EL - NYSE
The Estée Lauder Companies Inc.
EL·NYSE
$82.05
-4.1%Consumer DefensiveHousehold & Personal Products
The Estée Lauder Companies Inc. manufactures, markets, and sells skin care, makeup, fragrance, and hair care products worldwide. The company offers a range of skin care products, including moisturizers, serums, cleansers, toners, body care, exfoliators, acne care and oil correctors, facial masks, cleansing devices, and sun care products; and makeup products, such as lipsticks, lip glosses, mascaras, foundations, eyeshadows, nail polishes, and powders, as well as compacts, brushes, and other makeup tools. It also provides fragrance products in various forms comprising eau de parfum sprays and colognes, as well as lotions, powders, creams, candles, and soaps; and hair care products that include shampoos, conditioners, styling products, treatment, finishing sprays, and hair color products, as well as sells ancillary products and services. The company offers its products under Estée Lauder, Aramis, Clinique, Lab Series, Origins, M·A·C, Bobbi Brown, La Mer, Aveda, Jo Malone London, Bumble and bumble, Darphin, Smashbox, Le Labo, Editions de Parfums Frédéric Malle, GLAMGLOW, By Kilian, BECCA, Too Faced, Dr. Jart+, DECIEM, and The Ordinary brands. It also holds license arrangements for Tommy Hilfiger, Donna Karan New York, DKNY, Michael Kors, and Ermenegildo Zegna brands. The company sells its products through department stores, specialty-multi retailers, upscale perfumeries and pharmacies, and salons and spas; freestanding stores; its own and authorized retailer websites; third-party online malls; stores in airports; and in-flight and duty-free shops. The company was founded in 1946 and is headquartered in New York, New York.
At a Glance
Live SnapshotMarket Cap$29.68B
EPS-3.1500
P/E Ratio-25.68
Earnings Date08/19/2026
Earnings Call Transcript
EL • 2026 • Q3
Operator
Good day, everyone, and welcome to the Estée Lauder Companies Fiscal 2026 third quarter conference call. Today's webcast is being recorded. For opening remarks and introductions, I would like to turn the call over to the Senior Vice President of Investor Relations, Ms. Rainey Mancini.
Rainey Mancini
Hello. On today's webcast are Stéphane de La Faverie, President and Chief Executive Officer, and Akhil Shrivastava, Executive Vice President and Chief Financial Officer. Since many of our remarks today contain forward-looking statements, let me refer you to our press release and our reports filed with the SEC, where you will find factors that could cause actual results to differ materially from these forward-looking statements. To facilitate the discussion of our underlying business, the commentary on our financial results and expectations is before restructuring and other charges and adjustments disclosed in our press release. Unless otherwise stated, all organic net sales growth also excludes the non-comparable impacts of acquisitions, divestitures, brand closures, and the impact of foreign currency translation. You can find reconciliations between GAAP and non-GAAP measures in our press release and on the investor section of our website.
Akhil Shrivastava
Thank you, Stéphane. Hello, everyone, and thank you for joining us today. Overall, we delivered strong performance in the quarter with sales growth, continued margin expansion, and strong cash generation. Across One ELC, we are executing against our strategic priorities with great efficiency, continuing to advance Beauty Reimagined with focus, discipline, and speed. I'll begin with a recap of our third quarter performance and then turn to outlook, covering a raised fiscal 26 outlook and a preliminary view on fiscal 2027. For more details on our third quarter results, please refer to the press release we issued this morning. Starting with organic net sales, we grew 2% year-on-year, driven by double-digit growth in fragrance. Performance in the category was broad-based across most brands and all geographic regions, led by double-digit growth from our luxury brands and in both the Americas and Mainland China.
