The Estée Lauder Companies had one hell of a week. On Monday, the beauty giant reported a 7% increase in fiscal 2027 first-quarter net sales, led by an organic 20% jump in fragrance sales, and raised its full-year outlook. Shares rose nearly 3% in premarket trading, and then reversed to close down 4.1%.
CEO Stéphane de La Faverie took the turnaround story to Shanghai on Wednesday. At the company’s Capital Markets Experience, Lauder set a fiscal 2030 adjusted operating margin target of 16.5%–18.5%, up from 11.2% in fiscal 2026. On Monday, it raised its fiscal 2027 guidance for that margin to 12.9%–13.7%.
Lauder is also targeting annual mid-single-digit organic net sales growth and double-digit adjusted diluted earnings per share growth through fiscal 2030. De La Faverie presented China as a model for putting Beauty Reimagined to work globally.
Mainland China gave de La Faverie numbers to work with. Organic net sales rose 9% in the first quarter, according to the earnings release. How much of Lauder’s approach in China will translate to markets where shoppers discover and buy beauty differently?
On Monday’s earnings call, Lauder delivered investors a “double beat,” which means the conglomerate beat Wall Street expectations on both the top and bottom lines. Lauder reported $3.72 billion in net sales, ahead of the $3.64 billion expected by analysts.
“In the quarter, organic net sales grew 6%, led by strong double-digit growth in Fragrance and mid-single-digit growth in Skin Care, supported by robust innovation,” said Akhil Shrivastava, Executive Vice President and Chief Financial Officer of ELC, on Monday’s earnings call. “Sales growth accelerated in Asia Pacific, Mainland China, and EUKEM [Europe, the UK, and Emerging Markets], while performance in the Americas improved year-over-year. These results demonstrate our progress in building more diversified growth across product categories and geographic regions,” he said.
The bottom-line beat (earnings per share) was more of a TKO. Adjusted diluted earnings came in at $0.72 per share against the $0.51 analysts expected. Adjusted operating margin rose to 12.1% from 7.3% a year earlier, helped by higher sales, pricing, procurement savings, and manufacturing efficiencies.
Lauder’s 20% organic jump in fragrance sales came from double-digit growth at its luxury brands, led by Le Labo, Tom Ford, Jo Malone London, and Kilian Paris, as well as at Estée Lauder itself.
Kilian Paris was Lauder’s fastest-growing luxury brand. De La Faverie said its “ongoing strength in luxury complemented its blockbuster launch of the Cocktails Collection in the prestige price tier.” He also pointed to strong demand for prestige launches from Balmain Beauty and Estée Lauder, where Glimmer’s performance in the US and UK gave the company reason to take it into more markets.
Lauder said its fragrance retail sales grew at more than four times the industry rate in Western Europe and also outpaced the market in the US. In Japan, Le Labo and Tom Ford posted double-digit retail sales growth, helping Lauder gain share in prestige fragrance.
Makeup grew 1%, haircare was flat, and fragrance operating income rose 93%.
Lauder’s pitch to investors in Shanghai was that it can spend more getting products in front of shoppers and still widen margins. In mainland China, Lauder gained prestige beauty market share by sales value across makeup, skincare, and fragrance, led by Tom Ford, The Ordinary, Le Labo, and La Mer. Lauder’s operating margin in mainland China rose to 5.2% from 2.3% a year earlier, even as the company spent more on product launches and marketing.
Lauder is adapting its distribution to how shoppers buy in each market. On its fiscal 2026 third-quarter call, de La Faverie said that the company launched The Ordinary on Douyin (China’s version of TikTok; both are owned by ByteDance) and put Estée Lauder and MAC on the flash-sale platform Vipshop. On the same earnings call, de La Faverie discussed expanding on TikTok Shop in the US, Germany, and Malaysia.
Lauder reported double-digit travel retail growth in Hainan in fiscal Q1 2027, driven primarily by stronger online retail sales. Higher replenishment orders lifted net sales at Beijing and Shanghai airports following changes in duty-free operators. Western travel retail sales grew mid-single digits, outpacing the industry as Lauder expanded distribution for luxury fragrance brands including Jo Malone London, Tom Ford, and Kilian Paris, de La Faverie said.
On Monday’s call, Citi analyst Filippo Falorni asked whether Lauder had gained market share at Beijing and Shanghai airports and how online sales in Hainan compared with in-store sales. De La Faverie told him the airport transitions were complete, and Lauder’s performance was improving, but he gave no market share figures. De La Faverie pointed to a recovery online in Hainan but did not say how online sales compared with in-store sales.
The distinction between what Lauder ships to duty-free retailers and what shoppers buy carries particular weight in Asia travel retail. Shareholders alleged that Lauder concealed its reliance on gray-market resellers during the pandemic, a case the company settled for $210 million without admitting wrongdoing. Management now says it’s keeping shipments in line with retail sales.
In Asia Pacific and travel retail, shipments are growing faster than retail sales, which Shrivastava attributed to depressed shipments a year earlier. He said inventory is balanced across markets and channels.
Lauder expects its sales to travel retailers to grow more slowly in the second half, when they’ll be measured against higher shipments from the previous year. Management still expects sales to shoppers to keep improving. The test is whether that demand holds up once the boost from airport restocking fades.
Companywide, Lauder expects its adjusted operating margin to widen more in fiscal 2028 than in either of the following two years. It expects to get a full year of benefits from the restructuring initiatives it plans to complete in fiscal 2027. After that, Lauder is counting on further cost savings and stronger sales to keep widening margins while it continues to invest in shoppers.
The next read comes with fiscal second-quarter results, which will cover China’s Singles’ Day and the holiday season. It will also be the last quarter before travel retail runs into tougher comparisons. If sales to shoppers hold up and skincare and makeup start contributing more, the 2030 plan looks more credible. If fragrance is still doing most of the work, it’s a harder sell.
