EPS of $-1.51 decreased by 91.1% from previous year
Gross margin of 72.1%
Net income of -546.00M
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The Estee Lauder Companies Inc (0JTM.L) QQ4 2025 Results — Revenue Decline Amid Margin Resilience but Net Loss Driven by Non-Operating items
Executive Summary
Estee Lauder reported Q4 2025 revenue of USD 3.407 billion, down 11.99% year over year and 4.03% quarter over quarter, reflecting softer consumer demand in several regions amid a challenging macro backdrop for premium beauty. Despite delivering a positive operating income of USD 8.0 million and a gross margin of 72.1%, the quarter ended with a net loss of USD 546 million and an EPS of -$1.51, driven primarily by non-operating items and financing costs rather than core operating performance.
Core operating metrics remained solid on a margin basis, with gross profit of USD 2.456 billion and an operating margin of approximately 0.23%, underscoring the resilience of Estee Lauder’s premium brand portfolio. However, a substantial negative swing in total other income and expenses (USD -459 million) and a pre-tax loss of USD -451 million weighed on the bottom line, yielding a net income trajectory that is negative despite a still-healthy operating base. The quarter produced USD 601 million of cash from operations and USD 394 million of free cash flow, supported by a cash balance of USD 2.92 billion, while the balance sheet shows elevated leverage (total debt USD 9.44 billion; net debt USD 6.52 billion) and modest liquidity ratios (current ratio 1.30, quick ratio 0.92).
Near-term investment implications center on deleveraging risk and margin stabilization. Management commentary (when available) would be critical to confirm whether non-operating headwinds (including interest and other charges) are temporary or structural and to assess whether the company can restore profitability through revenue mix optimization, cost discipline, and portfolio optimization. Investors should monitor demand recovery in key regions, currency dynamics, and the trajectory of working capital as drivers of future cash flow generation.
Key Performance Indicators
Revenue
3.41B
QoQ: -4.03% | YoY:-11.99%
Gross Profit
2.46B
72.09% margin
QoQ: -7.70% | YoY:-11.59%
Operating Income
8.00M
QoQ: -97.39% | YoY:103.43%
Net Income
-546.00M
QoQ: -443.40% | YoY:-92.25%
EPS
-1.51
QoQ: -443.18% | YoY:-91.14%
Revenue Trend
Margin Analysis
Key Insights
USD 3,407.0 million in Q4 2025; YoY change: -11.99%; QoQ change: -4.03%
Net Income and EPS:
- Net income: USD -546.0 million; net margin: -16.0%
- EPS (diluted): -$1.51; YoY EPS change: -91.14%; QoQ: -443.18%
Other Results:
- EBITDA: USD -123.0 million; EBITDARatio: -3.61% (approx -0.0361)
- Interest expense: USD 135.0 million; depreciation & amortization: USD 221.0 million
- Income before tax: USD -451.0 million; income tax expense: USD 95.0 million
Cash Flow and Capital Allocation:
- Net cash provided by operating activities: USD 601.0 million
- Capital expenditures: USD -207.0 million
- Free cash flow: USD 394.0 million
- Dividends paid: USD -126.0 million
- Net change in cash: USD 290.0 million; cash at end of period: USD 2.921 billion
Balance Sheet and Liquidity:
- Total assets: USD 19.892 billion; total liabilities: USD 16.027 billion; total stockholders’ equity: USD 3.865 billion
- Cash and cash equivalents: USD 2.921 billion; total debt: USD 9.439 billion; net debt: USD 6.518 billion
- Current ratio: 1.301; quick ratio: 0.919; cash ratio: 0.537
- Debt to equity: 2.44; long-term debt to capitalization: 0.653; total debt to capitalization: 0.709
Valuation and Multiples:
- Price to book value: 7.54; price to sales: 8.55; price to earnings: negative (loss in the quarter)
- Dividend yield: ~0.43%
- Enterprise value multiple and related sensitivity are negative in the dataset, reflecting a net loss and leverage position rather than a traditional earnings-based valuation.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
3.41B
-11.99%
-4.03%
Gross Profit
2.46B
-11.59%
-7.70%
Operating Income
8.00M
103.43%
-97.39%
Net Income
-546.00M
-92.25%
-443.40%
EPS
-1.51
-91.14%
-443.18%
Key Financial Ratios
currentRatio
1.3
grossProfitMargin
72.1%
operatingProfitMargin
0.24%
netProfitMargin
-16%
returnOnAssets
-2.74%
returnOnEquity
-14.1%
debtEquityRatio
2.44
operatingCashFlowPerShare
$1.67
freeCashFlowPerShare
$1.09
dividendPayoutRatio
-23.1%
priceToBookRatio
7.54
priceEarningsRatio
-13.34
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Note: The earnings transcript data is not provided in the input dataset. As a result, there are no management quotes available to quote verbatim in this section. If a transcript becomes available, this section would group insights by themes (strategy, operations, market conditions) and provide context and significance for each quote.
