Estée Lauder reports US$1B loss amid sales declines, restructuring and tariff pressures

The Estée Lauder Companies (ELC) has reported a net loss of US$1.13 billion for fiscal 2025, as restructuring costs, falling sales, and looming tariff pressures weighed on results. Despite fragrance and digital-driven brands offering bright spots, shares still fell 6% following the reported losses, before closing about 4% lower. 

Q4 net sales declined 12% year over year to US$3.41 billion, while adjusted earnings per share fell to US$0.09 from US$0.64. For the full year, net sales decreased 8% to US$14.3 billion, and adjusted earnings per share dropped 42% to US$2.99. ELC also declared a quarterly dividend of US$0.35 per share.

The fiscal 2025 results mark the company’s third consecutive year of declining sales.

Skin care sales fell 16% in the fourth quarter, makeup decreased 11%, hair care dropped 15%, while fragrance was the only category to grow, rising 4%.

The company says it expects tariffs to weigh heavily on its near-term results. Based on current information and its net of mitigation measures, tariff-related headwinds are forecast to reduce FY2026 profitability by about US$100 million.

“Despite continued volatility in the external environment, we embarked on fiscal 2026 with signs of momentum and confidence in our outlook to deliver organic sales growth this year after three years of declines and to begin rebuilding operating profitability in pursuit of a solid double-digit adjusted operating margin over the next few years,” says Stéphane de La Faverie, president and CEO of ELC.

Investor reactions reflected caution despite management’s optimistic guidance. The Motley Fool noted that while cost savings are expected to support profitability, “continued revenue declines have led to investor skepticism.”

Shares dropped around 6% following the results, closed about 4% lower, and remained about 76% below their early 2022 highs.

Analysts also pointed to the company’s relatively high valuation, trading at around 40 times forward earnings, as a factor weighing on sentiment.

Skin care sales fell 16% in the fourth quarter, makeup decreased 11%, and fragrance grew 4%.Category and regional performance

By category, skin care sales fell 16% in the fourth quarter compared to last year. Makeup declined 11%, hair care dropped 15%, and fragrance grew 4%, which was supported by strong performances from Le Labo and Jo Malone London.

Regionally, the European, Middle Eastern, and African businesses recorded a 24% sales drop in constant currency during the quarter, partly due to weaker travel retail, while the Americas fell 5% and Asia-Pacific declined 4%.

Despite the drop in the US, the company reported that prestige beauty sales improved in H2, supported by The Ordinary, Clinique, and Estée Lauder brands.

In mainland China, prestige beauty grew in Q4, led by La Mer and Tom Ford. For the full year, the company says La Mer and Le Labo supported market share gains, though it did not disclose specific figures.

In Japan, ELC says it gained market share every quarter of fiscal 2025 and retained its position as the number-one fragrance player. Le Labo, Jo Malone London, and Kilian Paris were cited as the main contributors, though the company did not disclose specific market share figures.

Tariff impact on outlook

The company expects tariffs tied to US–EU trade tensions to weigh significantly on profitability in fiscal 2026, estimating an impact of about US$100 million. To mitigate these effects, ELC says it is exploring sourcing shifts and efficiency measures.

The company will reportedly tighten inventory controls to prevent excess stock and reduce discounting across channels. By limiting reliance on promotions, the aim is to align retail sales more closely with reported net sales, improve cash flow, and strengthen brand equity.

For fiscal 2026, ELC forecasts net sales between US$14.61 billion and US$15.04 billion and adjusted earnings per share of US$1.90 to US$2.10, above analyst consensus of US$1.48.

The company projects a global prestige beauty growth of 2–3%, “mid-single-digit” growth in mainland China, and a “modest” recovery in travel retail. Excluding mainland China, most other markets are expected to see “low-single-digit” growth. No numerical forecast was given.

Looking to the first quarter of fiscal 2026, the company anticipates results ranging from a “low-single-digit” decline to “slightly positive” growth. The company hopes strong performance in travel retail and mainland China will drive these results, but declines in other areas will partly offset these gains.

Shares dropped around 6% after the results and closed about 4% lower.Innovation and digital expansion

ELC continued to invest in product launches and digital growth to drive consumer engagement. Recent releases included Estée Lauder’s Double Wear Stay-in-Place 24-Hour Concealer, La Mer’s The New Balancing Treatment Lotion, Clinique’s Almost Lipstick in Nude Honey, and The Ordinary’s UV Filters SPF 45 Serum.

The company also expanded its e-commerce reach by bringing eight brands to Amazon US’ Premium Beauty platform and strengthening its presence on Amazon Canada, Shopee, and TikTok Shop.

Fragrance brand Le Labo posted sales increases in fiscal 2025, with new store openings and expanded retail distribution cited as key drivers. The company did not disclose specific sales figures.

Estée Lauder also emphasized sustainability and digital efficiency by announcing new investments in supply chain optimization and biotechnology partnerships.

Restructuring and profit recovery

In fiscal 2025, Estée Lauder continued executing its Profit Recovery and Growth Plan. 

The program includes reducing the workforce by 5,800 to 7,000 employees, recording impairments for underperforming brands such as Tom Ford Beauty, Dr.Jart+, and Too Faced, and incurring restructuring costs projected at US$1.2 billion to US$1.6 billion through fiscal 2027.

ELC says the program is designed to structurally expand gross margins and position the company for sustained profitability. It reports that the restructuring has already supported margin improvements, even as sales volumes declined.