Key Takeaways ELF is gaining share with affordable pricing, rapid innovation and a digitally native marketing model.EL is working to stabilize sales and rebuild margins through its Beauty Reimagined transformation plan.ELF reflects high-growth execution and EL diversified scale and recovery potential.e.l.f. Beauty, Inc. (ELF) and The Estee Lauder Companies Inc. (EL) are two influential players in global beauty, operating at different ends of the market while competing across several overlapping categories. ...

Estée Lauder Companies Conference Summary Company Overview - **Company**: Estée Lauder Companies (NYSE: EL) - **Event**: 2025 Conference held on December 02, 2025 - **Speakers**: CEO Stéphane de La Faverie and Chief Digital and Marketing Officer Aude Gandon Key Points Beauty Reimagined Program - The company is a year into the "Beauty Reimagined" program, focusing on five pillars: consumer coverage, accelerating innovation, and increased investment in consumer-facing initiatives [3][4] - Progress has been made in consumer coverage, with expansion into platforms like Amazon, Shopee, and TikTok Shop, reconnecting with lapsed consumers and attracting new ones [4] - Innovation is accelerating, with notable product launches like Double Wear Concealer and The Ordinary, which has seen consistent double-digit growth [5][6] Financial and Operational Performance - The company has maintained and even grown market share in the U.S. and China, with a focus on innovation and consumer engagement [5][39] - The company is in the process of reducing workforce by 5,800-7,000 positions as part of its Profit Recovery and Growth Plan (PRGP) [8] - A cultural shift is underway, with a focus on agility and accountability within the organization [19][26] Digital and Marketing Strategy - Aude Gandon emphasizes the importance of media investment rebalancing towards brand building and awareness, moving away from a solely performance-driven approach [13][15] - Personalization is a key focus, leveraging data and AI to enhance consumer engagement and marketing effectiveness [17][18] - The company is actively engaging in social selling through platforms like TikTok Shop, recognizing the need for shoppable content [27][29] Market Insights - In the U.S., the company is regaining market share after years of decline, with a focus on price-sensitive consumers and leveraging brands like The Ordinary and Clinique [39][40] - In China, the market is stabilizing after a period of depressed sales, with consistent market share gains across several brands [46][49] - Western Europe presents challenges, with low consumer sentiment in some markets, but opportunities exist in emerging markets like Mexico and India, where double-digit growth has been observed [53][55] Leadership and Organizational Changes - The executive team has undergone significant changes, with over 70% of the leadership being new or in new positions, aimed at enhancing skills in media, digital, and innovation [20][21] - The company is focused on building a more agile and accountable organization, with changes in the reward system to align with overall enterprise success [22][26] Future Outlook - The company is optimistic about its ability to sustain growth and regain market share, with a strong foundation and a committed leadership team [59][62] - Continued investment in innovation and consumer engagement is expected to drive future success [50][51] Additional Insights - The company is adapting to the evolving retail landscape, integrating emerging channels with traditional ones to enhance consumer experience [30][34] - The partnership with Shopify is seen as crucial for integrating commerce with marketing efforts [31][32] - The focus on content creation is shifting towards producing adaptable content for various platforms to meet consumer needs [33] This summary encapsulates the key discussions and insights from the Estée Lauder Companies conference, highlighting the company's strategic initiatives, market performance, and future outlook.

