The Estée Lauder Companies Inc.

everyone, and welcome to the Estee Lauder Company's fiscal 2026 second quarter conference call. Today's webcast is being recorded. For opening remarks and introductions, I would like to turn the call over to the Senior Vice President of Investor Relations, Ms. Rainey Mancini.

Hello. On today's webcast are Stéphane Delafavry, President and Chief Executive Officer, and Akhil Srivastava, Executive Vice President and Chief Financial Officer. Since many of our remarks today contain forward-looking statements, let me refer you to our press release and our reports filed with the SEC, where you'll find factors that could cause actual results to differ materially from those forward-looking statements. To facilitate the discussion of our underlying business, the commentary on our financial results and expectations is before restructuring and other charges and adjustments disclosed in our press release. Unless otherwise stated, all organic net sales growth also excludes the non-comparable impacts of acquisitions, divestitures, brand closures, and the impact of foreign currency translation. You can find reconciliations between GAAP and non-GAAP measures in our press release and on the Investors section of our website. Retail sales performance discussed is based on information available as of January 29, 2026. As a reminder, references to online sales include sales we make directly to our consumers through our brand.com sites and through third-party platforms. It also includes estimated sales of our products through our retailers' websites. Throughout our discussion, the Profit Recovery and Growth Plan will be referred to as our PRGP. During the Q&A session, we ask that you please limit yourself to one question so we can respond to all of you within the time scheduled for this webcast. Now I'll turn the webcast over to Stéphane.

