THE WHAT? The Estée Lauder Companies (ELC) reported a return to sales growth and improved profitability for fiscal 2026, with reported net sales rising 5% to US$15.05 billion and organic sales increasing 3%. Fourth-quarter momentum accelerated, with reported sales up 6% and organic sales up 5%.
THE DETAILS Full-year gross margin expanded 150 basis points to 75.5%, while adjusted operating margin increased 320 basis points to 11.2%. Adjusted operating income rose 47% to US$1.69 billion, while adjusted diluted EPS increased 66% to US$2.51. The company generated US$1.32 billion in free cash flow, nearly double the US$0.67 billion recorded a year earlier.
Growth was led by Fragrance, where organic sales rose 10%, driven by double-digit growth across ELC’s Luxury Brands, particularly Le Labo, TOM FORD and KILIAN PARIS. Skin Care increased 4%, led by La Mer, The Ordinary and Estée Lauder, while Makeup was virtually flat and Hair Care declined 1%.
ELC also expanded its consumer reach, growing its Amazon presence to 13 brands across 11 markets and TikTok Shop to 12 brands across nine markets. It opened 33 net new fragrance freestanding stores and launched M·A·C in select US Sephora locations, online and at Sephora at Kohl’s. Innovation accounted for 23% of fiscal 2026 sales.
THE WHY? The results suggest ELC’s Beauty Reimagined strategy and Profit Recovery and Growth Plan (PRGP) are beginning to translate into stronger sales and margins. The company expects the PRGP restructuring program to deliver approximately US$1.2 billion in annual gross benefits and a net reduction of around 10,000 positions. For fiscal 2027, ELC expects organic sales growth of 3% to 5% and has raised its adjusted operating margin outlook to 12.7%–13.5%, signalling expectations for further profitability gains.
Source: Business Wire
