Estée Lauder Companies, Inc. (NYSE:EL) shares plummeted in the premarket session on Wednesday after the company reported fourth-quarter results.
The company reported adjusted earnings per share of 9 cents, which is in line with the street view.
Quarterly sales of $3.41 billion (down 12% year over year) outpaced the analyst consensus estimate of $3.397 billion.
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Skin care sales slumped 16% year over year, makeup fell 11%, fragrance grew 4%, and hair care decreased 15% on a reported basis in the quarter.
In mainland China, the company gained prestige beauty share across all categories and channels in the fourth quarter, led by La Mer and TOM FORD, with full-year gains also driven by La Mer and Le Labo.
In Japan, it captured share in every quarter of fiscal year 2025 and reinforced its #1 fragrance ranking in the fourth quarter through Le Labo, Jo Malone London, and KILIAN PARIS.
In the U.S., share trends improved notably in the second half of fiscal year 2025, led by The Ordinary, Clinique, and Estée Lauder, though the fourth quarter saw a modest loss.
Gross profit in the quarter under review fell 12% to $2.456 billion. Gross margin expanded to 72% from 71.8% in the year-ago period. Quarterly adjusted operating income slumped 61% year over year to $137 million.
Estée Lauder said that this reflects the increase in consumer-facing investments, along with sales volume deleverage in fiscal 2025.
The company exited the quarter with cash and equivalents worth $2.921 billion, lower than $3.395 billion in the year-ago period.
The company announced a quarterly dividend of 35 cents per share on its Class A and Class B Common Stock, payable in cash on September 16.
Based on current information and net of planned mitigation actions, Estée Laude expects tariff-related headwinds to impact fiscal 2026 profitability by approximately $100 million.
“Despite continued volatility in the external environment, we embarked on fiscal 2026 with signs of momentum and confidence in our outlook to deliver organic sales growth this year after three years of declines and to begin rebuilding operating profitability in pursuit of a solid double-digit adjusted operating margin over the next few years,” said CEO Stéphane de La Faverie.
The company has provided its financial outlook for fiscal year 2026, projecting EPS to range between $1.90 and $2.10, well above the analyst consensus estimate of $1.48. The company expects sales to reach between $14.613 billion and $15.042 billion, surpassing the analyst forecast of $14.321 billion.
In its fiscal 2026 guidance, Estée Lauder has reflected several key assumptions. The company anticipates global prestige beauty growth to fall between 2% and 3%. Additionally, Estée Lauder plans to implement stricter inventory controls and a substantial reduction in discounts to better align retail and net sales growth.
In terms of regional performance, Estée Lauder is forecasting mid-single-digit growth in mainland China, signaling early signs of market stabilization. The company also expects a modest recovery in its global travel retail business, particularly in the first half of fiscal 2026, driven by improved shipment levels in Asia travel retail. However, the company cautions that volatility in this sector, including weak conversion rates, could temper overall performance.
Excluding mainland China, Estée Lauder is projecting low-single-digit growth in most other markets, with year-over-year growth rates improving compared to fiscal 2025. For the first quarter of fiscal 2026, the company expects a low-single-digit decline to slightly positive growth, driven by strong results in global travel retail and solid performance in mainland China. These gains are expected to offset more moderate declines in other areas of the business.
Price Action: EL shares are trading lower by 8.17% to $82.53 premarket at last check Wednesday.
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