Thank you, Rainy. And hello to everyone today. We reported strong second quarter results, marked the one-year anniversary of Beauty Reimagined, and raised our fiscal 26 outlook. Our second quarter performance further exemplifies the momentum we have created across our five action plan priorities. Having delivered 4% organic sales growth, our growth and operating margin expanded and EPS grew 43%, showcasing once again our ability to manage expenses. For the first year, we made promises, we kept promises. As we expanded our consumer coverage across online and brick-and-mortar in every region, overhauled our innovation engine with new leadership, faster-to-market launches, and a renewed consumer-first mindset. Increased consumer-facing investment every quarter to accelerate recruitment, enabled by significant savings from the PRGP. and created one ELC, one new operating model aligning brands, regions, and functions as one team with one culture and one operating ecosystem. When we introduced Beauty Reimagined, our ambition was bold. Execute the biggest operational, leadership, and cultural transformation in our history to become the best consumer-centric prestige beauty company. Thanks to the passion, creativity, and resilience of our team around the world, we have come far in one year. Yes, there is more work to do, but much has been accomplished. In the first half of fiscal 26, our global retail sales trend improved from the first to the second quarter, from down 4% to flat, as the decline in travel retail moderated. Even more encouraging, our retail sales grew 4% in the first half, excluding travel retail. In mainland China, we outperformed Prestige Beauty in the quarter again with double-digit growth. We gained share for the quarter and calendar year 25, led by La Mer and Tom Ford, showcasing the strong desirability of our brands compared to international and local peers. In Hainan, our retail sales grew high single-digit in the quarter, led by Estée Lauder and La Mer. In Japan, we outperformed Prestige Beauty in the quarter, driven by MAC and Le Labo. For calendar 25, we gained share in France to strengthen our number one category rank. In the U.S., for the quarter and calendar 25, we gained volume share in total prestige beauty. We also grew value share for the quarter and calendar 25 in skin care led by The Ordinary and hair care. In addition, Estée Lauder gained share in makeup for calendar 25. This retail result and share trend reflects the exceptional execution of Beauty Reimagined over the last year. For our first action plan priority, we moved rapidly to expand our portfolio presence in consumer-preferred, high-growth channels, market, media, and price tiers. We expanded our presence on Amazon Premium beauty stores, now with 12 brands across 10 markets. We also announced our brand reach on TikTok shop in the U.S. and Southeast Asia and launched our first brand in the U.K. and Germany. This work, coupled with strong performance on Timor, Dohing, Jelly, Notino, and Trendyol, drove high single-digit online organic sales growth in the first half, leading us to believe we outperformed Prestige Beauty in the channel. For fiscal 26, online is on track to exceed the 31% of reported sales reach in fiscal 25 as we increasingly tap into the full potential of this high growth channel. We increased our presence in travel retail across the West, including with Duty Free America, as well as new and upgraded doors for our luxury finances in European and Middle Eastern airports, contributing to double-digit retail sales growth for finances across several major retailers in the first half of fiscal 26. This strategic expansion is providing a double win, driving growth and diversifying our travel retail business. As we expanded our pharmacy reach in Europe and entered the channel in Latin America, while strengthening our ties in specialty multi with Max up and coming launch in the U.S. Sephora. For our second action plan priority, Create Transformative Innovation, we focused on three areas of breakthrough, entrant, and commercial. In China, innovation resonated especially strongly. Estello's three breakthrough launches in the longevity skincare science space contributed to its double-digit organic sales growth in skincare in the market. Our China Innovation Lab created Renutrives Oil in 15 months, quick for skincare and demonstrating how we are accelerating our speed to market. And Tom Ford, strong double-digit organic sales growth in China, was driven by highly sought-after on-trend launches in Leap and Face as well as Florence. Globally, The Ordinary's innovation and expanded consumer reach drove strong double-digit retail sales growth in the first half, demonstrating that our new model allows us to support growth for our own indie brands to drive greater scale. For makeup, Estée Lauder's Double Wear Concealer has been a game-changer in the U.S., achieving the top-ranked new product in prestige makeup based on unit for calendar year 25. Within her care, Aveda's new Miraculous Oil catapulted to be the brand's top-selling product through the first half. For fiscal 26, we are on track for innovation to represent at least 25% of sales. And as we work to increase the percentage of innovation launched in less than a year from 10 to 30%, we are tracking to 19% for fiscal 26, above the 16% we initially expected. Turning to our third action plan priority, we boosted consumer-facing investment, focused on high ROI opportunities. We invested in our freestanding stores, opening new doors for our luxury finance brands to showcase their unique experiential retail, while selectively closing doors for Mac and Origin to drive a more productive fleet. Impressively, Le Labo's strong double-digit organic sales growth in the first half of fiscal 26 reflects its expanded reach as well as double-digit like-for-like door. We also invested in groundbreaking campaigns for commercial innovation with several notable for MAC, which contributed to the brand's return to organic sales growth in the first half of fiscal 26. La Mer campaigns for 11.11 shopping festival and holiday also proved to be a winning investment. contributing to La Mer being our best-performing brand for the first half of fiscal 26, given its organic sales growth. For our fourth action plan priority, fuel sustainable growth through bold efficiencies, we continue to realize strong savings from the PRGP, which Akhil will describe. I want to personally thank the team for working together with Speed to bring this fruition. Finally, for our fifth action plan priority, our step to reimagine the way we work evolves today as we unveil one ELC, our new operating model, aligning brands, regions, and functions as one team with one culture and one operating ecosystem. We have simplified our structure in support of one team with fewer layers and silos along with clearer ownership to make it easier to get things done and done well. And guided by our newly announced beauty commitment to our team, we are leaning into one culture of bold thinking, accountability, agility, unity, and focus. Lastly, We have advanced our work to create a robust operating ecosystem for a more connected and scalable enterprise. In the second quarter, we've established our new enterprise business services. selecting Accenture to transform how we deliver select shared services globally as we accelerate the deployment of AI throughout the organization. This exciting partnership adds to the ecosystem we are building with leading technology providers, including Microsoft, Google, and Shopify, to fuel our ambition to be the best consumer-centric prestige beauty company. With the momentum of Beauty Reimagined and our first half results, we are raising our fiscal 26 outlook today by narrowing the organic sales growth range towards the high end, increasing operating margin expansion from 165 to 200 basis points at the midpoint, reflecting previously expected headwind-like tariffs, and now greater consumer-facing investment. and raising EPS growth from 33% to 43% at the midpoint. This outlook reflects the confidence in our turnaround, as well as the significant work that we still have ahead to drive better performance in the U.S., as well as in the U.K., despite its return to growth in the second quarter. And while the macroeconomic environment is challenging in the Western Europe market, we see opportunities to improve our results. For China, we are encouraged by the strong desirability of our brands and innovation, but cognizant of still subdued consumer sentiments. In our priority emerging market, after a significant acceleration to double-digit organic sales growth in the second quarter, we are confident that our new organizational design is enabling us to better tap into growth opportunities. For the second half of fiscal 26, we have a rich slate of innovation. Already out in skincare, Clinique launched its new dermatologist-developed skincare line, and La Mer introduced an eye cream to pair with its successful rejuvenating night cream. For makeup, Estée Lauder's Double Wear is launching next-generation matte foundation with more wear, more shade, more benefits. The brand is already the leader in foundation and looking to strengthen its leadership around the world. And Clinique is fueling the nostalgia trend with the Chubby Stick launch. For fragrance, new nests from Killian Paris, Le Labo, and Tom Ford builds on the category's terrific first half as our best-performing category with 10% organic sales growth. In hair care, Bumble and Bumble introduced a styling product at an exciting time as it enters salon-centric in the U.S., In closing, for fiscal 26, we expect return to organic sales growth and expand our operating margin for the first time in four years, setting the stage to restore sustainable sales growth and a solid double-digit adjusted operating margin in the next few years. I am immensely grateful for the opportunity to lead this great company, especially as we celebrate the 80th of our founding. We have an extraordinary team, an extraordinary portfolio of brands, and we have momentum onward and upward. I will now turn the call over to Akhil.