Net Sales Dip 4% for The Estée Lauder Companies in Q1 2025

Net sales for the Estée Lauder Companies dipped 4% in Q1 2025 with a reported $3.36 billion in Q1 2025 compared to $3.52 billion in the prior-year quarter.

Organic net sales decreased 5% primarily due to worsened consumer sentiment in China that drove further softening in overall prestige beauty in mainland China and low conversion rates in Asia travel retail and Hong Kong SAR. In addition, lower replenishment orders in Asia travel retail, including inventory pressure given the further retail market deceleration, impacted organic net sales. Partially offsetting these declines was growth in several markets, including Japan and the company’s priority emerging markets.

The company reported a net loss of $156 million, compared with net earnings of $31 million in the prior year, primarily due to charges associated with talcum litigation settlement agreements of $159 million in the aggregate, which includes charges for current and potential future claims with certain plaintiff law firms. These agreements relate to the settlement of approximately 70% of talcum litigation cases that were outstanding during the fiscal 2025 first quarter, and also provide for settling potential future cases with these firms, at annual capped amounts, starting on Jan. 1, 2025 for five years.

The change also reflects charges associated with the Restructuring Program component of the company’s profit recovery and growth plan. Diluted net loss per common share was $.43, compared with net earnings per common share of $.09 reported in the prior year. Excluding restructuring and other charges and adjustments as detailed on page 3, net income was $52 million and adjusted diluted net earnings per common share increased to $.14 and rose 7% in constant currency.

“Our first quarter results are largely aligned with our outlook on an adjusted basis, despite the fact that the expected headwinds in China and Asia travel retail were greater than anticipated,” said CEO Fabrizio Freda. “Our profit recovery and growth plan drove gross margin expansion, which was partially offset by operating deleverage. Other pillars of our strategic reset also delivered promising initial results.”

Freda said the company is reigniting its skin care. Its sought-after night-time innovations drove strong organic sales growth for the category in the markets of EMEA as well as strong share gains for the second consecutive quarter in prestige skin care in China, led by La Mer.

The company also capitalized on multiple growth drivers of fragrance by expanding consumer reach of its luxury and artisanal portfolio, and launched Balmain Beauty to strengthen its strategic leadership in luxury fragrance. Estée Lauder is reportedly the top-ranked company in Japan in the category driven by Le Labo and Jo Malone London.

“While we believe the new economic stimulus measures in China present medium- to long-term potential for stabilization and ultimately growth in prestige beauty, we anticipate still-strong declines near-term for the industry in China and Asia travel retail,” said Freda. “In the rest of our business, we continue to expect the ongoing normalization of growth in prestige beauty, most notably in North America.”

Skin Care

Skin care net sales decreased 8%, primarily due to worsened consumer sentiment in China that drove further softening in overall prestige beauty in mainland China and low conversion rates in Asia travel retail and Hong Kong SAR. In addition, lower replenishment orders in Asia travel retail, including inventory pressure given the further retail market deceleration, impacted organic net sales. The category’s performance was driven by double-digit declines from La Mer and Estée Lauder, primarily due to the aforementioned challenges.

Partially offsetting the declines in Estée Lauder in mainland China and Hong Kong SAR were:
Net sales growth in Europe, the Middle East and Africa and, to a lesser extent, The Americas, benefiting from new product innovation within the Advanced Night Repair and Revitalizing Supreme+ product franchises, which are strategically focused on nighttime skin care. The net sales growth in The Americas reflected shipments for the brand’s October 2024 launch in Amazon’s US Premium Beauty store.

Skin care operating income increased, primarily due to lower cost of sales and disciplined expense management, partially offset by the decline in net sales.

Makeup

Makeup net sales decreased 2%, led by MAC and Too Faced, partially offset by Clinique. Net sales from MAC declined high-single-digits, reflecting softness in the brand’s retail sales in North America, resulting in lower replenishment orders. The ongoing business disruptions in the Middle East also contributed to the brand’s decline in net sales.

Too Faced net sales decreased, primarily in North America. Net sales from Clinique increased double digits globally, with growth across all geographic regions, benefiting from continued strength in the lip subcategory, led by the Clinique Pop and Almost Lipstick product franchises and fueled by new product innovation, along with the fiscal 2024 third quarter launch in Amazon’s US Premium Beauty store. Makeup operating loss increased, due to $159 million in aggregate charges relating to the talcum litigation settlement agreements.

Fragrance

Fragrance net sales decreased 1%, driven by the challenges in the company’s global travel retail business, partially offset by growth in both Asia/Pacific and collectively in the markets of EMEA. Reported and organic net sales from the company’s luxury brands, excluding its global travel retail business, grew mid-single-digits in total compared to the prior year, reflecting strategic investments to support direct-to-consumer expansion, particularly freestanding stores.

Net sales from Tom Ford declined high-single-digits, reflecting the brand’s retail softness in North America that led to lower replenishment orders as well as the challenges in the company’s global travel retail business. Net sales from the company’s prestige brands declined double digits, primarily driven by challenges in the company’s global travel retail business.
Jo Malone London net sales were flat, driven by the challenges in the company’s global travel retail business, offset by growth in the rest of the business owing to new product innovation, including Orange Marmalade and Hinoki & Cedarwood, as well as existing products, such as

Cypress & Grapevine primarily owing to the franchise’s strategic focus on men. Net sales from Le Labo increased double digits, primarily driven by continued success of the Classic Collection as well as the annual city exclusive event, including new product innovation, and benefited from targeted expanded consumer reach, including direct-to-consumer, globally.

Fragrance operating income declined, primarily driven by strategic investments to support targeted expanded consumer reach globally and the growth of the company’s luxury brands through advertising and promotional activities, including the fiscal 2025 launch of Balmain Beauty.

Hair Care

Hair Care net sales decreased 6%, primarily driven by Aveda, reflecting the timing of shipments and continued softness in the Company’s North America salon channel. Hair care operating loss decreased, reflecting lower cost of sales and disciplined expense management, partially offset by the decline in net sales.

Outlook for Fiscal 2025 Second Quarter

Looking ahead, the company says it’s “cautiously optimistic” about the potential medium- to long-term growth opportunities presented by the new economic stimulus measures in China, but volatility and uncertainty remain elevated in the near-term. Consequently, the company said it does not expect the stimulus measures to benefit its second quarter performance. In the rest of its business, the Company continues to expect the ongoing normalization of growth in the prestige beauty industry, most notably in North America.

Reported and organic net sales are forecasted to decrease between 8% and 6% versus the prior-year period.