Estee Lauder Companies NYSE: EL said fiscal 2026 marked a return to growth and a substantial improvement in profitability as the prestige beauty company advanced its Beauty Reimagined strategy and Profit Recovery and Growth Plan.
For the full fiscal year, reported sales rose 5% and organic sales increased 3%, with positive organic sales performance in every quarter, President and Chief Executive Officer Stéphane de La Faverie said. Gross margin expanded 150 basis points, operating margin increased 320 basis points to 11.2%, and diluted earnings per share rose 66% to $2.51.
“We reignited growth with organic sales rising 3%, driven by the breadth of growth across brands and expanded operating margins significantly,” de La Faverie said.
Fourth-quarter organic sales growth reached 5%, the company’s strongest quarterly performance of the year. Growth was broad-based across product categories and geographies, with the exception of haircare, according to Executive Vice President and Chief Financial Officer Akhil Shrivastava. Business disruptions related to the Middle East conflict reduced growth in the Europe, U.K., Middle East and Africa region by 2% during the quarter, he said.
Fragrance and Skincare Lead Category Performance
Skincare generated 4% organic sales growth during fiscal 2026, while fragrance sales increased 10% organically. De La Faverie said fragrance performance reflected demand for hero products and new launches from Le Labo, TOM FORD, KILIAN PARIS and Jo Malone London, as well as the launch of Balmain Beauty.
Jo Malone London and TOM FORD joined Clinique, Estée Lauder, La Mer and M·A·C as billion-dollar brands in the company’s portfolio. Five of the six billion-dollar brands delivered sequential improvement in organic sales trends during the year, management said. The Ordinary continued to post double-digit organic sales growth and is approaching that sales milestone.
Makeup performance stabilized, with the organic sales trend improving by 500 basis points, led by M·A·C and TOM FORD. Management said M·A·C benefited from lip products and broader distribution in channels including specialty multi-retail and social commerce. The company also said it has been closing M·A·C freestanding stores where profitability and productivity were insufficient while shifting emphasis to faster-growing, more profitable channels.
Haircare did not return to organic sales growth, although the company cited signs of a turnaround at Aveda in the U.S. The Ordinary’s hair-density serum remained a strong performer, management said.
China, Travel Retail and Online Growth
Mainland China led regional growth with organic sales up 9%, supported by high-single-digit skincare growth, mid-single-digit makeup growth and double-digit fragrance growth. De La Faverie said the company outperformed the prestige beauty market and gained share in China in every quarter of fiscal 2026, extending its share-gain streak to six consecutive quarters.
He said 11 brands posted retail sales growth in China during the fourth quarter, including six that grew at double-digit rates. The company has also increased China-specific innovation, with about 30% of its worldwide innovation now coming from China for the Chinese market, he said.
Global travel retail returned to growth during fiscal 2026 and represented about 15% of reported sales. Management said travel retail retail sales turned positive in June and July for the first time in three years, led by Hainan, where retail growth was double digit in the fourth quarter. The company said it is shipping to demand and considers inventory in travel retail to be in a good position.
Online organic sales grew at a double-digit rate and accounted for a record 34% of reported sales, up three percentage points from fiscal 2025. Management cited share gains online across markets including China and the U.S.
In North America, the company returned to organic sales growth in the fourth quarter, while retail sales rose at a mid-single-digit rate. Management said the region’s result was supported by gains in prestige beauty volume share and improving performance across brands including The Ordinary, M·A·C, Clinique, Bobbi Brown, Le Labo and TOM FORD.
Restructuring, Cash Flow and Fiscal 2027 Outlook
Estee Lauder concluded approvals under its Profit Recovery and Growth Plan as of June 30 and recorded $823 million in cumulative restructuring charges during fiscal 2026, primarily related to employee costs. Shrivastava said benefits from the program arrived more quickly than initially expected and helped fund additional consumer-facing investment.
Cash flow from operating activities rose to $1.8 billion from $1.3 billion a year earlier, despite higher restructuring payments. Capital expenditures declined to $457 million from $602 million, and the company ended the year with $3.5 billion in cash.
For fiscal 2027, the company forecast organic net sales growth of 3% to 5%, with stronger growth expected in the first half because of an earlier innovation slate and stronger travel retail shipments against a lower prior-year base. Management expects stronger EUKEM growth in the second half as it laps the prior-year disruptions tied to the Middle East conflict. Based on current conditions, the company does not expect the conflict’s effects to be material to fiscal 2027 results.
- Adjusted operating margin is expected to range from 12.7% to 13.5%.
- Adjusted effective tax rate is projected at approximately 33% to 34%.
- Diluted EPS is expected to be between $3.10 and $3.35.
- Operating cash flow is forecast at $1.3 billion to $1.4 billion, reflecting higher restructuring payments and working-capital needs to support growth.
De La Faverie said the company will continue to focus on growing its core business and pursue minority investments and single-brand acquisitions that complement its portfolio. He said the company does not plan to pursue transformational acquisitions “for the foreseeable future,” citing a desire to avoid diversions from its current strategy.
Management said it expects further operating leverage from lower non-consumer-facing expenses, continued restructuring savings and sales growth. Shrivastava added that the company’s cash priorities include consumer-facing capital expenditures, dividends and debt reduction.
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.
This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to contact@marketbeat.com.
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