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EL
Earnings call · Jun 2026 (Q4 FY26)

ESTEE LAUDER COMPANIES Q4 FY26 earnings call EL

Aug 19, 2026 Source

Executive summary

The Estée Lauder Companies Q4 FY26 — Reignited Growth and Significant Margin Expansion

The Estée Lauder Companies reignited growth in fiscal 2026, driven by the successful execution of its Beauty Reimagined strategy and Profit Recovery and Growth Plan (PRGP). The company achieved broad-based organic sales growth and significant margin expansion, reflecting enhanced operational efficiency and disciplined investment. Looking ahead, the focus is on accelerating growth across diversified categories and geographies, particularly North America, while continuing to optimize profitability and strengthen the balance sheet.

Highlights

5

  • Organic sales rose 3% for FY26, with positive performance every quarter, and 5% in Q4 FY26, the strongest quarterly performance of the year.

  • Gross margin expanded 150 basis points for FY26 and 360 basis points in Q4 FY26, reaching 75.5%.

  • Operating margin expanded 320 basis points for FY26 to 11.2% and 330 basis points in Q4 FY26.

  • Diluted EPS grew 66% for FY26 to $2.51 and increased to $0.39 in Q4 FY26 from $0.09 last year.

  • Mainland China delivered broad-based 9% organic sales growth for FY26, outperforming the market and gaining Prestige Beauty share for six consecutive quarters.

Concerns

2

  • Hair Care was not yet back to organic sales growth in FY26, despite signs of Aveda's turnaround in the U.S.

  • Business disruptions from the conflict in the Middle East reduced EUKEM growth by 2% in Q4 FY26.

Guidance & targets

CategoryTargetConfidence
Organic net sales growth
3% to 5%
high materiality
High
Operating margin
12.7% to 13.5%
high materiality
High
Adjusted effective tax rate
33% to 34%
medium materiality
High
Diluted EPS
$3.10 to $3.35
high materiality
High
Net cash flows from operating activities
$1.3B to $1.4B
medium materiality
High
Capital expenditures
approximately 4% of sales
medium materiality
High

Segment performance

SegmentRevenueYoYQoQMargin
Skin Care
Drove growth across price spectrum with The Ordinary, Estée Lauder, and La Mer. Expected to lead innovation in FY27.
—4%——
Fragrance
Amongst the best in the industry, reflecting continued investment and growing demand. Hero scents and newness from Le Labo, TOM FORD, KILIAN PARIS, and Jo Malone London prospered. Balmain Beauty launched.
—10%——
Mainland China
Outperformed the market every quarter to gain Prestige Beauty share, led by La Mer, Le Labo, and TOM FORD. 30% of global innovation now comes from China for the China market.
Skin Care growth: high single digitMakeup growth: mid-single digitFragrance growth: double digitMarket share gain: every quarter of FY26Brands in retail sales growth: 11Brands in double-digit growth: 6
—9%——
Global Travel Retail
Returned to growth in June and July, fueled by investment in experiential retail across Mainland China and Korea. Hainan in double-digit growth in Q4. Inventory is in a very good place.
Reported sales as % of total: 15%
————
Priority Emerging Markets
Accelerated organic sales growth despite disruption in the Middle East.
—accelerating from mid-single digit to high single digit——
U.S.
Returned to organic sales growth in Q4 with continuous Prestige Beauty volume share gain. M·A·C regained #1 ranking and gained market share in Q4.
Q4 organic sales growth: positiveQ4 retail sales growth: mid-single digitFY26 volume share gain: every category contributing
————
U.K. and Ireland
Delivered 3 consecutive quarters of organic sales growth, gaining Prestige Beauty share in the U.K. in Q4.
Consecutive quarters of organic sales growth: 3Q4 Prestige Beauty share: gained
————
Korea
Retail sales growth accelerated from high single digit in Q3 to double digit in Q4, driving return to Prestige Beauty share gain.
Consecutive quarters of organic sales growth: 3Q3 retail sales growth: high single digitQ4 retail sales growth: double digitPrestige Beauty share: gained
————

Product announcements

ProductTypeDetails
Clinique and The Ordinary PDRN innovationlaunch
Estée Lauder longevity and night newnesslaunch
La Mer and Bobbi Brown next-generation hero productslaunch
Clinique new sensitive skin franchiselaunch
M·A·C signature lip franchise innovationlaunch
Balmain Beautylaunch
KILIAN PARIS new Prestige linelaunch
Estée Lauder Glimmer fragrancelaunch

Deals & partnerships

Forest Essentials Adding to portfolio

A single-brand deal that enhances the portfolio and can benefit from the company's ability to create scale and deliver attractive ROIC.

