Key Points
Fragrance sales rose 20% and earned the best operating margin of the four categories, while makeup and hair care were nearly flat.
Management expects growth to be front-loaded, with the raised 4% to 5.5% full-year range sitting below this quarter's 6% organic pace.
Estée Lauder (NYSE:EL) reported fiscal 2027 first-quarter net sales of $3.7 billion, up 7%, and shares rose about 2.3% in pre-market trading. Costs barely grew while sales did, so operating income more than doubled to $408 million, and management raised its full-year outlook. Fragrance drove the sales growth, while makeup and hair care barely moved.
Key Numbers
Missed AI’s "Act 1"? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn't buy Nvidia in 2005. But according to our analysts, we’re only at the end of "Act 1"—the R&D phase. "Act 2" is the global rollout. Continue »
- Organic net sales: $3.7 billion, up 6%.
- Gross margin: 75.7%, up from 73.4%.
- Operating margin: 11%, up from 4.9%.
- Diluted EPS: $0.64, versus $0.13.
What It Means
Cost cuts and pricing did the work. Procurement savings, manufacturing efficiencies, and pricing offset inflation, so cost of sales fell as sales rose. Overhead grew far slower than sales, which funded more consumer-facing spending and still lifted profit. A lower tax rate also helped EPS, since last year's rate was 56.9%.
Growth leans on fragrance. It rose 20%, while makeup and hair care were nearly flat. Fragrance also earned the best operating margin of the four categories, so the mix helps profit more than sales.
Management says growth is front-loaded. The raised full-year range of 4% to 5.5% sits below this quarter's pace, because launches, travel retail restocking, and easy comparisons help the first half more than the second.
What to Watch Next
Watch whether fiscal second-quarter organic growth holds near this quarter's 6%, since management expects the first half to carry the year. Also watch whether the Estée Lauder brand's makeup sales stop falling.
David Kretzmann has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.