Executive Summary

Q4 FY2025 reported net sales were $3.41B (-12% YoY) and adjusted diluted EPS was $0.09; GAAP diluted EPS was -$1.51 due to $527M of restructuring and intangible impairment charges and a $172M U.S. deferred tax valuation allowance .
Results were broadly in line with consensus; revenue modestly beat ($3.41B vs $3.40B*) and EPS matched/slightly beat ($0.09 vs $0.089*), with EBITDA essentially in line ($319M vs $318.8M*) ; estimates from S&P Global*.
Sequential deterioration vs Q3 reflected a stronger double-digit decline in global travel retail and softness in mainland China amid subdued consumer sentiment, partly offset by luxury fragrance growth (Le Labo, Jo Malone London) .
FY2026 outlook introduced: organic net sales 0–3%, GAAP net sales +2–5%, adjusted EPS $1.90–$2.10, adjusted operating margin 9.4–9.9%, ~36% adjusted ETR, CFO $1.0–$1.1B, capex ~4% of sales; tariff headwind ≈$100M .
Catalysts: affirmation of FY26 turnaround (return to growth, margin build), PRGP execution (cost saves funding consumer investments), and channel expansion (Amazon, specialty multi) .

What Went Well and What Went Wrong

What Went Well
- Luxury fragrance momentum: Le Labo delivered strong double-digit growth each quarter; Jo Malone London strength continued; Q4 fragrance net sales +2% organically .
- Gross margin resilience: adjusted gross margin held ~72% in Q4 despite volume deleverage; FY gross margin expanded 230 bps to 74% on PRGP efficiencies and reduced obsolescence/discounts .
- Share gains and consumer coverage: share gains in China (all categories), Japan, and improved U.S. share trends; expanded Amazon premium beauty storefronts (11 U.S. brands; new Canada, Mexico) .
- Management quote: “We embarked on fiscal 2026 with signs of momentum and confidence in our outlook to deliver organic sales growth this year… and to begin rebuilding operating profitability” — CEO Stéphane de La Faverie .
What Went Wrong
- Travel retail and Asia softness: sequential deterioration driven by stronger double-digit decline in travel retail and subdued China sentiment; retailer inventory tightening pressured shipments .
- Impairments and restructuring: Q4 included $425M intangible impairments (Dr.Jart+, Too Faced) and $106M restructuring, dragging GAAP profitability; FY impairments totaled $1.286B .
- Makeup and hair care declines: Q4 makeup -12% organically (M·A·C, Too Faced; face category weakness), hair care -15% (Aveda’s brick-and-mortar softness) .

Financial Results

Metric	Q4 2024	Q3 2025	Q4 2025
Revenue ($USD Billions)	$3.871	$3.550	$3.411
Gross Margin (%)	71.8%	75.0%	72.0%
Adjusted Gross Margin (%)	71.8%	75.0%	71.9%
Operating Margin (GAAP, %)	-6.0%	8.6%	-11.4%
Adjusted Operating Margin (%)	9.0%	11.4%	4.0%
Diluted EPS (GAAP)	-$0.79	$0.44	-$1.51
Adjusted Diluted EPS (Non-GAAP)	$0.64	$0.65	$0.09

Actual vs S&P Global consensus (Q4 FY2025):

Metric	Consensus*	Actual
Revenue ($USD Billions)	$3.399*	$3.411
Primary EPS ($USD)	$0.089*	$0.09
EBITDA ($USD Millions)	$318.8*	$319

Values marked with * are from S&P Global.

Segment net sales (Q4 FY2025 vs prior year):

Segment	Q4 2024 Net Sales ($MM)	Q4 2025 Net Sales ($MM)
Skin Care	$2,035	$1,705
Makeup	$1,105	$982
Fragrance	$539	$560
Hair Care	$165	$141
Other	$27	$20

Geographic net sales (legacy structure):

Region	Q4 2024 Net Sales ($MM)	Q4 2025 Net Sales ($MM)
The Americas	$1,014	$949
Europe, Middle East & Africa	$1,652	$1,293
Asia/Pacific	$1,205	$1,166

Drivers:

Organic net sales -13% in Q4, led by Skin Care (-17%) and Makeup (-12%); Fragrance +2% on luxury brands .
Operating loss -$390M GAAP; adjusted operating loss -$288M; impairment/restructuring weighed on GAAP .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Organic Net Sales Growth	FY2026	—	0%–3%	New
GAAP Net Sales Growth	FY2026	—	+2%–5%	New
Adjusted EPS (Non-GAAP)	FY2026	—	$1.90–$2.10	New
Adjusted Operating Margin	FY2026	—	9.4%–9.9% (2H > 1H)	New
Adjusted Effective Tax Rate	FY2026	—	~36% (Q1 ~40%)	New
Net Cash from Operations	FY2026	—	$1.0–$1.1B	New
Capital Expenditures	FY2026	—	~4% of projected sales	New
Tariff Impact on Profitability	FY2026	—	≈$100M headwind	New
Quarterly Dividend	Sep 2025	$0.35 (Jun 2025)	$0.35 declared (payable Sep 16)	Maintained

Additional qualitative guidance: Expect high-single-digit growth in global travel retail in Q1 FY2026, mid-single-digit growth in mainland China; tighter trade inventories and reduced discounts to align retail and net sales .

