The Estée Lauder Companies Inc.

11/02/2026 | Press release | Distributed by Public on 11/02/2026 11:07

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
RESULTS OF OPERATIONS
The Estée Lauder Companies Inc. is one of the world's leading manufacturers, marketers and sellers of quality skin care, makeup, fragrance and hair care products. We are a steward of over 20 luxury and prestige brands globally. Our products are sold in approximately 150 countries and territories. We operate as a wholesaler, with our products sold in brick-and-mortar locations and on various e-commerce platforms, including those operated by department stores, duty-free retailers, specialty-multi retailers, online pure players, upscale perfumeries and pharmacies, and top-tier salons and spas. Additionally, we operate a direct-to-consumer business across freestanding stores, our brands' websites and third-party online platforms.
Three Months Ended
September 30,
2026 2025
($ in millions)
$ % $ %
Net sales $ 3,715 100.0 % $ 3,481 100.0 %
Cost of sales 902 24.3 927 26.6
Gross profit 2,813 75.7 2,554 73.4
Operating expenses:
Selling, general and administrative 2,365 63.7 2,296 66.0
Restructuring and other charges 40 1.1 89 2.6
Total operating expenses 2,405 64.7 2,385 68.5
Operating income 408 11.0 169 4.9
Interest expense 83 2.2 86 2.5
Interest income and investment income, net 25 0.7 30 0.9
Other components of net periodic benefit cost 5 0.1 4 0.1
Earnings before income taxes 345 9.3 109 3.1
Provision for income taxes 112 3.0 62 1.8
Net earnings $ 233 6.3 % $ 47 1.4 %
Not adjusted for differences caused by rounding
The following table is a comparative summary of operating results for the three months ended September 30, 2026 and 2025, for our product categories and geographic regions and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 - Summary of Significant Accounting Policies and Note 13 - Segment Data and Related Information, for our product categories that meet the definition of reportable segments, for all periods presented. Royalty revenue from license arrangements, and products and services that do not fit within our definitions of skin care, makeup, fragrance and hair care have been included in the "other" category.
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Three Months Ended
September 30,
(In millions) 2026 2025
NET SALES
By Product Category:
Skin Care $ 1,651 $ 1,575
Makeup 1,048 1,030
Fragrance 861 721
Hair Care 128 129
Other 28 25
3,716 3,480
Returns associated with restructuring and other activities(1)
(1) 1
Net sales $ 3,715 $ 3,481
By Geographic Region(2):
The Americas $ 1,227 $ 1,174
Europe, the United Kingdom and Ireland and Emerging Markets ("EUKEM") 923 901
Asia/Pacific 952 873
Mainland China
614 532
3,716 3,480
Returns associated with restructuring and other activities(1)
(1) 1
Net sales $ 3,715 $ 3,481
OPERATING INCOME (LOSS)
By Product Category:
Skin Care $ 262 $ 187
Makeup 3 (15)
Fragrance 166 86
Hair Care 5 (12)
Other 13 9
449 255
Charges associated with restructuring and other activities(1)
(41) (86)
Operating income $ 408 $ 169
By Geographic Region(2):
The Americas $ 114 $ 87
EUKEM
44 6
Asia/Pacific 259 150
Mainland China
32 12
449 255
Charges associated with restructuring and other activities(1)
(41) (86)
Operating income $ 408 $ 169
(1) Returns and charges associated with restructuring and other activities are not allocated to our product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed Company-wide initiatives to redesign, resize and reorganize select areas of the business. Accordingly, the discussions of Net sales and Operating results by Product Categories and Geographic Regions below exclude the impacts of returns and charges associated with restructuring and other activities.
(2) The net sales and operating results from our travel retail business are included in the Asia/Pacific region.
Period-over-period changes in our net sales are generally attributable to the impacts from (i) pricing on our base portfolio, including changes in mix and those due to strategic pricing actions, (ii) volume on our base portfolio, combined with changes driven by the impact of new product innovation, (iii) acquisitions and/or divestitures, and/or (iv) foreign currency translation. The percentages disclosed for these impacts are calculated on an individual basis.
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The net sales impact from pricing consists of changes in list prices, due to strategic pricing actions, and mix shifts within and among product categories, geographic regions, brands and distribution channels. The prices at which we sell our products vary by brand, distribution channel (e.g., wholesale or direct-to-consumer) and may also vary by country. Our brands and products cover a broad array of pricing tiers. Prices of skin care and fragrance products are typically higher than makeup and hair care products.
New product innovation includes the introduction of new products, as well as changes related to existing products or where they are sold, including reformulations, regional expansion, repackaging and sets. A product is considered "new innovation" for the twelve-month period following the initial shipment date. Our innovation is launched at different price points than existing products and value derived from innovation may vary from year to year. We continually introduce new products, support new and established products through advertising, merchandising and sampling and phase out existing products that no longer meet the needs of our consumers or our objectives. The economics of developing, producing, launching, supporting and discontinuing products impact our sales and operating performance each period. The introduction of new products often has some cannibalizing effect on sales of existing products, inclusive of potential sales returns, which we take into account in our business planning. The impact of new product introductions, including timing compared to introductions in prior periods, also affects our results. For DECIEM brands, the impact of regional expansion into new markets following the initial twelve-month period continues to be excluded from the base portfolio pricing and volume calculations until the market is on a like for like basis in the base portfolio.
Non-GAAP Financial Measures
We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period helps investors and others compare operating performance between periods. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. See Reconciliations of Non-GAAP Financial Measures beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
We operate on a global basis, with the majority of our net sales generated outside the United States. Accordingly, fluctuations in foreign currency exchange rates affect our results of operations. Therefore, we present certain net sales, operating results and diluted net earnings per common share information excluding the effect of foreign currency rate fluctuations to provide a framework for assessing the performance of our underlying business outside the United States. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We calculate constant currency information by translating current-period results using prior-year monthly average foreign currency exchange rates and adjusting for the period-over-period impact of foreign currency cash flow hedging activities.
