Revenue fell by 8.2%, while operating profit slumped 28.5%. Note that OP has been hammered; down two-thirds since its peak during the pandemic.
It is also a third lower than it was ten years ago, even though Estée Lauder generated an additional $3bn in revenue in the fiscal year just ended.
Added to this, in 2025 there have been over $500m in exceptional expenses – or "supposed" exceptional expenses – relating to its ongoing restructuring plan, as well as $1.3bn in asset write-downs.
Free cash flow has halved from last year's level. This barely covers the dividend paid out over the last twelve months, which has also been cut by a third compared to the previous fiscal year.
The destruction of value is therefore clear, and all the more painful when compared to the nearly $7bn invested in acquisitions over the cycle. For the time being, these amounts have been invested at a loss.
There is similar consternation—and equally dismal results—regarding the $7.5bn in share buybacks between 2016 and 2022. Estée Lauder acquired its shares at their peak. Now that the price is at its lowest, it has obviously stopped buying them back. There is a problem with the logic here.
After anticipating the impossible – i.e., unrealistic growth prospects, particularly in light of the group's brands' decline in China – the market is now playing it safe, valuing Estée Lauder at 20x its average earnings over the last decade.
As we have said, this profit has fluctuated dramatically. Even so, the worst may be over. Unsurprisingly, management is promising stabilization by 2026.
This shift in investor perception is certainly instructive. It serves as a reminder that the market can assign a luxury multiple to a company it perceives as superior or protected by a powerful competitive advantage, before completely changing its mind.
Estée Lauder has seen its market capitalization quartered in four years: for over-optimistic shareholders, the punishment has been brutal.
