What's Happening?
Estée Lauder has reported a 12% decline in net sales for its fourth quarter, ending June 30, with total sales reaching $3.4 billion. This decline was slightly above analysts' expectations. The company faced significant challenges in its Asia travel retail business, leading to a 17% drop in skin care sales, which is a major segment of its business. Makeup sales also decreased by 12%, with declines noted across all geographic regions, particularly affecting MAC and North America. Hair care sales fell by 15% due to brick-and-mortar challenges in North America, despite the launch of Aveda in Amazon's U.S. Premium Beauty store. Fragrance sales were a bright spot, increasing by 2% due to brands like Le Labo and Jo Malone London. The company anticipates tariff-related headwinds to impact fiscal 2026 profitability by approximately $100 million.
Why It's Important?
The decline in Estée Lauder's sales highlights ongoing challenges in the global beauty industry, particularly in travel retail and North American markets. The anticipated $100 million impact from tariffs underscores the broader economic pressures facing multinational companies. This situation may affect stakeholders, including investors and employees, as the company has announced plans to eliminate between 5,800 and 7,000 positions as part of a restructuring program. The company's efforts to recover profitability and achieve organic sales growth are crucial for maintaining its competitive position in the beauty industry.
What's Next?
Estée Lauder is focused on executing its strategic vision of 'Beauty Reimagined' and aims to deliver organic sales growth in fiscal 2026 after three years of declines. The company is working on a cost-cutting program to improve operating profitability and achieve a solid double-digit adjusted operating margin over the next few years. Analysts have forecasted adjusted earnings between $1.90 and $2.10, slightly below their initial expectations of $2.21. The company's ability to navigate external volatility and tariff challenges will be critical in achieving these goals.
