Updated Version 3 - Estée Lauder reduces promotional activities, luxury fragrance business helps improve performance outlook

Details from the media conference call have been added in paragraphs 1, 4, and 5

Arriana McLymore/Anuja Bharat Mistry

Reuters, November 2 - Estée Lauder (EL.N) CEO Stephane de La Faverie said on Monday that as the company's business transformation gains momentum, it is cutting back on promotions and increasing brand investments. This comes after the cosmetics manufacturer raised its annual performance outlook.

Despite overall economic uncertainty, affluent consumers and younger shoppers’ willingness to spend on high-end beauty products has driven demand for luxury fragrance brands such as Le Labo, Tom Ford, and Jo Malone London, as well as skincare products.

Mainland China remains a highlight in Estée Lauder's efforts to return to profitability. The company expects that, with increased consumer-facing investments, both new and existing products will achieve strong organic sales growth.

“We’re accelerating ‘top of the sales funnel’ investments to enhance brand desirability and raise brand awareness,” de La Faverie said during the media conference call on Monday, adding that the company had previously planned to reduce discounts and promotions in China.

“While we’ll still offer value to consumers, our true focus is on elevating brand desirability… and reducing our reliance on promotions globally,” he added.

Estée Lauder hopes its cosmetics business will return to growth next quarter, as brands including MAC and Tom Ford Beauty continue to gain market share in mainland China.

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Analysts note that Chinese consumers are becoming more discerning in their luxury spending and increasingly favor brands that resonate with local culture.

Luxury groups including Gucci’s parent Kering PRTP.PA, LVMH LVMH.PA, and Hermes HRMS.PA are facing fresh challenges such as escalating Middle East conflicts as well as China’s tax scrutiny of wealthy shoppers, intensifying pressure from softening demand in major markets including China and the United States (link).

However, premium beauty products (link) have shown greater resilience, as China’s middle-class consumers shift their focus from entry-level luxury goods to higher-end skincare, cosmetics, and fragrances.

In the Americas, Estée Lauder’s organic sales rose 4%, reversing a 2% decline a year earlier. In China, organic sales grew 9%, matching the growth rate from a year ago.

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Analysts expect Estée Lauder (link)—which has said acquisitions remain a means to reshape its portfolio across regions, categories, and price ranges—to focus on smaller, niche deals after ending acquisition talks with Spanish fashion beauty group Puig.

The company has expanded its distribution channels through the Amazon U.S. “Premium Beauty” section as well as platforms like Shopee, TikTok Shop, Tmall, and Douyin, thereby boosting online organic sales growth.

Under the “Beauty Reimagined” transformation strategy, Estée Lauder is committed to accelerating innovation, entering new channels and markets, leveraging artificial intelligence to enhance consumer insights and marketing effectiveness, increasing consumer-facing investments, optimizing operations, and reducing costs.

The company now expects organic sales growth in fiscal year 2027 in the range of 4% to 5.5%, up from its previous forecast of 3% to 5%.

Annual adjusted earnings per share are now estimated at $3.20 to $3.45, higher than the prior range of $3.10 to $3.35.

Shares rose nearly 3% in premarket trading. Year to date, the stock has gained about 4%.

According to LSEG data, first-quarter sales grew 7% to $3.72 billion, surpassing analysts’ expectation of a 5% rise (to $3.65 billion).

Adjusted profit per share of 72 cents also exceeded the expected 51 cents.

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