Breakthrough return to travel retail “positivity” in June and July for The Estée Lauder Companies : Moodie Davitt Report

Travel retail’s fast-reviving fortunes represented a key theme during The Estée Lauder Companies’ (ELC) full-year earnings call yesterday (19 August)

As reported, ELC posted a +5% year-on-year increase in group-wide reported sales (organic +3%) to US$15 billion for the full year and a strong profitability rebound (see table below) with travel retail’s improved performance playing a key role.

Speaking during the earnings call, The Estée Lauder Companies President and CEO Stéphane de La Faverie revealed more details of how global travel retail returned to growth in the year.

This rebound was fuelled in part, he said, by the company’s investment in “experiential retail” across Mainland China and South Korea.

Asked for clarity on Asian – and Hainan, in particular – inventory levels and how they may affect the positive organic sales outlook, de La Faverie replied: “I want to be very clear, and I reiterate what I’ve said many, many times – we are shipping to demand. So our inventory is in a very good place in travel retail.”

Building on that point, he added: “Now I’m very happy to report another [piece of] good news in travel retail. For the first time in three years, for the month of June and the month of July we are back into positive territory for travel retail globally, led by Hainan that was in double-digit growth in the fourth quarter.

“That [growth] was also there in Q3, but we are [also] seeing great momentum in Korea, in Hong Kong and in Southeast Asia in travel retail.”

The critical Hainan offshore duty-free sector was spurred by a wholehearted return to traditional retail activity, anchored by high-profile activations for the launch of Double Wear Stay-in-Place Foundation, pictured above with China Duty Free Group at cdf Sanya International Duty Free Shopping Complex in Hainan. Click here for our full story.

The same campaign, shown here at London Heathrow Airport with Avolta-owned World Duty Free, typifies a similarly consumer-centric approach that is fuelling encouraging western hemisphere travel retail growth

Travel retail also performed strongly in the Americas, helping to offset some of the “headwind” being experienced in the traditionally strong Middle East region, de La Faverie noted.

“So the [pure] retail is strong in travel retail, and we are managing inventory to the demand,” he continued. “Travel retail represents about 15% of our business, and we intend to just keep it in line with industry standards.”

Travel retail represented approximately 15% of reported sales in fiscal ’26, similar to the channel’s global Prestige share. That is a significantly reduced percentage from 28% just five years earlier, underlining how the company has normalised its business by moving away from a hitherto over-reliance on the daigou reseller sector in the key Korean and Hainan markets.

De La Faverie then responded to a key question (posed by Christopher Carey of Wells Fargo Securities) asking how ELC was balancing management of the Mainland China domestic business versus Asia travel retail in order to deliver more consistent growth in both areas over the coming year.

“When it comes to the TR visibility, we have a very clear system in place today,” de La Faverie said, emphasising the strength of the revamped leadership team headed by President – Asia-Pacific Region and Travel Retail Worldwide Matthew Growdon and anchored by two key regions – East (out of Singapore) and West (London).

“We’ve really accelerated experiential retail in travel retail. So you are going to see us doing a lot more activities in the East and in the West. We’ve accelerated the deployment of our brand in the West, especially led by the fragrances.

“You’re seeing a lot more visibility on Jo Malone, on Tom Ford, on Kilian Paris, on Le Labo, at many, many airports in the Americas and EMEA. And when it comes to the management of the East, we have a system in place that allows a clear coordination of activities between Mainland China and travel retail China.

“That is done in conjunction between Joy Fan, who is the leader [President & CEO] of China and Matthew Growdon [President – Asia-Pacific Region and Travel Retail Worldwide]… where they meet regularly to coordinate launches, activities and [for example] how we go at 11/11 versus 6/18 between the travel retail and in the local market.

“So it’s a very sophisticated model that allows us to really make sure that we’re managing the total China ecosystem and looking at it from Mainland China [domestic] to travel retail [China] – alongside the Chinese travellers around the world – in a very coordinated model.”

