The Estée Lauder Companies Inc.

05/01/2026 | Press release | Distributed by Public on 05/01/2026 10:01

Quarterly Report for Quarter Ending March 31, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations.
RESULTS OF OPERATIONS
The Estée Lauder Companies Inc. is one of the world's leading manufacturers, marketers and sellers of quality skin care, makeup, fragrance and hair care products. We are a steward of over 20 luxury and prestige brands globally. Our products are sold in approximately 150 countries and territories. We operate as a wholesaler, with our products sold in brick-and-mortar locations and on various e-commerce platforms, including those operated by department stores, duty-free retailers, specialty-multi retailers, online pure players, upscale perfumeries and pharmacies, and top-tier salons and spas. Additionally, we operate a direct-to-consumer business across freestanding stores, our brands' websites and third-party online platforms.
Three Months Ended March 31, Nine Months Ended March 31,
2026 2025 2026 2025
($ in millions)
$ % $ % $ % $ %
Net sales $ 3,712 100.0 % $ 3,550 100.0 % $ 11,422 100.0 % $ 10,915 100.0 %
Cost of sales 876 23.6 889 25.0 2,797 24.5 2,774 25.4
Gross profit 2,836 76.4 2,661 75.0 8,625 75.5 8,141 74.6
Operating expenses:
Selling, general and administrative 2,279 61.4 2,258 63.6 7,202 63.1 7,141 65.4
Restructuring and other charges 224 6.0 97 2.7 520 4.6 375 3.4
Securities class action litigation settlement
84 2.3 - - 84 0.7 - -
Impairment of goodwill and other intangible assets
- - - - - - 861 7.9
Talcum litigation settlement agreements - - - - - - 159 1.5
Total operating expenses 2,587 69.7 2,355 66.3 7,806 68.3 8,536 78.2
Operating income (loss) 249 6.7 306 8.6 819 7.2 (395) (3.6)
Interest expense 82 2.2 87 2.5 253 2.2 269 2.5
Interest income and investment income, net 15 0.4 27 0.8 66 0.6 85 0.8
Other components of net periodic benefit cost 3 0.1 5 0.1 11 0.1 10 0.1
Earnings (loss) before income taxes 179 4.8 241 6.8 621 5.4 (589) (5.4)
Provision (benefit) for income taxes 90 2.4 82 2.3 323 2.8 (2) -
Net earnings (loss) $ 89 2.4 % $ 159 4.5 % $ 298 2.6 % $ (587) (5.4) %
Percentages not adjusted for differences caused by rounding
The following table is a comparative summary of operating results for the three and nine months ended March 31, 2026 and 2025, for our product categories and geographic regions and reflects the basis of presentation described in Notes to Consolidated Financial Statements, Note 1 - Summary of Significant Accounting Policies and Note 13 - Segment Data and Related Information, for our product categories that meet the definition of reportable segments, for all periods presented. Royalty revenue from license arrangements, and products and services that do not fit within our definitions of skin care, makeup, fragrance and hair care have been included in the "other" category.
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Three Months Ended
March 31, 		Nine Months Ended
March 31,
(In millions) 2026 2025 2026 2025
NET SALES
By Product Category:
Skin Care $ 1,856 $ 1,807 $ 5,485 $ 5,257
Makeup 1,072 1,035 3,266 3,223
Fragrance 628 557 2,161 1,931
Hair Care 128 126 425 424
Other 28 25 84 80
3,712 3,550 11,421 10,915
Returns associated with restructuring and other activities - - 1 -
Net sales $ 3,712 $ 3,550 $ 11,422 $ 10,915
By Geographic Region(1):
The Americas $ 1,076 $ 1,063 $ 3,468 $ 3,469
Europe, United Kingdom and Ireland and Emerging Markets ("EUKEM")
859 785 2,943 2,738
Asia/Pacific 1,003 1,006 2,776 2,700
Mainland China
774 696 2,234 2,008
3,712 3,550 11,421 10,915
Returns associated with restructuring and other activities - - 1 -
Net sales $ 3,712 $ 3,550 $ 11,422 $ 10,915
OPERATING INCOME (LOSS)
By Product Category:
Skin Care $ 444 $ 361 $ 1,085 $ 784
Makeup (3) 14 - (382)
Fragrance 21 32 212 (354)
Hair Care (5) (13) 1 (34)
Other 16 9 38 (25)
473 403 1,336 (11)
Charges associated with restructuring and other activities (224) (97) (517) (384)
Operating income (loss)
$ 249 $ 306 $ 819 $ (395)
By Geographic Region(1):
The Americas $ 21 $ 67 $ 212 $ (789)
EUKEM
32 28 194 183
Asia/Pacific 261 232 611 460
Mainland China
159 76 319 135
473 403 1,336 (11)
Charges associated with restructuring and other activities (224) (97) (517) (384)
Operating income (loss)
$ 249 $ 306 $ 819 $ (395)
(1) The net sales and operating results from our travel retail business are included in the Asia/Pacific region.
Period-over-period changes in our net sales are generally attributable to the impacts from (i) pricing on our base portfolio, including changes in mix and those due to strategic pricing actions, (ii) volume, including changes driven by the impact of new product innovation, (iii) acquisitions and/or divestitures, and/or (iv) foreign currency translation. The percentages disclosed for these impacts are calculated on an individual basis.
The net sales impact from pricing consists of changes in list prices, due to strategic pricing actions, and mix shifts within and among product categories, geographic regions, brands and distribution channels. The prices at which we sell our products vary by brand, distribution channel (e.g., wholesale or direct-to-consumer) and may also vary by country. Our brands and products cover a broad array of pricing tiers. Prices of skin care and fragrance products are typically higher than makeup and hair care products.
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New product innovation includes the introduction of new products, as well as changes related to existing products or where they are sold, including reformulations, regional expansion, repackaging and sets. A product is considered "new innovation" for the twelve-month period following the initial shipment date. Our innovation is launched at different price points than existing products and value derived from innovation may vary from year to year. We continually introduce new products, support new and established products through advertising, merchandising and sampling and phase out existing products that no longer meet the needs of our consumers or our objectives. The economics of developing, producing, launching, supporting and discontinuing products impact our sales and operating performance each period. The introduction of new products often has some cannibalizing effect on sales of existing products, inclusive of potential sales returns, which we take into account in our business planning. The impact of new product introductions, including timing compared to introductions in prior periods, also affects our results.
Non-GAAP Financial Measures
We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period helps investors and others compare operating performance between periods. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. See Reconciliations of Non-GAAP Financial Measures beginning on page 57 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
We operate on a global basis, with the majority of our net sales generated outside the United States. Accordingly, fluctuations in foreign currency exchange rates affect our results of operations. Therefore, we present certain net sales, operating results and diluted net earnings (loss) per common share information excluding the effect of foreign currency rate fluctuations to provide a framework for assessing the performance of our underlying business outside the United States. Constant currency information compares results between periods as if exchange rates had remained constant period-over-period. We calculate constant currency information by translating current-period results using prior-year monthly average foreign currency exchange rates and adjusting for the period-over-period impact of foreign currency cash flow hedging activities.
Outlook
While we have seen improvements within our business, we are mindful of areas of volatility and uncertainty that may impact our results. We continue to face challenges in key markets in the West, including in some markets in Western Europe and the United States. Within our Asia travel retail business, we continue to experience a transitory headwind from the change of duty-free retailers servicing the Beijing and Shanghai airports, including the related online businesses. We are also monitoring the conflict in the Middle East as it relates to our business in the domestic markets and travel retail locations in the region. Net sales from locations impacted by the conflict in the Middle East accounted for approximately 2% of consolidated net sales in fiscal 2025. We continue to monitor and assess the impact that these challenges may have on net sales and profitability, including impacts to our effective tax rate from changes to our geographical mix of earnings.
We are continuing to monitor and assess the potential effects of changing tariff conditions in the United States as well as in other markets in which we operate. These tariffs have led to significant volatility and uncertainty in global markets and difficulty in forecasting demand. We have implemented and are continuing to implement and consider additional mitigation measures. Our strategy remains optimizing our global supply chain network, by sourcing and manufacturing in the geography of sale where feasible. We also continue to leverage trade programs where available and monitor for additional opportunities as countries continue to update their trade programs. We continue to anticipate higher tariff rates to have an adverse effect on fiscal 2026 profitability and cash flows, and depending on actual rates and countries imposing tariffs such adverse impacts could be material.
On February 20, 2026, the U.S. Supreme Court ruled that the U.S. tariffs imposed under the International Emergency Economic Powers Act ("IEEPA") on goods imported into the U.S. were unauthorized. The ruling did not address potential refunds, however on March 4, 2026, the U.S. Court of International Trade ordered U.S. Customs and Border Protection to begin refunding all tariffs imposed under IEEPA. As of March 31, 2026, despite the ruling by the U.S. Court of International Trade, there continues to be uncertainty as to the ultimate recovery of any funds as a result of a potential appeal of this ruling, as well as uncertainty associated with the process, timing and amount of any potential refunds. As such, we have determined that the totality of uncertainties prevents us from reasonably asserting the probability of refund recovery at this time.
