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 Q1 2026, a significant improvement from a 13% decline in Q4 2025 [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 grew low single-digit [16][17] - The Ordinary brand contributed significantly to skincare share gains, while Aveda led share gains in hair care [6][17] - The Estée Lauder brand achieved its third consecutive quarter of overall share gain in the U.S. across skincare, makeup, and fragrance [6] Market Data and Key Metrics Changes - Mainland China contributed positively to the return to growth, with double-digit retail sales growth, outperforming the Prestige Beauty market [5][6] - The Americas experienced low single-digit sales decline, driven by makeup and hair care categories [16][17] - Travel retail showed improvement, particularly in Asia Pacific, with double-digit growth in Japan [60] 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 [13] - The company plans to expand its presence in various online channels, including TikTok Shop and Amazon [8][72] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the fiscal 2026 outlook, despite macroeconomic volatility and challenges in certain markets [15][21] - There is optimism regarding consumer sentiment in mainland China, although it remains subdued compared to historical levels [21][43] - The company anticipates a challenging second half of the fiscal year due to tougher comparisons from the previous year [21][22] Other Important Information - The company has achieved several sustainability goals since 2019 and is committed to advancing women's and girls' health, education, and leadership [14][15] - The company recorded $697 million in cumulative restructuring charges primarily related to employee costs [19] Q&A Session All Questions and Answers Question: Volume trends versus price mix - Management noted significant share gains from volume, driven by price adjustments and new product launches, particularly in the U.S. market [24][28] - The focus is on driving unit growth and bringing new consumers to the brand [30][32] Question: Short-term clarity on guidance - Management explained that while Q1 results were strong, the full-year guidance remains cautious due to macroeconomic challenges [39][41] - There is confidence in sustaining share gains in mainland China, with a focus on maintaining momentum [41][43] Question: Margin outlook - Management reaffirmed guidance for gross and operating margins, indicating confidence in achieving targets despite potential tariff impacts [50][52] - The focus remains on consumer-facing investments while managing non-consumer-facing expenses [51][53] Question: Travel retail inventory and demand trends - Travel retail remains volatile, but there are signs of recovery, particularly in Japan and other emerging markets [58][60] - Inventory levels are now aligned with demand, and management is optimistic about future retail activations [63][64] Question: Opportunities in new channels - The company is actively pursuing new distribution channels and enhancing existing ones, including partnerships with platforms like TikTok and Shopify [71][72] - There is a commitment to moving quickly to meet consumer demands across various regions [75] Question: Phasing of margin expansion - Management indicated that while Q1 showed strong performance, it is too early to change the phasing of margin expectations for the year [80][81] - The focus remains on building consistent sales while investing in growth opportunities [82][86]

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 [1] 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 a profit of $390 million to a loss of $1.133 billion [1] - The stock price fell nearly 15% following the earnings report, closing at $91.23, down from $374.2 at the beginning of 2022 [1] - 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 - Except for the fragrance category, which saw stable revenue, all other major categories experienced declines: skincare down 12%, scalp care down 10%, and makeup down 6% [7] - The skincare segment, previously a strong performer, faced significant declines, particularly from core brands Estée Lauder and La Mer [7] - The makeup category's decline was attributed to poor performance from M·A·C and a $159 million expense related to a talc lawsuit settlement [7] Market Trends and Consumer Behavior - Consumers are increasingly focused on product cost-effectiveness and ingredient efficacy, impacting Estée Lauder's premium positioning [8] - From 2021 to 2024, the compound annual growth rate for high-end beauty in China is projected to decline by 3%, with the market size shrinking from 257.8 billion yuan to 236.4 billion yuan [8] - The fragrance market in China is still in its infancy, with a penetration rate of only 5%, compared to 40% in Western markets, indicating significant growth potential [11] Strategic Changes and Future Outlook - Starting from Q1 of fiscal year 2026, Estée Lauder will report performance for mainland China as an independent region [5] - The company is undergoing significant restructuring, including a global layoff of approximately 7,000 positions, with over 3,200 already cut [9] - The CEO expressed confidence in achieving organic sales growth in fiscal year 2026 and aims to increase the proportion of innovative product sales to over 25% [9]

