The Estee Lauder Companies Inc. (EL) Earnings & Analysis

Latest quarter

Estée Lauder reported Q4 FY2026 revenue of $3.6 billion, compared with the consensus of $3.6 billion; revenue as the consensus counts it was 2.15% above that benchmark. The company reported adjusted EPS, as the consensus counts it, of $0.39 against consensus adjusted EPS of $0.32, or 21.9% above the consensus.

The filing shows revenue rose 6.33% from $3.4 billion a year earlier. Diluted EPS was −$0.32 in Q4 FY2026, compared with −$1.51 in Q4 FY2025. Gross margin was 75.5%, up 3.5 percentage points from 72.0%, while operating margin was −1.08%, compared with −11.4% a year earlier. CFO Akhil Shrivastava said fourth-quarter organic sales grew across product categories except hair care and across geographic regions, except that Middle East disruption reduced EUKEM growth by 2%. The filing reports free cash flow of $425.0 million, compared with $394.0 million a year earlier.

Adjusted EPS is the figure the consensus estimates, not the GAAP EPS above.

What management said on the call

President and Chief Executive Officer Stéphane de la Faverie said fiscal 2026 organic sales rose 3%, with growth across brands, and said the company is pursuing a more diversified set of growth drivers under its Beauty Reimagined strategy. He said the company intends to concentrate on its core business and pursue minority and single-brand deals rather than transformational transactions.

De la Faverie said Mainland China delivered 9% organic sales growth in fiscal 2026 and that the company gained prestige-beauty share in every quarter and category. He said the company has six brands growing at double-digit rates in China, where online accounts for more than 50% of its business, and said the company has become less promotional in that market. He also said travel retail returned to positive territory globally in June and July, led by Hainan, while the company is managing inventory to demand.

On North America, de la Faverie said the company returned to organic sales growth in the fourth quarter and characterized fiscal 2027 as a period of continued focus on retail sales, social commerce, broader distribution and innovation. He said the company aims to serve consumers across online, specialty multi, direct-to-consumer and department-store channels.

Shrivastava said PRGP benefits, gross-margin improvement and lower non-consumer-facing expenses supported fiscal 2026 margin progress. He said fiscal 2027 margin expansion is expected to be driven largely by SG&A actions, including employee-cost and infrastructure measures, while the company continues consumer-facing investment. In response to an analyst question on profit concentration, Shrivastava said the company sees opportunities to improve profitability in makeup, hair care and fragrance. He said PRGP savings will ramp through fiscal 2027, with the full run rate also reflected in fiscal 2028.

For fiscal 2027 demand, Shrivastava said the company expects first-half organic sales growth to exceed second-half growth because of earlier innovation and stronger travel-retail shipments. He said the company does not expect the Middle East conflict to have a material effect on fiscal 2027 results based on current information.

Guidance

Estée Lauder raised its FY2027 adjusted operating-margin outlook to 12.7% to 13.5%, from its prior preliminary outlook of 12.5% to 13.0%. CFO Akhil Shrivastava attributed the revised outlook in part to fiscal 2026 results, operating leverage in non-consumer-facing expenses and modest gross-margin expansion.