Estée Lauder(US:EL) Yahoo Finance·2026-02-05 18:50Financial Performance Highlights - Estée Lauder reported a mixed quarter, beating earnings expectations with an operating income of $401 million, a significant improvement from the $(580) million loss in the prior year, which included $861 million in impairments [3] - Gross margin increased by 40 basis points to 76.5%, and first-half free cash flow surged to $581 million from $114 million a year earlier [3] Revenue Breakdown - Makeup sales declined 1% organically to $1.16 billion, affected by an accrual for returns ahead of the Double Wear relaunch [4] - Skin care sales grew 6% organically to $2.05 billion, driven by brands like La Mer, Estée Lauder, and The Ordinary [4] - Fragrance sales also rose 6% to $812 million, supported by TOM FORD and Le Labo [4] China Market Performance - Sales in Mainland China increased by 13%, marking the second consecutive quarter of double-digit growth, which helped mitigate weaknesses in Northern Asian travel retail [5] Guidance and Outlook - Management raised full-year guidance, projecting organic sales growth of 1% to 3% and adjusted EPS of $2.05 to $2.25 [6] - The company anticipates approximately $100 million in tariff-related headwinds in the second half, which may temper growth expectations [6] - CEO Stéphane de La Faverie highlighted the ongoing transformation of the company, emphasizing the impact of the "Beauty Reimagined" initiative [6] Strategic Initiatives - The company plans to expand M·A·C into Sephora US stores by March 2026 and enhance its digital presence on platforms like Amazon and TikTok Shop [7] Stock Market Reaction - Despite the raised guidance, shares fell 18.7% due to revenue miss and anticipated tariff headwinds, with a forward P/E ratio of 58x [8] - Adjusted operating margin improved by 290 basis points to 14.4% from the prior year [8] - EPS was reported at $0.89, beating estimates of $0.86, while revenue was $4.23 billion, in line with estimates [8]