Estée Lauder Companies returned to growth in FY26. Reported sales rose 5% to $15.0bn and organic sales increased 3% to $14.8bn, after an 8% organic decline in FY25. The momentum accelerated in Q4 with reported sales increasing 6% to $3.63bn and organic sales rising 5%, the fourth consecutive quarter of organic growth. Adjusted operating income almost doubled to $267m, taking adjusted margin to 7.3% from 4.0%. Reported Q4 still showed a $116m net loss after $306m of restructuring charges.
For the full year, adjusted operating margin improved 320 basis points to 11.2%. Adjusted EPS rose 66% to $2.51. Operating cash flow increased 39% to $1.77bn and free cash flow almost doubled to $1.32bn but reported profit remained impacted by restructuring and litigation items.
Fragrance was the clear growth engine with organic sales rising 10% to $2.8bn, 18% of group sales, led by double-digit growth across Luxury Brands including Le Labo, Tom Ford and Kilian.
Skincare grew 4% to $7.3bn, 49% of group sales, driven La Mer, The Ordinary and Estée Lauder. Makeup was flat organically at $4.3bn, 28% of group sales, with gains from MAC and Tom Ford offset by Bobbi Brown and Too Faced. Haircare declined 1% to $565m, 4% of group sales, as Aveda’s channel reset and salon softness outweighed growth from The Ordinary’s growth.
Every region grew organically. Mainland China was up 9% to $3.1bn and Asia/Pacific excluding China up 4% to $3.7bn, The Americas up 1% to $4.5bn and EUKEM up 1% to $3.8bn. China growth came from innovation, existing products, shopping moments and broader reach. Estée Lauder reported prestige share gains in Mainland China, Japan, Korea and Western Europe, plus volume share gains in the US.
The turnaround plan delivered $1.2bn of expected gross benefits and a 10,000-position net reduction. Most run-rate benefits are still expected in FY27. But Estée Lauder’s turnaround has been more than a cost programme with the group increasing consumer-facing investment 7% in FY26, expanding Amazon and TikTok Shop coverage, opened 33 net D2C new fragrance stores and pushed online sales to 34% of reported sales.
For next year, Estée Lauder forecasts 3% to 5% organic sales growth and has raised its adjusted operating-margin outlook to 12.7% to 13.5%, from 12.5% to 13.0% in May. It expects more diversified growth, including a full-year Makeup recovery and faster North America growth.
Estée Lauder’s turnaround is evident and the next test for the group will be to broaden the top-line recovery beyond fragrance, skincare and China.
