Net Sales Dip 10% for The Estée Lauder Companies in Q3 2025

Net sales dipped 10% for the Estée Lauder Companies Inc. in Q3 2025 to $3.6 billion; organic net sales also saw a decrease of 9%, officials reported. For FY 2025, the company expects a 9% decline in sales.

In making its estimate for FY 2025, ELC made following assumptions:

• No further material adverse impacts from currently enacted tariffs, including consumer sentiment.

• A stronger double-digit net sales decline in the Company’s global travel retail business in the fiscal 2025 fourth quarter compared to the decline in the third quarter, reflecting the impacts from retailer shifts in strategies toward more profitable duty-free business models in both Korea and mainland China as well as weak consumer sentiment and conversion from Chinese consumers. This decline also reflects a difficult comparison to the prior-year period due to the resumption of replenishment orders in the second half of fiscal 2024 as well as the Company’s strategic decision to reduce its exposure to reseller activity.

• High-single digit organic net sales decline in Asia/Pacific for fiscal 2025, primarily driven by ongoing subdued consumer sentiment from Chinese consumers and the impact of the Company’s strategic exit of Dr.Jart+ from the travel retail channel in Korea.

• Adjusted gross margin of approximately 73.5%.

• An effective tax rate of approximately 38%.

• Adjusted EPS decline, primarily due to the challenges in the Company’s global travel retail business and Asia/Pacific geographic region.

There Is Some Good News for Estée Lauder Cos.

Despite the Q3 decline, adjusted gross margin expanded 310 basis points to 75.0% primarily driven by net benefits from the company’s Profit Recovery and Growth Plan. This also includes the favorable impact of 240 basis points due to the trigger of an in-period charge for under-absorbed manufacturing overhead costs in the prior-year period, partially offset by the unfavorable impact of 100 basis points due to a similar charge recognized in the fiscal 2025 third quarter.

However, operating margin declined to 8.6% from 13.5% in the prior-year period. Adjusted operating margin contracted 270 basis points, to 11.4% from 14.1%. These reflect the increase in consumer-facing investments, along with sales volume deleverage in the fiscal 2025 third quarter. In addition, the net benefits from the company’s PRGP helped to reduce non-consumer facing expenses.

“In the third quarter of fiscal 2025, we delivered our organic sales outlook and exceeded profitability expectations,” said Stéphane de La Faverie, president and CEO. “We are moving decisively and building momentum as we bring our ‘Beauty Reimagined’ strategic vision to life across its five key priorities. This is evidenced by our prestige beauty share gains in strategic markets like the US, China and Japan and our mid-single-digit organic net sales growth online.”

ELC’s global business organic sales trends, excluding travel retail, showed sequential improvement. With the strategic reset of its travel retail business underway to better reflect recent industry trends and market conditions, and provided meaningful resolution of the recently enacted tariffs to mitigate potential related negative impacts, the company has it’s confident in its ability to return to sales growth in fiscal 2026.

Skin Care Q3 Sales Fall 11%

Skin Care net sales decreased 11%, primarily due to the decrease in the company’s Asia travel retail business, which drove declines from Estée Lauder and La Mer, including: ongoing subdued sentiment and lower conversion from Chinese consumers; difficult comparison to the prior-year period due to the company’s resumption of replenishment orders in the fiscal 2024 third quarter and the company’s strategic decision to reduce its exposure to reseller activity; and retailer shifts in strategies toward more profitable duty-free business models in both Korea and mainland China, which led to lower replenishment orders.

Skin care operating income decreased, primarily due to the decline in net sales and increase in consumer-facing investments, partially offset by lower cost of sales.

Makeup Sales Slip 7%

Makeup net sales decreased 7%, primarily driven by declines from: MAC, reflecting an unfavorable impact from the timing and lower level of shipments for new product launches compared to the prior-year period—which more than offset the benefit from fiscal 2025 innovation, including the MAC Nudes Collection and MACximal Sleek Satin Lipstick—as well as retailer destocking primarily driven by elevated inventory levels stemming from retail softness; and Estée Lauder, primarily driven by the decline in the face subcategory, due in part to the timing of shipments for new product launches in the prior-year period, which more than offset the benefit from the fiscal 2025 launch of Double Wear Stay-in-Place 24-Hour Concealer.

Makeup operating income decreased, primarily due to the decline in net sales, partially offset by lower cost of sales.

Fragrance Sales Dip 1%

Fragrance net sales decreased 1%, primarily driven by declines from Clinique, mainly attributable to the Clinique Happy product franchise, and Estée Lauder, primarily reflecting retail softness in Asia/Pacific.

These declines were partially offset by the low-single-digit increase from the company’s luxury brands, led by strong double-digit growth from Le Labo. The brand’s performance was driven by hero products such as its Classic Collection, innovation with Osmanthus 19 and Eucalyptus 20, and targeted expanded consumer reach. This growth was partially offset by declines in the cologne and home subcategories from Jo Malone London, driven in part by the timing of shipments.

Fragrance operating income increased, primarily due to lower cost of sales, partially offset by the increase in consumer-facing investments.

Hair Care Sales Drop 10%

Hair care net sales decreased 10%, primarily driven by Aveda, reflecting continued softness in the Company’s salon and freestanding stores channels.

Hair care operating results improved, reflecting disciplined expense management and lower cost of sales, partially offset by the decline in net sales.

Outlook for 2025

The company anticipates a stronger double-digit net sales decline in its global travel retail business in the fiscal 2025 fourth quarter compared to the decline in the third quarter, reflecting the impacts from retailer shifts in strategies toward more profitable duty-free business models in both Korea and mainland China as well as weak consumer sentiment and conversion from Chinese consumers. This decline also reflects a “difficult” comparison to the prior-year period due to the resumption of replenishment orders in the second half of fiscal 2024 as well as the company’s strategic decision to reduce its exposure to reseller activity.

High-single digit organic net sales decline in Asia/Pacific for fiscal 2025, primarily driven by ongoing subdued consumer sentiment from Chinese consumers and the impact of the company’s strategic exit of Dr.Jart+ from the travel retail channel in Korea.