On November 2, US prestige beauty giant The Estée Lauder Companies Inc. announced its financial results for the first quarter of fiscal 2027, ended September 30, 2026. Net sales rose 7% year on year to $3.7 billion, with organic growth of 6%. Net sales in the Chinese Mainland grew 15% to $614 million, with organic growth of 9%.
Despite economic uncertainty, Gen Z consumers remained willing to spend on prestige beauty products, driving demand for luxury fragrance brands such as Le Labo, TOM FORD and Jo Malone London, as well as premium skin care.
The Chinese Mainland has been a bright spot in the Estée Lauder Companies’ transformation. With increased consumer-facing investment, the company expects strong organic sales growth from both new and existing products.
During the quarter, the Estée Lauder Companies gained market share in the Chinese Mainland for the seventh consecutive quarter. All categories performed strongly, with fragrance achieving double-digit growth and skin care and makeup both recording high-single-digit growth. TOM FORD, The Ordinary, Le Labo and La Mer were the main growth drivers.
During the reporting period, 11 of the group’s brands achieved growth in China, including six that recorded double-digit growth.
President and Chief Executive Officer Stéphane de La Faverie said on the earnings call, “We are increasing investment at the top of the funnel to build brand desirability and awareness.” He added that the company had already planned to reduce discounts and promotions in China. “While we will continue to offer consumers some incentives, our core focus is on building product desirability… and reducing our overall reliance on promotions globally.”
Following growth in fragrance and hair care, the Estée Lauder Companies is looking to makeup brands such as MAC and TOM FORD to capture more market share in the Chinese Mainland and return the makeup category to growth next quarter. “We are translating our strength in volume into value share. But we still have more work to do in makeup and skin care,” said Stéphane de La Faverie.
On November 4, the Estée Lauder Companies will webcast its capital markets investor event from Shanghai, China. The event will outline its long-term strategy to drive sustainable growth and stronger profitability. Senior executives and local leaders in China will share how the Beauty Reimagined strategy is being implemented in China and explain how the China model can serve as a blueprint for deploying capabilities globally.
At the close of trading on November 2, the Estée Lauder Companies’ shares were down 4.08% from the previous session at $104.77, giving it a market capitalisation of approximately $37.96 billion. Its share price had gained 8.36% over the past year.
Stéphane de La Faverie said, “The first quarter of fiscal 2027 marked another strong step forward for the Estée Lauder Companies. Growth is gaining pace, profitability is improving significantly, and the results of Beauty Reimagined are increasingly visible across our business. We continue to bring consumers more breakthrough innovations, build brand desirability through impactful marketing campaigns, and create a more responsive, efficient organisation that translates growth momentum into stronger financial results. We have moved beyond the recovery phase and are building multiple drivers of sustainable, profitable growth. Our teams’ energy and determination, together with the strength of our brands and progress in our transformation, give us confidence in the opportunities ahead. We are raising our fiscal 2027 outlook, reflecting both our strong start to the year and our confidence in the future.”
In the first quarter, the group’s prestige beauty business gained share in several key markets:
- The Chinese Mainland: Makeup, skin care and fragrance drove value share gains, led by TOM FORD, The Ordinary, Le Labo and La Mer;
- Japan: Makeup and fragrance drove value share gains, with Le Labo, MAC and TOM FORD achieving double-digit retail sales growth;
- South Korea: Retail sales grew by double digits, while MAC and TOM FORD drove makeup share gains;
- The US: The Ordinary and MAC drove volume share gains, while fragrance and hair care gained value share;
- Western Europe: Skin care and fragrance gained value share.
The Estée Lauder Companies said stronger execution was translating into better financial performance. The group significantly improved profitability while increasing consumer-facing investment by 8%. It places consumers at the centre of brand building, innovation and resource allocation. This investment supports product development, marketing campaigns and improvements to the consumer experience, continuing to build brand desirability and deepen consumer connections.
During the quarter, the group expanded distribution through Amazon’s US Premium Beauty store and platforms including Shopee, TikTok Shop, Tmall and Douyin, driving organic online sales growth.
On the analyst call, Stéphane de La Faverie noted that online channels help maintain customer relationships, while physical stores offer experiences that encourage consumers to shop for core products and new innovations. He said global travel retail was “stabilising, with a slight improvement”.
The group also continued to bring consumers more breakthrough innovations across categories and price points. These included La Mer’s The Concentrate Serum, MAC’s Lustreglass Stainglass Lip Tint, PDRN-related innovations from Clinique and The Ordinary, KILIAN PARIS’ The Cocktails Collection, and Estée Lauder’s Glimmer fragrance.
Gross margin expanded by 230 basis points to 75.7%, while adjusted gross margin increased by 240 basis points to 75.7%. This reflected net benefits from cost and operational efficiencies under the company’s Profit Recovery and Growth Plan (PRGP), sales leverage and the net benefits of strategic pricing, which together offset inflationary pressures. PRGP benefits included procurement savings, expense optimisation and manufacturing efficiencies.
Operating margin expanded by 610 basis points to 11.0%, while adjusted operating margin increased by 480 basis points to 12.1%. Operating leverage and gross margin expansion funded increased consumer-facing investment. Operating profit also reflected a $45 million year-on-year reduction in restructuring and other charges.
Diluted net earnings per common share rose to $0.64, while adjusted diluted net earnings per common share reached $0.72.
During the three months ended September 30, 2026, the group’s cash and cash equivalents increased to $3.2 billion.
— By Geographic Market —
*All net sales growth figures below are on an organic basis, excluding the impact of foreign currency translation.
