01—Abstract
Summary
Summary of the 10-Q filed November 2, 2026. Cited figures are marked; the original filing is the authoritative source.
The Estée Lauder Companies Inc. reported net sales of $3.715 billiona for the three months ended September 30, 2026, up 7% from $3.481 billion a year earlier (6% in constant currency).
Operating income rose to $408 millionb from $169 million, and operating margin improved to 11.0% from 4.9%. Gross margin expanded to 75.7% from 73.4%, and operating expenses fell to 64.7% of net sales from 68.5%. Restructuring and other charges were $40 million, down from $89 million.
Net earnings were $233 millionc, or $0.64 per diluted share, compared with $47 million, or $0.13, a year earlier. Management attributed the sales growth primarily to fragrance and skin care, with Mainland China and Asia/Pacific leading regional gains. The effective tax rate was 32.5% versus 56.9% in the prior-year quarter.
Balance sheet and cash flow remained under pressure. Cash and cash equivalents declined to $3.198 billiond from $3.498 billion at June 30, 2026, and net cash used for operating activities was $166 million, improved from $340 million. Total debt was $7.251 billion, and total debt as a percent of total capitalization was 64%, down from 66%.
Management said tariffs are expected to adversely affect fiscal 2027 profitability and cash flows, and it continues to face litigation related to talc products, with 116 cases pending in U.S. state courts and additional derivative complaints filed. Subsequent to quarter end, the company acquired the remaining 51% of Forest Essentials for $160 million and expects a gain of approximately $94 million in the fiscal 2027 second quarter.
02—Key points
Key Highlights
- Net sales rose 7% to $3.715 billion, with volume up 7%, pricing down 1%, and foreign currency up 1%.
- Operating income more than doubled to $408 million from $169 million, and operating margin rose to 11.0% from 4.9%.
- Diluted EPS was $0.64 versus $0.13 a year earlier; adjusted diluted EPS excluding restructuring charges was $0.72 versus $0.32.
- Gross margin increased to 75.7% from 73.4%, and the effective tax rate fell to 32.5% from 56.9%.
- Cash and cash equivalents fell to $3.198 billion from $3.498 billion, while total debt was $7.251 billion.
- Subsequent to quarter end, the company acquired the remaining 51% of Forest Essentials for $160 million, expecting an approximately $94 million remeasurement gain in fiscal Q2 2027.
- Management expects tariffs to adversely affect fiscal 2027 profitability and cash flows, and talc-related litigation continues with 116 cases pending in U.S. state courts.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q1 FY2027, Estée Lauder Companies kept $0.06.
- Revenue$3.71B100.0%
- Cost of revenue−$902.0M24.3%
- Gross profit$2.81B75.7%
- Operating costs−$2.40B64.7%
- Operating income$408.0M11.0%
- Interest, other & tax−$175.0M4.7%
- Net income$233.0M6.3%
04—Financials
Financial Highlights
Figures from 10-QQ1 FY2027filed November 2, 2026Financial Statements
Q1 FY2027 against Q1 FY2026
| Line item | Q1 FY2027Q1 FY2026 | Change |
|---|---|---|
| Revenue | $3.71B$3.48B | +6.7% |
| Cost of Revenue | $902.00M$927.00M | −2.7% |
| Gross Profit | $2.81B$2.55B | +10.1% |
| SG&A Expenses | $2.37B$2.30B | +3.0% |
| Operating Expenses | $2.40B$2.38B | +0.8% |
| Operating Income | $408.00M$169.00M | +141.4% |
| Net Income | $233.00M$47.00M | +395.7% |
| EPS (Basic) | $0.64$0.13 | +392.3% |
| EPS (Diluted) | $0.64$0.13 | +392.3% |
| Shares Outstanding (Basic) | 363.30M361.20M | +0.6% |
| Shares Outstanding (Diluted) | 366.10M363.30M | +0.8% |
05—Questions
Frequently Asked Questions
What drove the increase in net sales this quarter?
Reported net sales rose 7% to $3.715 billion, driven by volume growth of 7%, partially offset by a 1% decrease from pricing. Fragrance rose 19%, skin care rose 5%, and Mainland China rose 15%, with travel retail and Mainland China together contributing approximately $169 million of the increase.
How did profitability change compared with the prior year?
Operating income increased to $408 million from $169 million, and net earnings increased to $233 million from $47 million. The filing attributes the improvement primarily to higher net sales and gross margin expansion, partly offset by increased consumer-facing investments, mainly advertising.
What is the company's liquidity and debt position?
Cash and cash equivalents were $3.198 billion at September 30, 2026, down from $3.498 billion at June 30, 2026. Total debt was $7.251 billion, and total debt as a percent of total capitalization was 64%. Long-term debt is rated A- with a stable outlook by Standard & Poor's and A3 with a negative outlook by Moody's.
What risks does the filing highlight for investors?
Management highlights tariffs, which it expects to adversely affect fiscal 2027 profitability and cash flows and could be material. It also cites talc-related litigation with 116 cases pending in U.S. state courts, a possible increase in new cases, and securities-related derivative complaints that management says cannot currently be reasonably assessed.
What significant events occurred after the quarter ended?
On October 5, 2026, the company completed the acquisition of the remaining 51% equity interest in Forest Essentials for $160 million, funded from cash on hand, plus a $37 million one-time inducement payment. The company expects to record an approximately $94 million gain in the fiscal 2027 second quarter from remeasuring its previously held 49% stake.
06—Continue