Can Innovation Unlock Sustained Category Growth for Estee Lauder?

The Estee Lauder Companies Inc. EL is leaning more heavily on innovation to drive category growth and reconnect with consumers across its beauty portfolio. In the first quarter of fiscal 2026, the company showed that new product launches could still generate demand, even in a mixed macro environment, highlighting innovation as an important driver of category momentum.

A key shift lies in accelerating product development. The newly launched Fragrance Atelier in Paris exemplifies this approach, combining AI-enabled intelligence with deep olfactive expertise to compress development timelines well below historical norms. This increased agility is translating into measurable momentum. 

Fragrance emerged as Estee Lauder’s strongest-performing category in the fiscal first quarter, growing 13%, driven by new launches from luxury brands such as TOM FORD and Le Labo that resonated with consumers seeking distinct, high-quality offerings.

Innovation is also extending into faster-growing subcategories, notably skin longevity and clinical solutions. Recent launches, including Estee Lauder’s Advanced Night Repair Eye Lift and The Ordinary’s targeted acne treatments, demonstrate a focus on solving specific consumer concerns across multiple price tiers. Management noted that these innovations are supporting sell-through and helping brands reach incremental consumers, especially as newer products are introduced across high-engagement digital channels such as TikTok Shop and Amazon.

While structural initiatives provide operational support, sustained faster innovation is key to long-term category growth for Estee Lauder.  

Product Innovation Trends Among EL’s Competitors

Coty Inc. COTY is also leaning on innovation-led category growth, with fragrance as its core lever. In the first quarter of fiscal 2026, Coty emphasized blockbuster launches such as BOSS Bottled Beyond and a broad push into fragrance mists, aiming to accelerate development cycles and expand scenting adjacencies. Coty is pairing this innovation pipeline with wider digital distribution, including Amazon and TikTok Shop, to enhance visibility and consumer engagement across price tiers.

e.l.f. Beauty, Inc. ELF innovation-driven growth is fueled by a "steady stream of holy grails" that bring prestige-quality products to the mass market at extraordinary value.  e.l.f. Beauty’s strategy led to a 140-basis-point market share gain in the second quarter of fiscal 2026, marking 27 consecutive quarters of net sales growth. The acquisition of Rhode further accelerated e.l.f. Beauty’s momentum.

EL’s Price Performance, Valuation & Estimates

Shares of Estee Lauder have gained 9.1% in the past month compared with the industry growth of 8.7%.

From a valuation standpoint, Estee Lauder trades at a forward price-to-earnings ratio of 44.53X, up from the industry average of 30.26X.

The Zacks Consensus Estimate for Estee Lauder’s fiscal 2026 and 2027 earnings has moved up 1 cent and 3 cents to $2.17 and $2.96, respectively, over the past seven days.

Estee Lauder currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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