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    EL
    Earnings call· Dec 2025(Q2 FY26)

    ESTEE LAUDER COMPANIES Q2 FY26 earnings call EL

    Feb 5, 2026 Source

    Executive summary

    The Estée Lauder Companies Q2 FY26 — Strong Organic Sales Growth and Raised Outlook

    The Estée Lauder Companies reported strong Q2 FY26 results, marking the first anniversary of its 'Beauty Reimagined' strategy with 4% organic sales growth and significant operating margin expansion. The company raised its full-year outlook, reflecting confidence in its turnaround momentum despite ongoing macroeconomic and geopolitical uncertainties, particularly in travel retail and some Western markets. Management remains focused on disciplined execution and long-term value creation through strategic investments and operational efficiencies.

    Highlights

    5

    • Delivered 4% organic sales growth in Q2 FY26, led by 6% growth in Skin Care and Fragrance.

    • Expanded operating margin by 290 basis points to 14.4% in Q2 FY26, driven by PRGP net benefits and disciplined investment.

    • Diluted EPS grew 43% year-over-year to $0.89 in Q2 FY26.

    • Outperformed prestige beauty in Mainland China with double-digit growth and gained share for calendar year '25.

    • Raised full-year FY26 organic sales growth outlook to 1% to 3% and EPS growth to 36% to 49%.

    Concerns

    4

    • Americas sales expected to be flat for full-year FY26, with a slowdown in Latin America due to enacted tariffs.

    • Anticipate Q3 FY26 operating margin contraction of approximately 50 basis points due to increased consumer-facing investments and tariff headwinds.

    • Travel retail in Asia faces incremental transitory headwinds in H2 FY26 due to changes in duty-free retailers at Beijing and Shanghai airports.

    • Consumer sentiment in Western Europe remains subdued, with challenges in markets like France and Germany.

    Guidance & targets

    9
    CategoryTargetConfidence
    Full-year FY26 Organic Net Sales Growth
    1% to 3%
    high materiality
    High
    Full-year FY26 Operating Margin
    9.8% and 10.2%
    high materiality
    High
    Full-year FY26 Diluted EPS
    $2.05 and $2.25
    high materiality
    High
    Full-year FY26 Weighted Average Share Count
    approximately 365 million shares
    low materiality
    High
    H2 FY26 Organic Net Sales Growth
    low single digits
    medium materiality
    Medium
    Q3 FY26 Operating Margin
    contraction of approximately 50 basis points
    medium materiality
    High
    FY26 Innovation as % of Sales
    at least 25%
    low materiality
    High
    FY26 Innovation Launched in Less Than a Year
    19%
    low materiality
    High
    Full-year FY26 Americas Sales Growth
    flat
    medium materiality
    High

    Segment performance

    11
    SegmentRevenueYoYQoQMargin
    Mainland China
    Fourth consecutive quarter of share gain across all four categories. Consumer sentiment still subdued but conversion strong with right experience.
    Outperformed prestige beauty in the quarterGained share for calendar year '25Led by La Mer and TOM FORDEstee Lauder #1 prestige brand on Tmall and Douyin (11.11)La Mer #1 luxury brand on Tmall (11.11)Jo Malone #1 prestige fragrances on Tmall (11.11)Gained 22 bps share in skin care (Q2)Gained 87 bps share in makeup (Q2)Gained 100 bps share in fragrances (Q2)Gained 85 bps share in hair care (Q2)
    		—double-digit growth——
    Hainan
    Traffic picking up, conversion driven by retail entertainment. Ahead of department in calendar '25.
    Led by Estee Lauder and La MerJanuary growth: high double digitGaining market share across diverse portfolio (Lauder, La Mer, MAC, Jo Malone, TOM FORD)
    		—high single digit——
    Japan
    Seeing a shift from Japan to Korea and other markets in the region.
    Outperformed prestige beauty in the quarterDriven by MAC and Le LaboGaining market share despite disrupted market and reduced traffic
    		————
    France
    Gained share for calendar '25Strengthened #1 category rank
    		————
    U.S.
    Coming out of 10 years of market share loss. Strong performance with Estee Lauder and MAC at Ulta. Department store penetration at 30% or less.
    Gained volume share in total prestige beauty (Q2 and CY25)Grew value share in skin care (Q2 and CY25) led by The Ordinary and hair careEstee Lauder gained share in makeup (CY25)MAC in Sephora U.S. launch upcomingMAC in TikTok Shop U.S. gaining share in lip category
    		————
    Americas (Total)
    Latin America seeing slowdown due to tariffs.
    Growth online offset by decline in brick-and-mortar (Q2)
    		—flatsequential improvement from Q1—
    Priority Emerging Markets
    New organizational design enabling growth opportunities.
    Driven by Turkey, Middle East, ThailandMid-single digit growth in India
    		—double-digit organic sales growthsignificant acceleration—
    Skin Care
    Supported by increased consumer-facing investments and innovation.
    Estee Lauder double-digit organic sales growth in ChinaThe Ordinary strong double-digit retail sales growth in H1
    		—6%——
    Fragrance
    Best-performing category in H1 FY26. Supported by increased consumer-facing investments and innovation.
    Double-digit retail sales growth across several major retailers in H1 FY26 (European and Middle Eastern airports)10% organic sales growth (H1 FY26)
    		—6%——
    Makeup
    Profitability impacted by returns for Q3 innovation. Focus on rightsizing fixed costs, PRGP benefits, and accelerating sales through distribution expansion and innovation.
    Estee Lauder Double Wear concealer top-ranked new product in prestige makeup (unit, CY25, U.S.)MAC return to organic sales growth in H1 FY26
    		———breakeven level
    Hair Care
    Aveda's new Miraculous oil top-selling product in H1
    		————

