One could say Estée Lauder Companies faced a trial by fire in fiscal 2026. The conglomerate spent the year testing its limits, executing an ambitious restructuring plan, and trying to break a three-year cycle of revenue declines. At the same time, it dealt with the fallout from the beauty giant’s decision to call off its potential merger with Puig, the Spanish family-led beauty and fashion powerhouse.
But then on August 19, after Lauder’s fourth-quarter and fiscal year-end earnings call, there were clear signs that the owner of Clinique, MAC Cosmetics, Jo Malone, and La Mer may finally be emerging from the flames. The conglomerate recorded total net sales of $15.05 billion, with a 3% increase in organic sales and a 5% increase in reported sales, and expanded its adjusted operating margin by 320 basis points. Lauder also reported Q4 and full-year sales growth across all geographic regions.
The beauty giant beat adjusted EPS (earnings per share) by 22% and revenue by 2.25%. Lauder management guided fiscal 2027 adjusted EPS to $3.10-$3.35 (growth of 24% to 34%), affirmed 3%-5% organic sales growth, and raised the adjusted operating margin outlook to 12.7%-13.5%. Net earnings per common share reached $0.50 from a loss of $3.15 in fiscal 2025, and quarterly net loss narrowed to $116 million from 546 million.
And the markets responded. EL shares surged 16.4% at Wednesday’s close, the largest gain since 2011.
On the earnings call, Estée Lauder President and Chief Executive Officer Stéphane de La Faverie credited the organic sales rise to the breadth of growth across brands and to significantly expanded operating margins. The company also reported net sales growth of 6% in Q4 and 5% for the full fiscal year.
Skincare led the pack for fiscal 2026, reporting 4% organic growth at $7.34 billion, with La Mer and The Ordinary doing the heavy lifting. Fragrance was the fastest-growing category, posting a 10% increase in organic sales to $2.8 billion, buoyed by Le Labo, Kilian Paris, and the newest entrants to Lauder’s billion-dollar brands, Tom Ford and Jo Malone. Makeup was flat organically with $4.3 billion, and haircare continued its third year of downward trajectory, recording a 1% decline with $565 million.
Since de La Faverie introduced his “Beauty Reimagined” strategic vision in February 2025, he’s focused on the company’s need for “agility, risk-taking, and speed of decision,” mirroring the same ethos as indie brands. Notably, the company moved P&Ls to the regions last year to enable faster, regionally relevant decision-making.
But taking a global conglomerate to indie mode is no easy task.
“I think it’s very hard for big companies to act like small companies,” Lauren Lieberman, Managing Director and Barclays Equity Research's US CHPC (Cosmetics, Household & Personal Care) & Beverages analyst, told BeautyMatter. “There is infrastructure, processes, cultural norms, and a certain way of doing things.”
Lieberman said that at big companies, there is generally and culturally much less appetite for trying something new. “Can you imagine the number of people historically around a table at a big company who are involved in a brand decision versus at an indie?”
Yet, from de La Faverie's explanation on the call about what the company did with mainland China this year, it sounds like he’s testing the indie mindset by giving leadership autonomy—and mainland China’s 9% organic growth suggests the strategy is paying off. De La Faverie said that the company has a “very sophisticated model that allows us to really make sure that we are managing the total China ecosystem, and we are looking at it from mainland to travel retail, alongside also the Chinese travelers around the world in a very coordinated model that allows us to delight the Chinese consumer wherever they are” and to continue to ship to the demand wherever it is.
Filippo Falorni, Director, Equity Research at Citi, told BeautyMatter that one of the issues Lauder faced in China 5+ years ago was that the company didn’t have the autonomy to innovate or run the business locally. “The strategy was much more driven by corporate in the US, versus now.”
Falorni pointed to two things Lauder has done very well in China: “First, they decentralized some of the decision-making responsibility to the China team, which is very important because you have to be on the field to understand the consumer shift and consumer preferences. Second, they've built infrastructure to enable the team to be more independent. They opened the R&D facility in China, which is pretty significant. So now they can actually do research and development directly in Shanghai. Before, most of it came from the US. They also built more distribution centers in the region and a manufacturing facility in Japan, so they can move inventory much faster and respond to consumer demand.”
Falorni said the company previously had a long supply chain, with products shipping from the US to China. And now, Lauder can be more nimble in China. “So if there's a peak in demand, you can respond very quickly. Both from a strategic decision standpoint and from a supply chain standpoint, they've really changed how they run the business in China.”
