Estée Lauder sees further sales, profit erosion on soft travel retail business

[ESTĒE LAUDER store at Beijing Daxing International Airport]
Robert Way

Estée Lauder (NYSE:EL [https://seekingalpha.com/symbol/EL]) realized its third consecutive quarter [https://seekingalpha.com/news/4487310-estee-lauder-gaap-eps-of-0_09-beats-by-0_13-revenue-of-3_41b-beats-by-10m]of declining sales, reflecting double digit declines across most categories and across all geographic regions. Coupled with eroding profits and a warning that tariffs would shave $100M off the company’s bottom-line, shares were under heavy selling pressure into Wednesday’s open.

Amplified by challenges in the company’s travel retail business and softness in mainland China, makeup sales were down 12%, skin care was down 17%, and hair care sales fell 15%, all of which were worse than expectations. And although fragrance sales improved by 4%, overall sales were down 12% during the quarter to $3.41B, slightly above expectations.

The company’s profits were down as well with an adjusted profit of $0.09 per share down 86% year-over-year, but still $0.13 better than Wall Street’s very conservative expectations. Gross margin, however, expanded 10 basis points to 71.9%, beating expectations by 130 basis points largely due to the company’s Profit Recovery and Growth Plan (PRGP) enacted in February 2025.

For 2026, Estée Lauder (NYSE:EL [https://seekingalpha.com/symbol/EL]) expects organic sales growth of 0% to 3% and unadjusted earnings (on a constant currency basis) to be in the range of $1.87 to $2.07 per share versus $2.22 estimates. These expectations include an unfavorable impact of ~$100M on profitability from tariffs, net the company’s planned mitigation strategies.

As part of the company’s ongoing efforts to trim costs and restructure the business, the PRGP is expected to result in restructuring and other charges of $1.2B to $1.6B once fully implemented and yield annual gross benefits of $800M to $1B.

Additionally, PRGP will result in a net reduction in positions of 5,800 to 7,000 and expected to be completed by the end of 2026.

MORE ON ESTEE LAUDER

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* Estee Lauder GAAP EPS of $0.09 beats by $0.13, revenue of $3.41B beats by $10M [https://seekingalpha.com/news/4487310-estee-lauder-gaap-eps-of-0_09-beats-by-0_13-revenue-of-3_41b-beats-by-10m]
* Estee Lauder FQ4 2025 Earnings Preview [https://seekingalpha.com/news/4487068-estee-lauder-fq4-2025-earnings-preview]