Akhil Shrivastava
Looking at our geographic regions, positive results across all product categories except haircare drove mid-single-digit net sales growth in Mainland China and double-digit growth collectively in our priority emerging markets. Across our four regions, we delivered mid-single to double-digit growth online, reflecting continued momentum from expansion. In North America, sales declined low single digits, reflecting continued pressure in brick and mortar, including retailer bankruptcies, shop-in-shop closures, and softness for some of our brands. The disruption to our business from the conflict in the Middle East negatively impacted our third quarter sales growth in EMEA by approximately 1 percentage point. The impact to our consolidated results was not material. I'll discuss our assumption for the remainder of the fiscal year related to these disruptions when I address our outlook. Turning now to margins.
Akhil Shrivastava
Gross margin for the quarter was 76.4%, an expansion of 140 basis points compared to last year. This was largely driven by strong net benefits from a focused PRGP execution and programs covering all aspects of operational efficiencies, including our zero waste initiatives, which drove another reduction in excess and obsolescence this quarter. These net benefits helped to offset headwinds from incremental tariffs and inflation. This also reflects a favorable impact of 95 basis points related to an in period charge we took last year for under-absorbed overhead costs. Our improved sales leverage also contributed to expansion in the quarter. Looking at operating margin, we expanded by 360 basis points, delivering a margin for the quarter of 15% compared to 11.4% last year.
Akhil Shrivastava
Changes in our business mix, along with a shift in spending to the fourth quarter, led to better-than-expected results. Our disciplined investment allocation and PRGP net benefits drove a 4% reduction in non-consumer-facing expenses and improved operating leverage, even with the normalization of employee incentive costs. This funded a 9% increase in consumer-facing investments or 5% excluding the impact from FX. We continue to invest for growth, enhancing brand desirability and reinforcing the execution of Beauty Reimagined. Our effective tax rate for the quarter was 31.8%, up from 30.8% last year. Diluted EPS was $0.91 for the quarter, compared to $0.65 last year, an increase of 40%, driven by our sales growth and cost leverage. This also includes a dilutive impact of $0.02 related to business disruptions in the Middle East.
Akhil Shrivastava
Looking at our overall PRGP, we continue to execute with discipline, delivering results ahead of our expectations. With the establishment of One ELC operating model, we are continuing to make measurable progress against our strategic priorities, driving sales growth, improving our cost structure, and fueling sustainable long-term value creation. In terms of restructuring costs, through March 31st, we recorded $1.1 billion of total cumulative charges, primarily related to employee-related costs. Further to Stéphane's comment on evolving our focus towards high-growth channels and reflecting approved initiatives through April 29th, we now expect total restructuring and other charges of $1.5 billion-$1.7 billion before taxes. We still expect approvals for specific initiatives under the restructuring program in total to be completed by the end of fiscal 2026. Shifting now to another key priority, cash flows.
Akhil Shrivastava
For the nine months, we generated $1.2 billion in net cash flows from operating activities. This is a meaningful improvement compared to the $671 million generated last year and primarily reflects higher earnings excluding non-cash items. Contributing to the improvement was a favorable change in operating assets and liabilities, despite the significant increase in restructuring payments. We invested $306 million in CapEx as we continue to prioritize consumer-facing investments to fuel growth while optimizing all other CapEx investments. For the nine months, CapEx was down 23% versus last year, reflecting the phasing of projects. These results reinforce our ongoing focus on improving free cash flow. Turning to our outlook, the current geopolitical and macroeconomic environment remains uncertain and continues to drive global volatility.
Akhil Shrivastava
Starting with fiscal 2026, our solid year-to-date results, supported by continued net benefits from our PRGP and disciplined cost management give us confidence in raising our fiscal 2026 outlook. In terms of the conflict in the Middle East, our outlook assumes a greater year-on-year impact from disruption to our business in the fourth quarter relative to the third, as shipments for key shopping moments had already gone out before the conflict began. This helped to minimize the impacts to our third quarter sales and profitability. For the fourth quarter, we expect an unfavorable impact of approximately 2 percentage points to sales growth and $0.06 to EPS. Now looking at our fiscal 2026 outlook. We expect organic net sales growth of approximately 3% at the high end of our prior guidance range.
