The Estée Lauder Companies Inc.

Good day, everyone, and welcome to the Estée Lauder Companies Fiscal 2027 First 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 de la Faverie, 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, references to net sales refer to organic net sales, which excludes the noncomparable impacts of acquisitions, divestitures, brand closures, and the impact of foreign currency translation. You can find reconciliations between gap and non-gap measures in our press release and on the investor section of our website. Retail sales performance discussed is based on information available as of October 30th, 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, our 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 as many participants as possible within the time scheduled for this webcast. And now we have a brand video before Stephane begins.

Thank you, Rainy, and hello to everyone. Our first quarter performance marks another powerful step forward for the Estée Lauder Companies. Growth is accelerating, profitability is strengthening significantly, and the impact of Beauty Reimagined is becoming increasingly evident across our business. Simply said, we have moved beyond restoring growth. Through Beauty Reimagined, we are creating a stronger foundation for sustained, profitable growth and the progress that we are making gives us even greater confidence in the future we are building. I know there's been a lot of debate regarding the durability of our recovery. This quarter, we delivered another data point to prove our momentum is real and durable. We have placed the consumer at the center of how we operate, from the way we build our brands, to the innovation we bring to market, to the investment we make. I am incredibly proud of our team around the world. Your hard work is translating into our much improved performance. With a strong first quarter result, today we are raising our fiscal 2027 outlook. For organic sales growth, we now expect to deliver 4% to 5.5%, up from 3% to 5% previously, and an acceleration from the 3% in fiscal 2026. With the favorable impact of foreign exchange translation, our reported sales growth forecast becomes 5% to 6.5%. For operating margin, we now expect 170 to 250 basis point expansion up from 150 to 230 basis points, marking an overstepped change in profitability on top of the 320 basis point improvement we achieved in fiscal 26. Now, let's get into our first quarter numbers. Reported sales increased 7% and organic sales rose 6%. Three of four categories grew. Every geographic region grew. This is exactly the kind of diversified growth we sought to deliver when we designed Beauty Reimagine. Our profitability improved significantly, driven by operating leverage and PRGP benefits. Gross margin expanded 240 basis points, operating margin expanded 480 basis points, and diluted EPS grew 125%. And underpinning this result, we increased consumer-facing investment by 8%. Fragrance outperformed as organic sales rose 20%. We committed to create and capture growing demand in this vibrant category by strengthening our leadership in the luxury price tier and building our presence in the prestige price tier. And we are doing just that. and innovation from Le Labo, Tom Ford, Jo Malone London and Kylian Paris were highly sought after. Le Labo again delivered strong double digit organic sales growth with like for like door also up double digits while Tom Ford's new ombre leather reserve was a spectacular success while also creating a halo on the iconic ombre leather. Kylian Paris was our fastest growing brand as ongoing strength in luxury complemented its blockbuster launch of the cocktails collection in the prestige price tier. And this was not our only success in that price tier. Strong demand from prestige launches from all of Estée Lauder, Balmain Beauty, and Kylian Paris highlights the significant opportunity ahead, with each brand bringing a distinctive offering to the tier. And we were just getting started with rollouts with Estée Lauder's glimmer success in the US and UK, budding well as we take it around the world. In Western European markets, our France retail sales grew over four times faster than the industry, driving strong share gains while we also outperformed the industry in the U.S. In Japan, our luxury and artisanal brands sold as Delabo and Tom Ford realized strong double-digit retail sales growth, driving prestige share gain in the category. Skincare rose 4% organically. Iconic hero product and innovation were a powerful combination across price tiers. From La Mer in luxury to Estée Lauder in the art of prestige to the ordinary in the entry price tier, we are demonstrating the strengths of our brands across the consumer landscape. Looking at makeup, we have reignited our performance, delivering a second consecutive quarter of organic sales growth. Innovation across lip, face, and eye fueled Mac as well as Tom Ford, with both brands up double digits. Strategically, we are driving broad-based performance for these two brands fueled by launches in the quarter and earlier in calendar 26, demonstrating how well innovation is resonating. In the U.S., MAC has gained prestige makeup share for seven consecutive months, while for the quarter, MAC gained share in China, Japan, and Korea. Equally impressive, Tom Ford outperformed prestige makeup in China, Japan, and Korea in the quarter. For hair care, we stabilized performance, progressing sequentially from a modest decline. The Ordinary's HairDance City Serum drove strong growth, offsetting Aveda's brand-specific supply chain logistic challenges, which we are aggressively working to resolve. We remain encouraged by Aveda's improving trends across brand health, share in the US salon, and innovation. The brand is also driving strong share gains in the US and UK beyond the salon net channels. We grew across the board for the second consecutive quarter. Every region would have accelerated sequentially if not for the Americas benefiting in the fourth quarter from the gift card liability reversal. Asia Pacific led the growth. Global travel retail was a strong contributor in the region, with retail sales stabilizing thanks to Korea and the online business in Hainan. For travel retail in the West, while a smaller piece of our business, retail sales growth accelerated sequentially to mid-single-digit, outpacing the industry. Mainland China delivered 9% organic sales growth as skincare and makeup each rose high single digit, while France increased double digit. We outperformed the industry to gain prestige beauty share for the seven consecutive quarter, led by Tom Ford, The Ordinary, Le Labo, and La Mer, even on a much harder comparison. Our priority emerging market excelled with organic sales up 15% driven by Turkey, Mexico and India. We are thrilled to have completed the acquisition of Forest Essentials in October and have confidence it will be a strong contributor to our emerging market portfolio, which we continue to expect to reach 15% of our business in the next several years. Our diversified growth extends beyond categories and geographic regions. We deliver high single-digit organic sales growth online, driven by both established platforms and expansion. Encouragingly, online growth was also well balanced. Asia-Pacific rose double-digit, while each of the other three regions grew high single-digit. In the US and China, we gained share online, with retail sales growth more than two times faster than the industry in our two biggest markets. We are particularly pleased by the strong results we are seeing as we anniversary launches. For example, Max US TikTok shop sales more than doubled from its year-ago launch. Complimenting online growth, brick-and-mortar, which includes travel retail, rose mid-single-digit organically. We are investing in experiential retail across all platforms in specialty multi, department stores, and our freestanding stores, and seeing the benefit through new consumer acquisition. Our first quarter performance truly embodies beauty reimagined in action as we doubled down in our strength in fiscal 27. Expanding more brands into high-growth channels across more markets, launching a bigger and bolder innovation pipeline, continuing to increase consumer-facing investment, and increasingly benefiting from OneELC, our new operating model. Before I close, I am proud to highlight that last week we published our fiscal 2026 social impact and sustainability report. I am deeply grateful to our employees whose passion, resilience, and creativity are driving progress towards our 2030 goals, as you will find in this report. I also want to thank our partners and communities whose collaboration and shared commitment are essential to drive meaningful change. In closing, we are becoming a faster, more agile, and more disciplined organization. Beauty Reimagined has transformed our company and positioned us for more diversified and sustainable long-term sales growth, prestige beauty shares gained, and stronger profitability. This Wednesday, we are excited to share more about how Beauty Reimagined has come to life across the organization and especially in China at our capital market experience, which will be webcasts. To our colleagues around the world, thank you. These strong results are yours. Five consecutive quarters of organic sales growth and margin expansion, with performance in the most recent two quarters especially strong. Onward and upward. Akhil, over to you.