Outlook
While we have seen improvements within our business, we are mindful of areas of volatility and uncertainty globally that may impact our results. We continue to face challenges in key markets in the West, including markets in Western Europe and the United States. Within our Asia travel retail business, we continue to monitor the impacts of the change in duty-free retailers servicing the Beijing and Shanghai airports, including the related online businesses. We are also monitoring the conflict in the Middle East as it relates to our business in the domestic markets and travel retail locations in the region. Net sales from locations impacted by the conflict in the Middle East accounted for approximately 2% of consolidated net sales in fiscal 2026 and 2025. We continue to monitor and assess the impact that these areas of volatility and uncertainty may have on net sales and profitability, including impacts to our effective tax rate from changes to our geographical mix of earnings.
We are continuing to monitor and assess the potential effects of changing tariff conditions in the United States as well as in other markets in which we operate. These tariffs have led to significant volatility and uncertainty in global markets and difficulty in forecasting demand. We have implemented and are continuing to implement and consider additional mitigation measures. Our strategy remains optimizing our global supply chain network, by sourcing and manufacturing in the geography of sale where feasible. We also continue to leverage trade programs where available and monitor for additional opportunities as countries continue to update their trade programs. We anticipate tariffs to have an adverse effect on fiscal 2027 profitability and cash flows, and depending on actual rates and countries imposing tariffs such adverse impacts could be material.
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We continue to believe that the best way to increase long-term stockholder value is to provide superior products and services in the most efficient and effective manner while recognizing shifts in consumers' behaviors and shopping practices. Accordingly, our long-term strategy has numerous initiatives across product categories, brands, geographic regions, channels of distribution and functions designed to grow our sales, provide cost efficiencies, leverage our strengths, such as our history of outstanding creativity and innovation, high quality products and services, and engaging communications, to make us more productive and profitable. We continue to execute against "Beauty Reimagined," our previously announced strategic vision which focuses on accelerating best-in-class consumer coverage, creating transformative innovation, boosting consumer-facing investments, fueling sustainable growth through bold efficiencies and reimagining the way we work, including through the execution of the Profit Recovery and Growth Plan ("PRGP").
We continue to monitor the effects of the global macro environment, including the risk of recession; currency volatility; inflationary pressures; supply chain challenges; social and political issues; competitive pressures; legal and regulatory matters, including the imposition of tariffs and sanctions; geopolitical tensions; and global security issues. We are also mindful of inflationary pressures (including those caused by tariffs) on our cost base and are monitoring the impact on consumer preferences, the impact of changes being made in the organization, including those related to Beauty Reimagined and the PRGP, as well as the actual and potential impact of changes that have been made and are expected to be made as part of the PRGP on suppliers, retailers and others, and challenges relating to successfully outsourcing select services. Declines in net sales and profitability have, and may continue to, adversely impact the goodwill and other intangible assets associated with our brands, as well as long-lived assets, potentially resulting in impairments.
Our ability to recognize deferred tax assets, inclusive of utilizing net operating loss carryforwards, tax credits, and other carryforwards is dependent on the generation of sufficient taxable income in future periods. Accordingly, there can be no assurance that additional valuation allowances on our deferred tax assets will not be required should our financial performance be negatively impacted in the future. Such valuation allowance could be material.
Restructuring Program Component of the Profit Recovery and Growth Plan
For information about the Restructuring Program Component of the Profit Recovery and Growth Plan, refer to Notes to Consolidated Financial Statements, Note 3 - Charges Associated with Restructuring and Other Activities herein and Notes to Consolidated Financial Statements, Note 7 - Charges Associated with Restructuring and Other Activities in the Company's Annual Report on Form 10-K for the fiscal year ended June 30, 2026.
NET SALES
Three Months Ended
September 30,
($ in millions) 2026 2025
As Reported:
Net sales $ 3,715 $ 3,481
$ Change from prior-year period 234
% Change from prior-year period 7 %
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency adjusting for returns associated with restructuring and other activities 6 %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Reported net sales increased for the three months ended September 30, 2026, driven by an increase in net sales in the fragrance and skin care product categories, and to a lesser extent, in the makeup product category.
By geographic region, reported net sales increased across all geographic regions for the three months ended September 30, 2026, led by Mainland China and Asia/Pacific.
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Reported net sales were impacted by approximately $20 million of favorable foreign currency translation for the three months ended September 30, 2026.
Reported net sales increased 7% for the three months ended September 30, 2026, driven by the increase from volume of 7% and the favorable impact from foreign currency translation of 1%. These increases were partially offset by a decrease from pricing of 1%, reflecting changes in mix partially offset by the favorable impact from strategic price actions.
Product Categories
Reported net sales for our product categories for the three months ended September 30, 2026 and 2025 were as follows:
Three Months Ended September 30,
($ in millions) 2026 2025
$ Change
% Change
% Change in Constant Currency(1)
Skin Care $ 1,651 $ 1,575 $ 76 5 % 4 %
Makeup 1,048 1,030 18 2 1
Fragrance 861 721 140 19 20
Hair Care 128 129 (1) (1) -
Other 28 25 3 12 12
3,716 3,480 236 7 6
Returns associated with restructuring and other activities (1) 1 (2) (100+) (100+)
Net sales $ 3,715 $ 3,481 $ 234 7 % 6 %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Skin Care
Reported skin care net sales increased $76 million, or 5%, for the three months ended September 30, 2026, primarily driven by higher net sales from La Mer and The Ordinary, combined, of approximately $97 million.