In de La Faverie’s introduction, he directly addressed M&A as the “elephant in the room.” He made clear that Lauder’s focus will remain on growing the company’s core business. “We will continue to pursue minority and single-brand deals that enhance our portfolio and can benefit from our ability to create scale and deliver attractive ROIC (Return on Invested Capital).” De La Faverie pointed to the success of Kilian Paris, Le Labo, and The Ordinary, the beauty giant’s three fastest-growing brands in fiscal 2026, all of which were acquired within the last twelve years. “We have no doubt we will do it again with Forest Essentials, which we have announced we are adding to our portfolio.”
When de La Faverie spoke about the failed merger between Lauder and Puig at the dbAccess Global Consumer Conference 2026 on June 2, just 12 days after the deal fell through, many analysts and investors were left wanting. De La Faverie’s directness during the earnings call gave investors and analysts the closure they needed.
“I think he thought he addressed the situation earlier this year at the Deutsche Bank conference in Paris, and it just wasn't sufficient,” Lieberman said. “So today [August 19], coming out and very directly and overtly saying, ‘We're not doing large-scale M&A’—that is important. I think that was really positive, and it actually puts it to bed.”
Falorni said that on the earnings call, de La Faverie was deliberate in his word choice regarding Lauder’s M&A, making it crystal clear that the beauty conglomerate would focus on single-brand minority investments and deals. “When you talk about minority and single-brand deals, that means smaller scale. If you buy a company like Puig, that means you're buying a multi-brand company. He used those words very clearly, saying, ‘Hey, we're gonna look at deals, but they're going to be on the smaller-scale side, single brands and minority.’ Then he used the example of Forest Essentials, a deal they made in India, and then of Kilian Paris and The Ordinary. Those are much smaller and individual brands.”
One of the most telling metrics for whether Lauder’s PRGP (Profit Recovery and Growth Plan) is working is the company’s aggressive expansion of structural margins. By expanding adjusted operating margin 320 basis points year over year to 11.2%, Lauder provided its strongest evidence yet that the painful PRGP restructuring is translating into financial results.
The margin expansion signals Lauder’s prowess in making the right hard decisions. The changes will continue to impact the company’s global system indefinitely, instilling investor confidence in Lauder’s long-term plan.
Skincare isn't just Lauder's biggest category; it has now worn the crown for top category for eight straight years. According to the company’s press release, skincare net sales increased 5%, with organic sales up 4%, primarily driven by growth in La Mer, The Ordinary, and Estée Lauder.
Adjusted operating income increased 52%, driven primarily by higher sales and net benefits from the PRGP. According to the press release, this helped to “reduce non-consumer-facing expenses, despite a more normalized level of employee incentive costs, partially offset by the increase in consumer-facing investments to support key activations, new product launches and targeted expanded consumer reach.”
While fragrance is not Lauder’s top performer by volume for fiscal 2026, it is the fastest-growing category, with organic sales up 10% to $2.8 billion. According to the company’s press release, the increase in fragrance was primarily driven by double-digit growth in the company’s luxury brands. And the company credits Tom Ford’s fragrance growth to innovation, including Soleil Neige, Oud Voyager, and Figue Érotique, which created a halo effect that boosted sales of existing Private Blend and Signature products, according to the release.
With Le Labo and Kilian Paris taking two of the three top spots for best-performing brands overall in Lauder’s portfolio, and Tom Ford and Jo Malone joining Clinique, Estée Lauder, MAC Cosmetics, and La Mer in Lauder’s billion-dollar brand club, fragrance continues to dominate the conversation.
Makeup was flat for fiscal 2026, so how will Lauder drive growth? MAC Cosmetics, Clinique, and now Tom Ford can only take the beauty giant so far. According to Lieberman, who spoke with Lauder senior management offline after the call, now that Lauder has reset the business in Asia, they will take some of that success to the West.
Lieberman sees Lauder’s makeup plan as focusing on the big brands first and then figuring out how to layer in the smaller ones later. “These brands are so big, so if Clinique or MAC has a successful innovation, it can really matter. Too Faced coming out with an exciting new product doesn’t really move the needle.”
Though on the earnings call, de La Faverie was hopeful, noting that Q4 MAC became the #1 prestige makeup brand in the US. "For the quarter, we hold the top two positions in prestige makeup in the U.S. with MAC and Clinique."
