Estée Lauder (NYSE: EL) is starting to look very pretty, rebounding from several years of weakness, as it reaps the rewards of new management’s restructuring program.
The luxury cosmetics titan’s stock has soared 50% over the past six months, though it remains down 71% for the last four years. Estée Lauder, whose brands include Tom Ford, La Mer, and Jo Malone London, has a market capitalization of $37 billion.
During its troubled period, the company suffered from a weak digital operation, lackluster marketing strategies and flagging demand in China. But things have changed under its new CEO Stéphane de La Faverie, a 14-year Lauder veteran who was appointed in January.
His Beauty Reimagined campaign has touched virtually all segments of the company’s activity, from online sales to procurement. The results showed in the company’s latest earnings report, with revenue rising for the first quarter in almost two years.
In the fiscal first quarter 2026, ended Sept. 30, net sales climbed 4% from a year earlier, including a 9% gain in China, which accounts for 15% of Lauder’s revenue. Net income swung to a profit of $47 million from a loss of $156 million. And the gross profit margin rose to 73% from 72%.
On point online
As for Lauder’s progress on the digital front, it has made significant strides in just the last six months. It formed a partnership with Shopify (NASDAQ: SHOP), under which it will use Shopify’s e-commerce platform to build an AI-powered system connecting its direct-to-consumer sites and physical stores.
Also, the cosmetics company has broadened its global distribution on TikTok Shop. That included the debut of MAC, Clinique and Dr.Jart+ in the U.S. and The Ordinary in Malaysia and Singapore. In addition, Lauder has expanded its presence on Amazon, adding brands to Amazon sites in Mexico, Canada and Japan.
The company has created a chat bot in cooperation with Alphabet’s (NYSE: GOOGL) Google that allows customers to choose perfume without smelling it. That would seem like a tall task. Florid language appears to be the solution.
“Where would we like to journey today?” the bot asked in a session cited by The Wall Street Journal. “The freshness of an orchard? The warmth of a blooming flower garden? The windswept allure of the coastline?”
Since a soft launch of Lauder’s Jo Malone brand began in October, Internet shoppers who utilized the bot bought a fragrance at almost double the rate of those who didn’t, according to The Journal.
Job cuts, emerging markets
Looking at Lauder’s restructuring, in February, it announced plans to cut up to 7,000 employees to reduce costs and increase efficiency and agility. That would amount to more than 10% of the company’s 62,000-person workforce.
Lauder has plenty of room to expand in emerging markets, with only about half of its 20-plus brands currently available in large emerging markets, such as India, Brazil, and China, Morningstar analyst Dan Su wrote in a commentary.
“Estée is poised to benefit from premiumization trends, as beauty consumers in developed and emerging markets upgrade for perceived better-quality ingredients, efficacy, and services.”
She sees the company holding a bright future. “As a leading provider of premium beauty products, it owns category-leading brands in skin care, cosmetics, and fragrances that underpin its brand intangibles,” she said. And it’s strong across brick-and-mortar and digital channels.
“These attributes, coupled with scale-based cost advantages, should augur a long-term competitive edge that enables the firm to deliver returns in excess [of capital costs] for more than 20 years.”
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