The Estée Lauder Companies reported higher net sales in the third quarter (Q3) ended 31 March 2026, alongside improved adjusted profitability, and revised its full-year guidance.
The company said it continues to monitor geopolitical risks, tariffs, inflation and consumer demand trends as it progresses with its Beauty Reimagined strategy and operating model transformation.
Net sales increased 5% to $3.71bn while organic net sales rose 2% to $3.61bn.
Gross profit climbed 7% to $2.83bn, with gross margin expanding by 140 basis points to 76.4%.
Reported operating income decreased 19% to $249m, and operating margin fell to 6.7% from 8.6%.
The company said this reflected higher restructuring charges and an $84m loss contingency related to a potential securities class action settlement.
Diluted earnings per share dropped 45% to $0.24 while adjusted diluted earnings per share rose 40% to $0.91.
According to the company, results were supported by double-digit growth in fragrance, while skin care, makeup and hair care were broadly flat.
It posted net sales growth in three of its four geographic regions, led by Mainland China, and said it recorded share gains in markets including the US, Japan and Korea.
In the quarter, the company reported continued growth in digital and retail channels, launches across Estée Lauder, La Mer, M·A·C and TOM FORD, and an agreement to acquire the remaining interest in Forest Essentials, subject to regulatory approvals.
For the nine months ended 31 March 2026, net cash from operating activities rose to $1.2bn from $0.7bn.
Capital expenditure declined to $306m from $395m while free cash flow increased to $891m from $276m.
The company said its profit recovery and growth plan continued to deliver ahead of expectations.
It now expects restructuring charges of between $1.5bn and $1.7bn and annual gross benefits of $1.0bn to $1.2bn.
The programme is expected to result in a net reduction of 9,000 to 10,000 positions.
For fiscal 2026, Estée Lauder increased its outlook and now expects organic net sales growth of approximately 3% and adjusted diluted earnings per share of $2.35 to $2.45.
The company said tariff-related headwinds are expected to affect profitability by around $100m.
It also issued an initial outlook for fiscal 2027, projecting net sales to rise 3% to 5%, assuming geopolitical conditions do not worsen, and business operations remain uninterrupted.
The Estée Lauder Companies president and CEO Stéphane de La Faverie said: “With momentum across all five action plan priorities of Beauty Reimagined, today we raised our fiscal 2026 outlook, now expecting organic sales growth at the high-end of the prior range and adjusted operating margin expansion to approach 300 basis points, bolstered in part by adjusted gross margin expansion.”
