Estée Lauder Beats Sales Expectations Fueled by China Rebound
The American cosmetics giant Estée Lauder recently exceeded Wall Street's sales expectations for its first fiscal quarter, signaling promising early results for CEO Stéphane de La Faverie’s turnaround strategy. This positive performance was further bolstered by a significant rebound in its crucial Chinese market, leading to a nearly 6% surge in its shares during premarket trading.
For the period spanning July to September, Estée Lauder reported a robust 3.6% year-over-year increase in revenue, reaching $3.48 billion. This figure comfortably surpassed analysts’ average forecasts of $3.38 billion, as compiled by FactSet. While net profit for the quarter came in at $47 million, slightly below the anticipated $52 million, adjusted earnings per share stood at 13 cents, just shy of the 15 cents analysts had projected.
A key driver of this success was the strong resurgence in China, where sales climbed by 8.5% compared to the same quarter last year. The company, which owns renowned brands such as Clinique, M.A.C., La Mer, Le Labo, and Tom Ford, attributed this growth in mainland China to a combination of innovation, the continued strength of its existing product lines, and targeted customer expansion, particularly within its luxury skincare and fragrance categories.
In response to global retail industry challenges and rising costs, Estée Lauder has been actively implementing strategic operational changes. These include optimizing its production footprint to bring manufacturing closer to its consumer base, while simultaneously reducing inventory levels and promotional activities. Furthermore, the company reiterated details of its previously announced restructuring plan from February, which is expected to incur costs between $1.2 billion and $1.6 billion before taxes and will involve the reduction of 5,800 to 7,000 positions by the end of fiscal 2026.
Commenting on the results, CEO Stéphane de La Faverie stated, “We started fiscal 2026 well, gaining market share in several key strategic areas and improving profitability.” He added that “These results strengthen our confidence in our financial outlook for the 2026 fiscal year,” underscoring the company’s positive trajectory and strategic execution.
Looking ahead to fiscal 2026, Estée Lauder maintains its forecast for a 2% to 5% increase in net profit per share. The company also acknowledged its previous warning about potential new trade tariffs, which could reduce future earnings by nearly $100 million, but assured stakeholders that it is diligently monitoring changes in trade policy and implementing measures to mitigate any potential negative impacts.
