Continued challenges across the key Asia travel retail sector hit The Estée Lauder Companies (ELC) as the US beauty powerhouse today posted an -8% year-on-year decline in net sales to US$14,326 million and an operating loss of US$785 million for its full fiscal 2025 year.
The Asia travel retail slump was driven by ongoing subdued sentiment and lower conversion from Chinese consumers. Additionally, results suffered from a difficult comparison to the prior year due to the company’s resumption of replenishment orders in the fiscal 2024 third quarter and a strategic decision to reduce its exposure to reseller activity.
Retailer shifts in strategies toward more profitable duty-free business models in both South Korea and Mainland China [a reference to the move away from a reliance on the bulk daigou business referred to above] led to lower replenishment orders.
But the US beauty powerhouse said it had delivered “strategic progress”, and affirmed its fiscal 2026 outlook to restore positive sales growth and enhance operating profitability {we will bring you full analysis, including a close look at travel retail performance, after tonight’s earnings call}.
In a key development beginning with the fiscal 2026 first quarter,ELC will be reporting its fiscal 2026 and comparable fiscal 2025 results by geographic region under a new regional structure. The company’s four new geographic regions are:
- The Americas, including North America and Latin America
- Europe, the United Kingdom and Ireland and Emerging Markets (“EUKEM”), including the markets of the Company’s previously reported EMEA region, as well as the Southeast Asian Emerging Markets, which were previously reported in its Asia/Pacific region—Indonesia, Malaysia, the Philippines, Thailand, and Vietnam
- Asia/Pacific, including the company’s global travel retail business, which was previously reported in the EMEA region
- Mainland China, which was previously reported in the Company’s Asia/Pacific region, will now be reported as a separate region
President and CEO Stéphane de La Faverie said, “Having closed fiscal 2025 as expected, we remain wholly focused on continuing to execute our strategic vision of Beauty Reimagined with excellence.
“Despite continued volatility in the external environment, we embarked on fiscal 2026 with signs of momentum and confidence in our outlook to deliver organic sales growth this year after three years of declines and to begin rebuilding operating profitability in pursuit of a solid double-digit adjusted operating margin over the next few years.”
The group reported modestly encouraging progress in the key Mainland China market, where ELC share gains continued in fiscal Q4 2025 driven by every category and channel, led by La Mer and Tom Ford.
For the full year, the company also achieved share gains in every category across Mainland China, driven by La Mer and Le Labo.
The troubled Asian travel retail business (see factors mentioned above) drove a -12% year-on-year decline in skincare sales, primarily due to declines from Estée Lauder and La Mer.
Makeup sales (down -5% year-on-year) were also impact by the North Asia travel retail struggles. In particular, the Estée Lauder decrease, primarily driven by the decline in the face subcategory, reflected the challenges in Asia travel retail (despite sequential improvement in year-on-year net sales growth in the rest of the business in the fiscal 2025 fourth quarter).
More to follow. ✈