Haircare has not been pretty for Lauder for several years. The last time the company showed yearly growth in the haircare segment was in 2023. While the category’s net sales returned to growth in fiscal Q2 2026, increasing 5%—primarily driven by distribution expansion and the success of The Ordinary’s Multi-Peptide Serum for Hair Density—net sales for the full fiscal year declined 1%.
Despite the numbers, de La Faverie was bullish about the category. “For haircare, while not yet back to organic sales growth, we are seeing evidence of Aveda’s turnaround in the US—its biggest market—given share expansion in track salon data.”
In its May fiscal Q3 results, Lauder said more than 70% of the increase in planned job cuts would come from point-of-sale demonstration roles at select department-store and freestanding-store doors.
Put simply, Lauder is cutting roles at underperforming doors and reallocating resources to faster-growing channels like Amazon Premium Beauty, TikTok Shop, Sephora, and Ulta Beauty. On Lauder’s Q3 2026 earnings call, when de La Faverie was asked about the expanded job-cut estimates, he said he had been very clear about continuing to “right-size” the department stores and freestanding stores.
“Changing the channel has been one of the key pillars of Beauty Reimagined,” Falorni said. “Stéphane is clearly going into the channels that are growing the fastest. Historically, slaughter was much more skewed to the department stores and a lot less in very fast-growing channels like the specialty, Sephora, Ulta Beauty, and online.”
“When we introduced Beauty Reimagined in February 2025, we committed to the biggest organizational, leadership, and cultural transformation in our company’s history to become faster and more agile with greater discipline,” De La Faverie said on the earnings call. “Our ambition was clear: to become the best consumer-centric prestige beauty company with more diversified, balanced, and sustainable growth drivers.”
Falorni emphasized online channels since Lauder’s online presence prior to de La Faverie was mainly lauder.com or brand sites like lamer.com. “I would say that one of the biggest changes that he has made, especially in the US market, has been [Lauder’s] focus on the fastest-growing channels like the Amazon Premium Beauty Store. I think it's smart for them to really push in those channels, because their absence was hurting their market share; they weren't selling the products where consumers were going. And Stéphane has changed that.”
The shift in channels in China has also been significant to Lauder’s strategy, Falorni said. “They've done much better in terms of marketing and channel presence in China. Historically, Estée Lauder was very reliant on Tmall, but now they've expanded significantly in Douyin, which they mentioned on the call.”
When it comes to TikTok Shop, Lieberman said senior leadership in North America has made strategic hires of people well-versed in how e-commerce works and how TikTok Shop plays into that. “I think they recognize TikTok Shop as more of an advertising channel than a major revenue driver. At our conference last September, Amber [English, President of Digital and Online for the Americas at Lauder] said that they're looking at the full picture. They know it's not about conversion per se on TikTok Shop. It's the bigger picture of driving awareness, and they are agnostic as to where the conversion happens. So I do think they get it.”
Despite Lauder’s fiscal 2026 performance and the continuing benefits of its restructuring, the company will still need to prove that the growth is sustainable. Also, Lauder’s M&A focus on minority investments in small-scale brands raises the question of how it will integrate these companies into the Lauder ecosystem.
“How will they manage these small brands?” asked Lieberman. “Their track record includes The Ordinary, yes, which is fantastic, but you also have brands like Too Faced. Look at the media debacle of the past few weeks [Too Faced founder Jerrod Blandino aired his dirty Lauder laundry on the Gloss Angeles podcast].”
De La Faverie seems to recognize the challenges ahead of him, particularly those related to makeup. During the call, he said the company has a clear intent to accelerate the category’s performance. “The performance of makeup will be broad-based from a geography standpoint, but with a clear focus also on the West, especially North America again.”
He also acknowledged the company’s past challenges with makeup brands, but said it is strongly focused on makeup as its #2 category. “We continue to believe that it [makeup] will not only improve on sales trends, it will also improve, as was questioned earlier, on profitability with all of the work we are doing. That would be a critical part of continuing to build broader, more diversified sales growth and also profitability in this segment.
Lieberman still wants to see breadth. “We want to believe that there are multiple brands in the portfolio that are contributing [to Lauder’s success]. And I still think that's right and important over time, to say the least. But in the near term, the question for them is: How do we get back on the right side of growth and more in line with industry growth? They need their big brands to be working, and that's a really hard thing to do, you know, for big incumbents. And so I understand that if they've got the momentum with MAC, the first priority will be to continue to feed that.”
Estée Lauder Companies declined to provide comment for this story.