That approach, he said, allows ELC to delight the Chinese consumer wherever they are and to ship to the demand wherever it is. ✈

On the record with Stephane de la Faverie

On groupwide full-year performance: I am incredibly proud of our fiscal ’26 results. We reignited growth with organic sales rising +3%, driven by the breadth of growth across brands and expanded operating margin significantly.

On his bullish view of ELC prospects: Can we accelerate growth? Yes, we just did and we will again. The PRGP’s approvals are done. And now all our energy can be focused on accelerating growth.

On how to deliver that growth: As we continue to deploy our One ELC operating model, we are enabling the entire organisation to do what we do best. This means deepening investment in the desirability of our brands, leveraging superior AI-enabled consumer-driven insights to drive breakthrough innovation, and executing with excellence.

On “the elephant in the room” – M&A: Our focus has been and will remain growing our core business. We will continue to pursue minority and single-brand deals that enhance our portfolio and can benefit from our ability to create scale and deliver attractive ROIC [Return on Invested Capital].

We have done this with Kilian Paris, Le Labo and The Ordinary, our three fastest-growing brands in fiscal ’26. We have no doubt we will do it again with Forest Essentials.

To be clear, for the foreseeable future, we are not entertaining transformational deals that will divert us from our winning strategy.

On North Asia travel retail inventory levels: I want to be very clear, and I reiterate what I’ve said many, many times – we are shipping to demand. So our inventory is in a very good place in travel retail.

On the ‘billion dollar club’: Impressively, Jo Malone London and Tom Ford joined our billion-dollar club. Our portfolio of billion-dollar brands is unparalleled in Prestige Beauty with these two brands joining Clinique, Estée Lauder, La Mer and M·A·C. And The Ordinary is quickly ascending towards this milestone, fuelled by another year of double-digit organic sales growth in fiscal ’26.

On Beauty Reimagined (the strategic vision and restructuring plan introduced by de La Faverie in February 2025): With Beauty Reimagined we committed to creating transformative innovation as we restored sales growth. During fiscal ’26, we accelerated speed to market, launching breakthrough on-trend and commercial innovation across every category with 23% of sales from innovation.

With this fiscal ’26 result, we delivered on all aspects of Beauty Reimagined as promised, accelerating best-in-class consumer coverage, bringing innovation to market faster, increasing consumer-facing investment, streamlining our fixed cost base and revitalising our entrepreneurial spirit.

On innovation in skincare: We kicked off fiscal ’27 with a robust slate of newness. For the fiscal year, innovation as a percentage of sales is set to increase 200 to 250 basis points led by skincare.

Already out in skincare, Clinique and The Ordinary tapped into emerging ingredient trend with PDRN [polydeoxyribonucleotide] innovation, while Estée Lauder introduced a breakthrough in longevity as well newness for night. La Mer and Bobbi Brown created next-generation edition of beloved hero product, and Clinique introduced a new franchise for sensitive skin spanning Skin Care and Makeup.

On innovation in Makeup and Fragrance: M·A·C launched exciting innovation in signature lip franchise, including an all-new lip stain, which was a blockbuster success in its early launch in Korea during fiscal ’26.

For Fragrance, the category we expect to lead Prestige Beauty’s growth again in fiscal ’27, our first-quarter innovations are extensive – from Balmain Beauty along with the new Prestige line from Kilian Paris and Estée Lauder to Jo Malone London and Tome Ford in the luxury price tier. We introduced distinctive scents to drive new consumer acquisition across demographics and regional preference.

On media spending: For our new unified global media model, most of our markets have transitioned to WPP, already lighting up over 1,500 campaigns and harnessing AI for real-time personalisation for many of our performance campaigns. And we expanded our collaboration with Meta, leveraging the AI-powered tool built for advertising, conversational commerce and agentic messaging across our brand portfolio to reflect the new consumer behaviour of where they are interacting with brands.

And finally… In Beauty Reimagined, we have a winning playbook and I am confident we will deliver another strong year in fiscal ’27. We have the right brands, the right team, a clear momentum onward and upward. ✈

On the record with Stephane de la Faverie

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