01—Abstract
Summary
Summary of the 10-Q filed October 30, 2025. Cited figures are marked; the original filing is the authoritative source.
The Estée Lauder Companies Inc. reported net sales of $3.48 billiona for the three months ended September 30, 2025, up from $3.36 billion a year earlier, an increase of 4% as reported and 3% in constant currency.
Gross profit rose to $2.55 billionb from $2.43 billion, with gross margin at 73.4% versus 72.4%. Operating income was $169 million, compared with an operating loss of $121 million in the prior-year quarter, which included a $159 million talcum litigation settlement charge. Net earnings were $47 million, or $.13 per diluted share, versus a net loss of $156 million, or $(.43) per share.
Excluding restructuring charges and the prior-year talcum charge, diluted earnings per share were $.32 compared with $.14 a year earlier, per the company's non-GAAP reconciliation. Cash flow remained negative in the quarter, with net cash used for operating activities of $340 millionc, compared with $670 million a year earlier. Cash and cash equivalents fell to $2.22 billion from $2.92 billion at June 30, 2025.
Financing outflows included $150 milliond for payment of deferred consideration related to the TOM FORD acquisition and $127 million in dividends. Total equity was $3.89 billion, and the company declared a $.35 per share dividend on October 29, 2025. The company said it expects volatility to continue, citing weak travel retail conversion, challenges in Western Europe and department store headwinds in the United States, along with tariff uncertainty that could adversely affect fiscal 2026 profitability and cash flows.
The Restructuring Program under the Profit Recovery and Growth Plan now estimates a net reduction of approximately 5,800 to 7,000 positions and total restructuring and other charges of $1.2 billion to $1.6 billion before taxes. The company expects annual target gross benefits of $800 million to $1 billion once fully implemented. Securities class action litigation was ongoing following a March 31, 2025 denial of the motion to dismiss, and cosmetic talcum cases pending rose to 91 from 84.
02—Key points
Key Highlights
- Net sales rose to $3.48 billion from $3.36 billion, up 4% as reported and 3% in constant currency, led by fragrance (up 14%) and skin care (up 3%).
- Operating income was $169 million (4.9% operating margin) versus an operating loss of $121 million a year earlier, which included a $159 million talcum litigation settlement charge.
- Gross margin increased to 73.4% from 72.4%, reflecting Profit Recovery and Growth Plan benefits including lower promotional activity.
- Net earnings were $47 million, or $.13 per diluted share, compared with a net loss of $156 million, or $(.43) per share, a year earlier.
- Net cash used for operating activities narrowed to $340 million from $670 million, while cash and cash equivalents declined to $2.22 billion from $2.92 billion at June 30, 2025.
- The Restructuring Program estimates a net reduction of approximately 5,800 to 7,000 positions and charges of $1.2 billion to $1.6 billion before taxes, with target gross benefits of $800 million to $1 billion annually.
- Makeup operating results improved to a $15 million operating loss from a $185 million loss, while Mainland China net sales rose 9% and Asia/Pacific net sales rose 8%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2026, Estée Lauder Companies kept $0.01.
- Revenue$3.48B100.0%
- Cost of revenue−$927.0M26.6%
- Gross profit$2.55B73.4%
- Operating costs−$2.38B68.5%
- Operating income$169.0M4.9%
- Interest, other & tax−$122.0M3.5%
- Net income$47.0M1.4%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2026filed October 30, 2025Financial Statements
Q1 FY2026 against Q1 FY2025
| Line item | Q1 FY2026Q1 FY2025 | Change |
|---|---|---|
| Revenue | $3.48B$3.36B | +3.6% |
| Cost of Revenue | $927.00M$928.00M | −0.1% |
| Gross Profit | $2.55B$2.43B | +5.0% |
| SG&A Expenses | $2.30B$2.30B | −0.1% |
| Operating Expenses | $2.38B$2.55B | −6.6% |
| Operating Income | $169.00M-$121.00M | +239.7% |
| Net Income | $47.00M-$156.00M | +130.1% |
| EPS (Basic) | $0.13$-0.43 | +130.2% |
| EPS (Diluted) | $0.13$-0.43 | +130.2% |
| Shares Outstanding (Basic) | 361.20M359.60M | +0.4% |
| Shares Outstanding (Diluted) | 363.30M359.60M | +1.0% |
05—Questions
Frequently Asked Questions
How did The Estée Lauder Companies perform in the first quarter of fiscal 2026?
Net sales increased 4% to $3.48 billion, and operating income was $169 million compared with an operating loss of $121 million in the prior-year quarter. Net earnings were $47 million, or $.13 per diluted share. The prior-year quarter included a $159 million talcum litigation settlement charge, which drove much of the year-over-year improvement.
What drove the growth in net sales?
Pricing contributed 2%, volume 1%, and favorable foreign currency translation 1%. Fragrance net sales rose 14%, driven by Le Labo, TOM FORD and Jo Malone London, and skin care rose 3%. Makeup declined 1% and hair care declined 7%, with Aveda's lower sales cited as a factor. Net sales in The Americas fell 2%, while Asia/Pacific rose 8% and Mainland China rose 9%.
What is the status of the Profit Recovery and Growth Plan?
The company expects the Restructuring Program to result in charges of $1.2 billion to $1.6 billion before taxes and an estimated net reduction of 5,800 to 7,000 positions. Cumulative charges approved through October 26, 2025 totaled $852 million. Once fully implemented, the program is expected to yield annual target gross benefits of $800 million to $1 billion before taxes, and the company expects a return to a double-digit operating margin over the next few years.
What are the main risks the company highlighted?
The company cited weak travel retail conversion, subdued sentiment in Western Europe, and department store headwinds in the United States. It also flagged tariff-related volatility that could adversely affect fiscal 2026 profitability and cash flows, potential additional valuation allowances on deferred tax assets, and ongoing securities class action and talcum litigation. Its effective tax rate was 56.9% for the quarter.
06—Continue