    Operational metrics

    11
    Organic sales growth
    4%YoY
    Q2 FY26

    Led by 6% growth in Skin Care and Fragrance.

    Operating margin
    14.4%expanded 290 bps YoY
    Q2 FY26

    Driven by disciplined investment allocation and PRGP net benefits.

    Gross margin
    76.5%expansion of 40 bps YoY
    Q2 FY26

    Expansion driven by PRGP and improved sales leverage.

    Non-consumer-facing expenses reduction
    3%YoY
    Q2 FY26

    Helped maintain cost efficiency and operating leverage, even with normalization of employee incentive costs.

    Consumer-facing investments increase
    7%YoY
    Q2 FY26

    Funded by expense reductions, driving growth and strengthening brand equity.

    Effective tax rate
    39.8%down from 42.6% last year
    Q2 FY26

    Primarily due to lower tax expense related to previously issued stock-based compensation.

    Net cash flows from operating activities
    $785 millionsignificant improvement compared to $387 million last year
    H1 FY26

    Reflecting higher earnings and favorable change in operating assets and liabilities despite increased restructuring payments.

    Capital expenditure
    $204 milliondown 25% versus last year
    H1 FY26

    Prioritizing consumer-facing investments while optimizing other CapEx. Reflects phasing of projects.

    PRGP cumulative restructuring charges
    $904 million
    through Dec 31

    Recorded as part of the Profit Recovery and Growth Plan.

    Online sales penetration
    exceed 31%FY25 was 31%
    FY26

    On track to exceed previous fiscal year's penetration, tapping into high-growth channel potential.

    Innovation launched in less than a year
    19%above 16% initially expected
    FY26

    Demonstrates accelerated speed to market, majority from Makeup.

    Industry KPIs

    8
    MetricValueDetails
    Channel mixhigh single-digit%
    Portfolio rotation—
    Underlying sales growth4%%
    Brand marketing investment7%%
    Market value share by geographygained share
    Productivity cost savings program$904 millionUSD
    Developed vs emerging market split—
    Underlying operating margin bridge14.4%%

    Product announcements

    8
    ProductTypeDetails
    Clinique new dermatologist-developed skin care linelaunch
    La Mer eye creamlaunch
    Estee Lauder Double Wear next-generation matte foundationlaunch
    Clinique Chubby Sticklaunch
    KILIAN PARIS newnesslaunch
    Le Labo newnesslaunch
    TOM FORD newness (fragrance)launch
    Bumble and bumble styling productlaunch

    Deals & partnerships

    3
    Accenturestrategic agreement for enterprise business services

    To transform how select shared services are delivered globally, consolidating service providers, expanding outsourced services, and standardizing end-to-end processes using advanced technology. Part of the PRGP restructuring component.

    Duty Free Americaincreased presence in travel retail

    Expansion in travel retail across the West.

    China Duty Free (CDF), Wangfujing, Avoltatransition of duty-free retail operations

    Taking over operations from Sunrise in Beijing and Shanghai airports and related online businesses. Seen as a good thing for long-term inventory management and less discounting.

