Estée Lauder Q2 Results Raise Forecast Despite Tariffs
Estée Lauder Q2 Results beat estimates and lifted FY2026 guidance but a $100 million tariff headwind and higher consumer investments could temper momentum.
KEY TAKEAWAYS
- Estée Lauder beat Q2 estimates with net sales of $4.23 billion and adjusted EPS of $0.89.
- Raised full-year guidance but assumed an about $100 million tariff headwind and heavier consumer investments.
- China retail delivered double-digit growth, underpinning margin expansion and the turnaround narrative.
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Estée Lauder Companies Inc. reported fiscal second-quarter net sales of $4.23 billion and adjusted earnings per share (EPS) of $0.89 on Feb. 5, 2026. The company raised its full-year 2026 sales and earnings guidance while warning of an approximately $100 million tariff headwind and increased consumer investments.
Quarter Results and Guidance
The results for the quarter ended Dec. 31, 2025, exceeded consensus estimates on both sales and adjusted earnings. GAAP results returned to profit year over year as operating performance improved. Management raised full-year guidance to net sales growth of 3%–5% (organic growth of 1%–3%) and adjusted EPS of $2.05–2.25. The outlook reflects a strong first half and progress on the company’s turnaround but assumes the tariff headwind will be concentrated in the second half and includes heavier consumer-facing spending. The guidance midpoint remains below some analysts’ expectations.
China Sales Growth and Turnaround Progress
China maintained strong momentum with double-digit retail sales growth for a second consecutive quarter across categories. Fragrance led with 9% growth, followed by skin care at 7%, while makeup rose 1%.
Marking the one-year anniversary of its "Beauty Reimagined" program, management highlighted restructuring and cost savings that are beginning to boost free cash flow and support recovery. Stéphane de La Faverie, president and CEO, said, "Beauty Reimagined has invigorated our business as we execute the biggest operational, leadership, and cultural transformation in our history." The company expects operating-margin expansion in fiscal 2026, the first improvement in four years.
In the U.S., the market stabilized with volume-share gains in prestige beauty. The company is expanding retail footprints and platform commerce, including investments on Amazon and TikTok. These consumer-facing investments, combined with the tariff headwind, could temper near-term capital returns despite ongoing efforts to recover margins.