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Forward Guidance
There is no explicit forward guidance included in the provided data for Q4 2025. Given the revenue decline and net loss in the quarter, the key questions for forward-looking assessment are: (1) Will the non-operating headwinds reverse or diminish in the next quarters, enabling a path back to profitability? (2) Can Estee Lauder sustain or accelerate a recovery in consumer demand through portfolio optimization (brand mix, premium SKUs, fragrance/skincare segmentation), pricing discipline, and improved e-commerce/digital execution? (3) Is deleveraging on a clear trajectory, and how quickly will leverage metrics (net debt/EBITDA, debt to capitalization) improve? (4) How will currency movements impact margins and top-line performance across regions?
If management provides qualitative guidance, investors should assess targets for revenue recovery by geography, gross margin stabilization (cost control, mix, supply chain efficiency), and a deleveraging timeline. Given the current leverage position, a key factor to monitor will be the cadence of debt reduction, potential asset impairment considerations, and any capital allocation signals (share buybacks vs. reinvestment in brand-building). In the interim, industry tailwinds such as continued premiumization, growth in skincare, and accelerated direct-to-consumer channels could support improved profitability as non-operating headwinds fade.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
0JTM.L Focus
72.09%
0.24%
-14.10%
-13.34%
0HRS.L
13.00%
2.27%
2.18%
8.47%
0R08.L
20.80%
11.80%
10.30%
15.52%
0LD8.L
26.00%
0.68%
7.52%
14.39%
0Y0Y.L
31.90%
11.60%
4.53%
28.62%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Long-term investment thesis remains anchored in Estee Lauder’s strong brand equity, premium product mix, and durable gross margins. In the near term, the company is facing a challenging quarter characterized by a net loss driven by non-operating items and financing costs despite a solid operating base. Positive signs include robust cash flow generation (operating cash flow USD 601M; FCF USD 394M) and a healthy gross margin, which provides a foundation for profitability recovery if non-operating headwinds abate and revenue trends stabilize. The key investment questions are centered on debt deleveraging trajectory, the sustainability of margin improvements, and the pace at which the company can restore earnings growth through mix optimization, cost controls, and enhanced direct-to-consumer performance. Relative to peers and industry benchmarks, Estee Lauder’s margin structure appears strong at the gross line, but the bottom line is lagging due to leverage and non-operating charges. Investors should monitor debt reduction progress (net debt/EBITDA trajectory), working capital dynamics, and any forward-looking guidance from management related to revenue recovery by geography and channel mix. Given the current cash position and ongoing ability to generate free cash flow, the stock could be positioned for a multi-quarter deleveraging path if operating performance and non-operating headwinds normalize. Caution is warranted due to negative earnings in the latest quarter and elevated leverage, which imply higher risk until profitability and balance-sheet strength improve.
Key Investment Factors
Growth Potential
Premium beauty remains a high-margin category with strong brand equity. Potential growth drivers include skincare/routine-based products, fragrance, and prestige makeup, aided by e-commerce expansion, direct-to-consumer penetration, and travel retail exposure. Advances in product innovation and portfolio optimization (e.g., exclusive launches, limited editions, and region-specific SKUs) could bolster ASPs and volume.
Profitability Risk
1) Elevated leverage and interest costs weighing on bottom-line earnings and financial flexibility. 2) Negative net income in Q4 2025 indicates sensitivity to non-operating items and potential impairment charges. 3) Macro headwinds and discretionary consumer spending weakness globally, plus currency volatility impacting reported results. 4) Competitive intensity in prestige beauty and exposure to channel mix shifts (department stores, specialty retailers, e-commerce).
Financial Position
Solid liquidity with USD 2.92B in cash and equivalents, but a high total debt load (USD 9.44B) and net debt of USD 6.52B. Current ratio of 1.30 provides modest near-term liquidity. The company exhibits strong gross margins (~72%), but profitability is hampered by non-operating items and financing costs. Deleveraging and stabilizing operating margins are critical for improving risk-adjusted returns.
SWOT Analysis
Strengths
Iconic brand portfolio with global recognition (Estee Lauder, Clinique, MAC, La Mer, Jo Malone, Aveda, Origins, etc.)
High gross margin framework (~72%) supporting pricing power and product mix
Diversified distribution network (department stores, specialty retailers, own e-commerce, travel retail)
Strong cash flow generation from operations in Q4 2025 (USD 601M) despite a net loss
Healthy liquidity position with USD 2.92B cash on hand
Weaknesses
Significant net loss in QQ4 2025 driven by non-operating items and financing costs
High leverage (net debt USD 6.52B; total debt USD 9.44B) limiting financial flexibility
Negative earnings per share in the quarter and negative net income Margin near -16%
Reliance on premium pricing which is sensitive to macro volatility and currency movements
Opportunities
Growth in skincare and fragrance segments with premium pricing power
Expansion of direct-to-consumer and e-commerce capabilities
Portfolio optimization and potential product lifecycle management to improve mix
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