Net sales from La Mer increased, reflecting the benefit from new product innovation, including the launch of The Concentrate reformulation, as well as growth from The Treatment Lotion franchise. The increase in net sales from The Ordinary reflected growth from targeted expanded consumer reach as well as the benefit from key campaigns to drive sales growth.
Skin care net sales were impacted by approximately $18 million of favorable foreign currency translation for the three months ended September 30, 2026.
Reported skin care net sales increased 5% for the three months ended September 30, 2026, driven by an increase from volume of 3%, an increase from pricing of 1%, reflecting the favorable impact from strategic pricing actions partially offset by changes in mix, and the favorable impact from foreign currency translation of 1%.
Makeup
Reported makeup net sales increased $18 million, or 2%, for the three months ended September 30, 2026, reflecting higher net sales from M·A·C and TOM FORD, combined, of approximately $59 million. Net sales from M·A·C increased, reflecting higher net sales in the lip subcategory, including the benefit from the launch of Lustreglass Sheer-Shine Lipstick and Lustreglass Stainglass Lip Tint, as well as the benefit from targeted expanded consumer reach. The increase in net sales from TOM FORD was primarily driven by higher net sales in the lip and face subcategories, reflecting the benefit from new product innovation.
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Partially offsetting the makeup net sales increase were lower net sales, primarily from Estée Lauder, Too Faced and Bobbi Brown Cosmetics, combined, of approximately $20 million. Estée Lauder net sales decreased, reflecting lower net sales in the face subcategory, including the impact from the timing of new product innovation, partially offset by incremental sales from the next-generation of Double Wear Stay-in-Place Longwear Matte Foundation that launched in the second half of fiscal 2026. The decrease in net sales from Too Faced reflected the impact of closures of certain specialty-multi retailer-operated shop-in-shop doors. Bobbi Brown Cosmetics net sales decreased, driven by lower net sales within the department store channel, which included the impact from the strategic exit from certain retailers.
Makeup net sales were impacted by approximately $4 million of favorable foreign currency translation for the three months ended September 30, 2026.
Reported makeup net sales increased 2% for the three months ended September 30, 2026, driven by an increase from volume of 5%, partially offset by a decrease from pricing of 3%, reflecting changes in mix partially offset by the favorable impact from strategic pricing actions.
Fragrance
Reported fragrance net sales increased $140 million, or 19%, for the three months ended September 30, 2026, primarily driven by higher net sales from Le Labo, TOM FORD, Jo Malone London and Estée Lauder, combined, of approximately $117 million. The increase in net sales from Le Labo was led by the Classic Collection and City Exclusives Collection, which reflected the benefit from new product innovation, targeted expanded consumer reach and the success of hero products. Net sales from TOM FORD increased, within both the Private Blend and Signature franchises, reflecting the benefit from new product innovation which created halo benefits on existing products. Net sales from Jo Malone London increased, reflecting the benefit from new product innovation and growth within hero franchises, supported by targeted expanded consumer reach. The increase in net sales from Estée Lauder was driven by higher net sales from the launch of Glimmer Eau de Parfum Spray.
Fragrance net sales were impacted by approximately $1 million of unfavorable foreign currency translation for the three months ended September 30, 2026.
Reported fragrance net sales increased 19% for the three months ended September 30, 2026, driven by an increase from volume of 20%, partially offset by a decrease from pricing of 1%, reflecting changes in mix partially offset by the favorable impact from strategic pricing actions.
Hair Care
Reported hair care net sales decreased $1 million, or 1%, for the three months ended September 30, 2026, including the unfavorable impact of foreign currency translation of 1%. Including the unfavorable impact of foreign currency translation, the decrease in hair care net sales primarily reflected lower net sales from Aveda and higher net sales from The Ordinary.
The decrease in net sales from Aveda reflected lower shipments primarily due to brand-specific supply chain logistical challenges.
The increase in net sales from The Ordinary benefitted from the Multi-Peptide Serum for Hair Density, as well as targeted expanded consumer reach.
Hair care net sales were impacted by approximately $1 million of unfavorable foreign currency translation for the three months ended September 30, 2026.
Reported hair care net sales decreased 1% for the three months ended September 30, 2026, driven by a decrease from pricing of 7%, reflecting changes in mix partially offset by the favorable impact from strategic pricing actions, and the unfavorable impact of foreign currency translation of 1%. These decreases were largely offset by an increase from volume of 7%.
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Geographic Regions
Reported net sales by geographic region for the three months ended September 30, 2026 and 2025 were as follows:
Three Months Ended September 30,
($ in millions) 2026 2025
$ Change
% Change
% Change in Constant Currency(2)
The Americas $ 1,227 $ 1,174 $ 53 5 % 4 %
EUKEM
923 901 22 2 4
Asia/Pacific(1)
952 873 79 9 10
Mainland China
614 532 82 15 9
3,716 3,480 236 7 6
Returns associated with restructuring and other activities (1) 1 (2) (100+) (100+)
Net sales $ 3,715 $ 3,481 $ 234 7 % 6 %
(1)The net sales from our travel retail business are included in the Asia/Pacific region.
(2)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Reported net sales increased for the three months ended September 30, 2026, primarily driven by higher net sales in our travel retail business and Mainland China, combined, of approximately $169 million.
The increase in net sales in our travel retail business was led by Asia travel retail, primarily driven by (i) net sales growth from the Beijing and Shanghai airports, reflecting an increase in replenishment orders amid continued stabilization following changes in duty-free retailers, including the related online businesses, that began in the fiscal 2026 second quarter and (ii) Hainan travel retail, driven by the improvement in online retail sales.
