The Estee Lauder 2025 Q3 Earnings Misses Targets as Net Income Drops 52%

The Estee Lauder Companies reported its fiscal 2025 Q3 earnings on May 1st, 2025, revealing a decline in both revenue and earnings compared to the previous year. Despite surpassing adjusted EPS expectations, net income and sales fell short of forecasts, reflecting ongoing challenges. The company adjusted its guidance to reflect the potential impact of recent tariffs, aiming to return to growth in fiscal 2026. Estee Lauder remains committed to its strategic initiatives, focusing on operational efficiency and consumer-centric growth strategies amid a complex market environment.

Revenue
In the third quarter of fiscal 2025, Estee Lauder's total revenue decreased by 9.9% to $3.55 billion compared to $3.94 billion in the same period the previous year. The Skin Care division generated $1.81 billion, while Makeup contributed $1.03 billion. The Fragrance segment saw revenue of $557 million, followed by Hair Care at $126 million. Other segments collectively added $25 million, culminating in a total revenue of $3.55 billion.

Earnings/Net Income
Estee Lauder's earnings per share (EPS) fell significantly by 52.2% to $0.44 in fiscal 2025 Q3, down from $0.92 in the prior year. Similarly, net income dropped to $159 million from $335 million, marking a 52.5% decline. The EPS figures indicate a challenging quarter for Estee Lauder.

Post-Earnings Price Action Review
Post-earnings, Estee Lauder's stock performance was mixed. Despite a modest increase in stock value, the returns following the earnings release were limited to a maximum of 3.59% over a 30-day period. The market's reaction to the earnings metrics, especially EPS, was relatively positive, with a 10-day win rate of 61.90%. This suggests that while investors appreciated the EPS results, the overall price movement was tempered by inconsistent performance across different time frames. Revenue growth, a crucial metric, did not provide specific data on stock impact; however, it typically enhances stock prices by indicating potential profit growth.

CEO Commentary
Stéphane de La Faverie, President and CEO, expressed satisfaction with meeting organic sales and exceeding profitability expectations. He highlighted gains in prestige beauty market share in key regions, including the U.S., China, and Japan. The CEO remains optimistic about returning to sales growth in fiscal 2026, despite recent tariff impacts, emphasizing improvements in global business organic sales trends, excluding travel retail.

Guidance
Estee Lauder is focused on achieving sales growth in fiscal 2026, contingent on resolving tariff issues and aligning its travel retail strategy with current market conditions. The leadership is optimistic about leveraging their "Beauty Reimagined" strategic vision to capitalize on key market opportunities and enhance operational efficiency.

Additional News
In recent developments, Estee Lauder unveiled its "Beauty Reimagined" strategic vision, aiming to restore sustainable sales growth and strengthen profitability. This bold transformation includes significant organizational restructuring, with plans to cut up to 7,000 jobs. These changes are designed to create a flatter, leaner organization, enhancing communication and accountability across all levels. Estee Lauder is also consolidating its regional operations into four geographic clusters to improve agility and better respond to local consumer trends. Leadership roles have been updated to foster collaboration and accelerate speed-to-market, positioning Estee Lauder as a leader in the prestige beauty industry.