Risks & headwinds

Business disruptions from Middle East conflict Q4 FY26, potentially ongoing into FY27

reduced EUKEM growth by 2% in Q4 FY26

Mitigation:Management does not expect impacts to be material to FY27 results, but the situation remains dynamic. Expect stronger sales growth in EUKEM in H2 FY27 as they lap the disruption.

Hair Care organic sales growth FY26

not yet back to organic sales growth

Mitigation:Seeing evidence of Aveda's turnaround in the U.S. and strong growth from The Ordinary's Serum for Hair Density.

Macro environment uncertainty FY27

not quantified

Mitigation:Company maintains scenario planning to achieve goals across multiple paths, focusing on execution against controllable factors.

What to watch in Q1 FY27

North America organic sales growth

next quarter / FY27
Current positive in Q4 FY26
Target accelerated growth

Why it matters

North America is a key focus for diversified growth, and sustained acceleration is crucial for overall top-line performance.

Looking ahead to fiscal '27, we are doubling down on our strengths to further diversify growth across product categories and geographies, including accelerating growth in North America.

Q&A highlights

What factors led to the improved FY27 margin outlook since May, and what is the timeline for Makeup, Fragrance, Hair Care, and Americas to contribute more meaningfully to profitability improvement?

The improved FY27 outlook is due to a strong FY26 beat, further SG&A optimization opportunities from completed PRGP work, and continued investments to fuel growth. While Skin Care and Asia are highly profitable, the company plans to improve profitability in Makeup, Hair Care, and Fragrance, and across all geographic segments, with sequential improvement expected in the coming years.

“As we have completed our PRGP work, we see further opportunities for SG&A optimization, which we are flowing through, and that has been a consistent message on nonconsumer-facing investment optimization all through the year and that is included in the improved outlook.”

asked by Stephen Robert Powers · answered by Akhil Shrivastava

2 min read 6 chapters

Detailed narrative

Beauty Reimagined Strategy and PRGP Success

The company's 'Beauty Reimagined' strategy, introduced in February 2025, has driven significant transformation, focusing on agility, consumer-centricity, and sustainable growth. The Profit Recovery and Growth Plan (PRGP) concluded its approval phase by June 30, 2026, delivering more robust benefits faster than anticipated. This led to substantial gross and operating margin expansion, funding increased consumer-facing investments while streamlining fixed costs.

Diversified Growth Across Categories and Geographies

Fiscal 2026 saw a reignition of growth with 3% organic sales, driven by broad-based performance across brands and regions. Skin Care grew 4%, Fragrance 10%, and Makeup stabilized with a 500 basis point trend improvement. Mainland China led with 9% organic sales growth, gaining Prestige Beauty share for six consecutive quarters. North America returned to organic sales growth in Q4 FY26, with retail sales rising mid-single digit and volume share gains across categories.

Innovation and Speed to Market

The company accelerated its speed to market, with 23% of FY26 sales derived from innovation. For FY27, innovation as a percentage of sales is projected to increase by 200 to 250 basis points, led by Skin Care. Key launches include Clinique and The Ordinary with PDRN innovation, Estée Lauder's longevity products, and new prestige lines from Balmain Beauty, KILIAN PARIS, and Estée Lauder in Fragrance.

One ELC Operating Model and Digital Transformation

The 'One ELC' operating model is advancing rapidly, with M·A·C U.S. brand.com launching on Shopify and 80% of expected roles transitioned for enterprise business services by September. A new unified global media model with WPP is leveraging AI for real-time personalization, and expanded collaboration with Meta supports advertising and conversational commerce, reflecting new consumer behaviors.

M&A Strategy and Talent Investment

The company's M&A strategy remains focused on growing its core business through minority and single-brand deals that enhance the portfolio and offer attractive ROIC, such as the recent addition of Forest Essentials. Transformational deals are not being pursued for the foreseeable future. Significant investment has been made in talent, bringing in new expertise in creative marketing, research, innovation, and technology, leading to a stronger, more efficient organization.

Travel Retail Recovery and Inventory Management

Global travel retail returned to positive growth in June and July 2026, led by double-digit growth in Hainan. The channel represented approximately 15% of reported sales in FY26, in line with global Prestige share. Management emphasized shipping to demand, with inventory levels in travel retail being in a 'very good place,' supported by a transformed leadership team and coordinated activities between Mainland China and travel retail operations.

AI-generated summary of the company's earnings call. Not investment advice.