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We continue to believe that the best way to increase long-term stockholder value is to provide superior products and services in the most efficient and effective manner while recognizing shifts in consumers' behaviors and shopping practices. Accordingly, our long-term strategy has numerous initiatives across product categories, brands, geographic regions, channels of distribution and functions designed to grow our sales, provide cost efficiencies, leverage our strengths, such as our history of outstanding creativity and innovation, high quality products and services, and engaging communications, and make us more productive and profitable. Following the transition of leadership in the second and third quarters of fiscal 2025, we are executing against "Beauty Reimagined," our previously announced strategic vision which focuses on accelerating best-in-class consumer coverage, creating transformative innovation, boosting consumer-facing investments, fueling sustainable growth through bold efficiencies and reimagining the way we work, including through the expansion of the Profit Recovery and Growth Plan ("PRGP") during the fiscal 2025 third quarter, as discussed below.
We continue to monitor the effects of the global macro environment, including the risk of recession; currency volatility; inflationary pressures; supply chain challenges; social and political issues; competitive pressures; legal and regulatory matters, including the imposition of tariffs and sanctions; geopolitical tensions; and global security issues. We are also mindful of inflationary pressures (including those caused by tariffs) on our cost base and are monitoring the impact on consumer preferences, the impact of changes being made in the organization, including those related to Beauty Reimagined and the PRGP, as well as the potential impact of changes expected to be made as part of the PRGP on suppliers, retailers and others, and challenges relating to successfully outsourcing select services. Declines in net sales and profitability have, and may continue to, adversely impact the goodwill and other intangible assets associated with our brands, as well as long-lived assets, potentially resulting in impairments.
In December 2021, the Organization for Economic Cooperation and Development issued "Pillar Two" Global Anti-Base Erosion model rules for countries to enact into domestic law that would establish a 15% global minimum tax applied on a country-by-country basis for multinational companies. We are continuing to monitor and evaluate the potential impact of incorporating the global minimum tax in additional countries that have yet to enact the legislation.
On July 4, 2025, new U.S tax legislation was enacted known as the "One Big Beautiful Bill Act". This legislation includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of certain business tax provisions. The legislation has multiple effective dates, and we are continuing to evaluate the potential impact of the provisions that are expected to be effective in future fiscal years.
Our ability to recognize deferred tax assets, inclusive of utilizing net operating loss carryforwards, tax credits, and other carryforwards is dependent on the generation of sufficient taxable income in future periods. Accordingly, there can be no assurance that additional valuation allowances on our deferred tax assets will not be required should our financial performance be negatively impacted in the future. Such valuation allowance could be material.
Restructuring Program Component of the Profit Recovery and Growth Plan
As announced on November 1, 2023, we launched the PRGP to help progressively rebuild our profit margins in fiscal years 2025 and 2026.
As a component of the PRGP, on February 5, 2024, we announced a two-year restructuring program. We committed to this course of action on February 1, 2024.
After reviewing additional potential initiatives and the progress of previously approved initiatives, on February 3, 2025, we committed to the expansion of the PRGP, including an expansion of the restructuring program.
The expanded component of the restructuring program began during our fiscal 2025 third quarter. The focus of the overall expanded restructuring program (collectively the "Restructuring Program") includes (i) reorganization and rightsizing of certain areas, (ii) simplification and acceleration of processes, (iii) outsourcing of select services and (iv) evolution of go-to-market footprint and selling models, all to help rebuild operating margin and also fuel reinvestment in consumer-facing areas to drive sustainable sales growth. Specific initiatives under the Restructuring Program are expected to be approved by the end of fiscal 2026 and substantially completed by the end of fiscal 2027.
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In connection with the Restructuring Program, we now estimate a final net reduction in the range of approximately 9,000 to 10,000 positions globally, an increase from the previous range of 5,800 to 7,000. Over 70% of the increase is attributable to the reduction in point-of-sale demonstration roles at select unproductive doors in our department store and freestanding store channels, as we continue to evolve our focus towards high-growth channels. This net reduction takes into account the elimination of positions after retraining and redeployment of certain employees in select areas.
We now expect that the Restructuring Program will result in restructuring and other charges totaling between $1,500 million and $1,700 million, before taxes, an increase from the previous range of $1,200 million and $1,600 million, before taxes, consisting of employee-related costs, asset-related costs, contract terminations and other costs associated with implementing these initiatives, which other than the non-cash charges, are expected to result in future cash expenditures funded from cash provided by operations.
Once fully implemented, we now expect the Restructuring Program to yield annual target gross benefits of between $1,000 million and $1,200 million, before taxes, an increase from the previous range of $800 million and $1,000 million, before taxes, a portion of which is expected to be reinvested in consumer-facing activities. The net benefits of the PRGP, which includes the Restructuring Program, are expected to enable a return to a double-digit operating margin over the next few years.
Further information about the Restructuring Program Component of the Profit Recovery and Growth Plan, is described in Notes to Consolidated Financial Statements, Note 3 - Charges Associated with Restructuring and Other Activities herein.
Securities Class Action Litigation Settlement
On December 7, 2023 and January 22, 2024, purported securities class action complaints were filed in the United States District Court for the Southern District of New York against the Company and its then Chief Executive Officer and Chief Financial Officer. The actions were consolidated on February 20, 2024. On March 22, 2024, plaintiffs filed a consolidated amended complaint alleging violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 based on alleged materially false and misleading statements between February 3, 2022 and October 31, 2023. On March 31, 2025, the Court denied defendants' motion to dismiss. On April 2, 2026, the parties reached an agreement in principle to settle the securities class action litigation. In light of these discussions, we recorded a loss contingency of $84 million, net of the estimated probable insurance recoveries, in the consolidated statements of earnings (loss) relating to a potential settlement of the securities class action.
NET SALES
Three Months Ended
March 31, 		Nine Months Ended
March 31,
($ in millions) 2026 2025 2026 2025
As Reported:
Net sales $ 3,712 $ 3,550 $ 11,422 $ 10,915
$ Change from prior-year period 162 507
% Change from prior-year period 5 % 5 %
Non-GAAP Financial Measure(1):
% Change from prior-year period in constant currency
2 % 3 %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 57 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Reported net sales increased across all product categories for the three and nine months ended March 31, 2026. The increase in net sales was primarily driven by fragrance, skin care and makeup for the three months ended March 31, 2026, and primarily driven by fragrance and skin care for the nine months ended March 31, 2026.
By geographic region, reported net sales increased across all geographic regions for the three and nine months ended March 31, 2026, with the exception of Asia/Pacific for the three months ended March 31, 2026, and The Americas for the nine months ended March 31, 2026, with each remaining virtually flat. The increase in net sales for the three and nine months ended March 31, 2026 was primarily driven by Mainland China and EUKEM.
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Reported net sales were impacted by approximately $101 million and $200 million of favorable foreign currency translation for the three and nine months ended March 31, 2026, respectively.
Reported net sales increased 5% for the three months ended March 31, 2026, driven by the favorable impact from foreign currency translation of 3%, the increase from volume of 1% and the increase from pricing of 1%, reflecting the favorable impact from strategic price actions, partially offset by changes in mix.
Reported net sales increased 5% for the nine months ended March 31, 2026, driven by the favorable impact from foreign currency translation of 2%, the increase from volume of 2% and the increase from pricing of 1%, reflecting the favorable impact from strategic price actions, partially offset by changes in mix.
Returns associated with restructuring and other activities are not allocated to our product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select areas of the business. Accordingly, the following discussions of Net sales by Product Categories and Geographic Regions exclude the impacts of return adjustments associated with restructuring and other activities of $1 million for the nine months ended March 31, 2026. There were no returns associated with restructuring and other activities for the three months ended March 31, 2026 and the three and nine months ended March 31, 2025.
Product Categories
Reported net sales for our product categories for the three and nine months ended March 31, 2026 and 2025 were as follows:
Three Months Ended March 31, Nine Months Ended March 31,
($ in millions) 2026 2025
$ Change
% Change
% Change in Constant Currency(1)
2026 2025
$ Change
% Change
% Change in Constant Currency(1)
Skin Care $ 1,856 $ 1,807 $ 49 3 % - % $ 5,485 $ 5,257 $ 228 4 % 3 %
Makeup 1,072 1,035 37 4 - 3,266 3,223 43 1 (1)
Fragrance 628 557 71 13 10 2,161 1,931 230 12 10
Hair Care 128 126 2 2 - 425 424 1 - -
Other 28 25 3 12 12 84 80 4 5 5
3,712 3,550 162 5 2 11,421 10,915 506 5 3
Returns associated with restructuring and other activities - - - - - 1 - 1 100 100
Net sales $ 3,712 $ 3,550 $ 162 5 % 2 % $ 11,422 $ 10,915 $ 507 5 % 3 %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 57 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Skin Care
Reported skin care net sales increased $49 million, or 3% for the three months ended March 31, 2026, including the favorable impact of foreign currency translation of 3%. Including the favorable impact of foreign currency translation, the increase in skin care net sales was primarily driven by higher net sales from La Mer, reflecting the benefit from new product launches and growth from The Treatment Lotion franchise.
