Estée Lauder(US:EL)2026-02-05 17:01Financial Performance - Net sales for the three months ended December 31, 2025, were $4,229 million, a 5.6% increase from $4,004 million in the same period of 2024[186]. - For the six months ended December 31, 2025, net sales reached $7,710 million, reflecting a 5% increase from $7,365 million in the previous year[210]. - Net sales for the three months ended December 31, 2025, were reported at $4,229 million, a 6% increase from $4,004 million in the prior year[210]. - Total revenue for the six months ended December 31, 2025, was $7,710 million, an increase of 5% compared to $7,365 million in the same period of 2024[291]. - The Americas region generated net sales of $1,218 million in Q2 2025, slightly up from $1,209 million in Q2 2024[188]. - Reported net sales in The Americas decreased 1% for the six months ended December 31, 2025, driven by a 2% decrease from pricing[245]. Profitability - Gross profit margin improved to 76.5% in Q2 2025 from 76.1% in Q2 2024, with gross profit reaching $3,235 million[186]. - Operating income for the three months ended December 31, 2025, was $401 million, compared to an operating loss of $580 million in the same period of 2024[186]. - Reported operating income for the three months ended December 31, 2025, was $401 million, a $981 million increase from the prior-year period[255]. - Operating income for the six months ended December 31, 2025, was $570 million, a significant increase of $1,271 million from a loss of $701 million in the prior year[287]. - The effective tax rate increased to 51.40% for the three months ended December 31, 2025, from 9.20% in the prior year, primarily due to losses before income taxes and the impact of goodwill impairment[277]. Product Category Performance - Skin Care product category net sales increased to $2,054 million in Q2 2025, up from $1,921 million in Q2 2024, representing a 6.9% growth[188]. - Skin care net sales increased by $133 million, or 7%, for the three months ended December 31, 2025, and by $179 million, or 5%, for the six months ended December 31, 2025[217]. - Fragrance net sales rose by $68 million, or 9%, for the three months ended December 31, 2025, and by $159 million, or 12%, for the six months ended December 31, 2025[231]. - Reported makeup net sales increased slightly by $14 million, or 1%, for the three months ended December 31, 2025[224]. - Reported hair care net sales increased $9 million, or 6%, for the three months ended December 31, 2025, primarily due to higher sales from The Ordinary and the launch in Amazon's U.S. Premium Beauty store[235]. Challenges and Risks - The company anticipates continued volatility and uncertainty in its business environment, particularly in Western Europe and the U.S. department store sector[194]. - The company continues to face challenges from inflationary pressures and supply chain issues, which may impact consumer preferences and overall profitability[198]. - The company expects to continue facing challenges related to foreign currency translation and restructuring charges in future periods[281]. - The company is monitoring the effects of tariffs and expects higher rates to adversely affect fiscal 2026 profitability and cash flows[195]. Strategic Initiatives - The strategic vision "Beauty Reimagined" aims to enhance consumer engagement and drive sustainable growth through operational efficiencies[197]. - The introduction of new products is expected to impact sales, with ongoing innovation and marketing efforts to support both new and existing products[191]. - The restructuring program is expected to result in charges totaling between $1,200 million and $1,600 million, before taxes[207]. - The restructuring program aims to achieve annual gross benefits of between $800 million and $1,000 million, before taxes, once fully implemented[208]. Cash Flow and Debt Management - The company had cash and cash equivalents of $3,082 million as of December 31, 2025, compared to $2,921 million at June 30, 2025[297]. - Net cash flows provided by operating activities for the six months ended December 31, 2025, were $785 million, compared to $387 million in the same period of 2024[308]. - Total debt as of December 31, 2025, was $7,322 million, with long-term debt comprising $7,319 million and current debt of $3 million[304]. - Total debt as a percentage of total capitalization was 64.5% at December 31, 2025, down from 65.4% at June 30, 2025[307]. Market Performance - The increase in net sales from La Mer and Estée Lauder was primarily driven by higher sales in Mainland China and Asia travel retail, reflecting key shopping moments and holiday campaigns[218][219]. - Reported net sales in Mainland China increased 13% for the three months ended December 31, 2025, driven by a 9% increase from pricing and a 4% increase from volume[244]. - Operating income in Mainland China increased by $73 million, or 97%, for the three months ended December 31, 2025, and $101 million, or over 100%, for the six months ended December 31, 2025, driven by higher net sales[272].