Executive Summary
Estee Lauder Companies (EL) delivered a muted QQ1 2026 against a challenging consumer backdrop, with revenue of $3.481 billion, down 10.07% year over year and 1.94% quarter over quarter. Despite a robust gross margin of 73.37%, profitability narrowed as selling, general and administrative expenses remained elevated, resulting in an operating income of $169 million and net income of $47 million (EPS of $0.13). EBITDA stood at $395 million, implying an EBITDA margin of roughly 11.3%, while the operating margin anchored near 4.85%. The quarter produced a negative free cash flow of $436 million and negative operating cash flow of $340 million, driven by working capital dynamics (significant accounts receivable outflow of $358 million and payables outflow of $272 million). Net debt stood at approximately $6.79 billion with cash balances of about $2.22 billion, yielding a debt-to-equity posture that remains elevated for a consumer staples/consumer defensive franchise with a premium brand portfolio.
From a strategic perspective, EL continues to invest in direct-to-consumer (DTC) channels, e-commerce, and brand ecosystems across its key portfolios (Estee Lauder, Clinique, MAC, La Mer, Jo Malone, and others) to sustain growth against a soft macro environment. Management commentary (where available) typically emphasizes brand strength, pricing/mix optimization, and cost discipline as levers to improve margins. However, the QQ1 2026 results underscore near-term headwinds in revenue while profitability and liquidity metrics reflect the ongoing challenge of translating top-line weakness into meaningful cash flow given working capital movements and investment in growth initiatives.
Looking ahead, the company faces a balancing act between maintaining premium brand momentum and deleveraging the capital structure. The absence of explicit quantitative forward guidance in the provided data requires investors to monitor management commentary on DTC momentum, regional mix shifts (notably APAC versus Americas), supply chain costs, currency effects, and any announced efficiency programs. If EL can stabilize revenue and optimize SG&A alongside a gradual improvement in working capital efficiency, the trajectory could support a more favorable risk-reward profile despite the current leverage and near-term cash flow pressures.
Key Performance Indicators
QoQ: -1.94% | YoY:-10.07%
QoQ: -44.77% | YoY:172.53%
QoQ: -70.44% | YoY:116.55%
QoQ: -70.45% | YoY:116.46%
Key Insights
Revenue: 3.481B in QQ1 2026, YoY -10.07%, QoQ -1.94%. Gross Profit: 2.554B, YoY -8.06%, QoQ -4.02% (Gross Margin: 0.7337).
Operating Income: 169.0M, YoY +172.53%, QoQ -44.77% (Operating Margin: 0.0485).
Net Income: 47.0M, YoY +116.55%, QoQ -70.44% (Net Margin: 0.0135).
EPS: 0.13, YoY +116.46%, QoQ -70.45%.
EBITDA: 395.0M, EBITDA Margin: 0.1135.
Interest Expense: 86.0M; Depreciation & Amortization: 200.0M.
Balance Sheet (selected): Cash & Equivalents 2.22B; Total Debt 9.00B; Net Debt ~6.7...
Financial Highlights
Revenue: 3.481B in QQ1 2026, YoY -10.07%, QoQ -1.94%. Gross Profit: 2.554B, YoY -8.06%, QoQ -4.02% (Gross Margin: 0.7337).
Operating Income: 169.0M, YoY +172.53%, QoQ -44.77% (Operating Margin: 0.0485).
Net Income: 47.0M, YoY +116.55%, QoQ -70.44% (Net Margin: 0.0135).
EPS: 0.13, YoY +116.46%, QoQ -70.45%.
EBITDA: 395.0M, EBITDA Margin: 0.1135.
Interest Expense: 86.0M; Depreciation & Amortization: 200.0M.
Balance Sheet (selected): Cash & Equivalents 2.22B; Total Debt 9.00B; Net Debt ~6.79B; Total Assets 19.33B; Total Liabilities 15.44B; Total Stockholders’ Equity 3.89B.
Liquidity & Cash Flow: Net Cash Provided by Operating Activities: -$340.0M; Free Cash Flow: -$436.0M; Capital Expenditures: -$96.0M. Cash at end of period: $2.22B versus $2.92B at the start of period.
Leverage & Coverage: Long-term Debt $9.00B; Interest Coverage roughly 1.97x (EBIT of $169M / Interest $86M).
Capital Allocation: Dividends paid in the period approximated at $127M; no share repurchases indicated in the data; Net cash used in financing activities: -$239M.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
3.48B |
-10.07% |
-1.94% |
| Gross Profit |
2.55B |
-8.06% |
-4.02% |
| Operating Income |
169.00M |
172.53% |
-44.77% |
| Net Income |
47.00M |
116.55% |
-70.44% |
| EPS |
0.13 |
116.46% |
-70.45% |
Management Commentary
Transcript content not provided in the prompt. No direct management quotes or themes available to synthesize. If a transcript is supplied, key themes would typically include: (1) strategic updates on DTC acceleration, price/mix actions, and product cycle momentum; (2) commentary on regional performance, particularly APAC and travel retail; (3) cost management actions and any restructuring or efficiency programs; (4) commentary on inventory levels, holiday season visibility, and FX impact; (5) guidance or outlook for FY2026/Q2 and beyond.
Forward Guidance
No explicit numeric guidance was included in the provided data. Given the QQ1 2026 results, investors should monitor: (a) DTC and e-commerce trajectory and mix shift toward higher-margin SKUs; (b) regional performance, especially APAC recovery vs. mature markets; (c) cost control measures, SG&A leverage, and potential price increases to support margin; (d) working capital management to convert receivables and inventory into cash; (e) currency headwinds and supply chain cost dynamics; (f) progress on strategic initiatives such as licensing arrangements and brand portfolio optimization. In a baseline scenario, stabilizing revenue and achieving modest SG&A efficiency could gradually improve operating margin toward the mid-single digits, with ESOP or stock-based compensation programs remaining non-material in the near term. The key factors investors should monitor are revenue trajectory, gross margin stability, cash flow generation (OCF/FCF) and the pace of deleveraging given the current net debt position.