Estée Lauder(US:EL)2026-02-05 13:05Financial Performance - Net sales for the second quarter increased by 6% to $4.229 billion, with organic net sales rising by 4%[6] - Gross profit reached $3.235 billion, resulting in a gross margin of 76.5%, an increase of 40 basis points from the previous year[8] - Operating income improved significantly to $401 million, with an operating margin of 9.5%, up from a loss of $580 million in the prior-year period[6] - Diluted net earnings per share increased to $0.44, compared to a net loss of $(1.64) in the prior-year period, while adjusted diluted net earnings per share rose by 43% to $0.89[8] - Free cash flow for the six months ended December 31, 2025, was $581 million, a substantial increase from $114 million in the prior-year period[8] - Net earnings for Q2 2025 were $162 million, a significant recovery from a loss of $(590) million in Q2 2024, representing over 100% growth[51] - Adjusted operating income (Non-GAAP) for the six months ended December 31, 2025, was $863 million, a 42% increase from $606 million in 2024[55] - Net cash flows provided by operating activities for the six months ended December 31, 2025, were $785 million, up from $387 million in 2024[68] - Total assets as of December 31, 2025, were $19,634 million, slightly down from $19,760 million in 2024[66] - Total equity increased to $4,031 million as of December 31, 2025, compared to $4,169 million in 2024[66] Sales Performance by Category - Skin Care net sales grew by 6%, driven by strong performances from La Mer and Estée Lauder during key shopping moments[16] - Makeup net sales decreased by 1%, primarily driven by Estée Lauder, while M·A·C net sales increased due to initial shipments for the March 2026 launch[19] - Fragrance net sales increased by 6%, driven by high-single-digit growth from Luxury Brands, with TOM FORD, Le Labo, and KILIAN PARIS leading the growth[19] - Hair Care net sales returned to growth, increasing by 5%, primarily driven by distribution expansion and the success of Multi-Peptide Serum for Hair Density from The Ordinary[25] - Net sales from The Ordinary increased, benefiting from targeted expanded consumer reach and existing distribution growth, with successful activations including the launch of Volufiline 92% + Pal-Isoleucine 1% Targeted Plumping Serum[19] - The Americas region reported a 1% decline in net sales to $2,392 million, while the EUKEM region saw a 7% increase to $2,084 million[58] - Mainland China net sales increased by 11% to $1,460 million, contributing to overall growth in the Asia/Pacific region[58] Strategic Initiatives - The Company announced a strategic partnership with Shopify to modernize its digital infrastructure and improve consumer experiences[11] - A minority investment in the Mexican luxury fragrance brand XINÚ was made, emphasizing the Company's commitment to local entrepreneurship[11] - New product innovations included the launch of Re-Nutriv Ultimate Lift Rejuvenating Oil and La Mer's New Lip Treatment, enhancing the product portfolio[10] Outlook and Projections - The Company raised its fiscal 2026 full-year outlook, tightening the range on net sales and raising its outlook for adjusted diluted net earnings per common share and adjusted operating margin[36] - The Company expects tariff-related headwinds to impact fiscal 2026 profitability by approximately $100 million, mostly in the second half[39] - Organic net sales growth for fiscal 2026 is anticipated to be between 1% and 3%, with mid-single-digit growth expected in Mainland China, while The Americas is projected to remain flat[43] - Adjusted Non-GAAP EPS is expected to range from $2.05 to $2.25, reflecting a growth of 36% to 49% compared to $1.51 in 2025[43] - Forecasted GAAP EPS for fiscal 2026 is projected to be between $0.98 and $1.22, a significant recovery from a loss of $(3.15) in 2025, indicating over 100% growth[43] - Adjusted operating margin is forecasted to be between 9.8% and 10.2%, with a contraction of about 50 basis points expected in Q3 due to consumer-facing investments and tariff headwinds[43] - Capital expenditures are expected to be approximately 4% of projected sales, reflecting a more efficient level of expenditures[43] Restructuring and Charges - The restructuring program component of the PRGP is expected to yield annual gross benefits of between $0.8 billion and $1.0 billion, before taxes[32] - The Company has recognized total cumulative charges under the restructuring component of the PRGP of $904 million through December 31, 2025[34] - The company expects to continue incurring charges similar to those presented, which may impact future results[60] - The company recorded a $159 million charge in Q1 fiscal 2025 related to talcum litigation settlement agreements[54] - In Q2 fiscal 2025, TOM FORD brand and Too Faced reporting unit experienced lower-than-expected growth, leading to $773 million and $75 million impairment charges for TOM FORD and Too Faced trademarks, respectively[53] - For the six months ended December 31, 2024, total charges related to goodwill and other intangible asset impairments amounted to $861 million, impacting earnings by $1.87 per common share[54] Tax and Financial Metrics - Effective tax rate for the three months ended December 31, 2025, was 51.4%, compared to 9.2% in 2024[64] - Operating margin for the three months ended December 31, 2025, was 9.5%, a significant improvement from (14.5)% in 2024[64]