Earnings Call Themes & Trends

Topic	Q2 FY2025	Q3 FY2025	Q4 FY2025	Trend
Travel Retail	Double-digit decline; TOM FORD/Too Faced impairments; strategic reset	Stronger double-digit decline expected in Q4; inventory reset in 1H FY2025	Sequential deterioration; plan for improved shipments in FY2026	Improving shipment outlook, conversion remains weak
Mainland China	Subdued sentiment; retail softness	Stabilization; mid-single-digit retail growth; share gains	Share gains across categories; high-single-digit retail growth events	Improving stabilization and share gains
North America channel mix	Amazon expansion; TikTok launches	9 brands on Amazon U.S.; retail up low single digits vs net down	11 brands on Amazon U.S.; department stores <1/3 mix; narrowing retail-net gap	Diversifying channels; aligning shipments to retail
AI/Technology	Microsoft “Agent of Change”; Adobe Firefly partnership	Continued AI initiatives	Adobe partnership; AI driving +31% ROI in North America media	Accelerating AI-enabled execution
PRGP/Restructuring	Program expanded; charges $1.2–$1.6B expected	>300 bps adj GM expansion each quarter	Cumulative charges $610M by 6/30; annual benefits $0.8–$1.0B	Ongoing; cost saves funding consumer investments
Tariffs	Monitoring; potential increases	—	Assumed enacted rates; ~$100M net headwind	Headwind baked into FY2026 outlook

Management Commentary

“We enter fiscal ’26 with signs of momentum and the start of our turnaround, a return to top line growth in fiscal ’26 and the pursuit of a solid double digit operating margin in the years ahead.” — CEO Stéphane de La Faverie .
“Gross margin for the full year… 74%. This meaningful expansion was driven by the relentless execution of our PRGP.” — CFO Akhil Shrivastava .
“We now have a much more diversified business… department stores are… less than one third of our business.” — CFO Akhil Shrivastava on North America mix .
“Our investments in AI have begun to show meaningful impact… AI has driven a 31% increase in ROI from our North America media campaigns.” — CEO Stéphane de La Faverie .

Q&A Highlights

Retail vs net sales gap: Inventory reductions across major markets; expect net to track retail more closely, though Q1 North America gap remains elevated before narrowing through FY2026 .
North America strategy: Emphasis on Amazon and specialty multi; continued de-emphasis of department stores while ensuring profitable channel mix .
Margin build: FY2026 operating margin expansion driven primarily by SG&A reductions (non-consumer-facing) with gross margin flat-to-up despite tariffs; longer-term opportunities in procurement and outsourcing .
Europe outlook: Consumer softness in Western Europe (France, Germany) offset by targeted investments, innovation acceleration, and luxury fragrance expansion .
Confidence in FY2026: Visibility improving in China and travel retail shipments; PRGP savings underpin margin and cash targets, with prudence around exogenous risks .

Estimates Context

Q4 FY2025 actuals compared with S&P Global consensus: revenue $3.411B vs $3.399B* (beat), EPS $0.09 vs $0.089* (in line/slight beat), EBITDA $319M vs $318.8M* (in line). Values marked with * are from S&P Global.
Implication: Modest operational beats amid significant GAAP noise from impairments/restructuring; estimate revisions likely to focus on FY2026 margin cadence (SG&A leverage) and travel retail recovery path .

Key Takeaways for Investors

FY2026 setup: Targeted return to organic growth (0–3%) and 160–190 bps operating margin expansion, with cost saves funding consumer acquisition; watch SG&A execution and tariff offsets .
Channel strategy: Rapid expansion in Amazon and specialty multi is reshaping North America, reducing reliance on department stores and improving ROI via AI-enabled media .
China trajectory: Signs of stabilization and share gains in H2 FY2025; FY2026 assumes mid-single-digit growth — monitor shopping festivals and online momentum .
Travel retail normalization: Shipments expected to improve vs FY2025; conversion remains weak — sequential variability likely, with broader recovery into 2H FY2026 .
Gross margin resilience: PRGP continues to offset deleverage; focus shifts to SG&A and procurement/outsourcing for additional leverage .
Brand performance: Luxury fragrance (Le Labo, Jo Malone London) a bright spot; Skin Care and Makeup require continued innovation and pricing/discount discipline .
Cash and dividends: FY2026 CFO $1.0–$1.1B despite peak restructuring payments; dividend maintained at $0.35, supporting income investors while funding turnaround .

ESTEE LAUDER COMPANIES INC (EL)·Q4 2025 Earnings Summary