Estee Lauder lifts forecast as fragrance boom pulls in younger shoppers

Results and outlook

Estee Lauder's quarter landed ahead of expectations: sales increased 7% to 3.7 billion dollars, and diluted earnings per share reached 64 US cents versus the 51-cent consensus tracked by Bloomberg. At 9:34 a.m. in New York, the stock was essentially flat.

Management raised its full-year view. The company now sees organic sales up 4% to 5.5% for the fiscal year, compared with a previous 3% to 5% range, and lifted its adjusted earnings per share target by 10 US cents. Through last week's close, shares had gained 4.3% this year, trailing the S&P 500's 11% advance.

What is powering demand

Growth was driven by fragrance, buoyed by the lower-priced Kilian Paris Cocktails Collection, the brand that posted the company's quickest expansion last quarter. The company also rolled out Glimmer last summer, a high-end scent fronted by actress Hailee Steinfeld, in a bid to connect with younger consumers.

Chief Executive Officer Stéphane de La Faverie said younger shoppers are "buying fragrances very differently than the last generation," with more scents for different occasions. Since de La Faverie took the helm, the strategy has been to move business out of department stores and into quicker-growing outlets such as Amazon.com and TikTok, and to accelerate product creation to ride emerging trends. The higher outlook signals that de La Faverie's approach is starting to show results.

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China and competitive context

Sales in China topped expectations, and the market represented one fifth of revenue in the most recent fiscal year. Executives plan to hold a Wednesday event in Shanghai to present strategic plans for the country.

The broader backdrop helps: cosmetics spending is holding up despite higher inflation in many markets. In October, L'Oreal SA also beat sales forecasts, powered by salon haircare and premium skincare.

Strategy, brands, and what to watch

Estee Lauder, headquartered in New York and parent to Le Labo, Tom Ford, and La Mer, is pressing its turnaround after a sluggish post-pandemic stretch. The company said it has been innovating in fragrances and offering more approachable price points to appeal to younger shoppers. Earlier this year, Bloomberg reported merger talks with Puig Brands SA fell apart in part because of compensation demands from makeup artist Charlotte Tilbury.

The bottom line: momentum is coming from fragrances, accessible price tiers, and China. For your portfolio, that puts the focus on whether those channels and product launches keep converting into sustained sales and EPS growth.

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