Core Viewpoint - Estée Lauder reported its largest loss in two decades, with a net sales decline of 8% to $14.326 billion and a net profit drop of 390%, resulting in a loss of $1.133 billion for the fiscal year 2025 [2][4]. Financial Performance - For fiscal year 2025, Estée Lauder's net sales were $14.326 billion, down 8% year-over-year, and net profit plummeted from $390 million to a loss of $1.133 billion [2]. - The stock price fell nearly 15% following the earnings report, closing at $91.23, down from $374.2 at the beginning of 2022 [2]. - The company anticipates a net sales growth of 2% to 5% and an adjusted earnings per share of $1.90 to $2.10 for fiscal year 2026, representing a year-over-year increase of 26% to 39% [9]. Product Category Performance - All major product categories, except for fragrance, experienced declines in net sales. Skin care and scalp care dropped by 12% and 10%, respectively, while color cosmetics fell by 6% [6]. - The fragrance category remained stable, with brands like Le Labo contributing to double-digit growth [11]. - The skin care segment, previously a strong performer, saw a 22% decline in operating profit, primarily due to underperformance from core brands Estée Lauder and La Mer [6]. Market Trends - Consumer preferences have shifted towards cost-effective and ingredient-safe products, impacting Estée Lauder's high-end positioning [7]. - The Chinese fragrance market is still in its infancy, with a penetration rate of only 5%, compared to over 40% in Western markets, indicating significant growth potential [11]. - The overall market for high-end cosmetics in China is projected to decline, with a compound annual growth rate of -3% from 2021 to 2024 [7]. Strategic Initiatives - The company is undergoing significant operational changes, including a global workforce reduction of approximately 7,000 positions, with over 3,200 already cut [9]. - Estée Lauder plans to enhance its product innovation, aiming for new products to account for over 25% of sales in fiscal year 2026 [8][12]. - The management remains optimistic about achieving organic sales growth in fiscal year 2026 despite current challenges [4].