Estée Lauder Shares Fall on Weak Forecast and Sales Decline
Cosmetics giant forecasts fiscal 2026 earnings below estimates, citing new tariffs and persistent weakness in Asia travel retail.
Estée Lauder Companies Inc. saw its shares tumble after reporting a 12% drop in fourth-quarter revenue and issuing a bleak forecast for the coming year, citing the significant impact of new tariffs and ongoing struggles in its key Asia travel retail sector.
The cosmetics maker announced net sales fell to $3.41 billion for the quarter ending June 30, 2025, resulting in a net loss of $546 million, or $1.51 per share. For the full fiscal year, organic sales declined by 8%.
Looking ahead, the company projected adjusted earnings for fiscal 2026 to be between $1.90 and $2.10 per share, well below analyst consensus. Estée Lauder attributed the downbeat guidance partly to an estimated $100 million negative impact from newly enacted tariffs. This outlook overshadowed fourth-quarter adjusted earnings that narrowly beat expectations, sending the company's stock down in response to the news.
The disappointing results stem primarily from challenges in its Asia travel retail business, which has been hampered by subdued consumer sentiment in mainland China and shifts in retailer strategy. The company has faced slower-than-expected recovery in the region, a critical market that once accounted for a substantial portion of its revenue.
In response, CEO Stéphane de La Faverie is accelerating a "Profit Recovery and Growth Plan." The strategy includes rightsizing the organization, which involves layoffs and outsourcing certain services, while increasing investment in digital sales channels like Amazon's Premium Beauty store and TikTok to reach more consumers. “Having closed fiscal 2025 as expected, we remain wholly focused on continuing to execute our strategic vision of Beauty Reimagined with excellence,” de La Faverie said in a statement, acknowledging the "continued volatility in the external environment."
Despite the headwinds, the company aims to restore positive sales growth in fiscal 2026, forecasting organic sales to be between flat and a 3% increase. However, the path forward involves navigating intense competition from rivals like L'Oréal and successfully pivoting from its long-standing reliance on department store and duty-free channels.