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Sales at Estée Lauder Companies (ELC) dropped 8 per cent in the year ended 30 June to $14.3 billion, with declines across all geographies, missing analyst expectations. Shares fell 5 per cent on Wednesday morning.
Despite the decline in sales, gross margin improved from 71.7 per cent last year to 74 per cent this year, due to operational efficiencies and better pricing strategies.
“Having closed fiscal 2025 as expected, we remain wholly focused on continuing to execute our strategic vision of ‘Beauty Reimagined’ with excellence,” said CEO and president Stéphane de La Faverie, who was promoted to CEO in October 2024. “Despite continued volatility in the external environment, we embarked on fiscal 2026 with signs of momentum and confidence in our outlook to deliver organic sales growth this year after three years of declines and to begin rebuilding operating profitability in pursuit of a solid double-digit adjusted operating margin over the next few years.”
In February this year, the company announced its expanded profit recovery and growth plan, which includes organisational restructuring and a cost-saving programme. Under this strategy, ELC plans to improve its operating model and return to growth in 2026, and is forecasting a 2 to 3 per cent sales growth for the full year, including stabilisation in China. It expects travel retail to continue to suffer, and challenges to persist in the West as consumer sentiment remains subdued in the US and Western Europe. The company is focused on tightening its inventory monitoring and reducing discounts to improve profitability, too.
The company expects tariffs to impact profitability by $100 million in fiscal 2026. “Our teams have acted swiftly to implement mitigation actions, including leveraging available trade programmes and further optimising our regional manufacturing footprint to bring production closer to the consumer, including through a facility in Japan,” said CFO Akhil Shrivastava in the conference call. “These efforts, along with the agility we have built into our supply chain, are helping to offset more than half of the expected impacts and better position us to adapt quickly to address the evolving trade policies.”