Key Takeaways:
Estée Lauder reported fiscal 2026 net sales of $15.05 billion, up 5 percent, returning to growth after a year of decline, with adjusted operating margin expanding 320 basis points to 11.2 percent.
"We reignited growth with organic sales rising 3 percent, driven by the breadth of growth across brands, and achieved significant operating margin expansion," President and Chief Executive Officer Stéphane de La Faverie said. "We ended the year on a high note, as organic sales growth accelerated to 5 percent for our fourth consecutive quarter of growth."
Fourth-quarter net sales rose 6 percent to $3.63 billion, beating the $3.54 billion consensus, while adjusted diluted earnings per share of 39 cents topped the 32-cent estimate. Full-year adjusted EPS climbed 66 percent to $2.51 from $1.51, and gross margin widened 150 basis points to 75.5 percent. The prior-year operating loss of $785 million swung to income of $780 million, helped by $1.29 billion of goodwill and intangible impairments that no longer recurred.
Shares jumped 16.3 percent to $98.01 on the results, narrowing the year-to-date decline to 6 percent. Goldman Sachs raised its price target to $112 from $100 with a Buy rating, saying the quarter "meaningfully surpassed already elevated expectations" on stronger organic sales growth and margin.
Fragrance was the fastest-growing category, with net sales up 12 percent to $2.78 billion, driven by double-digit growth from Le Labo, TOM FORD and KILIAN PARIS. Skin care rose 5 percent to $7.34 billion on gains from La Mer, The Ordinary and the namesake brand, while makeup was flat organically and hair care slipped 1 percent.
Mainland China, about a fifth of group sales, grew 12 percent to $3.06 billion, with organic sales up 9 percent, as the company gained prestige beauty share across skin care, fragrance and makeup. Asia/Pacific rose 4 percent, helped by Korea and Hong Kong travel retail, while The Americas grew 1 percent.
The company completed approvals for the restructuring component of its Profit Recovery and Growth Plan, which is expected to cut about 10,000 positions and deliver $1.2 billion in annual gross benefits. It has recognized $1.4 billion in cumulative restructuring charges, with the program substantially complete in fiscal 2027.
For fiscal 2027, Estée Lauder affirmed organic net sales growth of 3 percent to 5 percent and raised its adjusted operating margin outlook to 12.7 percent to 13.5 percent, up from a preliminary 12.5 percent to 13.0 percent. It forecast adjusted EPS of $3.10 to $3.35, above the analyst consensus midpoint of $3.18, and expects fragrance and skin care to keep growing with makeup returning to growth.
The guidance raise signals management expects the cost-cutting plan to keep lifting margins beyond fiscal 2027, funding reinvestment in consumer-facing areas. Investors will watch whether makeup and hair care, which remain in adjustment, can replicate the fragrance and skin care recovery, and how North America growth accelerates after a flat year.