Akhil Shrivastava
For the full year, the impact of business disruptions in the Middle East is expected to be less than 1%. We assume gross margin of approximately 75% and operating margin of 10.7%-11%. The strong margin expansion is in spite of a more normalized level of employee incentive costs, which is expected to have a greater year-over-year impact in Q4 than in the first three quarters of the year. Diluted EPS is now expected to range between $2.35 and $2.45. This represents a year-over-year growth of 56%-62% and includes a dilutive impact of approximately $0.07 related to business disruptions in the Middle East. We also assume a weighted average share count of approximately 365 million shares.
Akhil Shrivastava
Please refer to a press release issued this morning for other assumptions included in our fiscal 2026 full-year outlook, including those regarding evolving trade policies and enacted tariffs. For fiscal 2027, our preliminary view is based on strong progress across Beauty Reimagined and our PRGP, as well as our assumption of low- to mid-single-digit growth in global prestige beauty. While we are in the process of finalizing our fiscal 2027 plan, we currently assume net sales growth of 3%-5% for the full year and operating margin of 12.5%-13%. As Stéphane said, we are confident in the trajectory of our business while recognizing ongoing external uncertainty and volatility. We plan to share a more complete view on fiscal 2027 in August when we report our fiscal 2026 full-year results.
Akhil Shrivastava
At that time, we will refine our view as needed based on our assessment of prevailing geopolitical and macroeconomic conditions, as well as changes in foreign currency exchange rates. In closing, we remain focused on executing our long-term strategy to become the best consumer-centric prestige beauty company with clear priorities of sales growth, margin improvement, and strong cash generation. Across One ELC, we are advancing a multifaceted transformation with discipline and speed, and we are deeply grateful for the dedication, resilience, and passion of our employees around the world who make this progress possible. Together, we are positioning the company to deliver sustainable long-term value creation. That concludes our prepared remarks. I'll now turn it over to Rainey.
Rainey Mancini
Before we start Q&A, please note that management will only be addressing questions related to our fiscal 2026 third quarter results, outlook for fiscal 2026, and preliminary view on 2027, as set forth in the press release we issued this morning or discussed on today's call. The company will not be commenting on the status of discussions with Puig or the possibility of a transaction. The company does not intend to provide any further information ahead of an official announcement detailing an agreed-upon transaction or a termination of discussions. During the Q&A session, we ask that you please limit yourself to one question, so we can respond to as many participants as possible within the time scheduled for this webcast. Now let me turn it over to the operator for the Q&A session.
Operator
The floor is now open for questions. If you have a question, you simply press the star key followed by the digit one on your touchtone telephone. To ensure everyone can ask their questions, we will limit each person to one question. Time permitting, we will return to you for additional questions. Just queue up again by pressing the star key and the digit one. Our first question today comes from Dara Mohsenian with Morgan Stanley. Please go ahead.
Operator
The next question comes from Filippo Falorni with Citi. Please go ahead.
Akhil Shrivastava
Hi.
Filippo Falorni
Stéphane, That's very helpful.
Akhil Shrivastava
Filippo. Hi. Stéphane touched very well upon our growth trajectory. I wanted to touch a little bit upon the margin progression and also build upon Dara's question. At 13 margin, 12.5, 13 margin, our gross margin is north of 75. Our SG&A or total OpEx is 62%. There's still significant runway, as Stéphane said, on margins. Why we feel confident is because if you look at even this year, we started with a guide of about 9.4%-9.9%, and it's really the comprehensive nature of our work, which starts by looking at discounts to operational excellence to a One ELC model, which Stéphane talked about, which really covers many meaningful parts. Shopify is one of them. It's a total online transformation. With leadership of Brian and team, we are doing a total tech transformation.
Akhil Shrivastava
There's a full-on project on procurement. We announced WPP in the media, so we are going to drive significant ROI on our consumer facing. With EBS on Accenture, that's a whole program to drive a better One ELC streamlined model across various parts of the world. What you are seeing is a very comprehensive program to drive cost, and with slightly increased announcement of restructuring, this gives us significant runway beyond the 12.5% and 13% margin guide we gave. Between those two combinations of growth flywheel that Stéphane talked about and a new cost efficiency with restructuring, but everyday efficiency muscle we are building in the organization up and down the chain gives us the confidence to drive not only growth, but margin, cash, and total value creation.
