Estée Lauder(EL) - 2026 Q1 - Quarterly Results

Financial Performance - Net sales for the first quarter of fiscal 2026 increased by 4% to $3.481 billion, with organic net sales rising by 3%[6] - Gross margin expanded by 100 basis points to 73.4%, while adjusted gross margin increased by 60 basis points to 73.3%, driven by operational efficiencies from the Profit Recovery and Growth Plan[6] - Operating income improved significantly to $169 million, compared to a loss of $121 million in the prior year, resulting in an operating margin of 4.9%[6] - Diluted net earnings per share rose to $0.13, compared to a loss of $0.43 in the previous year, with adjusted diluted net earnings per share increasing to $0.32 from $0.14[6] - Net earnings for the quarter were $47 million, a substantial recovery from a net loss of $156 million in the same quarter last year[49] - Adjusted operating income, excluding restructuring and litigation charges, was $255 million, a 77% increase from $144 million in the previous year[54] - The effective tax rate for the quarter was 56.9%, compared to 13.3% in the same quarter last year[54] Sales Performance by Category - Skin Care net sales grew by 3%, primarily due to strong performance from La Mer and Estée Lauder, benefiting from the Asia travel retail business[14] - Fragrance net sales surged by 13%, driven by strong growth from Luxury Brands such as Le Labo and TOM FORD, supported by expanded consumer reach[18] Regional Sales Performance - The Americas reported net sales of $1,174 million, a decrease of 2% compared to the previous year, with operating income increasing significantly to $87 million from a loss of $85 million[22] - EUKEM net sales increased by 4% to $901 million, while operating income decreased by 40% to $6 million due to increased consumer-facing investments[22][28] - Asia/Pacific net sales rose by 8% to $873 million, with operating income increasing to $150 million, reflecting strong growth in the global travel retail business[22][28] - Mainland China experienced a 9% increase in net sales to $532 million, with operating income at $12 million, despite challenges in the prior year[22][28] Product Development and Distribution - The Company launched several new products, including Advanced Night Repair Eye Lift + Sculpt Eye Cream and Re-Nutriv Ultimate Diamond Age Reversal Treatment Lotion, enhancing its product offerings[9] - The Company expanded its online distribution, launching brands on Amazon in Mexico and Canada, and increasing presence on TikTok Shop globally[10] - The Company opened a global Fragrance Atelier in Paris, focusing on next-generation perfume artistry and innovation[10] Restructuring and Future Outlook - The company expects restructuring charges between $1.2 billion and $1.6 billion, with annual gross benefits projected between $0.8 billion and $1.0 billion once fully implemented[30] - A net reduction of 5,800 to 7,000 positions is anticipated as part of the restructuring program, with over 4,000 positions already approved[31][33] - The company has recognized cumulative restructuring charges of $697 million through September 30, 2025, with $87 million recognized in the fiscal 2026 first quarter[32] - Fiscal 2026 full-year outlook reaffirms net sales growth of 2% to 5%, with organic growth expected to be between 0% and 3%[39] - The company anticipates tariff-related headwinds to impact fiscal 2026 profitability by approximately $100 million, with ongoing evaluations of mitigation strategies[36] Cash Flow and Assets - The company reported a net cash flow used for operating activities of $340 million for the three months ended September 30, 2025, an improvement from $670 million in the prior year[58] - Total assets decreased to $19,329 million as of September 30, 2025, down from $21,317 million a year earlier, reflecting a decline of approximately 9.3%[56] - Total current liabilities decreased to $5,083 million from $5,486 million, a reduction of about 7.3% year-over-year[56] - Capital expenditures for the three months ended September 30, 2025, were $96 million, compared to $141 million in the same period last year, indicating a decrease of approximately 31.9%[58] - Inventory and promotional merchandise decreased slightly to $2,062 million from $2,255 million, a decline of about 8.6% year-over-year[56] - Long-term debt remained stable at $7,320 million, showing a slight increase from $7,311 million a year ago[56] - Total equity increased to $3,890 million from $5,084 million, reflecting a decrease of approximately 23.5% year-over-year[56] Dividend Announcement - The quarterly dividend announced is $0.35 per share, payable on December 15, 2025[27]