Reported skin care net sales increased $228 million, or 4% for the nine months ended March 31, 2026, reflecting higher net sales from La Mer, Estée Lauder and The Ordinary, combined, of approximately $301 million. Net sales from La Mer increased, reflecting growth in hero product franchises, as well as the benefit from new product launches. The increase in net sales from Estée Lauder reflected growth attributable to new product launches and key campaigns, benefitting from key shopping moments and holiday. Net sales from The Ordinary increased, primarily reflecting targeted expanded consumer reach.
Partially offsetting the increase in net sales for the nine months ended March 31, 2026 were lower net sales from Origins, reflecting our retail softness, including the impact of door and market closures.
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Skin care net sales were impacted by approximately $46 million and $80 million of favorable foreign currency translation for the three and nine months ended March 31, 2026, respectively.
Reported skin care net sales increased 3% for the three months ended March 31, 2026, driven by the increase from pricing of 4%, reflecting changes in mix and the favorable impact from strategic pricing actions, and the favorable impact from foreign currency translation of 3%, partially offset by the decrease from volume of 4%.
Reported skin care net sales increased 4% for the nine months ended March 31, 2026, driven by the increase from pricing of 3%, reflecting changes in mix and the favorable impact from strategic pricing actions, and the favorable impact from foreign currency translation of 2%. The impact from volume was flat period-over-period.
Makeup
Reported makeup net sales increased $37 million, or 4% for the three months ended March 31, 2026, including the favorable impact of foreign currency translation of 3%. Including the favorable impact of foreign currency translation, the increase in makeup net sales was primarily driven by higher net sales from Estée Lauder, reflecting the launch of its next-generation of Double Wear Stay-in-Place Longwear Matte Foundation during the fiscal 2026 third quarter.
Reported makeup net sales increased $43 million, or 1% for the nine months ended March 31, 2026, including the favorable impact of foreign currency translation of 2%. Including the favorable impact of foreign currency translation, the increase in makeup net sales was primarily driven by an increase in net sales from M·A·C, reflecting higher net sales in the lip subcategory, driven by the success of Lipglass Air, Lip Pencil and Powder Kiss Lipstick. Also contributing to the increase in M·A·C net sales were higher net sales from shipments to support the launch of the brand in select U.S. Sephora locations as well as online and in Sephora at Kohl's.
Makeup net sales were impacted by approximately $35 million and $71 million of favorable foreign currency translation for the three and nine months ended March 31, 2026, respectively.
Reported makeup net sales increased 4% for the three months ended March 31, 2026, driven by the increase from volume of 5% and the favorable impact from foreign currency translation of 3%. Partially offsetting these increases was the decrease from pricing of 5%, reflecting changes in mix, partially offset by the favorable impact from strategic pricing actions.
Reported makeup net sales increased 1% for the nine months ended March 31, 2026, driven by the increase from volume of 3% and the favorable impact from foreign currency translation of 2%. Partially offsetting these increases was the decrease from pricing of 4%, reflecting changes in mix, partially offset by the favorable impact from strategic pricing actions.
Fragrance
Reported fragrance net sales increased $71 million, or 13%, and $230 million, or 12%, for the three and nine months ended March 31, 2026, respectively, reflecting higher net sales from Le Labo, TOM FORD and Kilian Paris, combined, of approximately $51 million and $185 million, for the respective periods.
Le Labo net sales increased in both periods, led by the Classic Collection, reflecting growth from targeted expanded consumer reach and the benefit from new product launches. The net sales increase from TOM FORD in both periods reflected the benefit from new product launches which created halo benefits on existing products, with overall growth in both the Private Blend and Signature franchises. Net sales from Kilian Paris increased in both periods, driven by the Angels' Share and Love, don't be shy franchises including growth attributable to new product launches and key campaigns, as well as growth from targeted expanded consumer reach.
Fragrance net sales were impacted by approximately $18 million and $46 million of favorable foreign currency translation for the three and nine months ended March 31, 2026, respectively.
Reported fragrance net sales increased 13% for the three months ended March 31, 2026, driven by the increase from volume of 7%, the favorable impact from foreign currency translation of 3%, and the increase from pricing of 2%, reflecting the favorable impact from strategic pricing actions, partially offset by changes in mix.
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Reported fragrance net sales increased 12% for the nine months ended March 31, 2026, driven by the increase from volume of 5%, the increase from pricing of 4%, reflecting the favorable impact from strategic pricing actions and changes in mix, and the favorable impact from foreign currency translation of 2%.
Hair Care
Reported hair care net sales increased $2 million, or 2%, including the impact of foreign currency translation of 2%, for the three months ended March 31, 2026, and increased $1 million, or less than 1%, including the impact of foreign currency translation of 1%, for the nine months ended March 31, 2026. Including the favorable impact of foreign currency translation, the increase in hair care net sales in both periods was primarily driven by higher net sales from The Ordinary, reflecting the growth of the Multi-Peptide Serum for Hair Density and impacts from targeted expanded consumer reach.
Partially offsetting the hair care net sales increase for the nine months ended March 31, 2026 were lower net sales from Aveda, reflecting the brand's strategies to improve long-term performance, including (i) planned reductions in online promotional activity and (ii) the exit from underperforming doors, including freestanding stores. These declines were partially offset by the impact from its launch in Amazon's U.S. Premium Beauty store during the fiscal 2025 fourth quarter.
Hair care net sales were impacted by approximately $2 million and $3 million of favorable foreign currency translation for the three and nine months ended March 31, 2026, respectively.
Reported hair care net sales increased 2% for the three months ended March 31, 2026, driven by the increase from pricing of 2%, reflecting the favorable impact from strategic pricing actions and changes in mix, and the favorable impact from foreign currency translation of 2%. These increases were partially offset by the decrease from volume of 2%.
Reported hair care net sales were virtually flat for the nine months ended March 31, 2026, driven by the increase from pricing of 6%, reflecting changes in mix and the favorable impact from strategic pricing actions, and the favorable impact from foreign currency translation of 1%. These increases were offset by the decrease from volume of 6%.
Geographic Regions
Reported net sales by geographic region for the three and nine months ended March 31, 2026 and 2025 were as follows:
Three Months Ended March 31, Nine Months Ended March 31,
($ in millions) 2026 2025
$ Change
% Change
% Change in Constant Currency(2)
2026 2025 $ Change % Change
% Change in Constant Currency(2)
The Americas $ 1,076 $ 1,063 $ 13 1 % - % $ 3,468 $ 3,469 $ (1) - % - %
EUKEM
859 785 74 9 3 2,943 2,738 205 7 2
Asia/Pacific(1)
1,003 1,006 (3) - (1) 2,776 2,700 76 3 3
Mainland China
774 696 78 11 6 2,234 2,008 226 11 9
3,712 3,550 162 5 2 11,421 10,915 506 5 3
Returns associated with restructuring and other activities - - - - - 1 - 1 100 100
Net sales $ 3,712 $ 3,550 $ 162 5 % 2 % $ 11,422 $ 10,915 $ 507 5 % 3 %
(1)The net sales from our travel retail business are included in the Asia/Pacific region.
(2)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 57 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Reported net sales increased for the three months ended March 31, 2026, primarily driven by higher net sales in Mainland China and our Priority Emerging Markets, combined, of approximately $121 million. The increase in net sales in Mainland China reflected growth attributable to key shopping moments, including the benefits from key campaigns to drive sales and new product launches. Net sales in our Priority Emerging Markets within EUKEM and The Americas increased collectively, reflecting growth in all product categories, supported by targeted expanded consumer reach, successful campaigns and new product launches.
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Reported net sales increased for the nine months ended March 31, 2026, primarily driven by higher net sales in Mainland China and our Priority Emerging Markets, reflecting the aforementioned growth as discussed above, and higher net sales in our travel retail business, combined, of approximately $443 million. The increase in net sales in our travel retail business was driven by Asia travel retail, reflecting favorability attributable to the low prior-year period net sales base which reflected (i) the challenging retail environment, including low consumer sentiment and conversion from Chinese consumers, as well as (ii) our prior-year efforts to improve in-trade inventory levels. Also contributing to the growth in Asia travel retail was the favorable impact of higher traffic in certain areas of the business, including during key shopping moments, supported by key campaigns to drive growth. These increases were partially offset by impacts associated with the transitory headwind from the change of duty-free retailers servicing the Beijing and Shanghai airports, including the related online businesses.
