Estée Lauder profits jump 40% as recovery plan offsets luxury slump

The Estée Lauder Companies (NYSE:EL) reported a 5% increase in net sales to $3.7 billion for the third quarter ended March 31, 2026, as the company’s strategic "Profit Recovery and Growth Plan" (PRGP) began to deliver tangible bottom-line results.

Organic net sales rose 2%, reflecting steady demand in high-end skincare and fragrance despite a volatile global macroeconomic environment.

The company’s focus on structural efficiency led to a significant expansion in gross margin, which rose 140 basis points to 76.4%.

This improvement was primarily attributed to the PRGP, which optimized supply chain costs and helped offset persistent headwinds from inflation and incremental tariffs.

On an adjusted basis, operating margin expanded by 360 basis points to 15%, as the firm successfully reduced non-consumer-facing expenses while simultaneously increasing investments in brand marketing.

However, the reported results were weighed down by several one-time items and legislative shifts.

The company recorded a $127 million restructuring charge and an $84 million loss contingency related to a potential securities class action settlement.

Additionally, a recently enacted U.S. tax law pushed the reported effective tax rate to 50.3%, resulting in a 45% decline in reported diluted earnings per share to $0.24.

Excluding these factors, Estée Lauder’s underlying performance was robust.

Adjusted diluted net earnings per share surged 40% to $0.91, compared to $0.65 in the prior-year period.

This figure included a minor $0.02 dilutive impact from business disruptions related to the ongoing conflict in the Middle East