Estée Lauder sales rebound as Fragrance and China drive FY2026 growth

The Estée Lauder Companies (ELC) has released its Q4 and FY2026 results, revealing a 5% sales rebound and improved profitability outlook, driven by Fragrance and growth in China. The global cosmetics conglomerate’s financials indicate a development toward a growth phase following its previous recovery period. 

China acted as a major growth engine for the company as mainland China’s organic sales increased 9%, with reported sales up 12%. Fragrance represented the strongest growth for ELC as its organic sales grew 10%, and reported sales went up 12% to US$2.78 billion.

ELC also cited its Profit Recovery and Growth Plan (PRGP) as a continuing restructuring strategy. It expects to cut 10,000 jobs, which sits “at the high-end of the previously communicated range.” The company expects the PRGP restructuring program to yield approximately US$1.2 billion in annual gross benefits.

“We reignited growth with organic sales rising 3%, driven by the breadth of growth across brands, and achieved significant operating margin expansion,” says Stéphane de La Faverie, president and CEO at ELC.

“We ended the year on a high note, as organic sales growth accelerated to 5% for our fourth consecutive quarter of growth and stronger profitability. We are delivering on all aspects of Beauty Reimagined. Our One ELC operating model is increasingly enabling the entire organization to move at speed and with discipline.”

Sales and profitability rise

Estée Lauder reported stronger sales and profitability in FY2026.

ELC reported a strong fiscal year in both sales and profitability.

In sales, the 5% full-year net growth added up to US$15.05 billion. The company reported that its growth momentum picked up toward year-end, with reported sales up by 6% in Q4. Organic sales were up by 5%, marking its fourth consecutive quarter of organic growth.

Profitability saw substantial growth as adjusted operating income rose by 47% to US$1.69 billion, while adjusted operating margin grew from 8% to 11.2%. Gross margin increased 150 basis points to 75.5%. Adjusted diluted net earnings per common share increased 66% to US$2.51.

Fragrance was ELC’s fastest-growing major category, with organic sales up 10%. Skin care also saw growth by 4%, fronted by premium brands La Mer, The Ordinary, and Estée Lauder. Makeup delivered flat results while hair saw a 1% drop off.

In addition to the strong performance reported from the Chinese market, the company reported further regional development in global markets. ELC outlined prestige beauty market-share gains in China, Japan, and the US. Meanwhile, Korea and Western Europe returned to share growth in Q4. Asia-Pacific saw a 4% organic sales growth, driven by the recovery of travel retail.

The Americas posted 5% organic sales growth in Q4 and 1% for the full year. ELC says the quarterly increase was primarily driven by North America’s return to growth.

Reinvesting in innovation

Furthermore, ELC is reallocating its savings from its recovery program into marketing and growth. The company focused on accelerating speed to market with

Fragrance was Estée Lauder’s fastest-growing major category.

Throughout FY2026, consumer-facing investment rose by 7%. The company took on online retail, expanding to 13 brands across 11 Amazon markets and 12 brands across nine TikTok Shop markets. It also opened 33 net new freestanding fragrance stores, led by Le Labo and Jo Malone London.

Net cash flows provided by operating activities increased 39% to US$1.77 billion, compared with US$1.27 billion in the prior year, primarily reflecting higher net earnings, excluding non-cash items. Free cash flow almost doubled from US$670 million to US$1.32 billion.

ELC received US$38 million in tariff refunds in Q4 under the International Emergency Economic Powers Act. This partially offset the full-year gross impact of incremental tariffs of US$102 million, which was primarily recorded in cost of sales.

Optimistic predictions

Looking forward, the company projects a 3–5% organic sales growth in FY2027, with sustained Fragrance and Skin Care growth, and a return to growth for Makeup. Following the FY2026 results, its raised its adjusted operating-margin expectations to 12.7–13.5%, from its previous 12.5–13% estimate. The company expects adjusted EPS of US$3.1–3.35, representing 24–34% growth.

“For fiscal 2027, we are affirming our confidence to accelerate organic sales growth. In addition, we are raising our outlook for an even stronger adjusted operating margin, as we double down on our strengths to further diversify growth across product categories and geographies, including accelerating growth in North America,” says de La Faverie.