Estée Lauder Companies (EL) Q3 2026 earnings summary

Executive summary

• Fiscal 2026 outlook was raised following strong Q3 and year-to-date performance, with net sales up 5% to $3.71 billion for the quarter and $11.42 billion for nine months, driven by organic sales growth, margin expansion, and robust results in Mainland China and EUKEM regions.

• Fragrance delivered double-digit organic growth, outpacing the industry; skincare and makeup showed mixed results, with La Mer and Estée Lauder brands growing, while hair care stabilized.

• The Americas stabilized, with mid-single-digit retail sales growth in the U.S. and share gains across categories, while EMEA saw double-digit growth in emerging markets and sequential improvement in the U.K.

• Online organic sales grew 10% year-to-date, with double-digit growth in Q4, outperforming prestige beauty in the channel.

• The company expanded its Profit Recovery and Growth Plan (PRGP), targeting $1.5–$1.7 billion in charges and a net reduction of 9,000–10,000 positions globally.

Financial highlights

• Q3 organic sales rose 2% year-over-year; gross margin expanded to 76.4%, up 140 basis points, and adjusted operating margin reached 15% (up from 11.4%).

• Adjusted operating income grew 38% for the quarter and 41% for the nine months; adjusted EPS rose 40% to $0.91.

• Net cash from operating activities for nine months was $1.2 billion, up from $671 million last year.

• Free cash flow for nine months was $891 million, up from $276 million.

• Operating expenses as a percentage of sales rose to 69.7% for the quarter, impacted by restructuring and litigation.

Outlook and guidance

• Fiscal 2026 organic net sales growth expected at 3%, at the high end of prior guidance; adjusted operating margin forecasted at 10.7–11%, and adjusted diluted EPS expected between $2.35 and $2.45.

• Fiscal 2027 preliminary outlook: organic sales growth of 3–5%, operating margin of 12.5–13%.

• Management expects continued volatility in Western markets and Asia travel retail, with ongoing monitoring of geopolitical risks and tariff impacts.

• The PRGP is expected to yield annual gross benefits of $1.0–$1.2 billion, supporting a return to double-digit operating margins.

• The company is evaluating the impact of new U.S. tax legislation and global minimum tax rules.