Why did reported operating income fall while adjusted results improved?

Reported operating income declined 19% to $249 million because of $224 million in restructuring and other charges and an $84 million loss contingency tied to a potential securities class action settlement. Adjusted operating income, which excludes these items, rose 38% to $557 million.

How much did the company raise its fiscal 2026 outlook?

Adjusted diluted EPS is now expected at $2.35 to $2.45, up from $2.05 to $2.25. Adjusted operating margin is expected at 10.7% to 11.0%, and organic net sales growth at approximately 3%, at the high end of the prior range.

What is the status of the PRGP restructuring program?

Total restructuring and other charges are now expected at $1.5 billion to $1.7 billion, up from $1.2 billion to $1.6 billion, and annual gross benefits at $1.0 billion to $1.2 billion. Through March 31, 2026, cumulative charges were $1.1 billion, and the net position reduction target rose to 9,000 to 10,000.

EL 8-K: Earnings & Results

01—Abstract

Summary

Summary of the 8-K filed May 1, 2026. Cited figures are marked; the original filing is the authoritative source.

The Estée Lauder Companies Inc. (NYSE: EL) furnished an 8-K on May 1, 2026 reporting results for its fiscal 2026 third quarter ended March 31, 2026, along with a raised fiscal 2026 outlook and a preliminary view on fiscal 2027, as set out in Exhibit 99.1.

Third-quarter net sales rose 5% to $3.7 billion^a ($3,711 million reported, $3,550 million prior year), with organic net sales up 2%. As reported operating income fell 19% to $249 million, weighed down by $224 million of restructuring and other charges and an $84 million loss contingency for a potential securities class action settlement. Adjusted operating margin expanded 360 basis points to 15.0%, and adjusted diluted EPS rose 40% to $0.91.

Year-to-date free cash flow was $891 million^b versus $276 million a year earlier. For fiscal 2026, the company now expects organic net sales growth of approximately 3%, at the high end of its prior range, an adjusted operating margin of 10.7% to 11.0%, and adjusted diluted EPS of $2.35 to $2.45, up from the prior $2.05 to $2.25. The restructuring program under the Profit Recovery and Growth Plan (PRGP) now carries total expected charges of $1.5 billion to $1.7 billion and a final net reduction of 9,000 to 10,000 positions.

The company also gave a preliminary fiscal 2027 view of 3% to 5% net sales growth and an adjusted operating margin of 12.5% to 13.0%, excluding potential tariff refunds. Management cautioned that Middle East disruptions are expected to weigh on the fiscal 2026 fourth quarter, with an unfavorable impact of approximately 2% on sales growth and a $0.06^c dilutive effect on EPS.

The company also declared a quarterly dividend of $0.35^d per share, payable June 15, 2026, to holders of record on May 29, 2026. Its more detailed fiscal 2027 outlook is slated for August 2026, when fiscal 2026 full-year results are reported.

02—Key points

Key Highlights

Q3 FY2026 net sales rose 5% to $3,712 million; organic net sales increased 2%, with fragrance up 10% organically and Mainland China up 6% organically.
As reported operating income declined 19% to $249 million, including $224 million of restructuring charges and an $84 million securities class action loss contingency; adjusted operating income rose 38% to $557 million.
Adjusted operating margin expanded 360 basis points to 15.0%; adjusted gross margin rose to 76.4% from 75.0%.
Reported diluted EPS fell to $0.24 from $0.44, while adjusted diluted EPS rose 40% to $0.91.
Fiscal 2026 outlook raised: organic net sales growth of approximately 3%, adjusted operating margin of 10.7% to 11.0%, and adjusted diluted EPS of $2.35 to $2.45 (previously $2.05 to $2.25).
PRGP restructuring charges now expected at $1.5 billion to $1.7 billion, with a net reduction of 9,000 to 10,000 positions and annual gross benefits of $1.0 billion to $1.2 billion.
Preliminary fiscal 2027 view: net sales growth of 3% to 5% and adjusted operating margin of 12.5% to 13.0%; nine-month free cash flow was $891 million.

03—Questions

Frequently Asked Questions

Why did reported operating income fall while adjusted results improved?
Reported operating income declined 19% to $249 million because of $224 million in restructuring and other charges and an $84 million loss contingency tied to a potential securities class action settlement. Adjusted operating income, which excludes these items, rose 38% to $557 million.
How much did the company raise its fiscal 2026 outlook?
Adjusted diluted EPS is now expected at $2.35 to $2.45, up from $2.05 to $2.25. Adjusted operating margin is expected at 10.7% to 11.0%, and organic net sales growth at approximately 3%, at the high end of the prior range.
What is the preliminary fiscal 2027 outlook?
The company expects net sales growth of 3% to 5%, with no foreign currency impact, and an adjusted operating margin of 12.5% to 13.0%, excluding potential tariff refunds. Management assumes no business disruptions from the Middle East conflict. More detail is planned for August 2026.
What is the impact of the Middle East conflict on results?
The company expects the fiscal 2026 fourth quarter to be hit by business disruptions in the Middle East, with an unfavorable impact of approximately 2% on sales growth and a $0.06 dilutive effect on diluted EPS. For the full fiscal year, the dilutive impact on diluted EPS is estimated at $0.07.
What is the status of the PRGP restructuring program?
Total restructuring and other charges are now expected at $1.5 billion to $1.7 billion, up from $1.2 billion to $1.6 billion, and annual gross benefits at $1.0 billion to $1.2 billion. Through March 31, 2026, cumulative charges were $1.1 billion, and the net position reduction target rose to 9,000 to 10,000.

04—Continue

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