Reported net sales in The Americas increased 1% for the three months ended March 31, 2026, driven by the increase from volume of 4% and the favorable impact from foreign currency translation of 1%. These increases were partially offset by the decrease from pricing of 3%, reflecting changes in mix, partially offset by the favorable impact from strategic pricing actions. Reported net sales in EUKEM increased 9% for the three months ended March 31, 2026, driven by the increase from volume of 7% and the favorable impact of foreign currency translation of 7%. These increases were partially offset by the decrease from pricing of 5%, reflecting changes in mix, partially offset by the favorable impact from strategic pricing actions. Reported net sales in Asia/Pacific were virtually flat for the three months ended March 31, 2026, driven by the decrease from volume of 4%, offset by the increase from pricing of 3%, reflecting the favorable impact from strategic pricing actions and changes in mix. Reported net sales in Mainland China increased 11% for the three months ended March 31, 2026, driven by an increase from pricing of 10%, reflecting changes in mix and the favorable impact from strategic pricing actions, and the favorable impact from foreign currency translation of 5%. These increases were partially offset by the decrease from volume of 4%.
Reported net sales in The Americas were virtually flat for the nine months ended March 31, 2026, driven by the decrease from pricing of 2%, reflecting changes in mix, partially offset by the favorable impact from strategic pricing actions. This decrease was offset by the increase from volume of 2%. Reported net sales in EUKEM increased 7% for the nine months ended March 31, 2026, driven by the favorable impact of foreign currency translation of 6% and the increase from volume of 4%. These increases were partially offset by the decrease from pricing of 2%, reflecting changes in mix, partially offset by the favorable impact from strategic pricing actions. Reported net sales in Asia/Pacific increased 3% for the nine months ended March 31, 2026, driven by an increase from pricing of 6%, reflecting changes in mix and the favorable impact from strategic pricing actions, partially offset by the decrease from volume of 3%. Reported net sales in Mainland China increased 11% for the nine months ended March 31, 2026, driven by the increase from pricing of 6%, reflecting changes in mix and the favorable impact from strategic pricing actions, the increase from volume of 3% and the favorable impact from foreign currency translation of 2%.
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GROSS MARGIN
Gross margin increased to 76.4% and 75.5% for the three and nine months ended March 31, 2026, as compared with 75.0% and 74.6% in the prior-year periods.
Favorable (Unfavorable) Basis Points
March 31, 2026
Three Months Ended Nine Months Ended
As Reported:
Mix of business 75 25
Obsolescence charges 80 65
Manufacturing costs and other 20 20
Foreign exchange transactions (35) (30)
Charges associated with restructuring and other activities
- 10
As Reported Gross Margin Basis Point Variance
140 90
Non-GAAP Financial Measure Adjustments
Charges associated with restructuring and other activities
- (10)
Non-GAAP Gross Margin Basis Point Variance
140 80
The increase in gross margin for the three and nine months ended March 31, 2026 reflected net benefits from the PRGP, including reductions in excess inventory, accretive new product launches and lower promotional activity in both periods, as well as the favorable impact of cost efficiencies within our global supply chain network, primarily in the nine months ended March 31, 2026. Additionally, in both periods, favorability in manufacturing costs and other benefited from the year-over-year favorable impact of the recognition of manufacturing variances associated with reduced manufacturing volumes on our standard cost within cost of sales in the fiscal 2025 third quarter, with offsets to overall favorability driven by the impact of tariffs and inflation on our costs.
THE ESTÉE LAUDER COMPANIES INC.
OPERATING EXPENSES
Operating expenses as a percentage of net sales were 69.7% and 68.3% for the three and nine months ended March 31, 2026, as compared with 66.3% and 78.2% in the prior-year periods.
Favorable (Unfavorable) Basis Points
March 31, 2026
Three Months Ended Nine Months Ended
As Reported:
General and administrative expenses 160 120
Advertising, marketing, promotion and product development
70 100
Selling (20) 20
Shipping 20 20
Store operating costs - (10)
Stock-based compensation 20 10
Foreign exchange transactions (30) (20)
Charges associated with restructuring and other activities (330) (120)
Securities class action litigation settlement (230) (70)
Impairment of goodwill and other intangible assets
- 790
Talcum litigation settlement agreements
- 150
As Reported Operating Expense Margin Basis Point Variance
(340) 990
Non-GAAP Financial Measure Adjustments:
Impact of restructuring and other activities
330 110
Securities class action litigation settlement 230 70
Impairment of goodwill and other intangible assets
- (790)
Talcum litigation settlement agreements - (150)
Non-GAAP Operating Expense Margin Basis Point Variance 220 230
The increase in our operating expense margin for the three months ended March 31, 2026 reflected the year-over-year unfavorable impact of restructuring and other activities and the securities class action litigation settlement. Partially offsetting these increases was favorability reflecting the impact of the increase in net sales, as well as the favorable year-over-year impact within general and administrative expenses associated with the timing of recognition of local government subsidies in China in the fiscal 2026 third quarter. Additionally, we increased investments in consumer-facing areas of the business to drive sales, including selling, advertising, store operating costs and promotion expenses, offsetting a portion of the favorability from the increase in net sales.
The favorability in our operating expense margin for the nine months ended March 31, 2026 reflected the impact of the increase in net sales, as well as the favorable year-over-year impact within general and administrative expenses associated with the timing of recognition of local government subsidies in China in the fiscal 2026 third quarter, with additional favorability associated with the impact of the change in policy related to local government subsidies in China that impacted the fiscal 2025 second quarter. Also contributing to the overall favorability were lower expenses within non-consumer facing areas of the business collectively, including lower employee-related costs realized through initiatives as part of the PRGP, with these benefits partially offset by higher employee incentive costs. Partially offsetting the overall favorability in our operating expense margin, including the benefit from the increase in net sales, were increased investments in consumer-facing areas of the business to drive sales, including advertising, selling, store operating costs and promotion expenses.
THE ESTÉE LAUDER COMPANIES INC.
OPERATING RESULTS
Three Months Ended
March 31, 		Nine Months Ended
March 31,
($ in millions) 2026 2025 2026 2025
As Reported:
Operating income (loss)
$ 249 $ 306 $ 819 $ (395)
$ Change from prior-year period (57) 1,214
% Change from prior-year period (19) % 100+%
Operating margin 6.7 % 8.6 % 7.2 % (3.6) %
Non-GAAP Financial Measure(1):
% Change in operating income (loss) from the prior-year period adjusting for the impact of charges associated with restructuring and other activities, the securities class action litigation settlement, impairment of goodwill and other intangible assets and talcum litigation settlement agreements
38 % 41 %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 57 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
The decrease in reported operating margin for the three months ended March 31, 2026 reflected the unfavorable operating expense margin, which includes the unfavorable impacts from restructuring and other activities and the securities class action litigation settlement. Partially offsetting the increased operating expense margin was the increase in net sales and increase in gross margin, as discussed above.
The increase in reported operating margin for the nine months ended March 31, 2026 was driven by the favorable operating expense margin, which includes the favorable year-over-year impact of the goodwill and other intangible asset impairment charges in the fiscal 2025 second quarter of $861 million, as well as the increase in net sales and increase in gross margin, as discussed above.
Charges associated with restructuring and other activities are not allocated to our product categories or geographic regions because they are centrally directed and controlled, are not included in internal measures of product category or geographic region performance and result from activities that are deemed a Company-wide initiative to redesign, resize and reorganize select areas of the business. Accordingly, the following discussions of Operating income (loss) by Product Categories and Geographic Regions exclude the impact of charges associated with restructuring and other activities for the three months ended March 31, 2026 and 2025 of $224 million and $97 million, respectively, and for the nine months ended March 31, 2026 and 2025 of $517 million and $384 million, respectively.
THE ESTÉE LAUDER COMPANIES INC.
Product Categories
Reported Operating income (loss) for our product categories for the three and nine months ended March 31, 2026 and 2025 were as follows:
Three Months Ended March 31,
($ in millions) 2026 2025 $ Change % Change
(As reported)
% Change
(Non-GAAP)(1)
Non-GAAP Financial Measure(1)
Skin Care $ 444 $ 361 $ 83 23 % 30 %
Adjusted for the impact of the securities class action litigation settlement
Makeup (3) 14 (17) (100+) 100+
Adjusted for the impact of the securities class action litigation settlement
Fragrance 21 32 (11) (34) 6
Adjusted for the impact of the securities class action litigation settlement
Hair Care (5) (13) 8 62 100+
Adjusted for the impact of the securities class action litigation settlement
Other 16 9 7 78 78
473 403 70 17 38 %
Charges associated with restructuring and other activities
(224) (97) (127) (100+)
Operating income
$ 249 $ 306 $ (57) (19) %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 57 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
Nine Months Ended March 31,
($ in millions) 2026 2025 $ Change % Change
(As reported)
% Change
(Non-GAAP)(1)
Non-GAAP Financial Measure(1)
Skin Care $ 1,085 $ 784 $ 301 38 % 42 %
Adjusted for the impact of the securities class action litigation settlement
Makeup - (382) 382 100 -
Adjusted for the impact of the securities class action litigation settlement, impairment of goodwill and other intangible assets and talcum litigation settlement agreements
Fragrance 212 (354) 566 100+ 15
Adjusted for the impact of the securities class action litigation settlement and other intangible asset impairments
Hair Care 1 (34) 35 100+ 100+
Adjusted for the impact of the securities class action litigation settlement
Other 38 (25) 63 100+ 31 Adjusted for the impact of other intangible asset impairments
1,336 (11) 1,347 100+ 41 %
Charges associated with restructuring and other activities
(517) (384) (133) (35)
Operating income (loss)
$ 819 $ (395) $ 1,214 100+%
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 57 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
THE ESTÉE LAUDER COMPANIES INC.