The increase in net sales in Mainland China for the three months ended September 30, 2026 reflected growth from existing products as well as new product innovation, benefiting from success during key shopping moments and key campaigns to drive sales growth.
Reported net sales in The Americas increased 5% for the three months ended September 30, 2026, driven by an increase from volume of 7%, partially offset by a decrease from pricing of 3%, reflecting changes in mix partially offset by the favorable impact from strategic pricing actions.
Reported net sales in EUKEM increased 2% for the three months ended September 30, 2026, driven by an increase from volume of 6%. This increase was partially offset by a decrease from pricing of 2%, reflecting changes in mix partially offset by the favorable impact from strategic pricing actions, and the unfavorable impact from foreign currency translation of 1%.
Reported net sales in Asia/Pacific increased 9% for the three months ended September 30, 2026, driven by an increase from volume of 9% and an increase from pricing of 1%, reflecting the favorable impact from strategic pricing actions partially offset by changes in mix. Partially offsetting these increases was the unfavorable impact from foreign currency translation of 1%.
Reported net sales in Mainland China increased 15% for the three months ended September 30, 2026, driven by the favorable impact from foreign currency translation of 7%, an increase from volume of 6% and an increase from pricing of 2%, reflecting changes in mix and the favorable impact from strategic pricing actions.
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GROSS MARGIN
Gross margin increased to 75.7% for the three months ended September 30, 2026, as compared with 73.4% in the prior-year period.
Favorable (Unfavorable) Basis Points
Three Months Ended
September 30, 2026
As Reported:
Mix of business 155
Obsolescence charges (5)
Manufacturing costs and other 55
Foreign exchange transactions 35
Charges associated with restructuring and other activities
(10)
As Reported Gross Margin Basis Point Variance
230
Non-GAAP Financial Measure Adjustments
Charges associated with restructuring and other activities
10
Non-GAAP Gross Margin Basis Point Variance
240
The increase in gross margin for the three months ended September 30, 2026 reflected favorability across our mix of business, including the benefit from the increase in net sales, net strategic pricing, product mix, as well as net benefits enabled through the PRGP. Within manufacturing costs and other, net benefits enabled through the PRGP, related to the favorable impact of cost efficiencies within our global supply chain network, and the favorable impact from shifts within our manufacturing network, were partially offset by the impact from inflation on our costs.
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OPERATING EXPENSES
Operating expenses as a percentage of net sales were 64.7% for the three months ended September 30, 2026, as compared with 68.5% in the prior-year period.
Favorable (Unfavorable) Basis Points
Three Months Ended
September 30, 2026
As Reported:
Selling 120
Advertising (140)
Promotional 40
Store operating costs (10)
Consumer-facing operating expenses(1)
10
General and administrative 30
Shipping -
Marketing 90
Product development 20
Stock-based compensation 60
Foreign exchange transactions 20
Non-consumer-facing operating expenses 220
Charges associated with restructuring and other activities 150
As Reported Operating Expense Margin Basis Point Variance 380
Non-GAAP Financial Measure Adjustments:
Impact of restructuring and other activities 140
Non-GAAP Operating Expense Margin Basis Point Variance 240
(1)Consumer-facing operating expenses in this table and within the operating expense margin discussion below do not include the impact of co-operative advertising expenses that are recorded as a reduction of revenue, however, our references to consumer-facing investments throughout the remainder of Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations include the consumer-facing operating expenses noted above as well as the impact of co-operative advertising expenses that are recorded as a reduction of revenue.
The favorability in our operating expense margin for the three months ended September 30, 2026 primarily reflected the impact of the increase in net sales which largely offset the impact from the overall increase in investments in consumer-facing areas of the business to drive sales, primarily in advertising expenses, including through new product innovation, key campaigns, and targeted expanded consumer reach. The favorability in the impact from non-consumer-facing expenses was also largely driven by the impact of the increase in net sales, and also reflected overall lower expenses collectively, driven by a reduction in employee-related costs enabled through the PRGP.
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OPERATING RESULTS
Three Months Ended
September 30,
($ in millions) 2026 2025
As Reported:
Operating income $ 408 $ 169
$ Change from prior-year period 239
% Change from prior-year period 100+%
Operating margin 11.0 % 4.9 %
Non-GAAP Financial Measure(1):
% Change in operating income from the prior-year period adjusting for the impact of charges associated with restructuring and other activities 76 %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 47 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
The increase in reported operating margin for the three months ended September 30, 2026 was primarily driven by the increase in net sales and the increase in gross margin, as discussed above.
Product Categories
Reported operating income (loss) for our product categories for the three months ended September 30, 2026 and 2025 were as follows:
Three Months Ended September 30,
($ in millions) 2026 2025 $ Change % Change
Skin Care $ 262 $ 187 $ 75 40 %
Makeup 3 (15) 18 100+
Fragrance 166 86 80 93
Hair Care 5 (12) 17 100+
Other 13 9 4 44
449 255 194 76
Charges associated with restructuring and other activities
(41) (86) 45 52
Operating income $ 408 $ 169 $ 239 100+%
Skin Care
Reported skin care operating income increased $75 million, or 40%, for the three months ended September 30, 2026, primarily driven by an increase in net sales, as well as lower non-consumer-facing expenses, including a reduction in employee-related costs, partially offset by an increase in consumer-facing investments to drive sales growth, primarily in advertising expenses, including to support new product innovation, key campaigns and targeted expanded consumer reach.
Makeup
Reported makeup operating results increased $18 million, or over 100%, for the three months ended September 30, 2026, primarily driven by an increase in net sales, as well as lower non-consumer-facing expenses, including a reduction in employee-related costs, partially offset by an increase in consumer-facing investments to drive sales growth, including to support new product innovation, key campaigns and targeted expanded consumer reach. The overall increase in consumer-facing expenses was partially offset by the strategic reduction in selling expenses.