Operator
The next question comes from Rupesh Parikh with Oppenheimer. Please go ahead.
Operator
The next question comes from Lauren Lieberman with Barclays. Please go ahead.
Akhil Shrivastava
If I could just add one thing, Lauren, which you are very well familiar. I mean, one of the untold story of Estée Lauder Companies is how well diversified our channels are around the world. We look at globally, our online business is almost 1/3 of our business. Our direct-to-consumer is more than 30%. Even in the U.S., online is getting closer to 40%, and direct to consumer is more than 30%. Worldwide, we have capabilities on around 8-10 big channels in the world.
Akhil Shrivastava
We are bringing these capabilities, cross capabilities around the world. For example, one of the things Stéphane has done is how to work with pure play. We now have a global team that drives pure play progress around the world. On platforms like Amazon, TikTok, we are taking the progress of one country to another at a rapid pace like we've never done before. It's an extraordinary ability to pivot. Market is transforming, but as part of Beauty Reimagined number one, we are trying to lead that change through consumer coverage, and whole organization is working across the board on that.
Operator
The next question comes from Chris Carey with Wells Fargo. Please go ahead.
Operator
The next question comes from Bonnie Herzog with Goldman Sachs. Please go ahead.
Bonnie Herzog
All right. Thanks. Good morning, everyone. I just had a quick follow-up on EBIT margins next fiscal year. I guess I'm wondering how critical it is for organic sales growth acceleration to ultimately drive op margin improvement versus your PRGP savings. I did have a question on the impact from duty-free changes at Beijing and Shanghai airports. You'd mentioned this last year, just hoping for, you know, an update on where things stand and if the resolution of these issues should, you know, ultimately support a sequential improvement in growth in Q4. Thanks.
Operator
Pardon me, ladies and gentlemen. It appears we have lost the connection to our speaker line. Please stand by while we reconnect. Thank you for your patience.
Operator
[Break]
Rainey Mancini
We don't know where. No, I think.
Operator
Pardon me, everyone. I have our speakers joined back. We can continue.
Bonnie Herzog
Okay. I don't know if
Rainey Mancini
Can you tell us where we left off? Does Stéphane need to repeat that answer?
Bonnie Herzog
Yes. Hey, Rainey. It's Bonnie. I can repeat my question. I assume you guys didn't hear it. I did have a quick follow-up on EBIT margins next fiscal year. I guess I'm wondering how critical it is for organic sales growth acceleration to drive the margin improvement in the year versus, you know, your PRGP savings. I do have a question on the impact from duty-free changes at, you know, the Beijing and Shanghai airports that you did highlight last quarter. Could you know, just maybe provide an update on where things stand and if the resolution of these issues should, you know, support a sequential improvement in growth in, you know, Q4? Thanks.
Akhil Shrivastava
Hi, Bonnie. I'll start with EBIT margin, and then Stéphane will take on the TR question. It's a very pertinent question given that 3%-5% sales growth is an acceleration. We feel confident that the work we have done on, as I was saying earlier, on the restructuring work, the big structural cost savings, and number two, the everyday efficiency we are building in the organization. With that, we feel confident in our margin at different sales ranges. Of course, when we give this guidance, we give in a risk-adjusted way that how we can get to that margin at the top end of the range, bottom end of the range, and even if the sales fully doesn't materialize.
Transcript from May 1, 2026
Other Transcripts
Related Guides
Continue your EL research with focused valuation guides.
Research Paths
1
Snapshot
Start with context, operating signals, and key market metrics.
2
Value Model
Stress test fair value across bear, base, and bull assumptions.
3
Statements
Validate revenue quality, margins, and balance sheet durability.
4
Earnings Call
Read management commentary and compare it with reported outcomes.
5
Dividends
Check payout sustainability and long-term distribution behavior.
6
Analyst Expectations
Review consensus spread and where estimate risk is concentrated.