Skin Care
Reported skin care operating income increased $83 million, or 23%, and $301 million, or 38%, for the three and nine months ended March 31, 2026, respectively, reflecting an increase in net sales. Also contributing to the increase for the nine months ended March 31, 2026 was lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP, partially offset by higher employee incentive costs. In both periods, the increase in operating income was partially offset by an increase in investments in consumer-facing areas of the business, including to support key campaigns, new product launches and targeted expanded consumer reach.
Makeup
Reported makeup operating results decreased $17 million, or over 100%, for the three months ended March 31, 2026, reflecting an increase in investments in consumer-facing areas of the business, including to support new product launches and key campaigns, as well as the unfavorable allocated impact of the securities class action litigation settlement. Largely offsetting the decrease in operating results was an increase in net sales and lower cost of sales.
Reported makeup operating results increased $382 million, or 100%, for the nine months ended March 31, 2026, reflecting the favorable year-over-year impacts of other intangible asset impairment charges in the prior-year period relating to TOM FORD and Too Faced, combined, of $245 million and a goodwill impairment charge relating to Too Faced of $13 million, as well as the favorable year-over-year impact of the charge in the fiscal 2025 first quarter associated with the talcum litigation settlement agreements of $159 million. Partially offsetting the increase in operating results was an increase in investments in consumer-facing areas of the business, including to support new product launches and key campaigns.
Fragrance
Reported fragrance operating income decreased $11 million, or 34%, for the three months ended March 31, 2026, reflecting an increase in investments in consumer-facing areas of the business, including to support key campaigns, new product launches and targeted expanded consumer reach, an increase in cost of sales, as well as the unfavorable allocated impact of the securities class action litigation settlement, partially offset by an increase in net sales.
Reported fragrance operating results increased $566 million, or over 100%, for the nine months ended March 31, 2026, reflecting the favorable year-over-year impact of the other intangible asset impairment charge in the prior-year period of $549 million relating to TOM FORD and an increase in net sales, partially offset by an increase in investments in consumer-facing areas of the business, including to support key campaigns, new product launches and targeted expanded consumer reach.
Hair Care
Reported hair care operating results increased $8 million, or 62%, for the three months ended March 31, 2026, reflecting lower operating expenses, as well as an increase in net sales. These increases to operating results were partially offset by the unfavorable allocated impact of the securities class action litigation settlement.
Reported hair care operating results increased $35 million, or over 100%, for the nine months ended March 31, 2026, reflecting lower non-consumer-facing expenses, including the reduction in employee-related costs realized through initiatives as part of the PRGP, lower consumer-facing investments and lower cost of sales. These increases to operating results were partially offset by the unfavorable allocated impact of the securities class action litigation settlement.
THE ESTÉE LAUDER COMPANIES INC.
Geographic Regions
Three Months Ended March 31,
($ in millions)
2026 2025
$ Change
% Change
(As Reported)
% Change
(Non-GAAP)(1)
Non-GAAP Financial Measure(2)
The Americas $ 21 $ 67 $ (46) (69) % 57 % Adjusted for the impact of the securities class action litigation settlement
EUKEM
32 28 4 14 14
Asia/Pacific(2)
261 232 29 13 13
Mainland China
159 76 83 100+ 100+
473 403 70 17 38 %
Charges associated with restructuring and other activities
(224) (97) (127) (100+)
Operating income
$ 249 $ 306 $ (57) (19) %
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 57 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
(2)The operating results from our travel retail business are included in the Asia/Pacific region.
Nine Months Ended March 31,
($ in millions)
2026 2025
$ Change
% Change
(As Reported)
% Change
(Non-GAAP)(1)
Non-GAAP Financial Measure(1)
The Americas $ 212 $ (789) $ 1,001 100+% 28 % Adjusted for the impact of the securities class action litigation settlement, impairment of goodwill and other intangible assets and talcum litigation settlement agreements
EUKEM
194 183 11 6 6
Asia/Pacific(2)
611 460 151 33 33
Mainland China
319 135 184 100+ 100+
1,336 (11) 1,347 100+ 41 %
Charges associated with restructuring and other activities
(517) (384) (133) (35)
Operating income (loss)
$ 819 $ (395) $ 1,214 100+%
(1)See "Reconciliations of Non-GAAP Financial Measures" beginning on page 57 for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
(2)The operating results from our travel retail business are included in the Asia/Pacific region.
Reported operating income in The Americas decreased $46 million, or 69%, for the three months ended March 31, 2026, reflecting the unfavorable impact of the securities class action litigation settlement charge in the fiscal 2026 third quarter. Partially offsetting the lower operating income were lower non-consumer-facing expenses, due in part to the reduction in employee-related costs realized through initiatives as part of the PRGP, despite higher employee incentive costs, and higher net sales.
Reported operating results in The Americas increased $1,001 million, or over 100%, for the nine months ended March 31, 2026, reflecting the favorable year-over-year impacts of other intangible asset impairment charges in the prior-year periods relating to TOM FORD and Too Faced, combined, of $848 million and a goodwill impairment charge relating to Too Faced of $13 million, as well as the favorable year-over-year impact of the charge in the fiscal 2025 first quarter associated with the talcum litigation settlement agreements of $159 million. Partially offsetting the increase in operating results is the unfavorable impact of the securities class action litigation settlement charge in the fiscal 2026 third quarter.
THE ESTÉE LAUDER COMPANIES INC.
Reported operating income in EUKEM increased $4 million, or 14%, and $11 million, or 6%, for the three and nine months ended March 31, 2026, respectively. Included in the nine months ended March 31, 2026 is the favorable impact of foreign currency translation of 6%. The increase in operating income for both periods reflected higher net sales, partially offset by an increase in non-consumer-facing expenses, due in part to higher employee incentive costs, an increase in investments in consumer-facing areas of the business, including to support targeted expanded consumer reach, key campaigns and new product launches, and higher cost of sales.
Reported operating income in Asia/Pacific increased $29 million, or 13%, and $151 million, or 33%, for the three and nine months ended March 31, 2026, respectively. For the three months ended March 31, 2026, reported operating income increased, reflecting lower cost of sales and lower non-consumer-facing expenses, due in part to the reduction in employee-related costs realized through initiatives as part of the PRGP, despite higher employee incentive costs. These increases in operating income were partially offset by an increase in investments in consumer-facing areas of the business, including to support key campaigns. For the nine months ended March 31, 2026, reported operating income increased, reflecting higher net sales and lower non-consumer-facing expenses, due in part to the reduction in employee-related costs realized through initiatives as part of the PRGP, partially offset by higher employee incentive costs.
Reported operating income in Mainland China increased $83 million, or over 100%, and $184 million, or over 100%, for the three and nine months ended March 31, 2026, respectively, reflecting higher net sales, as well as the favorable year-over-year timing of recognition of local government subsidies in the fiscal 2026 third quarter, with additional favorability for the nine months ended March 31, 2026 associated with the impact of the change in policy related to local government subsidies that impacted the fiscal 2025 second quarter. Partially offsetting the increase in operating income in both periods was an increase in investments in consumer-facing areas of the business, including to support key campaigns, new product launches and targeted expanded consumer reach.
INTEREST AND INVESTMENT INCOME
Three Months Ended
March 31, 		Nine Months Ended
March 31,
(In millions) 2026 2025 2026 2025
Interest expense $ 82 $ 87 $ 253 $ 269
Interest income and investment income, net $ 15 $ 27 $ 66 $ 85
Interest expense decreased for the three and nine months ended March 31, 2026, primarily reflecting a lower average debt balance compared to the prior-year periods, with commercial paper outstanding during the fiscal 2025 third quarter. Interest income and investment income, net decreased for the three months ended March 31, 2026, primarily driven by the impact of the impairment of a cost method minority investment. Interest income and investment income, net decreased for the nine months ended March 31, 2026, primarily driven by a lower average cash balance compared to the prior-year period, as well as the impact of the impairment of a cost method minority investment, partially offset by the favorable year-over-year impact of cost method minority investment activity.
PROVISION FOR INCOME TAXES
The provision or benefit for income taxes represents U.S. federal, foreign, state and local income taxes. The effective rate differs from the federal statutory rate primarily due to the effect of state and local income taxes, the tax impact of stock-based compensation, the taxation of foreign income and income tax reserve adjustments, which represent changes in our net liability for unrecognized tax benefits including tax settlements and lapses of the applicable statutes of limitations, as well as changes to valuation allowances based on our assessment of the realizability of deferred tax assets. Our effective tax rate will change from quarter-to-quarter based on recurring and non-recurring factors including the geographical mix of earnings, enacted tax legislation, state and local income taxes, tax reserve adjustments, the tax impact of stock-based compensation, changes to valuation allowances, the interaction of various global tax strategies and the impact from certain acquisitions. In addition, changes in judgment from the evaluation of new information resulting in the recognition, derecognition or remeasurement of a tax position taken in a prior annual period are recognized separately in the quarter of change.
