Estee Lauder Beats Earnings Estimates and Plans to Cut Back on Discounts
Estee Lauder reported stronger-than-expected quarterly sales of $3.72 billion, driven by robust luxury fragrance demand and a rebound in China. The cosmetics giant plans to cut back on discounts and raised its fiscal 2027 guidance.
Estee Lauder is moving to scale back promotions and discounts across its global markets following a strong quarterly report that beat Wall Street expectations, driven by resilient demand for luxury fragrances.
First-quarter sales reached $3.72 billion, marking a 7% increase compared to the same period last year and exceeding the $3.65 billion consensus estimate of analysts. Adjusted earnings also outperformed forecasts, coming in at 72 cents per share against expectations of 51 cents.
Luxury fragrances emerged as a standout category, with brands such as Le Labo, Tom Ford, and Jo Malone London experiencing robust demand from both affluent and younger consumers. This luxury perfume segment continued to thrive despite softness observed in other areas of the broader retail industry.
Sales in China also showed positive momentum, posting a 9% organic increase following a prolonged period of sluggishness that weighed heavily on major luxury houses. Meanwhile, sales in the Americas grew by 4%, recovering from a 2% decline recorded in the same period a year earlier.
Building on these encouraging results, the cosmetics giant aims to reduce its reliance on promotional discounts. CEO Stephane de La Faverie stated that while customer incentives will not disappear entirely, the company intends to prioritize brand equity and organic demand over markdown-driven sales, a strategy already underway in China.
The strategic shift extends beyond pricing adjustments. Estee Lauder is expanding its footprint in the U.S. through Amazon's Premium Beauty store while also selling via TikTok Shop, Shopify, Tmall, and Douyin. Duty-free channels likewise registered improvements, notably at airports in Beijing and Shanghai alongside online sales in Hainan.
Despite these gains, makeup and skincare sales remain subdued in several key markets, and the wider luxury sector has yet to achieve uniform recovery. Management also highlighted ongoing geopolitical tensions and consumer uncertainty as potential risk factors.
Even with these headwinds, Estee Lauder raised its financial guidance for fiscal 2027. The company now projects organic sales growth of 4% to 5.5%, up from its previous forecast of 3% to 5%, while raising its adjusted earnings per share outlook to a range of $3.20 to $3.45.
CEO Stephane de La Faverie is simultaneously spearheading a broader turnaround plan focused on cost reductions, new product launches, and expansion into alternative sales channels. The company is additionally ramping up investments in marketing and artificial intelligence tools to better analyze consumer behavior.