Overall net sales increased by 6%, with growth across all regions:
- Asia-Pacific (excluding the Chinese Mainland) led growth, with net sales up 10% to $923 million. This was primarily driven by Asian travel retail, including increased replenishment orders from Beijing and Shanghai airports, as the business gradually stabilised following changes to duty-free retailers and their online operations that began in the second quarter of fiscal 2026. Online sales in Hainan travel retail improved significantly. In the Chinese Mainland, both new and existing products drove growth, supported by consumer marketing investment around major promotional events and targeted customer acquisition across online and offline channels.
- Net sales in the Chinese Mainland grew 9% organically year on year to $614 million.
- The Americas continued to grow, with net sales up 4% to $1.227 billion, primarily supported by customer acquisition, product innovation and consumer-facing marketing investment.
- Key emerging markets in the Europe, Middle East and Africa region (EUKEM) collectively achieved growth, with net sales up 4% to $1.227 billion. Türkiye, Mexico and India performed particularly well, driven by new products and targeted customer acquisition.
Operating profit increased by 76%, with improvements across all geographic markets:
- Asia-Pacific: Operating profit rose 73%, as higher sales and lower costs increased gross profit.
- The Chinese Mainland: Operating profit more than doubled, with operating margin rising from 2.3% to 5.2%. Sales growth was the main driver, partially offset by increased consumer-facing marketing investment in new products and campaigns.
- The Americas: Operating profit rose 31%, as higher sales and lower cost of sales increased gross profit. This was partially offset by a net increase in consumer-facing marketing investment to support new products and distribution expansion.
- Europe, Middle East and Africa (EUKEM): Operating profit more than doubled, with operating margin rising from 0.7% to 4.8%, supported by sales growth and lower non-consumer-facing expenses. Consumer-facing investment increased on a net basis after strategic reductions in selling expenses, supporting distribution expansion and new product launches and partially offsetting profit growth.
— By Product Category —
*All net sales growth figures below are on an organic basis, excluding the impact of foreign currency translation.
— Skin Care
Net sales rose 4% year on year, primarily driven by La Mer and The Ordinary. La Mer’s sales increased thanks to its new The Concentrate Serum and continued demand for its established The Treatment Lotion range. The Ordinary’s sales growth reflected targeted customer acquisition and activations across existing distribution channels, supported by the strong performance of its hero Glycolic Acid 7% Exfoliating Toner and the launch of Lacto-PDRN 4% + B9 Eye Cream.
Skin care operating profit increased by 40%, primarily driven by sales growth and lower non-consumer-facing expenses. This was partially offset by a net increase in consumer-facing investment to support new product launches, marketing campaigns and distribution expansion.
— Makeup
Net sales grew 1%, with growth from MAC partially offset by a decline at Estée Lauder. MAC’s sales benefited from targeted customer acquisition and its expansion into selected Sephora stores in the US and the Middle East, Sephora at Kohl’s and online channels in the second half of fiscal 2026. Alongside the launches of Lustreglass Sheer-Shine Lipstick and Lustreglass Stainglass Lip Tint, these initiatives drove growth in lip products.
Estée Lauder’s sales declined as facial makeup weakened, reflecting the timing of new product launches in fiscal 2027. This was partially offset by incremental sales from the next-generation Double Wear Stay-in-Place Longwear Matte Foundation, launched in the second half of fiscal 2026.
The makeup business returned to profit, supported by higher sales and lower non-consumer-facing expenses. This was partially offset by a net increase in consumer-facing investment, after strategic reductions in selling expenses, to support distribution expansion, marketing campaigns and new product launches.
— Fragrance
Net sales rose 20% year on year, driven by double-digit growth from the group’s luxury fragrance brands, led by Le Labo, TOM FORD, Jo Malone London and KILIAN PARIS. Estée Lauder’s fragrance business also grew.
Le Labo’s sales increased on continued demand for its Classic Collection, including Another 13 and Santal 33, and strong performances from its City Exclusives, including Gaiac 10 and the Beijing exclusive Shiu 25, with growth across both new and existing channels. TOM FORD’s launches across its Private Blend and Signature ranges, including Tobacco Chocolat and Ombré Leather Reserve, created a halo effect that supported sales of existing products. Jo Malone London’s growth reflected new launches such as Sea Salt & Bergamot, gains across its hero ranges, and customer acquisition. Estée Lauder’s growth was driven by Glimmer, the brand’s first gourmand fragrance. KILIAN PARIS, the group’s fastest-growing luxury fragrance brand, increased sales through successful new launches in The Cocktails Collection, continued strength in its established products and an expanded consumer base.
Fragrance operating profit surged 93%, primarily driven by higher sales, partially offset by increased consumer-facing investment to support new product launches, marketing campaigns and distribution expansion.
— Hair Care
Net sales were flat year on year. Growth from The Ordinary was offset by a decline at Aveda. The Ordinary’s sales benefited from continued demand for its Multi-Peptide Serum for Hair Density and customer acquisition. Aveda’s sales declined primarily because brand-specific supply chain logistics issues reduced shipments.
The hair care business returned to profit, supported by lower non-consumer-facing expenses and cost of sales.
The Estée Lauder Companies raised its full-year fiscal 2027 outlook following a strong first quarter, while remaining cautious about ongoing geopolitical and macroeconomic risks:
- Organic net sales growth of 4.0%-5.5%, compared with the previous range of 3%-5%. The revised range runs from the midpoint to above the upper end of the previous guidance.
- Adjusted operating margin of 12.9%-13.7%, compared with the previous range of 12.7%-13.5%.
- Adjusted diluted net earnings per common share of $3.20-$3.45, compared with the previous range of $3.10-$3.35.
| Sources: Official financial results, official press releases, analyst conference call
| Image Credit: Official brand social media accounts
| Editor: Luxeplace
