The Estée Lauder Companies Inc.

In fiscal Q3, organic net sales increased 2% year over year; gross margin was 76.4%, up 140 basis points; operating margin was 15.0%, up from 11.4%; and diluted EPS was $0.91 versus $0.65 last year, a 40% increase. For the first 9 months, operating cash flow was $1.2 billion versus $671 million a year ago, and CapEx was $306 million, down 23%. For fiscal 2026, the company now expects organic net sales growth of approximately 3%, gross margin of about 75%, operating margin of 10.7% to 11%, and diluted EPS of $2.35 to $2.45, with Middle East disruption expected to have less than a 1% impact for the full year. For Q4, management expects an unfavorable impact of about 2 percentage points to sales growth and $0.06 to EPS from Middle East disruption. For fiscal 2027, preliminary guidance is for 3% to 5% organic sales growth and 12.5% to 13.0% operating margin.

Stephane de la Faverie framed the quarter as evidence that Beauty Reimagined is working, saying the company is back to organic growth and expanding margins for the first time in four years. He pointed to broad-based gains across regions, stronger online performance, and share gains in key markets like China and the U.S. His tone was confident and ambitious, emphasizing that One ELC, channel rebalancing, innovation, and PRGP are building a more leveraged P&L and that margin recovery is a milestone, not a sprint.

Akhil Shrivastava focused on the numbers behind the margin expansion and cash generation. He said gross margin reached 76.4% in Q3, helped by PRGP benefits and lower excess and obsolescence, and operating margin reached 15.0% as nonconsumer-facing expenses fell 4% and consumer-facing investment rose 9%. He also noted $1.2 billion in operating cash flow for the first 9 months, $306 million of CapEx, and total cumulative restructuring charges of $1.1 billion through March 31, with total restructuring charges now expected to be $1.5 billion to $1.7 billion before taxes.

Analysts focused on whether the company can sustain margin expansion beyond fiscal 2027, how much growth is needed to support the margin target, and whether more channel exits like department stores are coming. Management said the margin opportunity remains substantial because of gross margin improvement, SG&A efficiencies, restructuring savings, and One ELC/technology/media transformation, and it did not rule out further channel resizing in lower-productivity doors. On North America and travel retail, management said the U.S. can return to growth next year, inventories are in good shape, and the Beijing/Shanghai duty-free issue was less severe than feared, with travel retail showing low-single-digit growth and Hainan retail sales up over 30%.