Updated at 4:50 p.m. ET on Aug. 21
The Estée Lauder Cos. saw net sales slide in its fourth quarter and the company expects tariff-related headwinds to impact profitability by about $100 million, but it is betting on sales returning to growth next year.
The stock price closed down 3.8 percent on Wednesday to $86.57 following the release of the earnings report.
For the three months ended June 30, net sales fell 12 percent to $3.4 billion, the beauty group, whose brands include Clinique, MAC and Bobbi Brown, said Wednesday. This was a touch above analysts’ expectations.
Related Articles
Organic sales fell 17 percent in skin care, the majority of the business, primarily driven by Estée Lauder and La Mer, reflecting the challenges in the company’s Asia travel retail business.
Makeup net sales decreased 12 percent on the back of lower net sales from Estée Lauder, declines across all geographic regions from MAC and lower net sales in North America.
Sales declined 15 percent in hair care due to ongoing brick-and-mortar challenges in North America, which more than offset the benefit from the fiscal 2025 fourth-quarter launch of Aveda in Amazon’s U.S. Premium Beauty store.
One bright spot was fragrance, where net sales increased 2 percent thanks to Le Labo and Jo Malone London.
On a geographical basis, sales fell in all regions, primarily driven by declines in the company’s global travel retail business and North America.
The net loss was $546 million and diluted net loss per common share was $1.51, compared to $284 million and 79 cents, respectively, the prior year.
For the fiscal year as a whole, though, there were some green shoots. In the second half, the company gained prestige beauty share in China, Japan and the U.S. Tom Ford and Estée Lauder fueled second half share gain in China, while Le Labo, Estée Lauder and La Mer powered Japan in the U.S.
“Fiscal 2025 has been a time of stabilizing the company, setting the foundation, creating a powerful, transformative strategy and starting to execute with excellence,” said chief financial officer Akhil Shrivastava in an interview. “Of course, there is work ahead of us, and in 2026 the big message is we return to growth, but also return to profitability.”
A change in channel mix was also underway. Travel retail represented approximately 15 percent of reported sales last year, down four percentage points from fiscal 2024 and 14 percentage points below its peak reached during the pandemic, reducing its exposure to its volatility. The company is expecting it to return to growth.
At the same time, it increased the total number of Lauder brands on Amazon to 11.
“We are very pleased with our progress with Amazon,” said Stéphane de La Faverie, president and chief executive officer, during an earnings call. “Clinique was the first brand to launch, Aveda and Origins were the last ones to launch. Clinique continues to be very, very strong, which tells us that we’ve been able to not just attract new consumers, but also reengage with lapsed consumers. Over the past 12 months, Amazon not only is adding new consumers for us, but is also acting a little bit as a megaphone to our total business because Amazon is not only a commerce platform, but is also the majority of the beauty search that is happening in the market.
“You will see the mix of new retailers like Amazon or specialty multi increasing in the total going forward, and that’s the intent that we have,” he continued.
Providing only an annual forecast for fiscal 2026, sales growth is forecast between flat and 3 percent, an improvement from 2025 when annual sales dropped 8 percent.
Lauder expects tariff-related headwinds to impact fiscal 2026 profitability by about $100 million. Adjusted earnings are estimated to come in between $1.90 and $2.10. Analysts had pencilled in $2.21.
Shrivastava said the company has been working to reduce the tariff impact.
“The way we’ve managed tariffs is another great sign of what we are building as a company. It is a sign of agility. It is a sign of proactiveness,” he said. “We saw the challenge that was ahead of us, and we put a task force in place working directly with Stéphane and me on strategies to mitigate the tariff impacts. We have used the trade agreements. We have moved production. We have looked at material sourcing, finished good sourcing, leveraging our nine campuses around the world. And we are on track to reduce the share of products sold in China that are sourced from our U.S. plants to less than 10 percent by the end of the year.”
It also has the option to raise prices in its tool kit.
Away from tariffs, the company has been working to turn around its fortunes via its new Beauty Reimagined strategy and Profit Recovery and Growth Plan. In February, Lauder revealed plans to ramp up its restructuring program, part of the PRGP, and eliminate between 5,800 and 7,000 positions. As of Aug. 13, the company has approved initiatives totaling $747 million and a net reduction of more than 3,200 positions.
During the earnings call, de La Faverie also noted that it recently engaged an external adviser as it considers evolving the portfolio.
“Key organizational needs, in our view, include de-layering the organization to drive speed, digital community engagement, and reinventing important and iconic yet dusty skincare franchises to embrace new and existing customers,” said Oliver Chen, an analyst at TD Cowen. “The landscape has permanently changed with TikTok, L’Oréal, Amazon, Ulta and social media becoming key stakeholders in trend origination, change, growth and risk. We remain on the sidelines, but we like the progress management is making and monitor signs of sustained growth across categories and regions.”