    Capital programs

    1
    Profit Recovery and Growth Plan (PRGP) Restructuring Componentunderway
    Spent to date: $904 million

    Benefit: unlock greater productivity and efficiency across the organization, drive OpEx improvement and keep us on track to achieve our overall PRGP savings and margin progression

    Made significant progress in advancing the restructuring component, including a strategic agreement for enterprise business services with Accenture. Expected charges include professional service fees, employee costs, and contract terminations.

    Risks & headwinds

    6
    Macroeconomic, geopolitical, and retailer-specific uncertaintiesnear-term

    potential near-term headwinds

    Mitigation: encouraged by momentum and year-to-date performance

    Transitory headwind in Asia travel retailsecond half of the year

    incremental transitory headwind

    Mitigation: strong normalization based on the great relationship that we have had

    Subdued consumer sentiment in Chinaongoing

    still subdued consumer sentiment

    Mitigation: encouraged by the strong desirability of our brands and innovation

    Challenging macroeconomic environment in Western Europeongoing

    challenging in the Western Europe market

    Mitigation: see opportunities to improve our results

    Tariffs impacting Latin Americaongoing

    enacted tariffs are starting to hurt consumer confidence in Latin America

    Near-term cost pressure from PRGP restructuringnear-term

    some near-term cost pressure as we operate in parallel

    Mitigation: benefits building thereafter

    Q&A highlights

    8

    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

    3 min read7 chapters

    Detailed Narrative

    01

    Beauty Reimagined Progress

    The company is celebrating the one-year anniversary of its 'Beauty Reimagined' strategy, which aims to be the biggest operational, leadership, and cultural transformation in its history. Key achievements include expanding consumer coverage, overhauling the innovation engine, increasing consumer-facing investment, and creating a new 'one ELC' operating model. This initiative has driven strong momentum, leading to improved retail sales trends and market share gains in key regions.

    02

    China Outperformance and Travel Retail Dynamics

    In Mainland China, Estée Lauder outperformed prestige beauty in Q2 FY26 with double-digit growth, gaining share for calendar year '25, led by La Mer and TOM FORD. Hainan retail sales grew high single-digit, driven by Estee Lauder and La Mer, with January showing high double-digit growth. However, the broader Asia travel retail segment faces transitory📎 headwinds in H2 FY26 due to the transition of duty-free retailers at Beijing and Shanghai airports and the shutdown of the Universal app, which was a significant part of the business.

    03

    Strategic Channel Expansion

    The company is actively expanding its presence in high-growth channels, including Amazon Premium beauty stores (12 brands across 10 markets) and TikTok Shop (U.S., Southeast Asia, U.K., Germany). Online organic sales grew high single-digits in H1 FY26, on track to exceed 31% of reported sales in FY25. Strategic expansion in travel retail across the West and luxury fragrance doors in Europe/Middle East is diversifying the business and driving double-digit fragrance retail sales growth.

    04

    Innovation and Speed to Market

    Estée Lauder is focusing on breakthrough, on-trend, and commercial innovation. In China, Estee Lauder's longevity skincare launches contributed to double-digit organic sales growth, and the China innovation lab developed Re-Nutriv oil in 15 months. Globally, The Ordinary's innovation drove strong double-digit retail sales growth. The company is tracking to 19% of FY26 innovation launched in less than a year, exceeding the initial 16% expectation, with a target to reach 30%.

    05

    Profit Recovery and Growth Plan (PRGP)

    The PRGP continues to deliver strong savings, contributing to gross margin expansion and a 3% reduction in non-consumer-facing expenses in Q2 FY26. The company is advancing its restructuring component, including a strategic agreement for enterprise business services with Accenture to consolidate service providers, expand outsourced services, and standardize processes using AI. This initiative is expected to unlock greater productivity and efficiency, with benefits ramping up over time⏳.

    06

    North America Turnaround

    After years of market share loss, North America is showing momentum, gaining volume share in total prestige beauty and value share in skincare (led by The Ordinary) and hair care for calendar year '25. Estee Lauder also gained share in makeup. The company is rebalancing channels, increasing penetration in online and specialty-multi (e.g., MAC entering Sephora U.S.), while selectively rationalizing department store presence and investing in luxury freestanding stores.

    07

    Capital Allocation and Cash Flow

    The company generated $785 million in net cash flows from operating activities in the first six months, a significant improvement from $387 million last year, reflecting higher earnings and favorable changes in operating assets and liabilities despite increased restructuring payments. Capital expenditure was $204 million, down 25% year-over-year, prioritizing consumer-facing investments while optimizing other CapEx.

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