Estée Lauder’s second quarter was marked by revenue and non-GAAP profit results that matched Wall Street expectations, but the market responded negatively due to a significant year-over-year sales decline and a sharp drop in adjusted EBITDA margin. Management attributed the performance to ongoing challenges in travel retail, which saw a 28% decline, and persistent softness in key Western markets. CEO Stéphane de la Faverie noted, “Nearly two-thirds of our organic sales decline came from travel retail,” emphasizing the impact of strategic changes and lower conversion rates. Management also acknowledged that inventory adjustments and increased consumer-facing investments weighed on profitability.

Is now the time to buy EL? Find out in our full research report (it’s free).

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions From Estée Lauder’s Q2 Earnings Call

• Dara Mohsenian (Morgan Stanley) asked about the pace and cultural impact of restructuring. CEO Stéphane de la Faverie said the new organization is in place and engagement is strong, with further portfolio updates pending.
• Stephen Powers (Deutsche Bank) requested details on narrowing the gap between retail sales and shipments. CFO Akhil Shrivastava emphasized that inventory levels have improved, and the company expects this gap to compress throughout the year.
• Lauren Lieberman (Barclays) questioned the North American channel mix and the ongoing challenges with department stores. De la Faverie noted the strategic growth of Amazon and specialty retail, with department stores now representing a smaller portion of sales.
• Ashley Wallace (Bank of America) pressed on the timeline for non-travel retail business returning to growth. Shrivastava confirmed that excluding travel retail, growth should turn positive in the upcoming year, supported by innovation and distribution efforts.
• Peter Grom (UBS) inquired about confidence in guidance and embedded risk buffers. Shrivastava responded that the outlook is based on conservative assumptions, with ranges to accommodate ongoing volatility and a disciplined focus on cost control.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will focus on (1) the pace of recovery in travel retail and China, (2) evidence that restructuring and cost actions are translating into sustained margin improvement, and (3) the ability of new product launches and channel diversification—especially online—to drive share gains in key markets. Continued progress in emerging markets and effective mitigation of tariff impacts will also be important indicators of execution.

Estée Lauder currently trades at $89.25, in line with $90.01 just before the earnings. At this price, is it a buy or sell? Find out in our full research report (it’s free).

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