Estee Lauder Companies NYSE: EL raised its fiscal 2026 outlook and provided a preliminary view for fiscal 2027, citing improving sales momentum, significant margin expansion, and progress under its “Beauty Reimagined” strategy and Profit Recovery and Growth Plan (PRGP). Management also described ongoing channel shifts toward higher-growth platforms and detailed restructuring actions designed to further streamline the business.
Quarter performance: organic sales up 2% and EPS up 40%
In prepared remarks, President and CEO Stéphane de La Faverie said the company’s momentum continued, pointing to organic sales growth and profitability gains. Chief Financial Officer Akhil Shrivastava said organic net sales increased 2% year-over-year in the quarter, “driven by double-digit growth in fragrance.” He added that fragrance growth was “broad-based across most brands and all geographic regions,” led by luxury brands and strength in both the Americas and mainland China.
Shrivastava reported gross margin of 76.4%, an increase of 140 basis points, which he attributed largely to “strong net benefits from a focused PRGP execution” and operational efficiency programs, including zero waste initiatives that reduced excess and obsolescence. He said these benefits helped offset headwinds from “incremental tariffs and inflation.” Shrivastava also noted a 95 basis point favorable impact tied to an in-period charge taken in the prior year related to under-absorbed overhead costs.
Operating margin expanded 360 basis points to 15% from 11.4% a year ago. Shrivastava said changes in business mix and a shift in spending to the fourth quarter contributed to better-than-expected results. He added that non-consumer-facing expenses fell 4%, funding a 9% increase in consumer-facing investments (or 5% excluding FX).
Diluted earnings per share were $0.91, up from $0.65, a 40% increase. Shrivastava said results included a $0.02 dilutive impact from business disruptions tied to conflict in the Middle East.
Regional and category trends: China growth, fragrance strength, and U.S. stabilization
De La Faverie said year-to-date, “three of four region grew organically,” led by “high single-digit growth in mainland China” and “double-digit growth in our priority emerging markets,” while “the Americas stabilized.”
By category, de La Faverie said fiscal year-to-date fragrance rose “double-digit organically,” skincare grew “low single-digits,” hair care stabilized, and “makeup rate of decline slowed.” He characterized fiscal 2026 as “the pivotal year we intended,” aimed at restoring organic growth and expanding operating margin “for the first time in four years.”
De La Faverie highlighted share and retail sales performance in several markets. In mainland China, he said the company delivered high single-digit retail sales growth and estimated it outperformed prestige beauty for the “fourth consecutive quarter,” driven by brands including La Mer, Tom Ford, Le Labo, and The Ordinary. In Hainan travel retail, he said retail sales rose “strong double digit,” accelerating from high single digit in the second quarter, with 10 brands growing double digit led by La Mer, Estée Lauder, and M·A·C.
In the U.S., de La Faverie said retail sales grew “mid-single digit” and the company gained volume share in total prestige beauty “driven by every category.” He cited share gains from The Ordinary in skincare and share expansion for Clinique, M·A·C, Bobbi Brown Cosmetics, and Estée Lauder in makeup, plus value share gains in U.S. prestige hair care driven by Aveda and The Ordinary.
Shrivastava added that North America sales declined low single digits in the quarter, reflecting “continued pressure in brick and mortar,” including “retailer bankruptcies, shop-in-shop closures, and softness for some of our brands.” He also said the conflict in the Middle East reduced EMEA sales growth by about 1 percentage point in the quarter, though he said the impact to consolidated results “was not material.”
Strategy updates: channel expansion, innovation, and PRGP restructuring
Management emphasized accelerated expansion into higher-growth channels. De La Faverie said the company expanded reach across Amazon Premium Beauty Stores in 10 markets, citing examples including Clinique launching in France and Estée Lauder in the U.K. He also pointed to TikTok Shop expansion “from the U.S. to Germany and Malaysia” and enhanced China online presence, including The Ordinary launching on Douyin and Estée Lauder and M·A·C on VIP.com.
De La Faverie said these efforts contributed to “double-digit online organic sales growth” in the quarter and that online organic sales growth was 10% year-to-date. He also highlighted M·A·C’s entry into U.S. Sephora, saying M·A·C was the “number one lip brand” for the month across the Sephora stores where it launched.
On innovation, de La Faverie said fragrance launches supported the category’s double-digit growth, citing performance at Le Labo (including Violette 30), Tom Ford (including Figue Érotique), Balmain’s Beauty Destin, and Kilian Paris’ Her Majesty. In skincare, he said the company lacked the same breadth of newness as the prior year’s fourth quarter but cited launches from La Mer (Eye) and the Estée Lauder Supreme franchise as drivers in mainland China. In makeup, he cited Estée Lauder Double Wear Next Generation Matte Foundation and M·A·C’s Lips and Cheek Mousse.