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Fragrance
Reported fragrance operating income increased $80 million, or 93%, for the three months ended September 30, 2026, primarily driven by higher net sales, partially offset by an increase in consumer-facing investments to drive sales growth, primarily in advertising expenses, including to support new product innovation, key campaigns and targeted expanded consumer reach.
Hair Care
Reported hair care operating results increased $17 million, or over 100%, for the three months ended September 30, 2026, primarily driven by lower non-consumer-facing expenses, including a reduction in employee-related costs, and lower cost of sales.
Geographic Regions
Reported operating income for our geographic regions for the three months ended September 30, 2026 and 2025 were as follows:
Three Months Ended September 30,
($ in millions)
2026 2025
$ Change
% Change
The Americas $ 114 $ 87 $ 27 31 %
EUKEM
44 6 38 100+
Asia/Pacific(1)
259 150 109 73
Mainland China
32 12 20 100+
449 255 194 76
Charges associated with restructuring and other activities
(41) (86) 45 52
Operating income $ 408 $ 169 $ 239 100+%
(1)The operating results from our travel retail business are included in the Asia/Pacific region.
Reported operating income in The Americas increased $27 million, or 31%, for the three months ended September 30, 2026, primarily driven by higher net sales and lower cost of sales, partially offset by an increase in consumer-facing investments to drive sales growth, primarily in advertising expenses, including to support new product innovation, key campaigns and targeted expanded consumer reach.
Reported operating income in EUKEM increased $38 million, or over 100%, for the three months ended September 30, 2026, primarily driven by higher net sales, as well as a decrease in non-consumer-facing expenses, including a reduction in employee-related costs, partially offset by an increase in consumer-facing investments to drive sales growth, including to support new product innovation, key campaigns and targeted expanded consumer reach. The increase in overall consumer-facing investments was partially offset by the strategic reduction in selling expenses.
Reported operating income in Asia/Pacific increased $109 million, or 73%, for the three months ended September 30, 2026, primarily driven by higher net sales and, to a lesser extent, lower cost of sales.
Reported operating income in Mainland China increased $20 million, or over 100%, for the three months ended September 30, 2026, primarily driven by higher net sales, partially offset by an increase in consumer-facing investments to drive sales growth, including to support new product innovation, key shopping moments and key campaigns.
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INTEREST AND INVESTMENT INCOME
Three Months Ended
September 30,
(In millions) 2026 2025
Interest expense $ 83 $ 86
Interest income and investment income, net $ 25 $ 30
Interest expense decreased for the three months ended September 30, 2026, primarily reflecting lower average interest rates compared to the prior-year period. Interest income and investment income, net decreased, primarily driven by the unfavorable year-over-year impact related to our cost method minority investments, reflecting an impairment in the current-year period as compared to investment gains in the prior-year period.
PROVISION FOR INCOME TAXES
The provision or benefit for income taxes represents U.S. federal, foreign, state and local income taxes. The effective rate differs from the federal statutory rate primarily due to the effect of state and local income taxes, the tax impact of stock-based compensation, the taxation of foreign income and income tax reserve adjustments, which represent changes in our net liability for unrecognized tax benefits including tax settlements and lapses of the applicable statutes of limitations, as well as changes to valuation allowances based on our assessment of the realizability of deferred tax assets. Our effective tax rate will change from quarter-to-quarter based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes, tax reserve adjustments, the tax impact of stock-based compensation, changes to valuation allowances, the interaction of various global tax strategies and the impact from certain acquisitions. In addition, changes in judgment from the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of change.
Three Months Ended
September 30,
2026 2025
Effective rate for income taxes 32.50 % 56.90 %
Basis-point change from the prior-year period (2,440)
The effective rate for income taxes was 32.5% and 56.9% for the three months ended September 30, 2026 and 2025, respectively, a 2,440 basis point decrease period over period. The extent of the period-over-period change was broadly impacted by the lower earnings before income taxes for the three months ended September 30, 2025. The decrease in the effective tax rate was primarily attributable to a more favorable estimated full year geographical mix of earnings partially offset by the estimated increase in unrecognized tax benefits primarily related to transfer pricing matters impacting multiple tax jurisdictions.
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NET EARNINGS
Three Months Ended
September 30,
($ in millions, except per share data) 2026 2025
As Reported:
Net earnings $ 233 $ 47
$ Change from prior-year period 186
% Change from prior-year period 100+%
Diluted net earnings per common share $ .64 $ .13
% Change from prior-year period 100+%
Non-GAAP Financial Measure(1):
% Change in diluted net earnings (loss) per common share from the prior-year period adjusting for the impact of charges associated with restructuring and other activities 100+%
(1)See "Reconciliations of Non-GAAP Financial Measures" below for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
THE ESTÉE LAUDER COMPANIES INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period, or do not reflect the Company's underlying ongoing business, provides transparency for such items and helps investors and others compare and analyze our operating performance from period to period. In the future, we expect to incur charges or adjustments similar in nature to those presented below; however, the impact to the Company's results in a given period may be highly variable and difficult to predict. Our non-GAAP financial measures may not be comparable to similarly titled measures used by, or determined in a manner consistent with, other companies. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. The following tables present Net sales, Operating income and Diluted net earnings per common share adjusted to exclude the impact of charges associated with restructuring and other activities; and the effects of foreign currency translation.
