01—Abstract
Summary
Summary of the 10-Q filed February 5, 2026. Cited figures are marked; the original filing is the authoritative source.
The Estée Lauder Companies Inc. reported net sales of $4,229 milliona for the three months ended December 31, 2025, up from $4,004 million a year earlier, with the filing stating a 6% reported increase (4% in constant currency).
For the six months, net sales were $7,710 millionb versus $7,365 million, a 5% reported increase (3% in constant currency). Operating income was $401 million for the quarter compared with an operating loss of $(580) million in the prior-year quarter, which included a $861 million impairment of goodwill and other intangible assets. Net earnings were $162 million, or $.44 per diluted share, for the quarter, compared with a net loss of $(590) million, or $(1.64) per diluted share, a year earlier.
For the six months, net earnings were $209 millionc, or $.57 per diluted share. Gross margin improved to 76.5% for the quarter from 76.1%, and operating expenses fell to 67.0% of net sales from 90.6%, reflecting the absence of the prior-year impairment and benefits from the Profit Recovery and Growth Plan (PRGP). The effective tax rate rose sharply to 51.40% for the quarter, which the filing attributes primarily to the loss before taxes in the prior-year period and the estimated unfavorable impact of the One Big Beautiful Bill Act.
Restructuring and other charges were $207 milliond in the quarter, and the company estimates total Restructuring Program charges of $1,200 million to $1,600 million, with a net reduction of approximately 5,800 to 7,000 positions. Balance sheet and cash flow data show cash and cash equivalents of $3,082 million at December 31, 2025, and net cash from operating activities of $785 million for the six months, compared with $387 million a year earlier. Total debt was $7,322 million, and total debt as a percent of total capitalization was 64.5%.
The company paid $255 million in dividends during the six months and declared $.35 per share in quarterly dividends. Management cites ongoing challenges in Western Europe, department store headwinds in the United States, and tariffs expected to adversely affect fiscal 2026 profitability and cash flows.
02—Key points
Key Highlights
- Net sales rose to $4,229 million in the fiscal 2026 second quarter, up 6% as reported and 4% in constant currency, driven by skin care and fragrance; Mainland China net sales grew 13%.
- Operating income was $401 million (9.5% operating margin) versus an operating loss of $(580) million a year earlier, which included an $861 million goodwill and intangible impairment.
- Diluted EPS was $.44 for the quarter versus $(1.64) a year earlier; for the six months, diluted EPS was $.57 versus $(2.07).
- Gross margin expanded to 76.5% for the quarter from 76.1%, attributed to PRGP benefits, partly offset by tariffs and inflation in manufacturing costs.
- The effective tax rate increased to 51.40% for the quarter, primarily reflecting the prior-year loss before taxes and the estimated unfavorable impact of the One Big Beautiful Bill Act ($20 million for the quarter).
- Restructuring Program cumulative charges approved reached $1,249 million through January 30, 2026, against an expected total of $1,200 million to $1,600 million; the company estimates 5,800 to 7,000 net position reductions.
- Operating cash flow for the six months was $785 million versus $387 million a year earlier; cash rose to $3,082 million at December 31, 2025, and the company declared a $.35 dividend on February 4, 2026.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q2 FY2026, Estée Lauder Companies kept $0.04.
- Revenue$4.23B100.0%
- Cost of revenue−$994.0M23.5%
- Gross profit$3.23B76.5%
- Operating costs−$2.83B67.0%
- Operating income$401.0M9.5%
- Interest, other & tax−$239.0M5.7%
- Net income$162.0M3.8%
04—Financials
Financial Highlights
Figures from 10-QQ2 FY2026filed February 5, 2026Financial Statements
Q2 FY2026 against Q2 FY2025
| Line item | Q2 FY2026Q2 FY2025 | Change |
|---|---|---|
| Revenue | $4.23B$4.00B | +5.6% |
| Cost of Revenue | $994.00M$957.00M | +3.9% |
| Gross Profit | $3.23B$3.05B | +6.2% |
| SG&A Expenses | $2.63B$2.58B | +1.6% |
| Operating Expenses | $2.83B$3.63B | −21.9% |
| Operating Income | $401.00M-$580.00M | +169.1% |
| Net Income | $162.00M-$590.00M | +127.5% |
| EPS (Basic) | $0.45$-1.64 | +127.4% |
| EPS (Diluted) | $0.44$-1.64 | +126.8% |
| Shares Outstanding (Basic) | 362.10M360.00M | +0.6% |
| Shares Outstanding (Diluted) | 364.80M360.00M | +1.3% |
05—Questions
Frequently Asked Questions
How did The Estée Lauder Companies perform in the fiscal 2026 second quarter?
Net sales increased 6% to $4,229 million, and net earnings were $162 million, or $.44 per diluted share, compared with a net loss of $(590) million a year earlier. The prior-year quarter was depressed by an $861 million goodwill and intangible impairment charge.
What drove the growth in net sales?
The filing states that the increase was driven by skin care and fragrance. For the quarter, volume contributed 3% and pricing 1%, with favorable foreign currency translation of 2%. Mainland China net sales rose 13% and EUKEM rose 9%, while The Americas increased 1%.
What is the outlook and what risks does the company highlight?
Management says it expects volatility and uncertainty to continue, citing subdued sentiment in Western Europe, travel retail volatility including the change of duty-free retailers at Beijing and Shanghai airports, and department store headwinds in the United States. It expects higher tariff rates to adversely affect fiscal 2026 profitability and cash flows, which could be material.
How is the company's restructuring program progressing?
The company has approved cumulative Restructuring Program charges of $1,249 million through January 30, 2026, and expects total charges of $1,200 million to $1,600 million. It estimates a net reduction of approximately 5,800 to 7,000 positions and expects annual target gross benefits of $800 million to $1,000 million once fully implemented.
What does the filing say about legal matters and liquidity?
The company reports 105 pending cosmetic talcum powder cases, up from 84 at June 30, 2025, and states that securities class action and derivative matters cannot currently be reasonably assessed. Liquidity included $3,082 million in cash and cash equivalents and total debt of $7,322 million, with total debt at 64.5% of total capitalization.
06—Continue