Estee Lauder Companies (EL) Q2 FY26 earnings call: guidance and Q&A

Why is Americas growth expected to be flat for the year despite easier comps and progress with Amazon launches? What are the key moving parts and expected growth cadence (skewed towards F Q4)?

Stephane highlighted that North America is gaining volume share after 10 years of loss and value share in skincare, driven by The Ordinary. The company is rebalancing channels, expanding online and specialty-multi (MAC into Sephora U.S.), and rationalizing department stores. Latin America has seen a slowdown due to tariffs. Akhil clarified that after a negative Q1, the rest of the year for North America is expected to be positive, leading to a flat full-year. Q4 is expected to be stronger than Q3 for the company due to travel retail adjustments.

“We are now in a volume market share gain. And on top of it, we are also in a share gain in value in skin care led by the ordinary and many of our brands that are pulling the total.”

asked by Bonnie Herzog · answered by Stephane de la Faverie

Provide an update on the total travel retail business, outlook for Hainan (conversion rates, spending), and comments on North Asia (South Korea, Japan), considering more normalized shipment levels in H2.

Stephane noted strong momentum in Hainan, with January showing high double-digit growth and market share gains across diverse brands (Lauder, La Mer, MAC, Jo Malone, TOM FORD). He emphasized that conversion is driven by "retail entertainment" as traffic is up but conversion still low. He clarified that travel retail East is complex, including Hainan, Beijing/Shanghai airports, and the Universal app, which was shut down. The transition of airport concessions (Sunrise to CDF, Wangfujing, Avolta) caused disruption in Q2/Q3 but is seen as positive long-term. Japan is gaining market share despite traffic reduction. Akhil added that ELC is outperforming in the West, Hainan, Japan, and Thailand.

“the month of January in Hainan was in high double digit for us, again, gaining market share across many of our brands.”

asked by Filippo Falorni · answered by Stephane de la Faverie

Makeup profitability is near breakeven, unlike Skin Care and Fragrance. What are the drivers and how will it progress?

Akhil explained that Q2 Makeup profitability was temporarily impacted by returns for Q3 innovation launches. He stated that the company aims for significantly better margins in Makeup, similar to other categories over time, through rightsizing fixed costs, PRGP benefits, and accelerating sales. Stephane added that they are expanding distribution (TikTok Shop, MAC in Sephora U.S.), rationalizing existing distribution, and accelerating innovation (majority of fast-to-market innovation is in Makeup).

“In quarter 2, you did notice a little bit of a onetime due to the return we took on this innovation but those are the some of the salient points.”

asked by Stephen Robert Powers · answered by Akhil Shrivastava

Discuss the promotional environment around 11.11, expectations for Chinese New Year, and strategies to drive balanced, everyday performance outside of major selling moments.

Stephane confirmed strong performance in China, gaining share for four consecutive quarters, with brands like Estee Lauder, La Mer, and Jo Malone leading during 11.11. He noted that Chinese New Year is traditionally less promotional and more focused on gifting and experience. The company is creating "retailtainment" and VVIP events, accelerating freestanding store openings, and focusing on everyday connections to reduce reliance on highly promotional periods. Akhil added that discount levels in China are coming down while growth and profitability improve.

“our discount levels in China are coming down while we are driving this outstanding growth and outperformance of the market.”

asked by Lauren Lieberman · answered by Akhil Shrivastava

How has the gap between sell-in and sell-out improved in North America, and is it expected to close by year-end?

Akhil stated that the significant 5-point gap from Q1 has "significantly reduced" in Q2 and is expected to remain lower. A residual gap of a couple of points is anticipated due to online platform media investments being accounted for as sales reductions rather than OpEx. Inventory levels in North America are now lower or in line with needs. He reiterated that North America trends are improving, with Q2 being positive and the full year expected to be flat after a negative Q1.

“In quarter 2, this gap has significantly reduced and should continue to be lower than where we were in Q1.”

asked by Rupesh Parikh · answered by Akhil Shrivastava

What is the current mix of business in higher-growth channels versus heritage channels in North America, and where does the company stand in the brand evolution towards these channels?

Stephane explained that department store penetration in North America is now 30% or less, significantly lower for some brands. The company is rapidly increasing penetration in online players like Amazon (12 brands in U.S.) and TikTok Shop, and specialty-multi (MAC entering Sephora U.S.). Direct-to-consumer, including brand.com and luxury freestanding stores, is also growing. He emphasized that the company is moving where the consumer is, with high-growth channels driving most volume growth, exemplified by The Ordinary's strong performance.

“in North America, today, and I think we've mentioned it, we are continuing to decrease the penetration of department store in our total business. That's your question. And today, it's like at 30% or less.”

asked by Dara Mohsenian · answered by Stephane de la Faverie

Comment on the stabilization and sequential improvement in Europe, focusing on the U.K. and the medium-term outlook.

Stephane noted that sequential improvement in Europe is driven by emerging markets and the U.K. returning to positive territory in the last quarter. While consumer sentiment is subdued in France and Germany, Spain and Italy show strong performance, gaining share in fragrances. The U.K. is applying playbooks from the U.S., including Amazon, rationalizing distribution, and accelerating specialty-multi partnerships. Priority emerging markets delivered double-digit growth, driven by Turkey, Middle East, and Thailand, with mid-single-digit growth in India.

“Europe is a tale of multiple cities. Obviously, our region is U.K. and I want to remind everybody is like Europe is the U.K. and is obviously the emerging market. So if I look at the sequential improvement that we are seeing in the total area is really coming from the emerging market but also from the U.K. going into -- back into positive territory into the last quarter.”

asked by Chris Carey · answered by Stephane de la Faverie

Frame the expected difference in growth between Q3 and Q4, whether disruptions will still impact Q4, and how this informs the FY27 top-line trajectory.

Akhil explained that the back-half guidance accounted for anniversarying larger bases in China and travel retail. Q3 has a larger base period in APAC and TR. The Q4 improvement reflects the transitory nature of retailer transitions in travel retail, which are not long-term issues. He expects the beauty market to improve as travel retail bases off challenged periods. Stephane reiterated the goal to achieve the top end of the full-year guidance and that the company is refreshing its long-range plan, with more visibility expected in August. The mission is to gain market share post-transition.

“As travel retail bases off that period, beauty market itself should be better, assuming other things remain the same in the West and China continues to do mid-single.”

asked by Peter Grom · answered by Akhil Shrivastava