The Estée Lauder Companies Inc.

Good day, everyone, and welcome to the Estee Lauder Company's Fiscal 2026 Third 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 Stephane Delafabrie, 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 these 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 noncomparable 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 investor section of our website. Retail sales performance discussed is based on information available as of April 29th, 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 presentation, our profit recovery and growth plan will be referred to as our PRGP. And now I'll turn the webcast over to Stephan.

Thank you, Reni, and hello to everyone. Today, we raised our Fiscal 26 outlook and offered our preliminary view on Fiscal 27. We do so with confidence in the trajectory of our business as our third quarter results extend our strong year-to-date performance and as we begin realizing the benefits of one operating ecosystem. For the third quarter, organic sales rose 2%, operating margin expanded significantly, bolstered in part by gross margin expansion, and EPS grew 40%, further demonstrating the momentum of Beauty Reimagined. For the nine months of fiscal 26, we have delivered progress in many areas of our business. Three of four regions grew organically, led by high single-digit growth in mainland China and double-digit growth in our priority emerging markets. The Americas stabilized and we remain focused on seizing its full potential. Looking at categories, fiscal year to date, France rose double digit organically, significantly outperforming the industry, and skincare grew low single digits, while hair care stabilized and makeup rate of decline slowed. Fiscal 26 is promising to be the pivotal year we intended, one in which we restore organic sales growth and expand our operating margin for the first time in four years. we now expect to deliver organic sales growth of 3%, the high end of our prior range. Operating margin on track to be 10.7% to 11%, significantly ahead of the 10% we previously expected at the midpoint and notably better than the 8% of fiscal 25%. Driving these results, an expectation of retail sales growth and share gain in several key markets. In Mainline China, with our high single-digit retail sales growth, we estimate we outperformed Prestige Beauty for the third consecutive quarter of fiscal 26, driven by brands including La Mer, Tom Ford, Le Labo, and The Ordinary. For travel retail, in Hainan, we significantly outperformed Prestige Beauty, which itself improved sequentially, to gain share as our activation for Lunar New Year drove remarkable performance. Retail sales rose strong double-digit, accelerating from high single-digit in the second quarter, with 10 brands growing double-digit, led by La Mer, Estée Lauder and MAC. In Japan, where prestige beauty declined low single-digit, our share expanded overall, driven by outperformance in makeup. In Korea, we returned to retail sales growth, up high single-digit, and gained share in makeup. In both markets, MAC performed exceptionally well. In the U.S., our retail sales grew mid-single digit. We gained volume share in total prestige beauty driven by every category. On a value basis, the ordinary gained share in skincare, while Clinique, MAC, Bobbi Brown, Cosmetics, and Estée Lauder expanded share in makeup. The company gained value share in the U.S. Prestige Hair Care, driven by Aveda and The Ordinary. And we are seeing evidence of Aveda's turnaround given share expansion tracks and on data. These retail sales and share trends around the world are a tribute to our team's delivery of Beauty Reimagined. During the third quarter, we continued to execute with excellence across all five action plan priorities. We accelerated best-in-class consumer coverage, expanding our portfolio presence in consumer-preferred, high-growth channels, market, media and price tiers. For Amazon premium beauty stores, we deepened brand reach across the 10 markets where we have launched. For instance, with Clinique launching in France and Estée Lauder in the UK. Similarly, we increased our brand reach on TikTok shop in market from the US to Germany and Malaysia and announced our online presence in China, launching The Ordinary on Douyin and Estée Lauder and MAC on VIP.com. This work, coupled with strong performance on Douyin, Tmall, and Coupang, one of the leading Korean online platforms, drove double-digit online organic sales growth in the third quarter. Impressively, fiscal year to date, online organic sales growth grew 10%, leading us to believe we outperformed Prestige Beauty in the channel. In March, we strengthened our ties and specialties with Mac's much-anticipated entry into the U.S. Sephora. For the month, Mac was the number one lead brand in makeup across the Sephora stores where it launched. For our second action plan priority, create transformative innovation, we deliver on all three areas of breakthrough, on-trend, and commercial. Our newness in France resonated especially well, contributed to the category's double-digit organic sales growth driven by every region. Le Labo delivered another quarter of remarkable growth with high single-digit like-for-like door growth and strong double-digit organic sales growth, driven in part by Violet 30, a recent addition to the classic collection. Tom Ford's innovation in the category went from strength to strength as the brand followed Oud Voyageur's successful launch earlier in fiscal 26 with the highly sought-after Figuerotic. Balmain's beauty Destin, the brand's new entry into prestige price tier with a refillable Ball Saint, drove an exceptional consumer response and stronger than expected retail sales. Lastly, in France, Kylian Paris' latest launch, Her Majesty, contributed to the brand's strong double-digit organic sales growth. The fastest in the company demonstrated our ability to accelerate growth in promising emerging brands. In skincare, breakthrough launches from La Mer in Eye and Estée Lauder Supreme franchise were among several drivers fueling strengths for those brands in mainland China. While we are pleased with the performance of these launches, globally, we did not have the breadth of newness in skincare relative to last year's third quarter. Fiscal year to date, innovation has been a vital contributor to