THE ESTÉE LAUDER COMPANIES INC.
Three Months Ended
March 31, 		Nine Months Ended
March 31,
2026 2025 2026 2025
Effective rate for income taxes 50.3 % 34.0 % 52.0 % 0.3 %
Basis-point change from the prior-year period 1,630 5,170
For the three months ended March 31, 2026, the increase in effective tax rate was primarily attributable to the estimated unfavorable impact of the One Big Beautiful Bill Act, resulting from an increase in tax deductible interest expense which reduced U.S. taxable income and increased the excess foreign tax credits generated which require a valuation allowance.
For the nine months ended March 31, 2026, the increase in effective tax rate was primarily attributable to the loss before income taxes, the impact of the discrete treatment of charges associated with restructuring and other activities, the impairment of goodwill and other intangible assets, and the charge associated with the talcum litigation settlement agreements, each during the nine months ended March 31, 2025. Further contributing to the increase in the effective tax rate was the estimated unfavorable impact of the One Big Beautiful Bill Act, resulting from an increase in tax deductible interest expense which reduced U.S. taxable income and increased the excess foreign tax credits generated which require a valuation allowance, a higher effective tax rate on our foreign operations due to an unfavorable impact associated with the establishment of valuation allowances against certain net deferred tax assets, partially offset by the year-over-year favorable impact associated with previously issued stock-based compensation.
NET EARNINGS (LOSS)
Three Months Ended
March 31, 		Nine Months Ended
March 31,
($ in millions, except per share data) 2026 2025 2026 2025
As Reported:
Net earnings (loss)
$ 89 $ 159 $ 298 $ (587)
$ Change from prior-year period (70) 885
% Change from prior-year period (44) % 100+%
Diluted net earnings (loss) per common share
$ .24 $ .44 $ .82 $ (1.63)
% Change from prior-year period (45) % 100+%
Non-GAAP Financial Measure(1):
% Change in diluted net earnings (loss) per common share from the prior-year period adjusting for the impact of charges associated with restructuring and other activities, the securities class action litigation settlement, impairment of goodwill and other intangible assets and talcum litigation settlement agreements
40 % 50 %
(1)See "Reconciliations of Non-GAAP Financial Measures" below for reconciliations between non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
THE ESTÉE LAUDER COMPANIES INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
We use certain non-GAAP financial measures, among other financial measures, to evaluate our operating performance, which represent the manner in which we conduct and view our business. Management believes that excluding certain items that are not comparable from period to period, or do not reflect the Company's underlying ongoing business, provides transparency for such items and helps investors and others compare and analyze our operating performance from period to period. In the future, we expect to incur charges or adjustments similar in nature to those presented below; however, the impact to the Company's results in a given period may be highly variable and difficult to predict. Our non-GAAP financial measures may not be comparable to similarly titled measures used by, or determined in a manner consistent with, other companies. While we consider the non-GAAP measures useful in analyzing our results, they are not intended to replace, or act as a substitute for, any presentation included in the consolidated financial statements prepared in conformity with U.S. GAAP. The following tables present Net sales, Operating income (loss) and Diluted net earnings (loss) per common share adjusted to exclude the impact of charges associated with restructuring and other activities; the securities class action litigation settlement; impairment of goodwill and other intangible assets; talcum litigation settlement agreements; and the effects of foreign currency translation.
The following tables provide reconciliations between these non-GAAP financial measures and the most directly comparable U.S. GAAP measures.
($ in millions, except per share data) Three Months Ended March 31, Variance
% Change
% Change in
constant currency
2026 2025
Net sales, as reported $ 3,712 $ 3,550 $ 162 5 % 2 %
Returns associated with restructuring and other activities - - -
Net sales, as adjusted $ 3,712 $ 3,550 $ 162 5 % 2 %
Operating income, as reported
$ 249 $ 306 $ (57) (19) % (22) %
Charges associated with restructuring and other activities 224 97 127
Securities class action litigation settlement
84 - 84
Operating income, as adjusted $ 557 $ 403 $ 154 38 % 35 %
Diluted net earnings per common share, as reported
$ .24 $ .44 $ (.20) (45) % (48) %
Charges associated with restructuring and other activities .49 .21 .28
Securities class action litigation settlement
.18 - .18
Diluted net earnings per common share, as adjusted $ .91 $ .65 $ .26 40 % 37 %
THE ESTÉE LAUDER COMPANIES INC.
($ in millions, except per share data) Nine Months Ended
March 31, 		Variance
% Change
% Change in
constant currency
2026 2025
Net sales, as reported $ 11,422 $ 10,915 $ 507 5 % 3 %
Returns associated with restructuring and other activities 1 - 1
Net sales, as adjusted $ 11,421 $ 10,915 $ 506 5 % 3 %
Operating income (loss), as reported
$ 819 $ (395) $ 1,214 100+% 100+%
Charges associated with restructuring and other activities 517 384 133
Securities class action litigation settlement
84 - 84
Impairment of goodwill and other intangible assets
- 861 (861)
Talcum litigation settlement agreements
- 159 (159)
Operating income, as adjusted $ 1,420 $ 1,009 $ 411 41 % 39 %
Diluted net earnings (loss) per common share, as reported
$ .82 $ (1.63) $ 2.45 100+% 100+%
Charges associated with restructuring and other activities 1.12 .83 .29
Securities class action litigation settlement
.18 - .18
Impairment of goodwill and other intangible assets
- 1.88 (1.88)
Talcum litigation settlement agreements
- .34 (.34)
Diluted net earnings per common share, as adjusted $ 2.12 $ 1.42 $ .70 50 % 47 %
As diluted net earnings per common share, as adjusted, is used as a measure of the Company's performance, we consider the impact of current and deferred income taxes when calculating the per-share impact of each of the reconciling items.
THE ESTÉE LAUDER COMPANIES INC.
The following tables reconcile the change in net sales by product category and geographic region, as reported, to the change in net sales excluding the effects of foreign currency translation:
As Reported Impact of foreign
currency translation 		Variance,
in constant currency 		% Change,
as reported 		% Change,
in constant currency
Three Months Ended March 31,
($ in millions) 2026 2025 Variance
By Product Category:
Skin Care $ 1,856 $ 1,807 $ 49 $ (46) $ 3 3 % - %
Makeup 1,072 1,035 37 (35) 2 4 -
Fragrance 628 557 71 (18) 53 13 10
Hair Care 128 126 2 (2) - 2 -
Other 28 25 3 - 3 12 12
3,712 3,550 162 (101) 61 5 2
Returns associated with restructuring and other activities - - - - -
Total $ 3,712 $ 3,550 $ 162 $ (101) $ 61 5 % 2 %
By Geographic Region:
The Americas $ 1,076 $ 1,063 $ 13 $ (9) $ 4 1 % - %
EUKEM
859 785 74 (54) 20 9 3
Asia/Pacific 1,003 1,006 (3) (3) (6) - (1)
Mainland China
774 696 78 (35) 43 11 6
3,712 3,550 162 (101) 61 5 2
Returns associated with restructuring and other activities - - - - -
Total $ 3,712 $ 3,550 $ 162 $ (101) $ 61 5 % 2 %
THE ESTÉE LAUDER COMPANIES INC.
As Reported Impact of foreign
currency translation 		Variance,
in constant currency 		% Change,
as reported 		% Change,
in constant currency
Nine Months Ended
March 31,
($ in millions) 2026 2025 Variance
By Product Category:
Skin Care $ 5,485 $ 5,257 $ 228 $ (80) $ 148 4 % 3 %
Makeup 3,266 3,223 43 (71) (28) 1 (1)
Fragrance 2,161 1,931 230 (46) 184 12 10
Hair Care 425 424 1 (3) (2) - -
Other 84 80 4 - 4 5 5
11,421 10,915 506 (200) 306 5 3
Returns associated with restructuring and other activities 1 - 1 - 1
Total $ 11,422 $ 10,915 $ 507 $ (200) $ 307 5 % 3 %
By Geographic Region:
The Americas $ 3,468 $ 3,469 $ (1) $ (9) $ (10) - % - %
EUKEM
2,943 2,738 205 (161) 44 7 2
Asia/Pacific 2,776 2,700 76 6 82 3 3
Mainland China
2,234 2,008 226 (36) 190 11 9
11,421 10,915 506 (200) 306 5 3
Returns associated with restructuring and other activities 1 - 1 - 1
Total $ 11,422 $ 10,915 $ 507 $ (200) $ 307 5 % 3 %
THE ESTÉE LAUDER COMPANIES INC.