Restructuring and PRGP actions were a major focus. De La Faverie said the company achieved a milestone by approving initiatives to reach the high end of targeted gross savings under the PRGP restructuring program, and in April expanded the restructuring program with additional initiatives. He said the expansion “largely reflects the anticipated exit of select unproductive doors in department stores and freestanding stores channel,” as the company leans further into online growth. He noted the decision would impact beauty advisors globally.
Shrivastava said that through March 31 the company recorded $1.1 billion of cumulative restructuring charges, primarily employee-related. Reflecting approved initiatives through April 29, the company now expects total restructuring and other charges of $1.5 billion to $1.7 billion before taxes. He reiterated the company expects approvals for specific initiatives to be completed by the end of fiscal 2026.
Raised fiscal 2026 guidance and preliminary fiscal 2027 view
De La Faverie said the company now expects organic sales growth of 3% for fiscal 2026, “the high end of our prior range,” and operating margin of 10.7% to 11%, which he said was “notably better than the 8% of fiscal 2025.”
Shrivastava provided additional fiscal 2026 guidance details, including:
- Organic net sales growth: approximately 3%
- Gross margin: approximately 75%
- Operating margin: 10.7% to 11%
- Diluted EPS: $2.35 to $2.45, representing 56% to 62% year-over-year growth
Shrivastava said fiscal 2026 guidance includes a dilutive impact of about $0.07 related to Middle East business disruptions. For the fourth quarter specifically, he said the company expects an unfavorable impact of approximately 2 percentage points to sales growth and $0.06 to EPS due to the conflict, as shipments for key shopping moments had already gone out before the conflict began, which helped limit the third quarter impact.
For fiscal 2027, de La Faverie said the company’s preliminary plan assumes prestige beauty growth accelerates, including mid-single-digit improvement in retail sales growth from the China ecosystem (including travel retail). He said the company intends to deliver organic sales growth of 3% to 5% and operating margin of 12.5% to 13%. Shrivastava said the preliminary view is based on the company’s progress in Beauty Reimagined and PRGP and an assumption of “low- to mid-single-digit growth in global prestige beauty,” with more detail expected in August when the company reports full-year fiscal 2026 results.
Q&A highlights: margin runway, U.S. channel moves, EMEA mix, and travel retail
During Q&A, de La Faverie emphasized that margin recovery “is a marathon,” while pointing to the company’s progress from an 8% operating margin starting point at the launch of Beauty Reimagined to around 11% expected in fiscal 2026 and a preliminary view of 12.5% to 13% in fiscal 2027. He said the company is building “a P&L that is built for leverage” through gross margin improvements, SG&A discipline, and One ELC initiatives with partners including Accenture, Shopify, and WPP.
Responding to a question about North America, de La Faverie said, “The simple answer is yes,” the company expects to return to growth in fiscal 2027, citing share gains, channel expansion (including Amazon and Sephora), recruitment efforts, and innovation, while also noting disruption from retailer bankruptcies.
On U.S. department stores and channel exposure, de La Faverie said the company is “continuing to right-size the department stores,” adding that part of the PRGP expansion includes reducing beauty advisor roles in “dilutive” department store and freestanding store doors while increasing focus on higher-growth channels. Asked specifically about Bobbi Brown, de La Faverie said Bobbi Brown is growing in Asia and in higher-growth channels such as Amazon and specialty multi.
On EMEA, de La Faverie described the region as “a tale of so many different stories,” highlighting double-digit growth in emerging markets, including strong momentum in India and growth in markets such as Vietnam, Indonesia, and Turkey. He said Europe was “more muted,” while adding the U.K. showed sequential improvement and had returned to positive territory, though “we are not there yet.”
Finally, on travel retail, de La Faverie said the company’s travel retail business posted low single-digit growth in the quarter, and he said issues tied to retailer transitions in Beijing and Shanghai airports had “been less than initially expected.” He also cited strong performance in Hainan and said the company is investing to improve travel retail presentation and experiences across key global airports.
Separately, Investor Relations SVP Rainey Mancini stated the company would not comment on “the status of discussions with Puig or the possibility of a transaction” during the call.
About Estee Lauder Companies NYSE: EL
Estée Lauder Companies Inc NYSE: EL is a global leader in prestige beauty that develops, manufactures and markets a broad portfolio of skincare, makeup, fragrance and hair care products. Founded in 1946 by Estée Lauder, the company has grown from a small family business into a multinational consumer-products enterprise headquartered in New York City. Its activities span product research and development, brand and product marketing, manufacturing and global distribution across multiple retail channels.
The company's portfolio includes a mix of legacy and prestige brands that target different consumer segments and price points, with well-known names such as Estée Lauder, Clinique, MAC, La Mer and Jo Malone among others.
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