Financial Data and Key Metrics Changes - The company reported organic sales growth of 3% in the first quarter, a significant improvement from a 13% decline in the previous quarter [4][16] - Gross margin expanded by 60 basis points to 73.3%, driven by sales growth and benefits from the Profit Recovery and Growth Plan (PRGP) [17] - Operating margin increased by 300 basis points to 7.3% compared to 4.3% last year, reflecting operational efficiencies and reduced non-consumer facing expenses [17][19] - Diluted EPS more than doubled to $0.32 from $0.14 last year [19] Business Line Data and Key Metrics Changes - Fragrance category saw double-digit growth, while skincare experienced low single-digit growth [16] - Makeup and hair care categories declined, contributing to a low single-digit decrease in the Americas [16] - Retail sales in skincare grew 8%, outperforming the category growth of 6% [7] Market Data and Key Metrics Changes - Mainland China contributed positively to the return to growth, with double-digit retail sales growth, significantly outperforming the prestige beauty market [5][42] - Emerging markets, particularly Mexico, Turkey, and India, showed double-digit growth [4] - The U.K. market saw nearly 10% industry sales growth, with strong sequential improvement in retail sales trends [8] Company Strategy and Development Direction - The company is focused on its "Beauty Reimagined" action plan, which includes enhancing consumer coverage, driving innovation, and increasing consumer-facing investments [5][12] - A new partnership with Shopify aims to modernize and scale the direct-to-consumer business [14] - The company plans to expand its presence in various channels, including Amazon and TikTok Shop, to better connect with younger consumers [9][78] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the fiscal 2024 outlook, aiming for sustainable sales growth and rebuilding operating margins to solid double digits in the coming years [5][24] - The macroeconomic environment remains dynamic, with ongoing challenges and opportunities, particularly in the East [22][44] - The company anticipates a non-linear growth path due to macro volatility and tougher comparisons in the second half of the fiscal year [22][23] Other Important Information - The company opened 14 net new freestanding stores, enhancing its brand portfolio [12] - The fiscal 2025 Social Impact and Sustainability Report highlighted achievements in climate, water, waste, and social investment [15] Q&A Session Summary Question: Volume trends versus price mix - Management noted significant share gains driven by volume, with strategic price adjustments contributing to new consumer acquisition [26][28] Question: Clarity on full-year guidance - Management explained that while Q1 showed strong growth, the full-year guidance remains cautious due to macro volatility and challenging comparisons in the second half [40][46] Question: Margin outlook for the year - Management reaffirmed guidance for gross and operating margins, indicating confidence in maintaining progress despite potential tariff impacts [52][56] Question: Asia travel retail inventory levels - Management confirmed that travel retail inventory is now appropriately sized relative to demand, with positive momentum in certain markets [62][67] Question: Opportunities in new channels - Management emphasized the importance of moving quickly into new channels and enhancing existing ones, with ongoing efforts to expand distribution and consumer engagement [76][80]

Financial Data and Key Metrics Changes - The company reported organic sales growth of 3% in the first quarter, a significant improvement from a 13% decline in the previous quarter [4][16]. - Gross margin expanded by 60 basis points to 73.3%, while operating margin increased by 300 basis points to 7.3% compared to the previous year [17][19]. - Diluted EPS more than doubled to $0.32, up from $0.14 last year [19]. Business Line Data and Key Metrics Changes - Fragrance category saw double-digit growth, while skincare experienced low single-digit growth [16]. - Makeup and hair care categories declined, contributing to a low single-digit decrease in the Americas [17]. - The Ordinary brand drove share gains in skincare, while Aveda contributed to share gains in hair care [7][11]. Market Data and Key Metrics Changes - Mainland China contributed positively to growth, with the company outperforming the prestige beauty market, achieving double-digit growth [5][42]. - High single-digit growth was reported in priority emerging markets, including Mexico, Turkey, and India [4]. - The UK market showed resilience with nearly 10% industry sales growth, while France and Spain also saw share gains [8][10]. Company Strategy and Development Direction - The company is focused on its "Beauty Reimagined" action plan, which includes enhancing consumer coverage, driving innovation, and increasing consumer-facing investments [5][12]. - A new partnership with Shopify aims to modernize and scale the direct-to-consumer business [14]. - The company plans to expand its presence in various channels, including Amazon and TikTok Shop, to better connect with younger consumers [9][78]. Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the fiscal 2024 outlook, emphasizing the importance of sustainable sales growth and rebuilding operating margins [5][24]. - The macroeconomic environment remains dynamic, with ongoing challenges in certain markets, particularly in the East [22][44]. - The company anticipates a non-linear growth path, with potential headwinds from tariffs impacting profitability by approximately $100 million [23]. Other Important Information - The company opened 14 net new freestanding stores and launched several new campaigns to enhance consumer engagement [12][15]. - The fiscal 2025 Social Impact and Sustainability Report highlighted achievements in climate, water, waste, and social investment [15]. Q&A Session Summary Question: Volume trends versus price mix - Management noted significant share gains driven by volume, with strategic price adjustments contributing to new consumer acquisition [26][30]. Question: Clarity on full-year guidance - Management explained that while Q1 results were strong, macro volatility and challenging comparisons in the second half influenced the decision to maintain guidance [40][46]. Question: Margin outlook for the year - Management reaffirmed guidance for gross and operating margins, indicating confidence in sequential improvement despite potential tariff impacts [52][54]. Question: Asia travel retail inventory levels - Management confirmed that travel retail inventory is appropriately sized relative to demand, with positive momentum observed in certain markets [60][66]. Question: Opportunities in new channels - Management emphasized the importance of moving quickly into new channels and enhancing existing ones, with ongoing efforts to expand distribution and consumer engagement [74][78].