The following tables reconcile the change in operating results by product category and geographic region, as reported, to the change in operating results excluding the impact of the securities class action litigation settlement for the three and nine months ended March 31, 2026, as well as the impairment of goodwill and other intangible assets and talcum litigation settlement agreements for the nine months ended March 31, 2026:
As Reported
Add:
Securities class action
litigation settlement
Variance, as adjusted % Change, as reported % Change, as adjusted
Three Months Ended March 31,
($ in millions) 2026 2025 Variance
By Product Category:
Skin Care $ 444 $ 361 $ 83 $ 27 $ 110 23 % 30 %
Makeup (3) 14 (17) 35 18 (100+) 100+
Fragrance 21 32 (11) 13 2 (34) 6
Hair Care (5) (13) 8 9 17 62 100+
Other 16 9 7 - 7 78 78
473 403 70 $ 84 $ 154 17 % 38 %
Charges associated with restructuring and other activities (224) (97) (127)
Total $ 249 $ 306 $ (57)
By Geographic Region:
The Americas $ 21 $ 67 $ (46) $ 84 $ 38 (69) % 57 %
EUKEM 32 28 4 - 4 14 14
Asia/Pacific 261 232 29 - 29 13 13
Mainland China 159 76 83 - 83 100+ 100+
473 403 70 $ 84 $ 154 17 % 38 %
Charges associated with restructuring and other activities (224) (97) (127)
Total $ 249 $ 306 $ (57)
THE ESTÉE LAUDER COMPANIES INC.
As Reported
Add:
Changes in
Impairment
of goodwill
and other intangible assets
Add:
Securities class action litigation settlement
Add:
Talcum litigation settlement agreements 		Variance, as adjusted % Change, as reported % Change, as adjusted
Nine Months Ended March 31,
($ in millions) 2026 2025 Variance
By Product
Category:
Skin Care $ 1,085 $ 784 $ 301 $ - $ 27 $ - $ 328 38 % 42 %
Makeup - (382) 382 (258) 35 (159) - 100 -
Fragrance 212 (354) 566 (549) 13 - 30 100+ 15
Hair Care 1 (34) 35 - 9 - 44 100+ 100+
Other 38 (25) 63 (54) - - 9 100+ 31
1,336 (11) 1,347 $ (861) $ 84 $ (159) $ 411 100+% 41 %
Charges associated
with restructuring
and other activities
(517) (384) (133)
Total $ 819 $ (395) $ 1,214
By Geographic
Region:
The Americas $ 212 $ (789) $ 1,001 $ (861) $ 84 $ (159) $ 65 100+% 28 %
EUKEM 194 183 11 - - - 11 6 6
Asia/Pacific 611 460 151 - - - 151 33 33
Mainland China 319 135 184 - - - 184 100+ 100+
1,336 (11) 1,347 $ (861) $ 84 $ (159) $ 411 100+% 41 %
Charges associated
with restructuring
and other activities
(517) (384) (133)
Total $ 819 $ (395) $ 1,214
THE ESTÉE LAUDER COMPANIES INC.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL RESOURCES
Overview
Our principal sources of funds historically have been cash flows from operations, borrowings pursuant to our commercial paper program, borrowings from the issuance of long-term debt and committed and uncommitted credit lines provided by banks and other lenders in the United States and abroad. At March 31, 2026, we had cash and cash equivalents of $3,126 million compared with $2,921 million at June 30, 2025. Our cash and cash equivalents are maintained at a number of financial institutions. To mitigate the risk of uninsured balances, we select financial institutions based on their credit ratings and financial strength, and we perform ongoing evaluations of these institutions to limit our concentration risk exposure.
Based on past performance and current expectations, we believe that cash on hand, cash generated from operations, available credit lines and access to credit markets will be adequate to support seasonal working capital needs, currently planned business operations, information technology enhancements, capital expenditures, acquisitions, dividends, stock repurchases, restructuring initiatives, commitments and other contractual obligations on both a near-term and long-term basis.
The Tax Cuts and Jobs Act resulted in the Transition Tax on unrepatriated earnings of our foreign subsidiaries and changed the tax law in ways that present opportunities to repatriate cash without additional U.S. federal income tax. We continue to analyze the indefinite reinvestment assertion on our remaining applicable foreign earnings. We do not believe that continuing to reinvest these remaining applicable foreign earnings impairs our ability to meet our domestic debt or working capital obligations. If these reinvested earnings were repatriated into the United States as dividends, we would be subject to state income taxes and applicable foreign taxes in certain jurisdictions.
Tariffs negatively impacted our operating results in the fiscal 2026 third quarter and we are continuing to monitor and assess the potential effects of changing tariff conditions globally.
Credit Ratings
Changes in our credit ratings will likely result in changes in our borrowing costs. Our credit ratings also impact the cost of our revolving credit facilities. Downgrades in our credit ratings may reduce our ability to issue commercial paper and/or long-term debt and would likely increase the relative costs of borrowing. A credit rating is not a recommendation to buy, sell, or hold securities, is subject to revision or withdrawal at any time by the assigning rating organization, and should be evaluated independently of any other rating. As of April 24, 2026, our long-term debt is rated A- with a negative outlook by Standard & Poor's and A3 with a negative outlook by Moody's.
THE ESTÉE LAUDER COMPANIES INC.
Debt
At March 31, 2026, our outstanding borrowings were as follows:
($ in millions)
Long-term Debt
Current Debt
Total Debt
5.150% Senior Notes, due May 15, 2053 ("2053 Senior Notes") (1), (15)
$ 591 $ - $ 591
3.125% Senior Notes, due December 1, 2049 ("2049 Senior Notes") (2), (15)
637 - 637
4.150% Senior Notes, due March 15, 2047 ("2047 Senior Notes") (3), (15)
495 - 495
4.375% Senior Notes, due June 15, 2045 ("2045 Senior Notes") (4), (15)
454 - 454
3.700% Senior Notes, due August 15, 2042 ("2042 Senior Notes") (5), (15)
247 - 247
6.000% Senior Notes, due May 15, 2037 ("2037 Senior Notes") (6), (15)
296 - 296
5.000% Senior Notes, due February 14, 2034 ("2034 Senior Notes) (7), (15)
628 - 628
5.75% Senior Notes, due October 15, 2033 ("October 2033 Senior Notes") (8), (15)
198 - 198
4.650% Senior Notes, due May 15, 2033 ("May 2033 Senior Notes") (9), (15)
696 - 696
1.950% Senior Notes, due March 15, 2031 ("2031 Senior Notes") (10), (15)
566 - 566
2.600% Senior Notes, due April 15, 2030 ("2030 Senior Notes") (11), (15)
632 - 632
2.375% Senior Notes, due December 1, 2029 ("2029 Senior Notes") (12), (15)
646 - 646
4.375% Senior Notes, due May 15, 2028 ("2028 Senior Notes") (13), (15)
698 - 698
3.150% Senior Notes, due March 15, 2027 ("2027 Senior Notes") (14), (15)
- 500 500
Other long-term borrowings 26 2 28
$ 6,810 $ 502 $ 7,312
(1)Consists of $600 million principal, unamortized debt discount of $3 million and debt issuance costs of $6 million.
(2)Consists of $650 million principal, unamortized debt discount of $7 million and debt issuance costs of $6 million.
(3)Consists of $500 million principal, unamortized debt discount of $1 million and debt issuance costs of $4 million.
(4)Consists of $450 million principal, net unamortized debt premium of $8 million and debt issuance costs of $4 million.
(5)Consists of $250 million principal, unamortized debt discount of $1 million and debt issuance costs of $2 million.
(6)Consists of $300 million principal, unamortized debt discount of $2 million and debt issuance costs of $2 million.
(7)Consists of $650 million principal, unamortized debt discount of $2 million, debt issuance costs of $4 million and a $16 million loss to reflect the fair value of interest rate swaps.
(8)Consists of $200 million principal, unamortized debt discount of $1 million and debt issuance costs of $1 million.
(9)Consists of $700 million principal, unamortized debt discount of $1 million and debt issuance costs of $3 million.
(10)Consists of $600 million principal, unamortized debt discount of $2 million, debt issuance costs of $2 million and a $30 million loss to reflect the fair value of interest rate swaps.
(11)Consists of $700 million principal, unamortized debt discount of $1 million, debt issuance costs of $2 million and a $65 million loss to reflect the fair value of interest rate swaps.
(12)Consists of $650 million principal, unamortized debt discount of $2 million and debt issuance costs of $2 million.
(13)Consists of $700 million principal and debt issuance costs of $2 million.
(14)Consists of $500 million principal.
(15)The Senior Notes contain certain customary covenants, including limitations on indebtedness secured by liens.
Total debt as a percent of total capitalization was 64.7% and 65.4% at March 31, 2026 and June 30, 2025, respectively.
THE ESTÉE LAUDER COMPANIES INC.
Cash Flows
Nine Months Ended
March 31,
(In millions) 2026 2025
Net cash flows provided by operating activities $ 1,197 $ 671
Net cash flows used for investing activities $ (304) $ (408)
Net cash flows used for financing activities
$ (682) $ (1,016)
The change in net cash flows provided by operating activities was primarily driven by higher net earnings, excluding non-cash items, and the favorable change in operating assets and liabilities variances.