The following table provides reconciliations between these non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
($ in millions, except per share data) Three Months Ended
September 30, 		Variance
% Change
% Change in
constant currency
2026 2025
Net sales, as reported $ 3,715 $ 3,481 $ 234 7 % 6 %
Returns associated with restructuring and other activities 1 (1) 2
Net sales, as adjusted $ 3,716 $ 3,480 $ 236 7 % 6 %
Operating income, as reported $ 408 $ 169 $ 239 100+% 100+%
Charges associated with restructuring and other activities 41 86 (45)
Operating income, as adjusted $ 449 $ 255 $ 194 76 % 80 %
Diluted net earnings per common share, as reported $ .64 $ .13 $ .51 100+% 100+%
Charges associated with restructuring and other activities .08 .19 (.11)
Diluted net earnings per common share, as adjusted $ .72 $ .32 $ .40 100+% 100+%
As diluted net earnings per common share, as adjusted, is used as a measure of the Company's performance, we consider the impact of current and deferred income taxes when calculating the per-share impact of each of the reconciling items.
THE ESTÉE LAUDER COMPANIES INC.
The following table reconciles the change in net sales by product category and geographic region, as reported, to the change in net sales excluding the effects of foreign currency translation:
As Reported Impact of foreign
currency translation 		Variance,
in constant currency 		% Change,
as reported 		% Change,
in constant currency
Three Months Ended
September 30,
($ in millions) 2026 2025 Variance
By Product Category:
Skin Care $ 1,651 $ 1,575 $ 76 $ (18) $ 58 5 % 4 %
Makeup 1,048 1,030 18 (4) 14 2 1
Fragrance 861 721 140 1 141 19 20
Hair Care 128 129 (1) 1 - (1) -
Other 28 25 3 - 3 12 12
3,716 3,480 236 (20) 216 7 6
Returns associated with restructuring and other activities (1) 1 (2) - (2)
Total $ 3,715 $ 3,481 $ 234 $ (20) $ 214 7 % 6 %
By Geographic Region:
The Americas $ 1,227 $ 1,174 $ 53 $ (3) $ 50 5 % 4 %
EUKEM
923 901 22 10 32 2 4
Asia/Pacific 952 873 79 9 88 9 10
Mainland China
614 532 82 (36) 46 15 9
3,716 3,480 236 (20) 216 7 6
Returns associated with restructuring and other activities (1) 1 (2) - (2)
Total $ 3,715 $ 3,481 $ 234 $ (20) $ 214 7 % 6 %
THE ESTÉE LAUDER COMPANIES INC.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our principal sources of funds historically have been cash flows from operations, borrowings pursuant to our commercial paper program, borrowings from the issuance of long-term debt and committed and uncommitted credit lines provided by banks and other lenders in the United States and abroad. At September 30, 2026, we had cash and cash equivalents of $3,198 million compared with $3,498 million at June 30, 2026. Our cash and cash equivalents are maintained at a number of financial institutions. To mitigate the risk of uninsured balances, we select financial institutions based on their credit ratings and financial strength, and we perform ongoing evaluations of these institutions to limit our concentration risk exposure.
Based on past performance and current expectations, we believe that cash on hand, cash generated from operations, available credit lines and access to credit markets will be adequate to support seasonal working capital needs, currently planned business operations, information technology enhancements, capital expenditures, acquisitions, dividends, stock repurchases, restructuring initiatives, commitments and other contractual obligations on both a near-term and long-term basis.
The Tax Cuts and Jobs Act resulted in the Transition Tax on unrepatriated earnings of our foreign subsidiaries and changed the tax law in ways that present opportunities to repatriate cash without additional U.S. federal income tax. We continue to analyze the permanent reinvestment assertion on our remaining applicable foreign earnings. We do not believe that continuing to reinvest these remaining applicable foreign earnings impairs our ability to meet our domestic debt or working capital obligations. If these reinvested earnings were repatriated into the United States as dividends, we would be subject to state income taxes and applicable foreign taxes in certain jurisdictions.
Tariffs negatively impacted our operating results in the fiscal 2027 first quarter and we are continuing to monitor and assess the potential effects of changing tariff conditions globally.
On October 5, 2026, we completed the acquisition of the remaining equity interest in Mountain Valley Springs India Private Limited, the owner of the Forest Essentials brand, an India-based beauty brand grounded in the science of modern Luxurious Ayurveda, and paid $160 million for the purchase of the remaining 51% equity interest and $37 million related to a one-time inducement payment which is excluded from the consideration transferred, using cash on hand. For further information related to the acquisition, refer to Note 14 - Subsequent Events.
Credit Ratings
Changes in our credit ratings will likely result in changes in our borrowing costs. Our credit ratings also impact the cost of our revolving credit facilities. Downgrades in our credit ratings may reduce our ability to issue commercial paper and/or long-term debt and would likely increase the relative costs of borrowing. A credit rating is not a recommendation to buy, sell, or hold securities, is subject to revision or withdrawal at any time by the assigning rating organization, and should be evaluated independently of any other rating. As of October 26, 2026, our long-term debt is rated A- with a stable outlook by Standard & Poor's and A3 with a negative outlook by Moody's.
THE ESTÉE LAUDER COMPANIES INC.
