Estée Lauder falls after earnings forecast release

Estée Lauder shares fall over 4% following 2025 earnings forecast that missed analysts’ expectations
The company pointed to ongoing challenges from weak demand in key markets, namely the U.S. and China, as well as uncertainty related to tariff issues, which negatively affected investor sentiment.

Estée Lauder Companies Inc. is a U.S.-based cosmetics giant headquartered in New York, founded in 1946. The company is one of the largest cosmetics producers in the world, offering products across skincare, makeup, fragrance, and hair care categories. Its portfolio includes brands such as La Mer, Clinique, Jo Malone London, and Tom Ford Beauty. The company operates in over 150 countries and employs approximately 62,000 people.

Financial results for Q2 2025

• Adjusted revenue: 4.00 billion dollars, representing a 6.4% year-over-year decline compared to 4.28 billion dollars in Q2 2024.

• Adjusted gross profit: 3.05 billion dollars, down from 3.13 billion dollars in Q2 2024.

• Adjusted EBITDA: 669 million dollars, a 15.2% decrease year-over-year from 789 million dollars in Q2 2024, with an EBITDA margin of 16.7%.

• Adjusted net income: 225 million dollars, down from 320 million dollars in Q2 2024, with a net margin of 5.6%.

• Adjusted earnings per share (EPS): 0.62 dollars, a 30.3% decline compared to 0.89 dollars in Q2 2024.

• Cash flows from operating activities: 1.06 billion dollars, an increase from -670 million dollars in Q2 2024.

• Free cash flow: 925 million dollars, an improvement from -811 million dollars in Q2 2024.

• Capital expenditures: 132 million dollars, down from 141 million dollars in Q2 2024.

In the second quarter of fiscal year 2025, Estée Lauder reported revenues of 4.00 billion dollars, a 6.45% decline compared to the same period last year. The adjusted earnings per share (EPS) stood at 0.62 dollars, beating analysts’ expectations. However, despite the positive EPS result, the company’s shares declined, reflecting investor concerns over overall sales declines and future outlook. Sales declines were particularly pronounced in the Asia-Pacific region, where they dropped by 11%, and in the EMEA region (Europe, Middle East, and Africa), which saw a 6% decrease. The Americas region remained flat. The company faced its greatest challenges in China and in travel retail, which have traditionally been high-margin areas.

Chart view (D1 interval)

Source: xStation5

Restructuring and cost-saving plans

Estée Lauder began implementing its “Beauty Reimagined” restructuring plan some time ago and continues to execute it. The strategy aims to improve operational efficiency and reduce costs in response to market challenges. Despite ongoing corrective actions, the company expects that the travel retail segment and the Chinese market will continue to pose challenges, potentially impacting near-term results. Over the long term, the company forecasts global luxury cosmetics sales growth of 2–3% in fiscal year 2025, with potential acceleration in 2026 if conditions improve in China and travel retail.

Michael Burry maintains commitment to Estée Lauder despite partial share sale

Renowned investor Michael Burry, known for his accurate prediction of the 2008 financial crisis, reduced his stake in Estée Lauder in Q2 2024 by selling 25% of his shares (50,000 shares). Nevertheless, the company remains the largest holding in his portfolio with 150,000 shares valued at over 12 million dollars. More importantly, Burry purchased 500,000 call options on Estée Lauder shares worth approximately 40 million dollars, indicating his expectation of a stock price increase. This demonstrates that despite current challenges in the cosmetics market, the investor sees growth potential in the company and is betting on its recovery.

Outlook

Outlooks for the coming quarters remain cautious due to market uncertainties and global challenges, but ongoing corrective measures may contribute to improved profitability and stabilization of results.