The change in net cash flows used for investing activities was primarily driven by a favorable year-over-year impact from lower capital expenditures compared to the prior-year period.
The change in net cash flows used for financing activities primarily reflected a decrease in repayments of long-term debt due to the repayment of the outstanding principal balance of our $500 million, 2.000% Senior Notes that matured during the fiscal 2025 second quarter, and a decrease in dividends paid to stockholders in the current-year period. These decreases were partially offset by payments of deferred consideration in the fiscal 2026 first and third quarters associated with the fiscal 2023 acquisition of TOM FORD.
Dividends
For a summary of quarterly cash dividends declared per share on our Class A and Class B Common Stock for the nine months ended March 31, 2026, see Notes to Consolidated Financial Statements, Note 11 - Equity and Redeemable Noncontrolling Interest.
Pension and Post-retirement Plan Funding
There have been no significant changes to our pension and post-retirement funding as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025.
Commitments, Contractual Obligations and Contingencies
There have been no other significant changes to our commitments and contractual obligations as discussed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, except as disclosed in Notes to Consolidated Financial Statements, Note 8 - Commitments and Contingencies. For a discussion of contingencies, see Notes to Consolidated Financial Statements, Note 8 - Commitments and Contingencies.
Derivative Financial Instruments and Hedging Activities
For a discussion of our derivative financial instruments and hedging activities, see Notes to Consolidated Financial Statements, Note 4 - Derivative Financial Instruments.
Foreign Exchange Risk Management
For a discussion of foreign exchange risk management, see Notes to Consolidated Financial Statements, Note 4 - Derivative Financial Instruments (Fair Value Hedges, Cash Flow Hedges and Net Investment Hedges).
Credit Risk
For a discussion of credit risk, see Notes to Consolidated Financial Statements, Note 4 - Derivative Financial Instruments (Credit Risk).
THE ESTÉE LAUDER COMPANIES INC.
Market Risk
We address certain financial exposures through a controlled program of market risk management that includes the use of foreign currency forward contracts to reduce the effects of fluctuating foreign currency exchange rates and to mitigate the change in fair value of specific assets and liabilities on the balance sheet, anticipated transactions and receivables and payables and the net investment in certain foreign operations. To perform a sensitivity analysis of our foreign currency forward contracts, we assess the change in fair values from the impact of hypothetical changes in foreign currency exchange rates. A hypothetical 10% weakening of the U.S. dollar against the foreign exchange rates for the currencies in our portfolio would have resulted in a net decrease in the fair value of our portfolio of approximately $205 million and $223 million as of March 31, 2026 and June 30, 2025, respectively. This potential change does not consider our underlying foreign currency exposures.
We also enter into cross-currency swap contracts to hedge the impact of foreign currency changes on certain intercompany foreign currency denominated debt and to hedge a portion of the net investment in certain foreign operations. A hypothetical 10% weakening of the U.S. dollar against the foreign exchange rates for the currencies in our cross-currency swap contracts would have resulted in a net decrease in the fair value of our cross-currency swap contracts of approximately $85 million as of March 31, 2026 and June 30, 2025.
In addition, we enter into interest rate derivatives to manage the effects of interest rate movements on our funded indebtedness, including future debt issuances. Based on a hypothetical 100 basis point increase in interest rates, the estimated fair value of our interest rate derivatives would decrease by approximately $77 million and $43 million as of March 31, 2026 and June 30, 2025, respectively.
Our sensitivity analysis represents an estimate of reasonably possible net losses that would be recognized on our portfolio of derivative financial instruments assuming hypothetical movements in future market rates and is not necessarily indicative of actual results, which may or may not occur. It does not represent the maximum possible loss or any expected loss that may occur, since actual future gains and losses will differ from those estimated, based upon actual fluctuations in market rates, operating exposures, and the timing thereof, and changes in our portfolio of derivative financial instruments during the year. We believe, however, that any such loss incurred would be offset by the effects of market rate movements on the respective underlying transactions for which the derivative financial instrument was intended.
OFF-BALANCE SHEET ARRANGEMENTS
We do not maintain any off-balance sheet arrangements, transactions, obligations or other relationships with unconsolidated entities that would be expected to have a material current or future effect upon our financial condition or results of operations.
CRITICAL ACCOUNTING POLICIES
As disclosed in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025, the discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in conformity with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts of assets, liabilities, revenues and expenses reported in those financial statements. These estimates and assumptions can be subjective and complex, and consequently, actual results could differ from those estimates. Refer to the Critical Accounting Policies and Estimates section within Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended June 30, 2025. Since June 30, 2025, there have been no significant changes to the assumptions and estimates related to our critical accounting policies.
RECENTLY ISSUED ACCOUNTING STANDARDS
For a discussion regarding the impact of accounting standards that were recently issued but not yet effective, on our consolidated financial statements, see Notes to Consolidated Financial Statements, Note 1 - Summary of Significant Accounting Policies.
THE ESTÉE LAUDER COMPANIES INC.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION
We and our representatives from time to time make written or oral forward-looking statements, including in this and other filings with the Securities and Exchange Commission, in our press releases and in our reports to stockholders, which may constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may address our expectations regarding sales, earnings or other future financial performance and liquidity, other performance measures, product introductions, entry into new geographic regions, information technology initiatives, new methods of sale, our long-term strategy, restructuring and other charges and resulting cost savings, and future operations or operating results. These statements may contain words like "expect," "will," "will likely result," "would," "believe," "estimate," "planned," "plans," "intends," "may," "should," "could," "anticipate," "estimate," "project," "projected," "forecast," and "forecasted" or similar expressions. Although we believe that our expectations are based on reasonable assumptions within the bounds of our knowledge of our business and operations, actual results may differ materially from our expectations. Factors that could cause actual results to differ from expectations include, without limitation:
(1)increased competitive activity from companies in the skin care, makeup, fragrance and hair care businesses;
(2)our ability to develop, produce and market new products on which future operating results may depend and to successfully address challenges in our business;
(3)consolidations, restructurings, bankruptcies and reorganizations in the retail industry causing a decrease in the number of stores that sell our products, an increase in the ownership concentration within the retail industry, ownership of retailers by our competitors or ownership of competitors by our customers that are retailers and our inability to collect receivables;
(4)destocking and tighter working capital management by retailers;
(5)the success, or changes in timing or scope, of new product launches and the success, or changes in timing or scope, of advertising, sampling and merchandising programs;
(6)shifts in the preferences of consumers as to how they perceive value and where and how they shop;
(7)social, political and economic risks to our foreign or domestic manufacturing, distribution and retail operations, including changes in foreign investment and trade policies and regulations of the host countries and of the United States;
(8)changes in the laws, regulations and policies (including the interpretations and enforcement thereof) that affect, or will affect, our business, including those relating to our products or distribution networks, changes in accounting standards, tax laws and regulations, environmental or climate change laws, regulations or accords, trade rules and customs regulations, and the outcome and expense of legal or regulatory proceedings, and any action we may take as a result;
(9)foreign currency fluctuations affecting our results of operations and the value of our foreign assets, the relative prices at which we and our foreign competitors sell products in the same markets and our operating and manufacturing costs outside of the United States;
(10)changes in global or local conditions, including those due to volatility in the global credit and equity markets, government economic policies, natural or man-made disasters, real or perceived epidemics, supply chain challenges, inflation, or increased energy costs, that could affect consumer purchasing, the willingness or ability of consumers to travel and/or purchase our products while traveling, the financial strength of our customers, suppliers or other contract counterparties, our operations, the cost and availability of capital which we may need for new equipment, facilities or acquisitions, the returns that we are able to generate on our pension assets and the resulting impact on funding obligations, the cost and availability of raw materials and the assumptions underlying our critical accounting estimates;
(11)shipment delays, commodity pricing, depletion of inventory and increased production costs resulting from disruptions of operations at any of the facilities that manufacture our products or at our distribution or inventory centers, including disruptions that may be caused by the implementation of information technology initiatives, or by restructurings;
THE ESTÉE LAUDER COMPANIES INC.
(12)real estate rates and availability, which may affect our ability to increase or maintain the number of retail locations at which we sell our products and the costs associated with our other facilities;
(13)changes in product mix to products which are less profitable;
(14)our ability to acquire, develop or implement new information technology, including operational technology and websites, on a timely basis and within our cost estimates; to maintain continuous operations of our new and existing information technology; and to secure the data and other information that may be stored in such technologies or other systems or media;
(15)our ability to capitalize on opportunities for improved efficiency, such as publicly-announced strategies and restructuring and cost-savings initiatives, and to integrate acquired businesses and realize value therefrom;
(16)consequences attributable to local or international conflicts around the world, as well as from any terrorist action, retaliation and the threat of further action or retaliation;
(17)the timing and impact of acquisitions, investments and divestitures; and
(18)additional factors as described in our filings with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended June 30, 2025.
We assume no responsibility to update forward-looking statements made herein or otherwise.
The Estée Lauder Companies Inc. published this content on May 01, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on May 01, 2026 at 16:02 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]