Estée Lauder stock slipped before the opening bell on Wednesday after the beauty group forecast annual profit below analyst expectations and flagged fresh tariff-related costs.
The shares were down nearly 6% in pre-market trading, extending losses after a sharp swing lower, as investors digested ongoing weakness in the company’s two largest markets, the United States and China.
The company, which owns brands including Clinique, M.A.C., Jo Malone and Smashbox, said subdued consumer confidence in North America and softer travel retail sales were weighing heavily on results.
Sales and profit under pressure
For the three months ended June 30, Estée Lauder posted a net loss of $546 million, or $1.51 per share, compared with a $284 million loss, or 79 cents per share, a year earlier.
The result was hit by a $527 million restructuring and asset impairment charge as well as a $172 million deferred tax asset valuation allowance adjustment in the US.
On an adjusted basis, earnings were 9 cents a share, in line with Wall Street expectations, according to FactSet.
Revenue fell 12% to $3.41 billion but narrowly topped analyst forecasts of $3.39 billion.
Skin care sales, the company’s largest category, dropped 16% year-over-year, while makeup revenue fell 11%.
Hair care sales declined 15%, reflecting continued struggles in brick-and-mortar retail in North America.
The fragrance unit was a rare bright spot, rising 4% thanks to luxury brand demand.
$100 mn tariff hit to profit in current fiscal
Estée Lauder warned that new tariffs would reduce profit by about $100 million in its current fiscal year, which began in July.
Management said it would try to offset more than half the levies by leveraging trade programs and optimizing its supply chain, while also considering selective price increases.
The company projected fiscal 2026 earnings of between $1.63 and $1.87 a share, or $1.87 to $2.07 a share excluding one-time items and currency fluctuations.
Wall Street, by contrast, had modeled adjusted earnings of $2.20 a share.
Top-line growth for fiscal 2026 is expected at 2% to 5%, in line with consensus, with analysts looking for $14.69 billion in sales, or a 2.6% increase from the previous year.
CEO notes volatility but sees signs of momentum
Chief Executive Stephane de La Faverie said external headwinds continued to weigh on the business, particularly in Asia, but stressed that the company expected to return to growth.
“Volatility in the external environment continues to affect us, yet we are seeing momentum building in several categories,” he said.
The warning on tariffs comes as competition intensifies from rival beauty sellers on Amazon and TikTok, particularly in China.
Despite these challenges, Estée Lauder shares have climbed 41% over the past three months, although Wednesday’s drop to $83.40 highlighted investor concern over the near-term earnings outlook.
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