ESTEE LAUDER COMPANIES INC (EL)·Q1 2026 Earnings Summary

Executive Summary

• Q1 FY26 revenue and EPS beat: Net sales rose 4% to $3.48B and adjusted diluted EPS was $0.32 vs S&P consensus of ~$3.38B and ~$0.18, driven by Fragrance (+13% organic) and improved mix/margins from PRGP; adjusted operating margin expanded 300 bps to 7.3% while gross margin expanded 60 bps to 73.3% . Estimates marked with asterisks are from S&P Global: Revenue* ~$3.38B, EPS* ~$0.18 (19/16 estimates) and imply clear beats (Values retrieved from S&P Global).
• Guidance: FY26 outlook reaffirmed for sales growth (Reported +2–5%, Organic 0–3%) and adjusted EPS ($1.90–$2.10), but GAAP EPS range lowered to $1.39–$1.65 (higher restructuring) and tariff headwind ~ $100M maintained; adjusted operating margin still targeted at 9.4–9.9% .
• Regional/product dynamics: Asia/Pacific (+9% organic) and Mainland China (+9%) supported growth; The Americas declined low-single digits. Fragrance led with double‑digit growth across Le Labo, TOM FORD and Jo Malone London; Makeup and Hair Care declined modestly .
• Execution and catalysts: Management emphasized unit growth, expanding consumer coverage (Amazon, TikTok Shop), channel adds (M·A·C to U.S. Sephora in FQ3), and DTC modernization via Shopify; a Paris Fragrance Atelier aims to accelerate innovation with AI-enabled workflows, supporting sustained outperformance in luxury fragrance .

What Went Well and What Went Wrong

• What Went Well

  • Fragrance outperformed: Organic net sales +13% on strong innovation and distribution expansion; Le Labo, TOM FORD (Oud Voyager, Black Orchid Reserve) and Jo Malone London all delivered, with category operating income up on higher gross profit .
  • Margin progress: Adjusted gross margin +60 bps to 73.3% and adjusted operating margin +300 bps to 7.3%, reflecting PRGP efficiencies, lower promos, and reduced excess/obsolescence; adjusted EPS rose to $0.32 from $0.14 YoY .
  • China and Travel Retail stabilization: Mainland China organic +9% with broad portfolio strength and e‑commerce momentum; Asia/Pacific +9% organic aided by travel retail on a low base; inventory right-sized in TR with improving traffic (Golden Week uplift) .
  • Management quote: “We delivered organic sales growth of 3%… mainland China contributed nicely to a return to growth… and significant improvement in operating profitability” — CEO Stéphane de La Faverie .

• What Went Wrong

  • The Americas softness: Net sales -2% (organic -2%), reflecting department store challenges (closures, softness, elevated inventories) that offset marketplace expansion (Amazon U.S./Canada) .
  • Makeup and Hair Care declines: Makeup -2% organic (Bobbi Brown weakness, fewer new launch comps, strategic SKU reductions), Hair Care -7% (Aveda store exits, salon softness) though both saw improved cost discipline .
  • Elevated tax rate and restructuring: GAAP effective tax rate 56.9% (adjusted 40.5%); restructuring charges continue (Q1: $89M), and FY26 GAAP EPS guide lowered due to higher restructuring assumptions (.45–.51 vs .23–.27 previously) .

Financial Results

• Consolidated P&L vs prior quarters (oldest → newest)

• Q1 FY26 vs S&P Global consensus (beats in bold; estimates marked with asterisk)

Values retrieved from S&P Global.

• Segment Performance (Q1 FY26)

• Regional Performance (Q1 FY26; new reporting structure)

• KPIs (Q1 FY26)

Notes: Adjusted metrics exclude restructuring and other charges (and talc settlement in prior year).

