The Estée Lauder Companies (EL) Q2 2025 earnings summary

Executive summary

• Launched the 'Beauty Reimagined' strategy and expanded the Profit Recovery and Growth Plan (PRGP) to restore sustainable sales growth, achieve double-digit adjusted operating margin, and drive efficiencies through consumer-centric investments and organizational simplification.

• Leadership transition with new CEO and CFO, and a new executive team focused on agility, leveraging AI, and external partnerships.

• Net sales decreased 6% year-over-year to $4.0 billion for the quarter, with declines in skin care, makeup, and hair care, partially offset by fragrance growth.

• Operating loss of $580 million for the quarter, mainly due to $861 million in impairment charges and $181 million in restructuring charges.

• Announced significant restructuring, targeting a net reduction of 5,800–7,000 positions globally and $1.2–$1.6 billion in charges.

Financial highlights

• Organic net sales declined 6% year-over-year, with gross margin expanding 310 basis points to 76.1% due to PRGP benefits and strategic pricing.

• Adjusted operating income fell 20% to $462 million; adjusted operating margin contracted 200 basis points to 11.5%.

• Diluted EPS was $(1.64) for the quarter, with adjusted EPS at $0.62; net loss attributable to Estée Lauder was $590 million.

• Net cash flows from operations for six months were $387 million, down from $937 million last year; capital expenditures decreased to $273 million.

• Cash and cash equivalents were $2.6 billion at quarter-end.

Outlook and guidance

• Third quarter organic net sales expected to decrease 10–8% year-over-year, mainly due to double-digit decline in global travel retail.

• Q3 adjusted EPS expected between $0.20–$0.34, with currency translation to dilute EPS by $0.04.

• Expects continued volatility and low visibility due to subdued consumer sentiment in China and Korea, global geopolitical uncertainty, and persistent travel retail weakness.

• Full run rate benefits from PRGP expected by fiscal 2027, with annual gross benefits of $800 million–$1 billion.

• Plans to increase consumer-facing investments in Q3 to reignite retail sales growth.