Updated as of 4:30 p.m. on Thursday.
The Estée Lauder Cos.’ fortunes continue to improve, according to its latest earnings report, but this was not enough to prevent its stock price sliding more than 20 percent Thursday.
For the second quarter ended Dec. 31, net sales increased 6 percent to $4.2 billion, a touch above Wall Street estimates, while organic net sales rose 4 percent.
Adjusted diluted net earnings per common share increased to 89 cents, or 43 percent, compared with 62 cents a year earlier.
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As a result, the company nudged up the lower end of its net sales full-year forecasts to range between 1 percent and 3 percent, from the previous outlook of flat to 3 percent.
Nevertheless, its stock price was down by almost 20 percent to $96.66 as investors fretted that Lauder’s full-year adjusted earnings forecasts of between $2.03 to $2.23 were below some Wall Street estimates. It’s understood that investors were also still jittery about tariffs, with the company continuing to expect tariff-related headwinds to impact fiscal 2026 profitability by approximately $100 million, mostly in the second half.
When asked in a call with reporters if investors and analysts have overestimated the pace and magnitude of the turnaround, chief executive officer Stéphane de La Faverie said: “We’ve created a lot of momentum. We’ve revealed some confidence internally, and externally with investors. We are really focusing on the long term. This is the biggest transformation from a cultural standpoint, a leadership standpoint, that we’ve done in our company history. And we are putting the right foundation. We’ve talked about this new operating ecosystem that we are building to be able to accelerate. So I think my position is, we have great brands, we have an amazing team, we are well positioned around the world. There’s a lot more opportunity to tap into emerging consumers that are coming in many markets around the world, and I see again, great momentum and great future ahead of us.”
A breakdown of the sales numbers showed skin care net sales increased 6 percent; makeup net sales decreased 1 percent; fragrance rose 6 percent, and hair care was up 5 percent.
On a geographical basis, mainland China saw the second consecutive quarter of double-digit retail sales growth of 13 percent, while the Americas was up 1 percent.
In Europe, meanwhile, the company noted that consumer sentiment is still very subdued with challenges in France and in Germany, although there were strong performances in Spain and Italy.
The company has been working to turn around its fortunes via its new Beauty Reimagined strategy and Profit Recovery and Growth Plan.
During the call with reporters, de La Faverie said, “Today marks the one-year anniversary of the launch of Beauty Reimagined. We are in the midst of our biggest operational leadership and cultural transformation, as we enter the 80th anniversary of the Estée Lauder company this year. We’ve built a strong foundation of transforming the way we are working to become the most consumer-centric beauty company in the world, and to make sure that we restore sustainable sales growth and solid double-digit operating margin. The outlook is very strong, and the future is really bright for the stellar company.”
On the company’s performance in its home market of the U.S., he pointed to volume share gains in prestige beauty: “We have had 10 years of market share loss in the U.S., and part of the momentum that we build in the U.S. is by actually having share gain in volume in the U.S. That was the most important thing. The first stage for me was stabilizing the share and growing in volume to show that we are able to recruit new consumers. Doing that in less than a year is showing the right momentum, and then I’m excited of what is to come.”
The company expects sales growth to be flat in North America for 2026 fiscal year as a whole. Latin America, meanwhile, was strong at the beginning of 2025, according to de La Faverie, but the company has witnessed a slowdown in consumer consumption in the market more recently, which he believes is partly down to tariffs.
When asked about the importance of department stores following the Saks bankruptcy, which has impacted Lauder, de la Faverie responded that it remains an important channel in the U.S., especially for luxury brands like La Mer and Tom Ford. According to chapter 11 filings, Saks owes Lauder $16 million.
“We have had a very strong historical partnership with Saks, and we are helping them in this transition to make sure that we have the highest return on opportunity for the future and the best in class,” he said. “But I want to be very clear that Beauty Reimagined was clearly highlighting that it was not the story of just one channel here in the U.S. and around the world. We are diversifying our consumer coverage and where we are putting our brand. We have 12 brands in 10 different markets with Amazon, we are accelerating TikTok shop, where we have 12 brands in seven markets. We are accelerating our deployment of our brands in specialty multi. We are weeks away for entering Sephora U.S. with MAC, which is a very, very exciting milestone for us. I feel very good today that we are on the right path of the right diversification of our distribution network around the world and here at home in the U.S.”
Currently, department stores count for around 30 percent of retail.
“Frankly, it is way less on some brands. Obviously, Lauder, Clinique and MAC are still brands that have like a higher penetration in the department store than other brands that have a very limited penetration,” de La Faverie later added during a call with analysts.