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Strategic focus: “The first quarter marked the beginning of our return to growth… as we restore organic sales growth and expand our operating margin for the first time in four years.” — CEO .
• Margin discipline: “Gross margin expanded 60 bps to 73.3%… Adjusted operating margin expanded 300 bps to 7.3%… we funded a 4% increase in consumer-facing investments while reducing non-consumer-facing expenses by 3%.” — CFO .
• China and TR: “We significantly outperformed Prestige Beauty in China… seven brands grew double-digit… travel retail grew on a favorable comparable… inventory right-sized and managed to retail demand.” — CEO/CFO .
• Channels/tech: “We are thrilled to announce our new partnership with Shopify to modernize and scale our direct-to-consumer business… creating a best-in-class omnichannel experience globally.” — CEO .
• Fragrance innovation: Opening of Paris Fragrance Atelier to accelerate innovation using AI and neuroscience modeling to cut development timelines by 30–50% over time .

Q&A Highlights

• Volumes vs price/mix and unit growth: Management emphasized a return to unit growth with pricing in “the right bands,” particularly in fragrance (smaller sizes) and entry prestige, driving new consumer acquisition; pricing contribution was “sub 2%” within 3% organic growth .
• Outlook cadence and macro: FY26 guidance reaffirmed with stronger 1H cadence (easier comps in China/TR) and more variable 2H; macro/tariff volatility warrants caution despite a strong start .
• Margin phasing: FY26 margin guidance (adj OM 9.4–9.9%) intact; gross margin to be flat-to-positive as tariffs flow through with lag; continued SG&A leverage and ROI focus on consumer-facing investments .
• Travel Retail dynamics: Inventory “right sized,” traffic improving in parts of Asia TR (e.g., Hainan) with retail activations; conversion still below prior norms but improving with experiences .
• Channel strategy: Continued expansion where consumers shop (Amazon, TikTok Shop, Sephora for M·A·C) while safeguarding brand equity; Shopify partnership modernizes DTC stack .

Estimates Context

• Q1 FY26 results vs S&P Global consensus: Revenue $3.48B vs ~$3.38B*, EPS $0.32 vs ~$0.18*, both beats (19/16 estimates); beats driven by Fragrance strength, China/TR rebound off a low base, and PRGP-driven margin expansion . Values retrieved from S&P Global.
• Implications: Street models may need to raise FY26 adjusted EPS trajectory for 1H on stronger execution and mix, while GAAP EPS remains constrained by higher restructuring charges (guide raised) .

Key Takeaways for Investors

• Clear top- and bottom-line beat with quality mix: double-digit Fragrance growth and disciplined promo drove gross margin expansion; adjusted OM improved 300 bps .
• China/TR inflecting: Mainland China +9% organic and TR stabilization underpin the 1H-weighted growth cadence; monitor conversion trends and macro sensitivity into 2H .
• Americas still a watch item: Department store pressure and retailer inventory overhang continue; offsets from Amazon and upcoming M·A·C in Sephora could aid FQ3 seasonality .
• FY26 framework intact: Sales growth and adjusted EPS ranges reaffirmed; GAAP EPS lowered on higher restructuring—supportive of long-term margin goals but a headline risk near term .
• Structural levers durable: PRGP savings (procurement, SG&A, value chain) and DTC modernization (Shopify) should support sustained margin rebuild to solid double-digit over the next few years .
• Fragrance moat widening: Paris Atelier and portfolio strength (Le Labo, TOM FORD, Jo Malone London) position EL to lead in the category expected to outgrow beauty in FY26 .
• Trading setup: Near-term momentum from beats, China/TR tailwinds and holiday execution; risks are macro/tariffs and Americas channel softness—watch 11.11/holiday sell-through and 2H cadence .

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Sources: Q1 FY26 8‑K/press release and exhibits ; Q1 FY26 earnings call transcript ; prior quarters Q4 FY25 8‑K ; Q3 FY25 press release ; Fragrance Atelier press release (Oct 14, 2025) .

Estimates marked with asterisks are from S&P Global (Values retrieved from S&P Global).