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Why Estée Lauder Dropped Today

Core Viewpoint - Estée Lauder is experiencing significant revenue declines amid a challenging global economy, leading to skepticism about future growth despite cost-cutting measures and a new management strategy [1][2]. Financial Performance - In Q4 2025, Estée Lauder reported a revenue decline of 11.9% to $3.41 billion, with adjusted earnings per share dropping 86% to $0.09, although these results were better than analysts' low expectations [3]. - The revenue decline was primarily driven by a 24% drop in sales in the Europe, Middle East, and Africa region, attributed to weak travel-related business from Chinese tourists [4]. Management and Strategy - The new CEO, Stéphane de La Faverie, has expanded the "Profit Recovery and Growth Plan" (PRGP), resulting in the reduction of 5,800 to 7,000 employees, which may be impacting current revenue [5]. - Despite the revenue challenges, management claims that adjusted gross margins have structurally improved over the past year [5]. Future Outlook - Management projects a revenue growth of 0% to 3% for the upcoming year on a constant currency basis, indicating a potential return to growth [7]. - The stock remains significantly below its all-time highs, trading at 40 times forward earnings, suggesting that investors will need to see substantial profit growth beyond the next year for a meaningful recovery [8].