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The Estee Lauder Companies Inc. EL reported second-quarter fiscal 2026 results, wherein both top and bottom lines beat the Zacks Consensus Estimate and increased year over year.
The company reported strong second-quarter performance, supported by its “Beauty Reimagined” transformation and ongoing operational and cultural changes. EL raised its fiscal 2026 outlook, despite expected second-half headwinds and higher investments, expressing confidence in restoring organic sales growth and expanding operating margins for the first time in four years.
Adjusted earnings of 89 cents per share beat the Zacks Consensus Estimate of 84 cents in the fiscal second quarter. The bottom line increased 43% from 62 cents in the year-ago quarter.
The Estee Lauder Companies Inc. price-consensus-eps-surprise-chart | The Estee Lauder Companies Inc. Quote
The company's quarterly net sales of $4,229 million beat the Zacks Consensus Estimate of $4,226 million. The top line increased 6% year over year. Organic net sales increased 4% to reach $4,155 million.
Skin Care sales rose 6% year over year to $2,054 million, led by La Mer, Estée Lauder and The Ordinary. Operating income improved as higher sales and the Profit Recovery and Growth Plan (PRGP) drove cost efficiencies more than offset increased consumer investments.
Makeup revenues declined 1% year over year to $1,164 million, mainly due to Estee Lauder’s performance offsetting gains from M·A·C. Despite a slight sales decline, operating performance improved, reflecting the absence of prior-year impairment charges.
In the Fragrance category, revenues of $812 million increased 6%, led by strong growth from luxury brands TOM FORD, Le Labo and KILIAN PARIS. Operating results improved significantly, reflecting both higher sales and the absence of large prior-year impairment charges, although increased brand investments partially moderated the upside.
Hair Care sales totaled $168 million, up 5% year over year, driven by wider distribution, strong demand for The Ordinary and early momentum from Bumble and bumble. Profitability improved as sales growth and PRGP efficiencies lowered non-consumer-facing expenses.
Sales in the Americas broke even at $1,218 million. Revenues in the EUKEM region increased 2% to $1,183 million. In the Asia-Pacific region, sales increased 2% to $900 million, whereas in Mainland China, sales increased 13% to $928 million.
Estee Lauder’s adjusted gross margin expanded 40 basis points year over year to 76.5%, driven by benefits from the company’s PRGP. These gains were largely offset by headwinds from incremental tariffs, business mix shifts and inflation. PRGP-related improvements were supported by operational efficiencies, including more competitive procurement, tighter expense management, and lower excess and obsolescence.
EL reported operating earnings of $401 million compared with a loss of $580 million in the prior-year period. Excluding returns and charges related to restructuring and other activities, the operating earnings were $608 million compared with $462 million a year ago. Adjusted Operating Income expanded 290 bps to 14.4%, driven by PRGP efficiencies that lowered non-consumer-facing expenses. These savings also helped fund higher consumer-facing investments, despite the normalization of employee incentive costs.
This Zacks Rank #2 (Buy) company exited the quarter with cash and cash equivalents of $3,082 million, long-term debt of $7,319 million and total equity of $4,031 million.
The net cash flow provided for operating activities for the six months ended Dec. 31, 2025, was $785 million. Capital expenditures during this time amounted to $204 million.
The company is progressing with its PRGP, including a restructuring program and an Enterprise Business Services partnership with Accenture to transform the global operating model. The initiatives focus on outsourcing expansion, service consolidation, process standardization and technology-driven productivity improvements. The company remains on track to complete the program largely by fiscal 2027, with most benefits realized in the same year, supporting a return to sales growth from fiscal 2026 and improved margin resilience.
The restructuring program is expected to generate annual gross benefits of $0.80-$1.00 billion, with total charges of $1.2-$1.6 billion and a net workforce reduction of 5,800-7,000 positions. By Jan. 30, 2026, Estee Lauder approved initiatives totaling $1.2 billion in charges and over 6,000 position reductions, representing more than 80% progress toward expected benefits, costs and workforce targets, indicating strong execution momentum.
The company has raised its fiscal 2026 outlook, driven by strong first-half performance, while maintaining a cautious stance amid macroeconomic uncertainty and ongoing business headwinds.
The reported net sales are now expected to increase by 3–5% year-on-year, compared with the previous guidance of 2–5%. The company’s adjusted organic net sales are also anticipated to grow 1-3% in the year, compared with its prior outlook of 0-3%.
The adjusted earnings per share are now likely to increase 36-49%, ranging from $2.05-$2.25 in fiscal 2026, up from its prior guidance of 26-39% and a range of $1.90-$2.10.
EL stock has gained 31.3% in the past three months compared with the industry’s growth of 14.1%.
Five Below, Inc. FIVE operates as a specialty value retailer in the United States and currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Five Below’s current fiscal-year sales and earnings calls for growth of 22.4% and 24.6%, respectively, from the year-ago reported numbers. FIVE delivered a trailing four-quarter earnings surprise of 62.1%, on average.
European Wax Center, Inc. EWCZ operates as the franchisor and operator of out-of-home waxing services in the United States. At present, European Wax Center carries a Zacks Rank of 2. EWCZ delivered a trailing four-quarter earnings surprise of 170.2%, on average.
The consensus estimate for European Wax Center’s current fiscal-year earnings implies growth of 46.7% from the year-ago figures.
Ulta Beauty, Inc. ULTA operates as a specialty beauty retailer in the United States. It currently holds a Zacks Rank #2. ULTA delivered a trailing four-quarter earnings surprise of 15.7%, on average.
The Zacks Consensus Estimate for Ulta Beauty’s current fiscal-year sales and earnings calls for growth of 9.5% and 0.9%, respectively, from the year-ago reported numbers.
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This article originally published on Zacks Investment Research (zacks.com).
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