Fragrance demand leads growth, China market recovers: Estee Lauder Companies Inc. Class A (EL.US) Q1 revenue and profit both beat expectations, full-year guidance raised.

On November 2, before the U.S. market opened, Estee Lauder Companies Inc. Class A (EL.US) reported better-than-expected earnings and raised its business outlook. The financial report shows that net sales for the quarter were US$3.715 billion, up 7% year-over-year, above the market expectation of about US$3.65 billion; adjusted diluted earnings per share were US$0.72, far exceeding analysts' expectations of about US$0.51; GAAP earnings per share were US$0.64, compared with US$0.13 in the same period last year. Driven by the earnings beat and raised guidance, Estee Lauder Companies Inc. Class A's stock price rose nearly 5% in pre-market trading. It is worth noting that the company will hold a Capital Markets Day in Shanghai on November 4 to further promote its China strategy. Estee Lauder Companies Inc. Class A achieved organic growth of 6% in the quarter; gross margin was 75.7%, up 230 basis points year-over-year; adjusted operating margin was 12.1%, up 480 basis points. By category, fragrance was the biggest highlight, with net sales of US$861 million and organic growth of 20%. Le Labo, Tom Ford, Jo Malone and Kilian all achieved double-digit growth; skincare grew 4% organically, driven by La Mer and The Ordinary. By region, mainland China net sales were US$614 million, up 15% on a reported basis (up 9% organically), and Asia-Pacific organic growth was 10%, mainly driven by increased replenishment orders in Beijing and Shanghai International Airport and improved online sales in Hainan travel retail. The company also raised its full-year guidance for fiscal 2027: organic net sales growth is expected to increase from 3% to 5% to 4% to 5.5%, adjusted operating margin is expected to rise to 12.9% to 13.7%, and adjusted earnings per share are expected to increase from US$3.10 to US$3.35 to US$3.20 to US$3.45. The company also announced a quarterly dividend of US$0.35 per share, payable on December 15. President and Chief Executive Officer Stphane de La Faverie said the company has "moved beyond the stage of restoring growth" and is building multiple drivers of sustainable profitable growth. Analysts pointed out that these results are the latest signal that Estee Lauder Companies Inc. Class A's transformation efforts are winning over consumers. The company is driving growth by reconnecting with consumers and attracting younger customer groups; Glimmer, a premium fragrance launched this summer and endorsed by actress Hailee Steinfeld, is the company's most important new fragrance in years.