It’s been a wild ride for the beauty world lately. Honestly, if you’ve been tracking the ticker, you know the vibe around The Estée Lauder Companies (ELC) has been, well, tense. But after the latest Estée Lauder earnings call, it feels like the giant is finally catching its breath. Or at least trying to.
For a long time, the narrative was just… grim. China was slow. Inventory was piled high. People were whispering about a family rift. Then, the Q1 2026 numbers hit the wire, and suddenly the "Beauty Reimagined" strategy doesn't just sound like corporate word salad. It actually looks like a plan.
The Estée Lauder Earnings Call: Turning the Corner?
Basically, they’re growing again. Net sales climbed 4% to $3.48 billion for the first quarter of fiscal 2026. That might not sound like a lot in a world of tech-driven moonshots, but for a legacy prestige beauty house that hasn't seen operating margin expansion in four years? It’s massive.
The standout was the fragrance category, which spiked 13%. Think Le Labo and Tom Ford. People are clearly still willing to drop $300 to smell like "Santal 33" or "Black Orchid Reserve," even if they're cutting back on other luxuries. Skin care also managed a 3% bump, mostly thanks to La Mer and the OG Estée Lauder brand.
But it wasn't all rose-scented. Hair care (looking at you, Aveda) dropped 7%, and makeup slipped 2%. It’s a bit of a mixed bag, really.
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The New CEO and the "China Question"
Stéphane de La Faverie, the new President and CEO, has his work cut out for him. He took the reins from Fabrizio Freda, who is sticking around as an advisor through fiscal 2026. The transition is a huge deal. Freda led for 16 years, and changing the guard during a massive restructuring is like swapping a plane engine while mid-flight.
On the call, the energy around China was noticeably different. They’ve been getting hammered there for years, but this time, organic sales in Asia/Pacific jumped 9%. In Mainland China specifically, they actually gained market share in every single category. That’s a big win given how much the "Daigou" (reseller) market has cooled off.
Numbers You Actually Care About
Let's talk money. Adjusted diluted earnings per share (EPS) hit $0.32. That’s more than double the $0.14 from last year. Wall Street was only expecting $0.15, so they absolutely crushed the consensus.
- Gross Margin: 73.4% (up 100 basis points).
- Operating Margin: 7.3% (up a whopping 300 basis points).
- Net Sales: $3.48 billion.
- Fiscal 2026 Outlook: Reaffirmed at $1.90 to $2.10 adjusted EPS.
Why the Market is Still Nervous
Despite the beat, the stock has been a bit of a rollercoaster. Why? Tariffs. Management mentioned that tariff-related headwinds could bite into 2026 profits by about $100 million. That's a scary number for investors.
Also, the Profit Recovery and Growth Plan (PRGP) is expensive. They’re spending somewhere between $1.2 billion and $1.6 billion on this restructuring. They’ve already burned through $1.14 billion of that. Part of that "efficiency" includes cutting up to 7,000 jobs. It’s a brutal reality of corporate turnarounds.
Honestly, the biggest takeaway from the Estée Lauder earnings call is that they’re leaning hard into "newness." They’ve got Daisy Edgar-Jones as a new global ambassador and they’re launching on Amazon’s Premium Beauty store and TikTok Shop. They’re finally going where the younger shoppers are, rather than waiting for them to walk into a dusty department store.
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Misconceptions About the Turnaround
A lot of people think Estée Lauder is "dying" because Gen Z loves cheaper brands like e.l.f. or The Ordinary. But here’s the kicker: ELC actually owns The Ordinary. And it’s doing great. It’s one of the few brands in their portfolio that’s consistently gaining share in the U.S. and Mexico.
The problem hasn't been the brands; it was the plumbing. They had too much inventory in the wrong places. They’ve spent the last year cleaning that up.
Actionable Insights for Investors and Industry Watchers
If you're looking at this from a business perspective, keep your eye on these three things over the next six months:
- The Q2 Call in February: This will show if the holiday season actually moved the needle. Analysts are expecting $0.82 EPS. If they miss that, the "turnaround" narrative will crumble.
- The Amazon/TikTok Expansion: Watch for how much of their makeup sales move to these platforms. If Clinique and M·A·C don't start popping on TikTok, they’ve got a demographic problem.
- The Margin Recovery: They want to hit double-digit margins again in the next few years. If they can keep the PRGP costs from spiraling, they might actually get there by 2027.
The luxury market isn't what it used to be. It’s more fragmented, and consumers are pickier. But Estée Lauder is showing that if you have the right "hero" products—like Advanced Night Repair or Le Labo fragrances—people will still open their wallets. They just might do it on their phones instead of at a counter.
Keep an eye on the February 5, 2026 conference call. That’s when we’ll see if this Q1 momentum was a fluke or a genuine comeback.
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Next Steps for Tracking Performance:
- Review the Q2 Fiscal 2026 Earnings Release scheduled for February 5, 2026.
- Monitor the prestige beauty share gains in the U.S. and China to verify if the "Beauty Reimagined" strategy is sustaining its growth.
- Track the implementation of the Shopify DTC partnership as a key indicator of their digital transformation success.