November 2, 2026
Bonus Content: Estée Lauder’s Margins Just Proved the Turnaround
Dear Friend,
In 1976, a Chevron drilling team tapped an energy source so powerful it could run a city.
No fuel costs. No carbon. No supply chain.
They proved it worked. Then they killed the project.
Unocal proved it worked. Killed it.
Texaco proved it worked. Killed it.
Three of the largest oil companies on Earth confirmed the same thing.
And all three buried the results for the same reason: it would have destroyed their core business.
For fifty years, the official line was “the technology isn’t ready.”
The technology was fine. The threat was too big.
Now one company has spent sixty years perfecting what Big Oil refused to touch.
Google just locked in a 15-year contract. Bill Gates wrote a $100 million check. And on November 17th, the government hands it a competitive edge no other energy source gets.
Big Oil had fifty years to act. They chose not to.
See the company that didn’t wait >>
“The Buck Stops Here,”
Kelly Maguire
Behind the Markets
Estée Lauder’s Margins Just Proved the Turnaround
For two years, investors in Estée Lauder (EL) have been asked to trust a turnaround they could not yet see in the numbers. This morning, they got something concrete to hold onto.
Fiscal first-quarter net sales rose 7% to $3.7 billion on an as-reported basis, with organic sales up 6%. Gross margin expanded 230 basis points to 75.7%, compared with 73.4% a year earlier. That margin move is not noise. It reflects operating leverage, lower excess inventory, and the deliberate cost work the company has been running under its Profit Recovery and Growth Plan. As-reported operating margin expanded 610 basis points, to 11.0% from 4.9% in the prior year.
Net earnings reached $233 million, with adjusted diluted earnings of 72 cents per share, well above the average analyst estimate of 52 cents per share tracked by Zacks. The company also raised its fiscal 2027 full-year outlook on sales, margin, and earnings per share.
What the China Numbers Actually Say
The results land on a fraught morning for anyone trying to read mainland Chinese consumers. The CSI 300 fell into bear-market territory in October, after a multi-month slide, alongside October PMI data showing China’s official manufacturing PMI fell back into contraction. China’s manufacturing PMI dropped to 49.3 in October from 50.1 in September, below forecasts of 49.9. This is the backdrop against which Estée Lauder’s China results have to be read.
They held up. Mainland China net sales rose 15% on a reported basis to $614 million, compared with $532 million a year earlier. Mainland China operating margin improved to 5.2% from 2.3%, driven by higher net sales, partially offset by increased consumer-facing investment to support new product launches and key activations. These are not the numbers of a consumer who has stopped buying prestige beauty. They suggest Estée Lauder’s share-gain story in mainland China survived October’s equity selloff, at least through the September quarter-end.
Travel retail, the channel that nearly broke the company two years ago, is also recovering. Growth in Asia/Pacific was primarily driven by the company’s Asia travel retail business, including an improvement in Hainan online retail sales. CEO Stéphane de La Faverie had said previously that travel-retail inventory was more right-sized relative to the retail the company was seeing. Today’s margin expansion suggests that discipline is now flowing through to profitability rather than just being a talking point.
What the Opportunity Looks Like From Here
The bear case on Estée Lauder has always rested on two pillars: that China would not recover fast enough to matter, and that travel retail inventory bloat would continue to suppress margins indefinitely. This quarter challenges both, so risks remain. But prestige beauty spending has proved more resilient than overall retail in China across recent quarters, and Estée Lauder’s portfolio, anchored by La Mer and Estée Lauder skincare, skews toward consumers with the assets to keep buying regardless of equity market volatility.
The improving travel retail picture is set to play a role in fiscal 2027 performance, with the company expecting an increase in travel retail shipments reflecting improved trends entering the new financial year. Management expects growth to be stronger in the first half of fiscal 2027 than in the second, citing an earlier product-launch calendar, improving travel-retail shipment trends, and easier first-half comparisons.
The Wealth-Builder Takeaway
Patience in a restructuring is only rewarded when the restructuring actually produces structural change, not just cost cuts. Gross margin at 75.7% and an operating margin above 11% suggest Estée Lauder is crossing that line. Investors who waited through two years of withdrawn guidance and China uncertainty now have a first clean data point confirming the model is working again. The stock is not cheap relative to near-term earnings, but investors buying a return to normalized mid-teens operating margins over a three-to-five year horizon are no longer buying on faith alone. They have a quarter of evidence.