Core Viewpoint - Goldman Sachs upgraded Estée Lauder from "Neutral" to "Buy," raising the price target to $115 from $76, indicating a belief that the company has reached a "fundamental inflection point" after previous struggles [1] Group 1: Company Strategy and Performance - Estée Lauder's "Beauty Reimagined" strategy is gaining traction, with management launching brands on Amazon across 11 divisions and TikTok, adopting a consumer-first approach to drive faster innovation [2] - The company is emerging from three consecutive years of sales declines, with a fiscal 2026 revenue growth guidance of flat to 3%, marking a turnaround after an 8% decline in fiscal 2025 [5] - CEO Stéphane de la Faverie's strategy focuses on five pillars, with consumer coverage and innovation showing the fastest progress, including the operation of 11 brand stores on Amazon's U.S. Premium Beauty platform [6] Group 2: Market Trends and Growth Catalysts - China is identified as a significant catalyst, with sales returning to mid-single-digit growth in the second half of fiscal 2025 after prolonged weakness [3] - Travel retail is rebounding, particularly in Hainan, with inventory levels improving; travel retail previously accounted for nearly a third of sales but fell to 15% in fiscal 2025 [3] - Goldman Sachs forecasts 500 basis points of EBIT margin expansion by fiscal 2028, driven by cost efficiencies and productivity gains, expecting double-digit EBIT margins by fiscal 2027 [4] Group 3: Stock Performance and Market Sentiment - Estée Lauder's stock has rallied over 80% in the past six months as market sentiment improves, with recent upgrades from HSBC, Deutsche Bank, and BofA Securities indicating growing Wall Street confidence [4]

Core Insights - Global beauty giants are redefining growth strategies to reshape consumer experiences and set new industry benchmarks, with Estee Lauder Companies Inc. expected to generate topline growth as early as the fiscal first quarter starting in September, followed by a return to double-digit EBIT margins in FY27 and beyond according to Goldman Sachs [1] Company Analysis - Analyst Bonnie Herzog upgraded Estee Lauder's rating to Buy and raised the price target to $115, indicating confidence in the company's strategic vision "Beauty Reimagined" [2] - The management's consumer-first approach and focus on faster on-trend innovation aim to make Estee Lauder a more agile beauty company, although this has led to underperformance in recent years [3] - Estee Lauder's shares were up 5.81% at $92.74, nearing its 52-week high of $97.44 [3] Industry Trends - The prestige beauty industry has mid-single-digit long-term growth potential [5] - Stabilizing business trends in Estee Lauder's key China market, with mainland China sales expected to return to mid-single-digit growth in the latter half of 2025 [5] - Recovery in travel retail, particularly with Hainan returning to growth in May [5] - Anticipated market share gains in the U.S. in the latter half of 2025 after several years of contraction [5] - Strong savings are expected to drive a recovery in gross margins, supporting EBIT margin expansion in FY26 and beyond while fueling continued reinvestments [5]

