Estee Lauder forecast annual profit above many Wall Street estimates on Wednesday, betting its CEO’s turnaround strategy would deliver sustained demand for luxury fragrances and strong performance in major growth market China. Shares of the Clinique and M.A.C owner, whose merger talks with Jean Paul Gaultier-owner Puig PUIGb.MC collapsed in May, rose about 18 per cent in early trading after it also exceeded quarterly results expectations. Resilient spending by affluent and younger customers has boosted demand for the cosmetics maker’s luxury fragrances and skincare products, such as Le Labo and Balmain Beauty. The company wants the same momentum for its makeup and hair care categories, for which net sales were respectively flat and declining. To sustain its gains, Estee is accelerating premium product launches. It has streamlined the supply chain and increased investments in innovation and marketing under CEO Stephane de La Faverie’s “Beauty Reimagined” strategy. The company is “doubling down” on expanding brands across distribution channels and into more markets, and increasing “consumer-facing investment,” de La Faverie said during Wednesday’s earnings call. UPSCALE FRAGRANCE IS A ‘STANDOUT CATEGORY’ Its luxury fragrance brands Le Labo and Tom Ford drove 10 per cent growth in net sales during the fourth quarter. Le Labo’s classic collection, which sells 50 milliliter perfumes for $250, benefited from increased distribution channels and targeted shopper expansion. “Prestige fragrance remains a standout category with strong appeal to younger consumers across genders, and Estée Lauder’s portfolio of brands with more niche appeal is well positioned to capture demand,” said Sky Canaves, analyst at eMarketer. Net sales in makeup remained flat overall, though the company said M.A.C’s expansion into U.S. Sephora stores had helped the category. M.A.C cosmetics have been a “blockbuster success in many markets from Korea to the U.S.,” de La Faverie said during a media call. “We’ll continue to build on that and making sure that the brand is not only visible in the right channels, but is also bringing breakthrough innovation.” FRAGRANCE PLAYBOOK TO BE APPLIED TO HAIR CARE Hair care net sales declined 1 per cent, primarily due to lower Aveda sales. The company said its products from skincare brand The Ordinary offset the drop. De La Faverie said the company was not satisfied with its performance in makeup and hair care, but that it would take the playbook from its fragrance and skin care categories to accelerate growth. Estee Lauder also said it recorded a $38 million benefit in the cost of sales from tariff refunds received during the fourth quarter of fiscal 2026. That partly offset the full-year gross impact of incremental tariffs of $102 million, primarily recorded in the cost of sales. The refunds helped the company to counter disruptions stemming from the Middle East conflict, which had a dilutive impact on fiscal 2026 net earnings per share. The cosmetics maker anticipated high organic sales growth in China with new and existing products after it made more consumer-facing investments. De La Faverie told the earnings call the company had reduced the number of discounts and special deals for the Chinese market. Estee Lauder expects fiscal 2027 adjusted earnings per share in the range of $3.10 to $3.35, with its midpoint above analysts’ estimates of $3.18, according to data compiled by LSEG. Nik Modi of RBC Capital Markets said in a note that Estee’s stock has further upside as its turnaround gains traction. With merger speculation behind it, he said the focus has returned to execution and he expected a steady recovery. Its fourth-quarter sales of $3.63 billion were also ahead of the estimate of $3.54 billion. On an adjusted basis, its quarterly profit of 39 cents per share also surpassed estimates of 32 cents per share. (Reporting by Anuja Bharat Mistry in Bengaluru and Arriana McLymore in New York; Editing by Shilpi Majumdar, David Holmes and Barbara Lewis)
