Estée Lauder Companies (ELC) reported a 10% year-on-year decline in net sales to $3.6 billion in Q3 of its fiscal 2025 — a sharper drop than last year, but still beating Wall Street expectations. The earnings boost sent shares up 3% before market close on Thursday, offering a glimmer of hope as the newly appointed CEO Stéphane de la Faverie leads a strategic transformation dubbed "Beauty Reimagined."
In his first full quarter at the helm, de la Faverie struck an optimistic tone. “We delivered on our organic sales outlook and exceeded profitability expectations,” he said in a statement. "We are building momentum, with share gains in key markets such as the US, China, and Japan — and mid-single-digit organic net sales growth in e-commerce channels."
Skincare and Fragrance Weaken, Online and Emerging Markets Offer Strength
Skincare, ELC’s largest category, posted a 12% decline to $1.8 billion, largely due to persistent softness in China and continued weakness in the Asia travel retail business. Flagship brands Estée Lauder and La Mer both underperformed, though La Mer saw pockets of success with new launches in China, including the Night Recovery Concentrate.
Fragrance sales dropped 3% to $557 million, as weaker results in Asia offset growth in the luxury segment. Le Labo led the way, delivering double-digit gains thanks to demand for its Classic Collection and hero scents Osmanthus 19 and Eucalyptus 20. Meanwhile, Jo Malone London faced pressure from shipment timing issues and softness in home and cologne categories.
Makeup revenue also declined 9% to $1 billion. Mac Cosmetics — once a star performer — continues to face shipment timing challenges and sluggish momentum. Estée Lauder makeup also saw downturns in face products, though the new Double Wear Stay-in-Place 24-Hour concealer showed promise.
Haircare, made up of brands like Aveda and Bumble and Bumble, declined 12% to $126 million. Yet executives said this was an improvement over the prior quarter and indicated early signs of a turnaround.
Regional Performance: Weak in EMEA and Travel Retail, Brighter Spots in China and Online
The US market fell 6% to $1 billion due to persistent department store softness and logistical challenges. Still, de la Faverie pointed to strong momentum on Amazon and TikTok Shop. Brands like The Ordinary have launched successfully on both platforms, driving mid-single-digit organic growth across third-party and pure-play e-commerce.
Sales in EMEA dropped sharply by 18% to $1.3 billion, led by weak consumer sentiment, muted conversion among Chinese travelers, and declines in key markets like the UK. The company pledged renewed focus on the region in the coming quarters.
Asia-Pacific sales slipped 3% to $1.1 billion, with South Korea and Hong Kong SAR leading the declines. Political unrest, reduced foot traffic, and Dr Jart+'s exit from travel retail contributed to the dip. However, strong sales around the Lunar New Year and Valentine's Day sparked a modest recovery in Mainland China, which saw positive engagement for luxury brands.
Tariff Tensions and a Resilient Supply Chain Strategy
Tariffs remain a significant headwind for ELC’s turnaround plan. CFO Akhil Shrivastava said the company had already ramped up North American production and accelerated operations at its new Japanese facility to mitigate the impact. “We’re well-positioned to reduce reliance on cross-border sourcing between the US and China,” he said.
While de la Faverie did not specify the current percentage of US-bound finished goods sourced from China, he called it “very minimal” and emphasized ELC’s ability to leverage its nine global factories for more flexible, resilient operations.
Outlook: Confidence Amid Challenges
Despite a projected full-year sales drop for FY2025, de la Faverie remains confident that growth will return in FY2026 — especially if tariff issues resolve and the travel retail reset gains traction. “We know there’s more work to do in markets like the UK and in emerging economies,” he said. “But we see strong desirability for our brands in China, Japan, the US and beyond — and we’re focused on replicating what works across the globe.”
