China +15%, fragrance +19%: Estée Lauder’s recovery gathers pace

What happened After years in which weakening demand in China and Asia travel retail weighed heavily on The Estée Lauder Companies’ (ELC) performance, the market that once sat at the center of the beauty giant’s troubles is becoming one of its strongest sources of growth. Mainland China net sales rose 15% year-on-year to $614 million in the first quarter of fiscal 2027, the three months to September 30, the fastest reported growth of any of the group’s four regions, according to its results. Excluding currency effects, organic sales rose 9%, accelerating from 7% in the previous quarter. Operating profit in the market nearly tripled to $32 million from $12 million, and the company said on its earnings call that it has now gained share in China’s prestige beauty market for seven consecutive quarters. The rebound helped ELC lift group net sales 7% YoY to $3.72 billion, with organic sales up 6%. Operating income more than doubled to $408 million from $169 million, and the company raised its full-year organic sales growth forecast to between 4% and 5.5%, from 3% to 5% previously, citing its strong start to the year. Fragrance leads the portfolio Fragrance remained ELC’s strongest category globally. Reported sales rose 19% to $861 million, or 20% on an organic basis, and operating profit climbed 93% to $166 million. Le Labo, Tom Ford, Jo Malone London and Kilian Paris all recorded double-digit growth, as did the Estée Lauder brand’s own fragrances, helped by the launch of Glimmer, its first gourmand scent. Elsewhere, skincare sales rose 5%, makeup increased just 2% and haircare slipped 1%. Tom Ford and Le Labo were among the group’s strongest performers in mainland China, alongside La Mer and The Ordinary. Fragrance sales in the market grew by double digits, and skincare and makeup each rose at a high-single-digit rate, the company said on its earnings call. Eleven ELC brands posted growth in China during the quarter, six of them by double digits. The Jing Take Both online and brick-and-mortar channels contributed to growth in mainland China, according to the release. Travel retail, which weighed on results alongside mainland China during the downturn, is also steadying. Sales at Beijing and Shanghai airports rose as retailers placed more replenishment orders following changes in duty-free operators, while Hainan sales grew by double digits on stronger online sales, the company said on its earnings call. Growth arriving through several channels at once makes the recovery less dependent on any one of them. “Growth is accelerating, profitability is strengthening significantly, and the impact of Beauty Reimagined is becoming increasingly evident across our business,” said Stéphane de La Faverie, ELC’s president and CEO, in the results release. Beauty Reimagined is the group’s strategic framework for its turnaround, and the raised outlook gives his claim some weight: ELC now expects an adjusted operating margin of 12.9% to 13.7% for the full year, up from 12.7% to 13.5%. China becomes a showcase for Beauty Reimagined ELC held what de La Faverie called its first-ever earnings call live from China on November 2, two days before a Capital Markets Experience in Shanghai billed as a “China Ecosystem Immersion.” Senior and local executives are due to present how Beauty Reimagined is working in China and how the group plans to apply that model elsewhere, according to the release. Holding the event in China gives management a chance to show the strategy working in one of global beauty’s most competitive markets, the same market that sat at the center of its downturn. During the earnings call held the same day, Stéphane de La Faverie, the Group’s President and CEO, noted that 30% of the Group’s global innovation now originates from China — with some of these innovations developed specifically for the Chinese market, and others intended for the global market. Behind that strategy sits one of the deepest restructurings in ELC’s history. The Profit Recovery and Growth Plan, launched in November 2023, has been expanded several times. The company now expects it to deliver about $1.2 billion in annual gross benefits and a net reduction of about 10,000 positions. Approvals for the restructuring are complete, and most of the benefits should be realized by the end of fiscal 2027, Akhil Shrivastava, ELC’s chief financial officer, said on the earnings call. In the first quarter, ELC cut non-consumer-facing expenses by 1% while raising consumer-facing investment, which includes advertising and promotion, by 8%. Cutting costs is only half the story Cost reduction can restore margins, but sustainable growth will depend on ELC turning the extra headroom into stronger products and broader distribution. The latest results suggest that is starting to happen, particularly in luxury fragrance and in skincare, where Le Labo, Tom Ford, La Mer and The Ordinary are carrying much of the momentum. Though fragrance is doing much of the heavy lifting, the softer categories have yet to follow. In makeup, gains at Mac were partly offset by a decline at the Estée Lauder brand. Haircare was held back by lower Aveda shipments, which ELC attributed to supply-chain problems at the brand. The next phase of the turnaround will depend on whether ELC can translate the momentum in China and fragrance into stronger growth in those categories. Its full-year forecast assumes a return to growth in makeup. The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.

China +15%, fragrance +19%: Estée Lauder’s recovery gathers pace

TUMI’s new growth playbook: From travel expertise to lifestyle performance

Upgrade to Pro

Sectors

Insights

Company

China +15%, fragrance +19%: Estée Lauder’s recovery gathers pace

TUMI’s new growth playbook: From travel expertise to lifestyle performance