TLDR
- Estee Lauder’s adjusted earnings of 87 cents per share beat analyst estimates of 83 cents, while revenue rose 6% to $4.23 billion
- Stock plummeted 23% after restructuring charges cut non-adjusted profit to 44 cents per share, missing Wall Street’s 78 cent target
- Tariffs expected to reduce fiscal 2026 profit by $100 million and squeeze third-quarter operating margins by 0.5 percentage points
- China sales surged 13% while skincare and fragrance categories both grew 6%, though makeup sales declined 1%
- Company raised full-year guidance to organic sales growth of 1% to 3% and adjusted earnings of $2.05 to $2.25 per share
Estee Lauder stock crashed Thursday morning after tariff pressures and restructuring costs overshadowed what appeared to be a solid quarterly earnings report.
Shares dropped 23% to $95.56 despite the company posting adjusted earnings of 87 cents per share for the fiscal second quarter ended December 31, 2025. That beat analyst estimates of 83 cents.
Revenue climbed 6% year-over-year to $4.23 billion, matching Wall Street forecasts.
The Estée Lauder Companies Inc., EL
The brutal selloff caught some investors off guard. After all, the numbers looked decent on the surface.
But the devil was in the details. On a non-adjusted basis, Estee Lauder earned just 44 cents per share. That missed estimates of 78 cents by a wide margin.
Restructuring charges from a program announced last February wiped out roughly half the company’s quarterly profit.
Tariff Headwinds Weigh on Outlook
The tariff situation added fuel to the fire. Estee Lauder warned that tariff-related costs would slice $100 million from fiscal 2026 profits.
The company faces a 39% tariff rate on Swiss imports and 35% on Canadian imports to the U.S.
Management expects adjusted operating margins to shrink by about 0.5 percentage points in the third quarter. That’s due to both tariff pressures and increased spending on consumer-facing investments.
TD Cowen analyst Oliver Chen noted the results showed “improving momentum across global luxury markets and early signs of a China inflection.”
But the market wasn’t buying it.
Citi analyst Filippo Falorni said the negative reaction was expected. The buy-side had set a “very high” bar heading into the report.
Oppenheimer’s Rupesh Parikh agreed. He said the stock needed meaningful earnings upside to move higher, which “didn’t play out” this quarter.
Regional Performance Mixed
China emerged as the standout market with 13% organic sales growth. That’s a promising sign after years of weakness in the key region.
Europe, the UK, Middle East and Africa grew 2%. The Americas stayed flat on an organic basis.
By product category, skincare and fragrance both posted 6% sales increases. Hair care returned to growth with a 5% gain.
Makeup sales fell 1%, driven primarily by the Estee Lauder brand. MAC provided a partial offset.
Gross margin expanded 40 basis points to 76.5% from 76.1%. The company’s Profit Recovery and Growth Plan delivered benefits through operational efficiencies and better procurement.
However, those gains were largely offset by tariff impacts, business mix changes and inflation.
CEO Stéphane de La Faverie called it the “biggest operational, leadership, and cultural transformation in our history” under the Beauty Reimagined initiative.
Despite the market’s harsh reaction, Estee Lauder raised its full-year outlook. The company now expects organic sales growth of 1% to 3% for fiscal 2026.
Adjusted earnings guidance rose to $2.05 to $2.25 per share.
Raymond James analyst Olivia Tong suggested the second-half outlook reflects “some conservatism” on top of higher spending behind innovation. She noted that organic sales growth accelerated in three of four regions and three of four product categories.
The company’s operating margins returned to double digits. Adjusted EPS of 89 cents beat even Tong’s high estimate of 88 cents, despite a higher tax rate that created a five cent headwind versus expectations.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
