Fiscal 2026 fourth quarter and full year
Filed Aug 19, 2026Delivers Return to Sales Growth and Improved Profitability with Beauty Reimagined Execution
Fiscal 2026 net sales increased 5% and organic net sales increased 3%, while adjusted operating margin expanded 320 basis points to 11.2% and adjusted diluted EPS increased 66% to $2.51. Fourth-quarter organic sales growth accelerated to 5%, with growth across all geographic regions and all product categories except Hair Care.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Full-year net salesGAAP | $15,049 million | – | 5% |
| Full-year organic net salesnon-GAAP | $14,811 million | – | 3% |
| Full-year gross profitGAAP | $11,362 million | – | 7% |
| Full-year gross marginGAAP | 75.5% | – | expanded 150 basis points |
| Full-year adjusted gross profitnon-GAAP | $11,372 million | – | 7% |
| Full-year adjusted gross marginnon-GAAP | 75.5% | – | expanded 150 basis points |
| Full-year operating incomeGAAP | $780 million | – | 100+% |
| Full-year operating marginGAAP | 5.2% | – | – |
| Full-year adjusted operating incomenon-GAAP | $1,687 million | – | 47% |
| Full-year adjusted operating marginnon-GAAP | 11.2% | – | expanded 320 basis points |
| Full-year diluted net earnings (loss) per common shareGAAP | $.50 | – | 100+% |
| Full-year adjusted diluted net earnings per common sharenon-GAAP | $2.51 | – | 66% |
| Full-year effective tax rateGAAP | 64.8% | – | – |
| Full-year adjusted effective tax ratenon-GAAP | 35.7% | – | – |
| Full-year net cash flows provided by operating activitiesGAAP | $1.77 billion | – | increased 39% |
| Full-year capital expendituresother | $457 million | – | decreased |
| Full-year free cash flownon-GAAP | $1.32 billion | – | – |
| Cash and cash equivalentsGAAP | $3.50 billion | – | increased |
| Fourth-quarter net salesGAAP | $3,627 million | – | 6% |
| Fourth-quarter organic net salesnon-GAAP | 5% | – | increased 5% |
| Fourth-quarter operating lossGAAP | $(39) million | – | 90% |
| Fourth-quarter adjusted operating incomenon-GAAP | $267 million | – | 95% |
| Fourth-quarter net lossGAAP | $116 million | – | – |
| Fourth-quarter diluted net loss per common shareGAAP | $.32 | – | – |
| Fourth-quarter adjusted diluted net earnings per common sharenon-GAAP | $.39 | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| Skin CareOrganic growth was driven by La Mer, The Ordinary and Estée Lauder. | $7,338 million | – | 5% reported; 4% organic |
| MakeupGrowth from M·A·C and TOM FORD was offset by declines from Bobbi Brown and Too Faced. | $4,276 million | – | 2% reported; — organic |
| FragranceDouble-digit Luxury Brands growth was led by Le Labo, TOM FORD and KILIAN PARIS. | $2,779 million | – | 12% reported; 10% organic |
| Hair CareAveda declines were largely offset by growth from The Ordinary. | $565 million | – | — reported; (1)% organic |
| OtherNo product-category driver was provided. | $103 million | – | 3% reported; 3% organic |
| The AmericasAdjusted operating income increased 17%, reflecting higher sales and PRGP benefits, partly offset by consumer-facing investments. | $4,463 million | – | 1% reported; 1% organic |
| EUKEMAdjusted operating income increased 35%, primarily due to higher gross profit from sales growth. | $3,794 million | – | 6% reported; 1% organic |
| Asia/PacificGrowth was primarily due to Asia travel retail, including Korea, Hong Kong SAR and Hainan travel retail. | $3,746 million | – | 4% reported; 4% organic |
| Mainland ChinaHigh-single-digit growth was driven by innovation, existing products, key shopping moments, holiday and targeted expanded consumer reach. | $3,058 million | – | 12% reported; 9% organic |
| Fourth-quarter Skin CareFourth-quarter sales grew as part of growth across all product categories except Hair Care. | $1,853 million | – | 9% reported; 7% organic |
| Fourth-quarter MakeupFourth-quarter sales grew as part of growth across all product categories except Hair Care. | $1,010 million | – | 3% reported; 2% organic |
| Fourth-quarter FragranceFourth-quarter sales grew as part of growth across all product categories except Hair Care. | $618 million | – | 10% reported; 10% organic |
