Estée Lauder Companies Returns to Growth as Fragrance and Skin Care Support Recovery. The Estée Lauder Companies reported a return to sales growth in fiscal 2026, with organic net sales increasing by 3% for the full year and 5% in the fourth quarter. Profitability also improved, supported by operational efficiencies, higher gross margins and increased investment in consumer-facing activities. For fiscal 2027, the company expects organic net sales growth of between 3% and 5%.
Sales growth resumes across all regions
The Estée Lauder Companies has reported a stronger performance for the financial year ended 30 June 2026. Reported net sales rose by 5% to approximately $15.0 billion, while organic net sales increased by 3%. In the fourth quarter, reported sales growth reached 6% and organic sales growth reached 5%.
According to the company, sales increased across all geographic regions in both the fourth quarter and the full financial year. The results indicate a gradual recovery following a period of weaker trading and operational pressure in several important beauty markets.
The company’s President and Chief Executive Officer, Stéphane de La Faverie, attributed the performance to growth across a broad range of brands and the implementation of the company’s “Beauty Reimagined” strategy. The operating model, known as “One ELC”, is intended to help the organisation make decisions more quickly while maintaining greater cost discipline.
For fiscal 2027, Estée Lauder Companies has confirmed its expectation of organic net sales growth between 3% and 5%. At the same time, it has raised its forecast for adjusted operating margin to between 12.7% and 13.5%.
Fragrance and skin care contribute to market share gains
The group reported prestige beauty share gains in several key markets. In mainland China, value share gains for the full year were supported by fragrance, skin care and make-up. Japan also recorded value share gains, with fragrance and make-up contributing to the result.
In South Korea, the company reported a return to value share growth in the fourth quarter. Retail sales growth accelerated from high single-digit to double-digit rates, driven by make-up and skin care.
In the United States, the company recorded volume share gains in the fourth quarter and for the full year. All product categories contributed to the annual performance. Western Europe also returned to value share growth in the fourth quarter, with skin care and fragrance identified as the main drivers. The United Kingdom was included in this regional improvement.
The figures are relevant to retailers because they point to a continued role for fragrance and skin care in the recovery of prestige beauty. They also show that market performance can differ considerably by country and product category.
Fragrance remains central to the portfolio
The Estée Lauder Companies increased the number of brands generating more than $1 billion in annual sales to six. Jo Malone London and TOM FORD were added to the group of billion-dollar brands during fiscal 2026.
Fragrance also featured prominently in the company’s retail and brand development activities. The group opened 33 net new freestanding fragrance stores worldwide, led by Le Labo and Jo Malone London. It also continued to expand its presence across digital commerce platforms, including Amazon and TikTok Shop.
During major shopping events in mainland China, including 11.11 and 6.18, the company reported strong positions in prestige beauty, luxury and prestige fragrance across several brands and platforms. Estée Lauder, La Mer and Jo Malone London were among the brands supporting this performance.
The company also highlighted recognition for several fragrance launches and established products at the 2026 Fragrance Foundation Awards. These included Editions de Parfums Frédéric Malle’s Portrait of a Lady, TOM FORD Oud Voyager Eau de Parfum and Jo Malone London Beach Blossom Cologne.
Innovation supports consumer engagement
Product innovation was another element of the fiscal 2026 performance. The company reported that 23% of annual sales came from innovation. New products and updated versions of established franchises were introduced across make-up, skin care and fragrance.
Examples included Estée Lauder Double Wear Stay-in-Place Longwear Matte Foundation, M·A·C Skinfinish Colourstruck Blush and La Mer Balancing Infused Emulsion. The Ordinary also introduced Caffeine Solution 5% + EGCG Eye Serum, while TOM FORD launched Taormina Orange Eau de Parfum.
The company’s approach combines the development of established hero products with new launches intended to respond to consumer trends. It has also used different price points to attract new customers. This strategy may be relevant to cosmetics manufacturers seeking to balance premium positioning with broader consumer access.
Profitability improves through operational efficiencies
Gross margin increased by 150 basis points to 75.5% in both reported and adjusted terms. The improvement was primarily linked to the Profit Recovery and Growth Plan, or PRGP. Operational efficiencies, changes in procurement and lower levels of excess and obsolete stock contributed to the result.
The company also reported an adjusted operating margin of 11.2%, compared with 8.0% in the previous year. This represents an increase of 320 basis points. The improvement was attributed to higher gross margins and operating leverage, with savings helping to fund additional consumer-facing investment.
Consumer-facing investment increased by 7% in the fourth quarter and across the full year. Excluding foreign currency effects, the increases were 5% and 4% respectively. More than 75% of the company’s capital expenditure in fiscal 2026 was directed towards consumer-facing activities.
Reported operating margin was 5.2%, compared with a reported loss of 5.5% in the previous year. However, the comparison is affected by significant impairment charges and litigation-related costs recorded in fiscal 2025. Adjusted figures therefore provide a clearer indication of the underlying operational development.
Restructuring programme changes the operating model
The PRGP is also linked to a substantial restructuring programme. By 30 June 2026, the company had recognised cumulative restructuring charges of $1.4 billion, mainly related to employee costs.
Once approved measures are implemented, the programme is expected to deliver annual gross benefits of approximately $1.2 billion. The company expects a net reduction of around 10,000 positions. The measures include reorganising selected business areas, simplifying processes, outsourcing certain services and changing parts of the go-to-market and selling model.
Most of the remaining benefits are expected to be realised during fiscal 2027. For retail partners and manufacturers, the changes could affect commercial structures, service models, supply chain coordination and the way brands support physical and digital points of sale.
Cash flow provides room for further investment
Cash and cash equivalents increased to $3.50 billion from $2.92 billion. Operating cash flow rose by 39% to $1.77 billion. Free cash flow reached $1.32 billion, compared with $0.67 billion in the previous year.
Capital expenditure decreased to $457 million from $602 million. The company stated that this reflected a more selective investment approach, with priority given to activities connected to consumer growth.
The group also paid $300 million in deferred consideration linked to the acquisition of TOM FORD and distributed $508 million in dividends. In addition, it agreed to acquire the remaining interest in Forest Essentials, subject to regulatory approval, and announced minority investments in XINÚ and 111Skin.
Gradual continuation of the recovery rather than a rapid change in market conditions
The results suggest that the prestige beauty sector remains dependent on a combination of brand strength, product innovation and disciplined operations. Fragrance and skin care are supporting growth in several markets, while digital commerce and directly operated stores continue to expand the ways in which consumers discover and purchase products.
At the same time, the restructuring programme demonstrates the pressure on global beauty companies to improve efficiency while continuing to invest in marketing, innovation and customer experience. The fiscal 2027 outlook indicates that Estée Lauder Companies expects a gradual continuation of its recovery rather than a rapid change in market conditions.
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