Core Viewpoint - Estée Lauder reported its largest loss in two decades for the fiscal year 2025, with net sales declining by 8% to $14.326 billion and a net profit drop of 390%, resulting in a loss of $1.133 billion [1][2] Group 1: Financial Performance - For fiscal year 2025, Estée Lauder's net sales were $14.326 billion, down 8% year-over-year, and net profit fell from $390 million to a loss of $1.133 billion [1] - The stock price dropped nearly 15% following the earnings report, with current shares at $87.72, down from $374.2 at the beginning of 2022 [1] - Morgan Stanley maintains a "neutral" bearish rating on Estée Lauder, predicting a potential decline of over 20% in the next 12 months [1] Group 2: Product Category Performance - All major product categories except for fragrance saw declines, with skincare and scalp care down 12% and 10% respectively, and makeup down 6% [2] - The fragrance category remained stable, with brands like Le Labo contributing to double-digit growth [5][6] - The skincare segment, previously a stronghold, faced significant declines attributed to underperformance of key brands like Estée Lauder and La Mer [2] Group 3: Market Trends and Consumer Behavior - Consumers are increasingly focused on cost-effectiveness and product efficacy, impacting Estée Lauder's high-end positioning [3] - The Chinese high-end beauty market is experiencing a compound annual growth rate decline of 3% from 2021 to 2024, with a market size reduction from 257.8 billion to 236.4 billion [3] - Emerging brands are capturing market share from traditional giants by offering innovative products and marketing strategies [3] Group 4: Strategic Changes and Future Outlook - Estée Lauder is undergoing significant operational changes, including a global workforce reduction of approximately 7,000 positions, with over 3,200 already cut [4] - The company projects a net sales growth of 2% to 5% for fiscal year 2026, with adjusted earnings per share expected to rise by 26% to 39% [4] - The company plans to enhance its product innovation, aiming for innovative products to account for over 25% of sales in fiscal year 2026 [3][4] Group 5: Fragrance Market Potential - The fragrance market in China is still in its infancy, with a penetration rate of only 5%, compared to over 40% in Western markets [5] - The fragrance segment is expected to grow at a compound annual growth rate of 21.78% from 2021 to 2026, outpacing most other beauty categories [5] - Despite current success, the fragrance business faces challenges from established luxury brands and shifting consumer preferences [7]

Core Viewpoint - Estée Lauder is facing significant challenges in its recovery path, with a decline in net sales and operating income amid economic downturns and geopolitical factors [1][3]. Financial Performance - For the fiscal year 2025, Estée Lauder reported a net sales decline of 8% year-over-year, totaling $14.33 billion (approximately ¥1028.01 billion) [1][2]. - The company's gross profit decreased by 5% to $10.60 billion, with a gross margin of 74.0% [2]. - Operating income turned into a loss of $785 million, marking a significant decline from a profit of $970 million in the previous year [2][6]. - The diluted net loss per share was $3.15, compared to earnings of $1.08 per share in the prior year [2]. Business Segment Performance - The only category to show growth was the fragrance segment, which remained flat with a slight increase, while skincare, makeup, and hair care categories experienced declines of 12%, 6%, and 10% respectively [4][6]. - The skincare segment's decline was attributed to decreased sales of brands like Estée Lauder and La Mer, alongside a drop in Asian travel retail sales [7][11]. - The makeup segment's downturn was primarily due to poor performance from brands like M·A·C and Too Faced [7][8]. Regional Performance - All regions reported declines in net sales, with the EMEA region experiencing the largest drop of 12%, followed by Asia/Pacific at 7% and the Americas at 4% [10][11]. - In mainland China, net sales fell by 6%, influenced by a challenging retail environment and low consumer sentiment [11][14]. Strategic Initiatives - Estée Lauder is undergoing a restructuring plan (PRGP) aimed at restoring profitability, which has already led to over 3,200 job cuts, with projections of total cuts reaching between 5,800 to 7,000 positions [19][22]. - The company anticipates that the restructuring will incur pre-tax costs between $1.6 billion to $3.3 billion [19]. Future Outlook - Despite current challenges, Estée Lauder's management expressed confidence in achieving organic sales growth in fiscal year 2026 and aims to rebuild operational profitability [3][22]. - The company plans to report its financials based on a new geographical structure starting Q1 of fiscal year 2026, which will include China as a separate reporting region [11][19].

Group 1 - L'Oréal is reportedly interested in acquiring the UK skincare brand Medik8, which has sparked discussions in the industry [1] - Medik8 is known for its "CSA skincare philosophy" and has gained popularity for its "morning C, evening A" concept [2] - Medik8's sales are projected to grow by 50% in 2024, with global revenue expected to exceed $100 million (approximately 720 million RMB) in 2025 [4] Group 2 - L'Oréal's skincare division has been expanding rapidly, with sales surpassing 7 billion euros (approximately 54.8 billion RMB) in 2024, making it one of the fastest-growing segments of the company [6] - Estée Lauder's brand The Ordinary has entered the Chinese market, emphasizing high-concentration ingredient formulations at affordable prices [6] - Both L'Oréal and Estée Lauder are targeting a trend where consumers prefer effective and cost-efficient products [8] Group 3 - Local skincare brands like Winona and Yuze have established a strong market presence in China, leveraging a "medical-research co-creation" model [9] - The evolving consumer awareness in China indicates that mere ingredient stacking is insufficient; product texture, scientific formulation, and brand storytelling are becoming increasingly important [9] - For L'Oréal, building a distribution channel for Medik8 in China is crucial for market entry, while The Ordinary faces challenges from well-established local competitors [10]

Core Viewpoint - The company, which owns The Ordinary and Clinique brands, expects a sales decline of 8% to 9% this year, which is worse than Wall Street's expectations [1] Group 1: Sales and Financial Performance - The anticipated sales decline is attributed to trade turmoil and a challenging economic outlook, exacerbating existing deep-rooted challenges faced by the beauty giant [1] - The company's stock rose by 5% in pre-market trading on Thursday, despite a year-to-date decline of 20% for Estée Lauder, compared to a 5.3% drop in the S&P 500 index [1] Group 2: Strategic Initiatives - The company has indicated early signs that its turnaround plan is showing effectiveness, suggesting potential for recovery if issues are adequately addressed [1] - Recent tariff measures have been implemented to mitigate potential negative impacts related to the economic challenges [1]