Aug 19, 2026 earnings call — Beauty Reimagined drives margin and growth turnaround
Organic net sales rose 3% and operating margin expanded 320 basis points in fiscal 2026.
Revenue $3.6B (est $3.5B) · EPS $0.39 (est $0.32)
Key quotes
"First, can we accelerate growth? Yes, we just did and we will again. The PRGP's approvals are done. And now all our energy can be focused on accelerating growth."
"Our return to organic sales growth of 3%, operating margin improvement of 320 basis points, diluted EPS growth of 66% and net cash flows from operations of $1.8 billion reflect our strong delivery against that commitment."
"Mainland China led with broad-based 9% organic sales growth as Skin Care rose high single digit, Makeup rose mid-single digit and Fragrance rose double digit."
Analyst Q&A 8
Reasons for upgraded margin outlook
Q (Stephen Robert Powers · Deutsche Bank): Analyst asked what improved since May to allow an upgraded fiscal '27 margin outlook, and when Makeup, Fragrance, Hair Care and Americas will contribute more to profitability.
A: Management said the fiscal '26 beat and completion of PRGP work allowed more SG&A optimization to be included in the improved outlook. They said they will keep investing to fuel growth while executing PRGP savings through the year, with full run rate reflecting in '28. They acknowledged Skin Care and Asia are driving profits today and said Makeup, Hair Care and Fragrance profitability should improve over the coming years.
"So essentially, we had a strong '26 beat." — Akhil Shrivastava (CFO)
Organic growth guide and travel retail inventory
Q (Lauren Lieberman · Barclays): Analyst asked why fiscal '27 organic sales guide is 3% to 5% if management expects acceleration, and asked about stability of inventory in Asia travel retail (Hainan) and its impact on organic outlook.
A: Management said they expect more diversified growth across geographies, with acceleration in the West particularly North America, and continued strong Fragrance performance while accelerating Makeup. They said travel retail shipments are being managed to demand, inventory is in a good place, and travel retail represents about 15% of the business so they keep it in line with industry standards.
"I want to be very clear, and I reiterate what I've said like many, many times, we are shipping to demand" — Stephane de la Faverie (CEO)
Timing of innovation and Asia/TR coordination
Q (Christopher Carey · Wells Fargo): Analyst asked whether growth will be faster in the first half and whether travel retail and Mainland China are being managed together for more consistent growth.
A: Management said they deliberately have a stronger pipeline of innovation in the first half, so growth should be higher in H1 than H2 while still delivering the 3% to 5% guidance. They described a restructured travel retail leadership split East/West, regular coordination between China and travel retail leaders, and a system to manage launches and shopper activity across Mainland and travel retail.
"When it looks at the outlook for fiscal '27, and we said it in our prepared remarks, we have a stronger pipeline of innovation in the first half versus the second half." — Stephane de la Faverie (CEO)
Why China turnaround worked
Q (Filippo Falorni · Citi): Analyst asked what changed in the market and in execution that led to consistent top-line growth and market-share gains in Mainland China.
A: Management said China prestige beauty is back to high single-digit growth and they have six consecutive quarters of market-share gains. They cited diversified growth across many brands, 30% of global innovation coming from China for China, stronger R&D in Shanghai, greater presence on Douyin and less promotional selling as drivers of the turnaround.
"So now we are on to sixth consecutive quarter of market share gain in China." — Stephane de la Faverie (CEO)
What drove fiscal '26 upside and guidance flexibility
Q (Peter Grom · UBS): Analyst asked what drove the fiscal '26 upside versus expectations and whether similar flexibility is built into '27 guidance.
A: Management said strong execution on PRGP, reductions in nonconsumer-facing costs, better gross margin and diversified top-line surprises (North America, China, travel retail) drove the beat. They said the company is transformed, has more scenario planning for volatility, and expects the cost streamlining and sales leverage to help replicate and accelerate results into fiscal '27.
"And also on gross margin, we delivered 150 basis points." — Akhil Shrivastava (CFO)
North America growth quality and drivers
Q (Cristian Rios Martinez · Bernstein): Analyst asked how the 5% organic growth in North America breaks down between sell-through and shipment timing, and what channels or brands are most promising next year.
A: Management said the Q4 improvement in North America was retail-driven and noted timing differences like Prime Day shifts between years. They highlighted volume share gains on brands such as The Ordinary and M·A·C, share gains in specialty and online, and said they have a slate of innovation and activities (social commerce, distribution) that should help maintain or accelerate North America growth into fiscal '27.
"We have a slate of innovation that is really going to allow us to just like maintain, if not to accelerate our growth in North America in fiscal '27." — Stephane de la Faverie (CEO)
Makeup recovery plan
Q (Rupesh Parikh · Oppenheimer): Analyst asked what the bigger opportunities are and how confident management is about returning Makeup to growth.
A: Management said they own leading Makeup brands including M·A·C and Clinique (the #1 Makeup brand in the U.S.) and are addressing challenges on other brands. They plan to deploy Makeup into fast-growing channels and optimize distribution and innovation, and they expect sales and profitability in Makeup to improve as part of the broader plan to diversify sales and profits.
"Makeup being our #2 category, we continue to believe that it will not only improve on sales trends, it will also improve as was -- question was asked earlier on profitability with all of the work we are doing." — Akhil Shrivastava (CFO)
Margin opportunities and cash uses
Q (Olivia Tong Cheang · Raymond James): Analyst asked where the biggest margin opportunities remain and how management plans to use cash now that PRGP is closed and transformational M&A is off the table.
A: Management said this year's 320 basis points expansion came from gross margin and reductions in nonconsumer-facing costs, and the 150–230 basis-point guide for '27 will be driven more by SG&A and restructuring actions, with further flow-through into '28. On cash, they said priority is deleveraging and paying down debt, funding consumer-facing CapEx, maintaining the dividend, and looking for other returns after strengthening the balance sheet.
"So that flow-through in margin should continue to come in '28." — Akhil Shrivastava (CFO)