Executive Summary
The Estée Lauder Companies (EL) reported a challenging QQ2 2025 with a material year-over-year revenue decline driven by muted demand in Asia Pacific and weakness in travel retail, offset by stronger online performance and selective brand momentum (notably The Ordinary). Organic net sales fell 6% YoY, and net income and EPS remained negative as the company faced volume deleverage, mix shifts, and elevated operating costs related to an expanded restructuring program and ongoing investments in growth initiatives. Management articulated a multi-year transformation—Beauty Reimagined (five action priorities) and an expanded Profit Recovery and Growth Plan (PRGP)—to accelerate top-line growth, improve operating margins, and restore sustainable profitability. The company signaled a commitment to leaner, faster operations, greater consumer-facing investment, and selective outsourcing to improve efficiency, with explicit guidance for the third quarter and a longer-term path to double-digit adjusted operating margin by the end of the horizon. The near-term outlook remains soft for travel retail (expected strong double-digit sales decline in H2), while the rest of the business is anticipated to stabilize with in-market investments and improved inventory management underscoring the path to improved margins over time.
Key Performance Indicators
QoQ: -379.34% | YoY:-201.05%
QoQ: -278.21% | YoY:-288.50%
QoQ: -281.40% | YoY:-288.51%
Key Insights
Revenue (Q2 2025): $4.004B, YoY -6.43%, QoQ +19.13% ; Gross Profit: $3.047B, YoY -2.50%, QoQ +25.24% ; Operating Income: -$0.580B, YoY -201.05%, QoQ -379.34% ; Net Income: -$0.590B, YoY -288.50%, QoQ -278.21% ; Diluted EPS: -$1.64, YoY -288.51%, QoQ -281.40% ; Gross Margin: 76.10%; Operating Margin: -14.49%; Net Margin: -14.74%; EBITDA: -$0.353B; Free Cash Flow: $0.925B; Operating Cash Flow: $1.058B; Capex: $0.132B; Cash at End of Period: $2.586B; Net Debt: $6.797B; Total Debt: $9.383B; Total Li...
Financial Highlights
Revenue (Q2 2025): $4.004B, YoY -6.43%, QoQ +19.13% ; Gross Profit: $3.047B, YoY -2.50%, QoQ +25.24% ; Operating Income: -$0.580B, YoY -201.05%, QoQ -379.34% ; Net Income: -$0.590B, YoY -288.50%, QoQ -278.21% ; Diluted EPS: -$1.64, YoY -288.51%, QoQ -281.40% ; Gross Margin: 76.10%; Operating Margin: -14.49%; Net Margin: -14.74%; EBITDA: -$0.353B; Free Cash Flow: $0.925B; Operating Cash Flow: $1.058B; Capex: $0.132B; Cash at End of Period: $2.586B; Net Debt: $6.797B; Total Debt: $9.383B; Total Liabilities: $15.591B; Total Assets: $19.760B; Equity: $4.169B; ROE (recent): -14.2%; Current Ratio: 1.371; Quick Ratio: 0.973; Debt/Total Capitalization: 0.692; Dividend Payout: negative; Shares Outstanding (avg): 360M.
Income Statement
| Metric |
Value |
YoY Change |
QoQ Change |
| Revenue |
4.00B |
-6.43% |
19.13% |
| Gross Profit |
3.05B |
-2.50% |
25.24% |
| Operating Income |
-580.00M |
-201.05% |
-379.34% |
| Net Income |
-590.00M |
-288.50% |
-278.21% |
| EPS |
-1.64 |
-288.51% |
-281.40% |
Key Financial Ratios
operatingProfitMargin
-14.5%
operatingCashFlowPerShare
$2.94
freeCashFlowPerShare
$2.57
dividendPayoutRatio
-21.4%
priceEarningsRatio
-11.44
Management Commentary
Key insights from management include: (1) Strategy and transformation: Beauty Reimagined with five action plan priorities aimed at accelerating consumer coverage, transformative innovation, increased consumer-facing investments, operational efficiencies via expanded PRGP, and simplified ways of working. The CEO notes the goal of restoring sustainable sales growth and achieving a solid double-digit adjusted operating margin over the next few years. (2) AI and data-driven decision making: Management highlighted hardwiring AI to forecast demand, optimize supply chain, and accelerate product development and marketing, with AI expected to free up resources for brand teams. (3) Delivery and execution: The leadership emphasized moving quickly to scale wins, exiting what isn’t working, and flattening the organization to improve speed and accountability. (4) Travel retail risk and China exposure: The call underscored weak Asia travel retail trends, particularly Korea, and ongoing China consumer sentiment headwinds, with expectations of continued volatility in the near term. (5) M&A discipline and deleveraging: While open to opportunities, management stressed deleveraging in the near term and evaluating opportunities through the lens of portfolio complementarity and balance sheet strength.
Our bold new strategic vision of Beauty Reimagined is designed to address these factors to restore sustainable sales growth and deliver a solid double-digit adjusted operating margin over the next few years.
— Stéphane de La Faverie
I'm energized to partner with Stéphane as we boldly drive the execution of Beauty Reimagined, our transformative strategic vision.
— Akhil Shrivastava
Forward Guidance
Third-quarter outlook: Organic net sales down 10% to 8% versus last year, driven primarily by a strong double-digit decline in global travel retail; rest of business expected to see a moderation in net sales decline. Currency translation expected to subtract ~2 percentage points from reported net sales. Gross margin anticipated to modestly expand due to in-period prior-year charges, with continued benefits from the expanded PRGP offsetting anticipated sales deleverage. Third-quarter effective tax rate guidance ~36% (vs. 30.5% prior year). Adjusted EPS projected at $0.20–$0.30, with currency translation diluting by about $0.04. Management notes that the company will continue to invest in consumer-facing activities to reignite growth, while using PRGP to fund these investments and offset operating deleverage. Longer-term guidance emphasizes achieving a solid double-digit adjusted operating margin in the coming years as operational improvements, cost discipline, and growth investments compound.