Estee Lauder Returns to Growth in Fiscal 2026, Led by Fragrance and Recovery in China

On August 19, Estee Lauder Group announced its financial results for the fiscal year ended June 30, 2026.

After experiencing a decline in revenue and significant losses in the previous fiscal year, the company has returned to sales growth. Full-year net sales amounted to $15.049 billion, a 5% year-over-year increase, with organic net sales growing by 3%. Operating profit reached $780 million, compared to an operating loss of $785 million in the same period last year, while the operating margin improved from -5.5% to 5.2%.

Growth accelerated further in the fourth quarter. From April to June, Estee Lauder's net sales totaled $3.627 billion, representing a 6% year-over-year increase and 5% organic growth. During the same period, the operating loss narrowed significantly from $390 million in the corresponding period of the previous year to $39 million. Adjusted operating profit increased from $137 million to $267 million. The quarterly net loss stood at $116 million, markedly lower than the $546 million recorded in the same period last year.

However, Estee Lauder's "turnaround" this fiscal year must be viewed in the context of the low base established in the previous fiscal year. Operating profit in fiscal 2025 was impacted by $1.286 billion in impairment charges for goodwill and other intangible assets, as well as $159 million in expenses related to talc litigation.

Excluding special items, adjusted operating profit for fiscal 2026 was $1.687 billion, a 47% year-over-year increase, with the adjusted operating margin rising from 8.0% to 11.2%. Meanwhile, the company's gross margin improved by 1.5 percentage points to 75.5%, indicating that the profit recovery was not solely due to reduced impairments.

In terms of business structure, fragrance remained the fastest-growing category. Fragrance sales in fiscal 2026 reached $2.779 billion, up 12% year-over-year (10% organically), primarily driven by premium fragrance brands such as Le Labo, TOM FORD, and KILIAN PARIS. Skincare sales totaled $7.338 billion, a 5% year-over-year increase, with growth reported across La Mer, The Ordinary, and the Estee Lauder brand.

In contrast, makeup and hair care remain in a phase of adjustment. Full-year makeup sales were $4.276 billion, a 2% year-over-year increase, but organic sales were essentially flat after excluding factors such as exchange rates. Growth in M·A·C and TOM FORD was partially offset by declines in brands like Bobbi Brown and Too Faced. Hair care sales remained largely flat at $565 million, with organic sales declining by 1%, mainly due to weaker performance from Aveda.

The Chinese market emerged as one of the faster-growing regions during the fiscal year.

Under Estee Lauder's new regional reporting framework, full-year sales in mainland China reached $3.058 billion, a 12% year-over-year increase (9% organically), accounting for approximately 20% of the group's total sales. In the fourth quarter, sales in mainland China grew by 12% year-over-year, with 7% organic growth.

The company stated that skincare, fragrance, and makeup collectively drove an improvement in its share of the premium beauty market in mainland China, while online channel sales also maintained rapid growth.

Profit improvements coincided with ongoing restructuring efforts.

By the end of June, Estee Lauder had completed approvals for restructuring initiatives related to its Profit Recovery and Growth Plan. The plan is expected to result in a net reduction of approximately 10,000 positions and generate annual total savings of about $1.2 billion. By the end of fiscal 2026, the company had cumulatively recognized $1.4 billion in associated restructuring costs, with related measures expected to be substantially completed in fiscal 2027.

For fiscal 2027, Estee Lauder projects organic sales growth of 3% to 5%, with the adjusted operating margin further increasing to a range of 12.7% to 13.5%. The company anticipates continued growth in fragrance and skincare, along with a return to growth in makeup. After hitting a performance trough in fiscal 2025, Estee Lauder has re-entered a growth trajectory. However, whether this growth can extend to relatively weaker segments such as makeup, hair care, and North America will influence the sustainability of its ongoing recovery.