| Fourth-quarter Hair CareHair Care was the only product category with fourth-quarter sales declines. | $140 million | – | (1)% reported; (1)% organic |
| Fourth-quarter OtherNo driver was provided. | $19 million | – | (5)% reported; (5)% organic |
| Fourth-quarter The AmericasNorth America returned to growth, aided by campaigns, shipment timing, consumer-facing investments and an $18 million gift-card-liability reversal. | $995 million | – | 6% reported; 5% organic |
| Fourth-quarter EUKEMThe conflict in the Middle East had an unfavorable impact to EUKEM sales growth of 2%. | $851 million | – | 3% reported; 1% organic |
| Fourth-quarter Asia/PacificFourth-quarter sales grew across all geographic regions. | $970 million | – | 7% reported; 9% organic |
| Fourth-quarter Mainland ChinaFourth-quarter sales grew across all geographic regions. | $824 million | – | 12% reported; 7% organic |
Fiscal 2027 full year ending June 30, 2027 outlook
- RevenueAs Reported - GAAP 3% - 5%; Organic, Non-GAAP 3% - 5%
- Gross marginmodest expansion in gross margin
- Operating expensescontinued operating leverage in non-consumer facing expenses
- Tax rateadjusted effective tax rate in the range of approximately 33% to 34%
- NoteAdjusted operating margin of 12.7% to 13.5%
- NoteEPS - GAAP $2.52 - $2.85
- NoteForecasted/Adjusted EPS - Non-GAAP $3.10 - $3.35
- NoteForecasted/Adjusted Constant Currency EPS - Non-GAAP $3.06 - $3.31
- NoteDiluted weighted-average shares outstanding of approximately 368 million shares
- NoteNet cash flows provided by operating activities to be between $1.3 billion and $1.4 billion
- NoteCapital expenditures to be approximately 4% of projected sales
- NoteNo deterioration in the geopolitical landscape or related impacts, including tariffs and consumer sentiment
Capital returns
- The Company paid $508 million in Dividends during fiscal 2026.
- Quarterly dividend of $.35 per share on Class A and Class B Common Stock, payable in cash on September 15, 2026 to stockholders of record at the close of business on August 31, 2026.
What drove it
- PRGP operational efficiencies, procurement, expense optimization and lower excess and obsolescence supported gross-margin expansion.
- Consumer-facing investments increased 7% in both the fourth quarter and full year, or 5% and 4% excluding foreign currency translation, respectively.
- Fragrance delivered 10% organic sales growth, led by Le Labo, TOM FORD and KILIAN PARIS.
- Mainland China delivered 9% organic net sales growth, while Asia/Pacific organic sales increased 4%.
- North America returned to growth in the fourth quarter.
- The Company concluded PRGP restructuring-program approvals as of June 30, 2026 and expects annual gross benefits of approximately $1.2 billion.
- Innovation represented 23% of fiscal 2026 sales.
Concerns
- Incremental tariffs had a full-year gross impact of $102 million, primarily in cost of sales, partially offset by a $38 million fourth-quarter benefit from tariff refunds received.
- The conflict in the Middle East had a dilutive impact to fiscal 2026 reported and adjusted diluted EPS of $.03 and $.06, respectively, and had an unfavorable impact to fourth-quarter consolidated sales growth of 1%.
- Makeup adjusted operating results decreased to a loss position, reflecting sales deleverage from increased consumer-facing investments.
- Hair Care organic net sales decreased 1%, primarily due to Aveda declines and continued challenges in the salon channel.
- Fiscal 2027 operating cash flow is forecast to decline to between $1.3 billion and $1.4 billion, reflecting higher restructuring payments and increased working-capital needs.
What to watch
- Execution against fiscal 2027 organic net sales growth guidance of 3% to 5%, including the expected greater increase in the first half.
- The expected return to full-year Makeup growth and continued growth in Fragrance and Skin Care.
- Realization of the vast majority of full run-rate PRGP benefits during fiscal 2027.
- Adjusted operating-margin delivery within the raised 12.7% to 13.5% outlook.
- Travel retail shipment improvement, including the expected increase in fiscal 2027.
