBIn $
RMB @ 6
Revenue42,0007,000
Cost of Rolex(30,000)(5,000)
USD = 6 RMB, USD 5,000
Cost of Sales(30,000)(5,000)
Gross Profit12,0002,000
SG&A (Travel)(3,000)(500)
Net Income9,0001,500
In RMBIn $
RMB @ 7
Revenue42,0006,000
Cost of Rolex(30,000)(5,000)
USD = 6 RMB, USD 5,000
Cost of Sales(30,000)(5,000)
Gross Profit12,0001,000
SG&A (Travel)(3,000)(500)
Net Income9,000500
