EL's North America Trends Improve but Asia Remains the Wild Card

Core Insights - Estee Lauder Companies Inc. reported a 3% organic net sales growth in Q1 fiscal 2026, but performance varied significantly by region, raising concerns about the ability of North America to offset ongoing weaknesses in Asia [1][9] North America Performance - North America experienced a low-single-digit organic sales decline due to pressures from department store closures, a major retailer's bankruptcy, and high inventory levels, which outweighed the benefits from increased shipments to Amazon Premium Beauty stores [2][9] - The organic sales decline in the Americas segment improved to 2% in Q1 fiscal 2026, compared to a 4% decline in Q4 fiscal 2025, indicating potential stabilization in the region [3] Asia Performance - Asia/Pacific reported high-single-digit organic growth, primarily driven by global travel retail and favorable comparisons to a weak prior-year base, although underlying demand challenges persist [4][9] - Mainland China returned to growth, supported by online sales and targeted promotions, but overall consumer sentiment remains subdued [4] - Management noted that foot traffic in travel retail is recovering in select locations, but conversion rates are still below normal levels [4] Industry Comparison - Coty Inc. reported a 6% year-over-year decline in net revenues in the Americas, reflecting similar regional headwinds faced by Estee Lauder [6] - e.l.f. Beauty, Inc. saw a significant 18% year-over-year growth in U.S. net sales, highlighting a divergence in performance between U.S. and international markets [7] Valuation and Estimates - Estee Lauder shares have increased by 5.2% over the past month, outperforming the industry growth of 2.5% [8] - The company trades at a forward price-to-earnings ratio of 42.35X, significantly higher than the industry average of 28.48X [10] - The Zacks Consensus Estimate for Estee Lauder's fiscal 2026 EPS is $2.15, with a slight increase in estimates for fiscal 2027 to $2.93 [11]