Estée Lauder shares tumble as tariff concerns overshadow strong Q2 results

Investing.com -- Estee Lauder shares are down more than 5% premarket on Thursday as investors reacted to the company's latest quarterly report.

The company reported second-quarter earnings per share of $0.89, $0.06 better than the analyst estimate of $0.83 and up 43% year-on-year. Revenue for the quarter came in at $4.23 billion, up 6% year-on-year and above the consensus estimate of $4.22 billion.

Skin care and fragrance net sales increased 6%, while hair care returned to growth, up 5%. The company's makeup segment saw net sales decrease 1%, primarily driven by Estée Lauder, partially offset by MAC.

Geographically, Mainland China was the standout performer with 13% organic sales growth, while Europe, the UK, the Middle East and Africa (EUKEM) grew 2%. The Americas region reported flat organic sales.

“We delivered excellent second quarter results to solidify a strong first half of fiscal 2026,” said Stéphane de La Faverie, President and CEO.

She added that "Beauty Reimagined has invigorated our business as we execute the biggest operational, leadership, and cultural transformation in our history."

Despite raising its full-year outlook, Estée Lauder warned that tariff-related headwinds would impact fiscal 2026 profitability by approximately $100 million, mostly in the second half. The company expects these tariffs to affect imports from various countries, including a 39% rate on Swiss imports and a 35% rate on Canadian imports to the U.S.

The company's reported and adjusted Gross margin expanded 40 basis points, to 76.5% from 76.1%, reflecting net benefits from its Profit Recovery and Growth Plan (PRGP), although this was largely offset by the impact of incremental tariffs, changes in the company’s mix of business and inflation.

The PRGP benefits are said to have been driven by operational efficiencies, including a more competitive approach to procurement and expense optimization.

Looking ahead, EL raised its fiscal 2026 full-year outlook, narrowing the net sales range and raising its profit guidance. It now expects full-year organic net sales growth of 1% to 3% and adjusted earnings per share of $2.05 to $2.25.

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