Digital gains helped The Estée Lauder Cos. notch its second straight quarter of growth after more than a year of declines.
For its fiscal Q2 ended Dec. 31, the beauty giant reported a 6% year-over-year increase in net sales to $4.23 billion. Online demand — especially from platforms like Amazon and TikTok Shop — continued to steady Estée Lauder’s recovery.
Speaking on the earnings call, CEO Stéphane de La Faverie credited high single-digit online growth in the first half of fiscal 2026 in part to gains on those platforms, along with regional ecommerce partners like Tmall and Douyin.
“For fiscal 2026, online is on track to exceed the 31% of reported sales reach in fiscal 2025, as we increasingly tapped into the full potential of this high-growth channel,” he said.
The results signal early traction in Estée Lauder’s “Beauty Reimagined” profit recovery and growth plan. As part of the turnaround strategy, the company said it partnered with Accenture in Q2 to modernize enterprise services and accelerate artificial intelligence (AI) deployment across the business.
“This exciting partnership adds to the ecosystem we are building with leading technology providers, including Microsoft, Google and Shopify, to fuel our ambition to be the best consumer-centric prestige beauty company,” de La Faverie said.
With a stronger-than-expected first half, the company has raised its full-year outlook, although it still expects a $100 million tariff hit in fiscal 2026.
Estée Lauder is No. 41 in the Top 2000. The database ranks North America’s largest online retailers by their annual ecommerce sales and more.
Estée Lauder online sales performance leads Q2 growth
With ecommerce channels expanding and restructuring underway, Estée Lauder is starting to reverse recent sales declines. Early results show online sales outpacing in-store performance across key markets.
During Q2, Estée Lauder’s organic net sales — which strip out currency effects — rose 4% to $4.16 billion. That was led by double-digit gains in mainland China, where digital sales outpaced brick-and-mortar, boosted by Singles’ Day and holiday promotions. The company also reported double-digit growth across priority emerging markets in the Americas and in Europe, the Middle East and Africa (EMEA).
Regionally, the Americas posted 1% growth in reported net sales to $1.22 billion. EMEA rose 9% to $1.18 billion. Mainland China led with 13% growth to $928 million, while Asia Pacific increased 1% to $900 million.
By product category, net sales of skin care rose 7%, fragrance 9%, makeup 1%, and hair care 6%.
In North America, sales were flat with sequential improvement from the first quarter, chief financial officer Akhil Shrivastava said. Online expansion helped offset softer in-store performance, he added.
Executives emphasized an ongoing channel shift to reduce department store exposure while building distribution through Amazon, TikTok Shop and other platforms. De La Faverie noted that department stores now account for 30% or less of the business.
“The penetration of specialty-multi is increasing; the penetration of the online player is increasing,” he said. “The penetration of our direct-to-consumer business is also increasing, especially our brand dot-com, but also freestanding stores in luxury fragrance.”
Even so, department stores remain strategic for certain brands, such as Estée Lauder, Clinique and MAC, he said. The company continues to work with retail partners, such as Macy’s, Bloomingdale’s and Saks Global — which filed for Chapter 11 bankruptcy protection in January — to retain market share, he added.
Turnaround strategy and AI investments
Estée Lauder is also leaning into digital growth and AI-powered operations to regain footing in fiscal 2026.
In November, it signed a global enterprise services agreement with Accenture to help overhaul its operating model and accelerate the deployment of AI.
The initiative includes consolidating service providers, expanding outsourced functions and standardizing end-to-end processes using advanced technology, Shrivastava said, with a goal to unlock greater productivity and efficiency.
In October, Estée Lauder also partnered with Shopify to modernize its digital infrastructure and unify commerce across direct-to-consumer (DTC) sites and freestanding stores. The company described it as a first-of-its-kind collaboration in the beauty sector.
This was followed by the December launch of an “AI Scent Advisor” under its Jo Malone London brand. The conversational tool, powered by Google Gemini and Vertex AI, delivers personalized fragrance recommendations.
Estée Lauder outlook for fiscal 2026
Now approaching its 80th anniversary, Estée Lauder continues restructuring under its Profit Recovery and Growth Plan. The company said it expects a net reduction of 5,800 to 7,000 positions globally, including cuts already approved, and anticipates $1.2 billion to $1.6 billion in pre-tax restructuring charges. Once fully implemented, the program is projected to deliver $800 million to $1 billion in annual gross benefits.
Looking ahead, Estée Lauder now expects organic net sales to grow 1% to 3% in fiscal 2026. Gains are expected across most regions except the Americas, where sales are expected to remain flat, the company said.
Tariffs are projected to reduce profitability by approximately $100 million this fiscal year, primarily in the second half. The company said it’s taking mitigation steps – including leveraging trade programs, shifting manufacturing closer to key markets and boosting supply chain agility — which it says will offset more than half of the projected impact. It’s also evaluating additional mitigation efforts, such as pricing actions and further restructuring initiatives.
“In closing, for fiscal 2026, we expect a return to organic sales growth and expand our operating margin for the first time in four years,” de La Faverie said, adding that this will set the stage to “restore sustainable sales growth and a solid double-digit adjusted operating margin in the next few years.”
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