Estée Lauder Companies is showing tangible signs that its multi-year reset is working. Fiscal 2026 second-quarter results delivered mid-single-digit sales growth, sharp margin expansion and a raised full-year outlook—marking a pivotal moment for CEO Stéphane de La Faverie’s “Beauty Reimagined” transformation as the group positions itself to restore organic growth and double-digit operating margins for the first time in four years.
The big picture
Net sales rose 6% to $4.2B (organic +4%), with strength across prestige skin care, fragrance and hair care offsetting near-term makeup disruption. Adjusted operating margin expanded 290 basis points to 14.4%, fueled by the Profit Recovery and Growth Plan (PRGP), which is freeing up cash to reinvest behind brands, innovation and go-to-market. Adjusted EPS jumped 43% to $0.89, while first-half free cash flow surged to $581M, giving the company added flexibility as it leans into consumer-facing spend. Management raised fiscal 2026 guidance, signaling confidence that the turnaround is gaining traction even as tariffs and macro volatility persist.
Sales trends by product category
Skin Care: Growth engine stays strong (+6%)
Skin care continues to anchor performance, driven by a balanced portfolio across luxury, prestige and masstige. La Mer posted strong gains on hero franchises like Crème de la Mer and The Treatment Lotion, supported by holiday activations. The Estée Lauder brand benefited from innovation across Advanced Night Repair, Revitalizing Supreme+ and Re-Nutriv, with China-led launches playing an outsized role. The Ordinary scaled further on expanded reach and high-velocity launches, reinforcing its position as a gateway brand for younger consumers. Operating income increased as PRGP savings offset stepped-up marketing and launch support.
Makeup: Transitional dip, improving profitability (-1%)
Makeup sales declined slightly, but the earnings profile improved meaningfully. The Estée Lauder brand saw pressure tied largely to return accruals ahead of the February 2026 launch of next-generation Double Wear. M·A·C grew on lip-category momentum and early shipments linked to its March 2026 Sephora rollout, a strategic distribution reset in the U.S. Operating results swung to income versus a loss last year, which had been weighed down by impairment charges.
Fragrance: Luxury momentum accelerates (+6%)
Fragrance emerged as one of the company’s most consistent growth drivers. Luxury brands delivered high-single-digit gains across regions, led by TOM FORD, Le Labo and KILIAN PARIS. TOM FORD benefited from a strong innovation cycle that lifted both new launches and core franchises, while Le Labo and KILIAN PARIS continued to scale on expanded reach and experiential storytelling. Profitability improved sharply versus last year’s impairment-impacted base, despite heavier investment in retail expansion and marketing.
Hair Care: Back to growth (+5%)
Hair care returned to growth, supported by distribution expansion and the continued success of The Ordinary’s Multi-Peptide Serum for Hair Density, alongside initial shipments tied to Bumble and bumble’s SalonCentric launch. Operating income improved to positive territory, reflecting both volume leverage and PRGP-driven cost efficiencies.
Why the turnaround looks more credible now
Performance is increasingly balanced geographically, with double-digit growth in Mainland China and priority emerging markets offsetting slower pockets elsewhere. Operational discipline is improving as PRGP initiatives advance toward delivering $0.8–$1.0B in annual gross benefits. At the same time, Estée Lauder is modernizing its go-to-market model through expanded presence on Amazon and TikTok Shop, broader specialty-multi distribution and upgraded DTC capabilities powered by Shopify. Innovation remains tightly aligned with growth platforms spanning longevity skin care, luxury fragrance and AI-enabled personalization.
What’s next
Tariffs and macro uncertainty remain meaningful headwinds, but Estée Lauder is mitigating more than half of the expected impact through supply-chain localization, trade programs and selective pricing actions. With margins rebuilding, cash flow strengthening and category leaders firing, the raised outlook suggests the most disruptive phase of the reset is likely behind the company.
Bottom line for beauty execs
Estée Lauder’s turnaround is no longer just a restructuring story—it is increasingly visible in margins, cash generation and category performance. The next test will be sustaining momentum into fiscal 2027 as restructuring benefits fully land and growth investments scale.