- Tariffs, geopolitical conditions, consumer sentiment and any related impact on results.
Balance sheet and cash flow
- Cash and cash equivalents increased to $3.50 billion from $2.92 billion.
- Net cash flows provided by operating activities increased 39% to $1.77 billion, compared with $1.27 billion in the prior year.
- Capital expenditures decreased to $457 million from $602 million in the prior year.
- Free Cash Flow was $1.32 billion, compared with $0.67 billion in the prior year.
- The Company paid $300 million in deferred consideration associated with the fiscal 2023 acquisition of the TOM FORD brand, including a $150 million early payment made in the fiscal 2026 third quarter.
Analysis
Estée Lauder closed fiscal 2026 with a return to growth and substantially improved profitability. Full-year net sales increased 5% to $15,049 million and organic net sales increased 3%. Fourth-quarter reported sales increased 6% to $3,627 million and organic sales increased 5%, marking the fourth consecutive quarter of growth. The quarter included growth across every geographic region and all product categories except Hair Care, with North America returning to growth.
Product mix was led by Fragrance, where organic sales increased 10%, supported by double-digit Luxury Brands growth led by Le Labo, TOM FORD and KILIAN PARIS. Skin Care organic sales increased 4%, driven by La Mer, The Ordinary and Estée Lauder. Makeup was virtually flat organically for the full year, although growth from M·A·C and TOM FORD offset declines at Bobbi Brown and Too Faced. Hair Care organic sales declined 1%, reflecting Aveda's planned promotional rebalancing, door exits and salon-channel challenges.
Margins improved sharply. Reported and adjusted gross margin each expanded 150 basis points to 75.5%, driven by PRGP operational efficiencies and lower excess and obsolescence, partly offset by inflation and tariffs. Adjusted operating margin expanded 320 basis points to 11.2%, and adjusted operating income increased 47% to $1,687 million. The improvement funded a 7% increase in consumer-facing investments while non-consumer-facing expenses were flat for the full year. Reported operating margin was 5.2%, reflecting restructuring and other charges and an $84 million securities class action loss contingency, net of funded insurance recoveries.
Cash generation strengthened alongside the earnings recovery. Operating cash flow increased 39% to $1.77 billion, capital expenditures decreased to $457 million and free cash flow rose to $1.32 billion. Cash and cash equivalents increased to $3.50 billion. The company paid $508 million in dividends and $300 million of deferred consideration related to the TOM FORD acquisition. It also announced a quarterly dividend of $.35 per share.
Fiscal 2027 guidance calls for 3% to 5% reported and organic sales growth, adjusted operating margin of 12.7% to 13.5%, and adjusted EPS of $3.10 to $3.35. The operating-margin outlook was raised from the preliminary May 2026 outlook of 12.5% to 13.0%, according to the current release. Management expects continued Fragrance and Skin Care growth, a return to growth in Makeup, more diversified regional growth and a greater sales increase in the first half. Key operating variables are PRGP benefit realization, travel retail shipments, tariffs, geopolitical conditions and the expected reduction in operating cash flow from higher restructuring payments and working-capital needs.
Management, verbatim
I am incredibly proud of our team for delivering fiscal 2026 results ahead of the expectations we had to start the year. We reignited growth with organic sales rising 3%, driven by the breadth of growth across brands, and achieved significant operating margin expansion.
Stéphane de La Faverie, President and CEO
For fiscal 2027, we are affirming our confidence to accelerate organic sales growth. In addition, we are raising our outlook for an even stronger adjusted operating margin, as we double down on our strengths to further diversify growth across product categories and geographies, including accelerating growth in North America.
Stéphane de La Faverie, President and CEO
Not in the filing
stated, not guessed- Full-year GAAP net income or loss was not provided in the supplied filing text.
- Full-year adjusted net income was not provided in the supplied filing text.
- Fourth-quarter gross profit, gross margin, adjusted gross profit and adjusted gross margin were not provided in the supplied filing text.
- Fourth-quarter operating margin and adjusted operating margin were not provided in the supplied filing text.
- Debt balance was not provided in the supplied filing text.
- Share repurchases were not provided in the supplied filing text.
- Previous-quarter outlook document was not provided; therefore, no formal comparison of actual results with prior guidance is included.
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.