Debt
At September 30, 2026, our outstanding borrowings were as follows:
($ in millions) Long-term
Debt 		Current
Debt 		Total Debt
5.150% Senior Notes, due May 15, 2053 ("2053 Senior Notes") (1), (15)
$ 591 $ - $ 591
3.125% Senior Notes, due December 1, 2049 ("2049 Senior Notes") (2), (15)
637 - 637
4.150% Senior Notes, due March 15, 2047 ("2047 Senior Notes") (3), (15)
495 - 495
4.375% Senior Notes, due June 15, 2045 ("2045 Senior Notes") (4), (15)
454 - 454
3.700% Senior Notes, due August 15, 2042 ("2042 Senior Notes") (5), (15)
248 - 248
6.000% Senior Notes, due May 15, 2037 ("2037 Senior Notes") (6), (15)
296 - 296
5.000% Senior Notes, due February 14, 2034 ("2034 Senior Notes) (7), (15)
593 - 593
5.75% Senior Notes, due October 15, 2033 ("October 2033 Senior Notes") (8), (15)
198 - 198
4.650% Senior Notes, due May 15, 2033 ("May 2033 Senior Notes") (9), (15)
696 - 696
1.950% Senior Notes, due March 15, 2031 ("2031 Senior Notes") (10), (15)
556 - 556
2.600% Senior Notes, due April 15, 2030 ("2030 Senior Notes") (11), (15)
615 - 615
2.375% Senior Notes, due December 1, 2029 ("2029 Senior Notes") (12), (15)
646 - 646
4.375% Senior Notes, due May 15, 2028 ("2028 Senior Notes") (13), (15)
698 - 698
3.150% Senior Notes, due March 15, 2027 ("2027 Senior Notes") (14), (15)
- 500 500
Other long-term borrowings 25 3 28
$ 6,748 $ 503 $ 7,251
(1)Consists of $600 million principal, unamortized debt discount of $3 million and debt issuance costs of $6 million.
(2)Consists of $650 million principal, unamortized debt discount of $7 million and debt issuance costs of $6 million.
(3)Consists of $500 million principal, unamortized debt discount of $1 million and debt issuance costs of $4 million.
(4)Consists of $450 million principal, net unamortized debt premium of $7 million and debt issuance costs of $3 million.
(5)Consists of $250 million principal, unamortized debt discount of $1 million and debt issuance costs of $1 million.
(6)Consists of $300 million principal, unamortized debt discount of $2 million and debt issuance costs of $2 million.
(7)Consists of $650 million principal, unamortized debt discount of $1 million, debt issuance costs of $4 million and a $52 million loss to reflect the fair value of interest rate swaps.
(8)Consists of $200 million principal, unamortized debt discount of $1 million and debt issuance costs of $1 million.
(9)Consists of $700 million principal, unamortized debt discount of $1 million and debt issuance costs of $3 million.
(10)Consists of $600 million principal, unamortized debt discount of $2 million, debt issuance costs of $2 million and a $40 million loss to reflect the fair value of interest rate swaps.
(11)Consists of $700 million principal, debt issuance costs of $2 million and a $83 million loss to reflect the fair value of interest rate swaps.
(12)Consists of $650 million principal, unamortized debt discount of $2 million and debt issuance costs of $2 million.
(13)Consists of $700 million principal and debt issuance costs of $2 million.
(14)Consists of $500 million principal.
(15)The Senior Notes contain certain customary covenants, including limitations on indebtedness secured by liens.
Total debt as a percent of total capitalization was 64% and 66% at September 30, 2026 and June 30, 2026, respectively.
Cash Flows
Three Months Ended
September 30,
(In millions) 2026 2025
Net cash flows used for operating activities
$ (166) $ (340)
Net cash flows used for investing activities $ (61) $ (116)
Net cash flows used for financing activities
$ (80) $ (239)
THE ESTÉE LAUDER COMPANIES INC.
The change in net cash flows used for operating activities was primarily driven by higher net earnings, excluding non-cash items, and to a lesser extent, the favorable change in operating assets and liabilities variances.
The change in net cash flows used for investing activities was primarily driven by a favorable year-over-year impact from the settlement of net investment hedges and lower capital expenditures compared to the prior-year period.
The change in net cash flows used for financing activities primarily reflected the payment of deferred consideration in the fiscal 2026 first quarter associated with the fiscal 2023 acquisition of TOM FORD.
Dividends
For a summary of quarterly cash dividends declared per share on our Class A and Class B Common Stock during the three months ended September 30, 2026, see Notes to Consolidated Financial Statements, Note 11 - Equity.
Pension and Post-retirement Plan Funding
There have been no significant changes to our pension and post-retirement funding as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2026.
Commitments, Contractual Obligations and Contingencies
There have been no significant changes to our commitments and contractual obligations as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2026. For a discussion of contingencies, see Notes to Consolidated Financial Statements, Note 8 - Commitments and Contingencies.
Derivative Financial Instruments and Hedging Activities
For a discussion of our derivative financial instruments and hedging activities, see Notes to Consolidated Financial Statements, Note 4 - Derivative Financial Instruments.
Foreign Exchange Risk Management
For a discussion of foreign exchange risk management, see Notes to Consolidated Financial Statements, Note 4 - Derivative Financial Instruments (Fair Value Hedges, Cash Flow Hedges and Net Investment Hedges).
Credit Risk
For a discussion of credit risk, see Notes to Consolidated Financial Statements, Note 4 - Derivative Financial Instruments (Credit Risk).
Market Risk
We address certain financial exposures through a controlled program of market risk management that includes the use of foreign currency forward contracts to reduce the effects of fluctuating foreign currency exchange rates and to mitigate the change in fair value of specific assets and liabilities on the balance sheet, anticipated transactions and the net investment in certain foreign operations. To perform a sensitivity analysis of our foreign currency forward contracts, we assess the change in fair values from the impact of hypothetical changes in foreign currency exchange rates. A hypothetical 10% weakening of the U.S. dollar against the foreign exchange rates for the currencies in our portfolio would have resulted in a net decrease in the fair value of our portfolio of approximately $159 million and $164 million as of September 30, 2026 and June 30, 2026, respectively. This potential change does not consider our underlying foreign currency exposures.
We also enter into cross-currency swap contracts to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt and to hedge a portion of the net investment in certain foreign operations. A hypothetical 10% weakening of the U.S. dollar against the foreign exchange rates for the currencies in our cross-currency swap contracts would have resulted in a net decrease in the fair value of our cross-currency swap contracts of approximately $76 million as of September 30, 2026 and June 30, 2026.