Group 1 - The session included a video presentation that outlined the "5 pillars of Beauty Reimagined," which were initially shared externally in February [2] - The company has been aligning its strategies with previously identified needs, indicating a proactive approach to its business model [3] Group 2 - The discussion emphasized the importance of the forward-looking statements disclosure, suggesting a focus on transparency and future planning [2]

Industry Overview - The beauty and cosmetics industry has evolved into a multi-billion-dollar global market, driven by innovation, cultural trends, and changing consumer values [2] - Skincare has become a dominant trend, with consumers prioritizing healthy skin over cosmetic coverage, leading to a surge in products featuring natural ingredients and dermatologist-recommended solutions [3][4] - Sustainability is increasingly important, with a focus on ethically sourced ingredients, sustainable packaging, and transparent business practices [5] Company Insights - Johnson & Johnson (JNJ) is making strides in sustainability through initiatives like reducing plastic usage and improving recyclability in its skincare and personal care lines [6] - Unilever PLC (UL) is integrating advanced technologies into its skincare brands, focusing on dermocosmetics that combine pharmaceutical research with skincare [8] - The Estee Lauder Companies Inc. (EL) is undergoing a transformation with its "Beauty Reimagined" initiative, emphasizing digital agility and consumer-centricity [10] - Coty Inc. is redefining its position in the beauty landscape through innovation and digital acceleration, with a strong focus on prestige fragrances [15][16] - Ulta Beauty is enhancing its customer experience through digital innovation and a loyalty ecosystem, with over 45 million active rewards members [20][22] Technological Advancements - Technology is reshaping the beauty industry, with AI-powered diagnostics and augmented reality enhancing the shopping experience [7] - The Estee Lauder Companies is leveraging AI for demand forecasting and product development, partnering with Adobe and Microsoft for further innovation [13][14] - Ulta Beauty is utilizing mobile-first innovations and AI tools for personalized beauty experiences, enhancing its omnichannel strategy [21][22] Market Trends - The rise of K-beauty and J-beauty influences consumer preferences, leading to increased investment in hydration-focused and sun protection products [4] - Coty's online sales now contribute nearly 20% to total revenues, supported by partnerships with platforms like Amazon and TikTok Shop [17] - Ulta Beauty is seeing growth across multiple categories, particularly in fragrance and skincare, while also expanding its wellness offerings [19]

Core Viewpoint - Estee Lauder Companies Inc. is set for a significant turnaround driven by its "Beauty Reimagined" strategy, despite recent challenges, particularly in Asia, with a forecasted stock price increase of 30% [1][2]. Group 1: Financial Performance and Projections - The company is expected to achieve a 4% revenue CAGR through fiscal year 2027 and a margin expansion of 430 basis points to 12%, with EBIT projected to be 10% above consensus [3]. - Earnings per share (EPS) have dropped by 80% from their peak due to weakness in Asia, particularly in China and Hainan, but improved demand is anticipated in the upcoming quarters [5]. - The current trading multiple of 2.4x EV/sales indicates a significant discount compared to peers like L'Oréal, suggesting potential for a re-rating of the stock [7]. Group 2: Strategic Initiatives - The "Beauty Reimagined" strategy focuses on innovation speed, new channels, and cost efficiency, with a potential 10% reduction in headcount yielding up to $1 billion in savings, which may be reinvested into a 25% increase in brand and consumer marketing [4]. - The company generates $14 billion in revenue across 25 brands, positioning itself as the second-largest player in the $160 billion global prestige beauty market [4]. Group 3: Market Conditions - A more rational market environment during key shopping festivals and stabilizing trends in Hainan are expected to support growth in fiscal year 2026, while Korea's travel retail segment faces ongoing pressure [6].