skincare organic sales growth, and we have a rich innovation pipeline for fiscal 27. In makeup, Estée Lauder Double Wear Next Generation Matte Foundation drove the brand's double-digit growth in the category, while MAC's Lips & Chic Moves capture the multi-use makeup trend. Turning to our third action plan priority, we boosted consumer-facing investment for the fifth consecutive quarter, focused on high ROI opportunities. La Mer, experiential celebration for the launch of the rejuvenating high cream, where one of the several drivers making La Mer once again the greatest contributor to the company's organic sales growth. And Estée Lauder's launch of the all-new Double Wear Foundation delivered exciting activation around the world to drive engagement and new consumer acquisition. We invested in groundbreaking campaigns, including Jo Malone's commercial innovation featuring the Jagger sisters driving organic sales growth. The Ordinary showcased its brand equity with its dictionary-themed pop-up across five countries as the brand extended its double-digit organic sales growth. Our fourth action plan priority fuels sustainable growth through bold efficiencies. We achieved a significant milestone in the PRGP's restructuring program by quarter-end, having approved initiatives to achieve the high-end of the target growth-saving range. In April, we expanded the size of the restructuring program, reflecting additional initiatives expected across the pillar of the program. This includes the expansion of the position impacted, which largely reflects the anticipated exit of select and productive doors in department stores and freestanding store channels, as we increasingly tapped into the high growth potential of online. This was a decision we did not take lightly, as it will impact Beauty Advisor globally as we evolve our business to better align with consumer shopping preferences. We remain committed to completing business case approvals for the restructuring program by the end of fiscal 2026. With a line of sight of additional gross benefit driven primarily by optimization of our selling model, we are increasing the target range of gross savings. For the entirety of PRGP, we have taken decisive actions to reshape our cost structure and operation, to drive speed and agility, which is now evident in our organization. We remain on track to achieve the vast majority of PRGP's full run rate benefit in fiscal 27. Since launching Beauty Reimagined, we are well on our way in executing the biggest organizational leadership and cultural transformation in our company's history, while successfully managing internal and external disruption and restoring organic sales growth and improving profitability. Finally, for our fifth action plan priority, we have now fully established one ELC, our operating model, aligning brands, regions, and functions as one team with one culture and one operating ecosystem. We swiftly deployed one team to begin fiscal 26, simplifying the organization with fewer layers and silos and clear ownership. More recently, in February, we unveiled one culture guided by our beauty commitments, reinforcing how our team works every day, grounded in accountability and bold entrepreneurship thinking. On our last earning call, I spoke of the work underway for our one operating ecosystem to build a more connected and scalable enterprise transformed by AI. At that time, we had established enterprise business services, selecting Accenture, and elected to modernize our direct-to-consumer omnichannel experience with Shopify. In April, we appointed WPP for a unified enterprise-led approach to media buying to enable greater scale, precision, and impact. By partnering with these and other best-in-class organizations, we are transforming from a fragmented data landscape to a more unified one. enabling real-time insights, a single consumer view, and more effective activation across brands and markets. We made significant progress with Accenture over the last few months, beginning to consolidate vendors across brands, regions, and functions to drive simplification, ensure governance, and eliminate long-tail spam. We have completed go-live across consumer care, CRM, and tech infrastructure and are pleased with the early proof point that we have achieved in record time. All told, we plan to have enterprise business services fully deployed by the end of calendar 26. Before I close, I'm thrilled to welcome to the Estée Lauder Company's portfolio the number one prestige skincare brand in India, Forest Essentials. In March, we agreed to build upon a long-term partnership as a minority owner by acquiring the remaining shares. With the transaction expected to close in the second half of the calendar year, Forest Essential is an exquisite Indian beauty brand grounded in the science of modern luxurious Ayurveda, and we are excited to expand the brand in India and share it with the world. Additionally, in April, we made a minority investment in 111 Skin, a luxury skincare brand which is ideally positioned for pre- and post-procedure growing demand. This exemplifies our minority investment strategy to build brands for the future like we did with Deciem and Forest Essentials. In closing, with strong year-to-date results and the momentum of beauty reimagined, we are confident we will deliver our now higher fiscal 26 outlook. Looking ahead to fiscal 27, our view is for Prestige Beauty's growth to accelerate as we expect retail sales growth from the China ecosystem, including travel retail, to improve to meet single digit and the global demand for Prestige Beauty to remain robust. In our preliminary plan, we intend to deliver another strong year in fiscal 27 as we expect accelerating organic sales growth of 3% to 5%, gaining prestige beauty share at the mid to high end of the range and operating margin of 12.5% to 13%. We have the right brands, the right team, and a clear momentum onward and upward. Before I turn to Akhil, I extend my deepest gratitude to our colleagues around the world who have achieved so much for the Estée Lauder companies. I also want to recognize our colleagues, retailers and suppliers across the Middle East as they navigate a challenging time in the region. We are committed to continuing to support the safety and well-being of all our employees in the affected area. I will now turn the call over to Akhil.