In addition, we enter into interest rate derivatives to manage the effects of interest rate movements on our funded indebtedness, including future debt issuances. Based on a hypothetical 100 basis point increase in interest rates, the estimated fair value of our interest rate derivatives would decrease by approximately $67 million and $72 million as of September 30, 2026 and June 30, 2026, respectively.
THE ESTÉE LAUDER COMPANIES INC.
Our sensitivity analysis represents an estimate of reasonably possible net losses that would be recognized on our portfolio of derivative financial instruments assuming hypothetical movements in future market rates and is not necessarily indicative of actual results, which may or may not occur. It does not represent the maximum possible loss or any expected loss that may occur, since actual future gains and losses will differ from those estimated, based upon actual fluctuations in market rates, operating exposures, and the timing thereof, and changes in our portfolio of derivative financial instruments during the year. We believe, however, that any such loss incurred would be offset by the effects of market rate movements on the respective underlying transactions for which the derivative financial instrument was intended.
OFF-BALANCE SHEET ARRANGEMENTS
We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations.
CRITICAL ACCOUNTING POLICIES
As disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2026, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those financial statements. These estimates and assumptions can be subjective and complex, and consequently, actual results could differ from those estimates. Refer to the Critical Accounting Policies and Estimates section within Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2026. Since June 30, 2026, there have been no significant changes to the assumptions and estimates related to our critical accounting policies.
RECENTLY ISSUED ACCOUNTING STANDARDS
For a discussion regarding the impact of accounting standards that were recently issued but not yet effective, on our consolidated financial statements, see Notes to Consolidated Financial Statements, Note 1 - Summary of Significant Accounting Policies.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
We and our representatives from time to time make written or oral forward-looking statements, including in this and other filings with the Securities and Exchange Commission, in our press releases and in our reports to stockholders, which may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may address our expectations regarding sales, earnings or other future financial performance and liquidity, other performance measures, product introductions, entry into new geographic regions, information technology initiatives, new methods of sale, our long-term strategy, restructuring and other charges and resulting cost savings, and future operations or operating results. These statements may contain words like "expect," "will," "will likely result," "would," "believe," "estimate," "planned," "plans," "intends," "may," "should," "could," "anticipate," "estimate," "project," "projected," "forecast," and "forecasted" or similar expressions. Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, actual results may differ materially from our expectations. Factors that could cause actual results to differ from expectations include, without limitation:
(1)increased competitive activity from companies in the skin care, makeup, fragrance and hair care businesses;
(2)our ability to develop, produce and market new products on which future operating results may depend and to successfully address challenges in our business;
(3)consolidations, restructurings, bankruptcies and reorganizations in the retail industry causing a decrease in the number of stores that sell our products, an increase in the ownership concentration within the retail industry, ownership of retailers by our competitors or ownership of competitors by our customers that are retailers and our inability to collect receivables;
(4)destocking and tighter working capital management by retailers;
THE ESTÉE LAUDER COMPANIES INC.
(5)the success, or changes in timing or scope, of new product innovation, including launches, and the success, or changes in timing or scope, of advertising, sampling and merchandising programs;
(6)shifts in the preferences of consumers as to how they perceive value and where and how they shop;
(7)social, political and economic risks to our foreign or domestic manufacturing, distribution and retail operations, including changes in foreign investment and trade policies and regulations of the host countries and of the United States;
(8)changes in the laws, regulations and policies (including the interpretations and enforcement thereof) that affect, or will affect, our business, including those relating to our products or distribution networks, changes in accounting standards, tax laws and regulations, environmental or climate change laws, regulations or accords, trade rules and customs regulations, and the outcome and expense of legal or regulatory proceedings, and any action we may take as a result;
(9)foreign currency fluctuations affecting our results of operations and the value of our foreign assets, the relative prices at which we and our foreign competitors sell products in the same markets and our operating and manufacturing costs outside of the United States;
(10)changes in global or local conditions, including those due to volatility in the global credit and equity markets, government economic policies, natural or man-made disasters, real or perceived epidemics, supply chain challenges, inflation, or increased energy costs, that could affect consumer purchasing, the willingness or ability of consumers to travel and/or purchase our products while traveling, the financial strength of our customers, suppliers or other contract counterparties, our operations, the cost and availability of capital which we may need for new equipment, facilities or acquisitions, the returns that we are able to generate on our pension assets and the resulting impact on funding obligations, the cost and availability of raw materials and the assumptions underlying our critical accounting estimates;
(11)shipment delays, commodity pricing, depletion of inventory and increased production costs resulting from disruptions of operations at any of the facilities that manufacture our products or at our distribution or inventory centers, including disruptions that may be caused by the implementation of information technology initiatives, or by restructurings;
(12)real estate rates and availability, which may affect our ability to increase or maintain the number of retail locations at which we sell our products and the costs associated with our other facilities;
(13)changes in product mix to products which are less profitable;
(14)our ability to acquire, develop or implement new information technology, including operational technology and websites, on a timely basis and within our cost estimates; to maintain continuous operations of our new and existing information technology; and to secure the data and other information that may be stored in such technologies or other systems or media;
(15)our ability to capitalize on opportunities for improved efficiency, such as publicly-announced strategies and restructuring and cost-savings initiatives, and to integrate acquired businesses and realize value therefrom;
(16)consequences attributable to local or international conflicts around the world, as well as from any terrorist action, retaliation and the threat of further action or retaliation;
(17)the timing and impact of acquisitions, investments and divestitures; and
(18)additional factors as described in our filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended June 30, 2026.
We assume no responsibility to update forward-looking statements made herein or otherwise.
The Estée Lauder Companies Inc. published this content on November 02, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on November 02, 2026 at 17:07 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]