TheChek News Flow

According to experts and industry sources, Lauder's post-Puig path is likely to revolve around strategic refocus, boosting investor sentiment and divestitures.

A renewed focus on strategy, boosting relations with investors and divestitures are what experts and sources believe is in the cards for the Estée Lauder Cos. in the near-term following the ending of merger talks with Puig.

The prospect of any more potential multibillion-dollar deals is seen as a few years off.

As a refresher, on May 21 the two beauty companies revealed they had terminated discussions regarding a potential business combination. During a banking conference in Paris last week, Stéphane de La Faverie, chief executive officer of the Estée Lauder Cos., revealed it all came down to money.

One banking source said: “As a public stock, investors will basically tell them, ‘OK, so Puig maybe on paper made sense.’ I think people had questions around it, but I don’t think public investors will tell them, ‘now go try to do another deal,’ unless you’re just going to sell the company, and I don’t think the [Lauder] family is there.”

Still, the group has to make some bold moves to kick-start both its shares and growth, given the collapse in its share price. Lauder’s stock is currently trading around $84.64 with a market capitalization of $30.62 billion, down from its peak of over $370 in January 2022, which gave it a market cap of more than $133 billion at the time. Its stock closed up 11.9 percent to $88.32 the day after it was revealed the Puig talks had ended, but for the year to date it is down more than 20 percent.

Olivia Tong, an analyst at Raymond James, said: “They’ve got to do some work in terms of obviously the stock is not back to where it used to be, and they probably need to do a little bit of repairing with some of their investors.

“With the merger talks having ended, they can focus back on the Beauty Reimagined program,” continued Tong. “It’s a complex program… They’re trying to reinvigorate the top line, they’ve got the margin recovery going on, and that’s what’s been driving the recent beats and raises. So that’s going to drive more shareholder value to make sure that you have that program continuing to fire on all cylinders, and get back to the crux of your business, which is reinvigorating your existing brands, improving the efficiency of costs and stripping out unnecessary costs from your business.”

De La Faverie unveiled his Beauty Reimagined strategy in February 2025, with the goal to “restore sustainable sales growth and achieve a solid double-digit adjusted operating margin over the next few years.” Central to his vision is expanding into high-growth channels, markets, media and price tiers to participate in key growth opportunities in prestige beauty.

Under its Profit Recovery and Growth Plan, Lauder is also restructuring. In its third-quarter 2026 earnings report, the company said that it now estimates a final net reduction in positions of 9,000 to 10,000, an increase from 5,800 to 7,000. More than 70 percent of the increase is attributable to the reduction in point-of-sale demonstration roles at select unproductive doors in its department store and freestanding store channels. All business decisions related to the restructuring component are set to be approved by the end of this month.

According to a Lauder filing with the Securities and Exchange Commission from last week, it is tallying restructuring charges to date at between $1.5 billion and $1.7 billion.

Another source stressed that in order to win, “they’ve got to make their biggest brands work. They have to restore their share and volume in North America, and quite honestly, they don’t have brands that play in Sephora in a major way.”

Among the largest are namesake Estée Lauder, Clinique, La Mer, MAC Cosmetics and Jo Malone. In recent years, the company has made efforts to diversify channel offering, with an about-turn that brought many of its brands onto Amazon, while more recently it has started to add some brands on TikTok Shop. And after 41 years in business, MAC entered Sephora U.S. for the first time in February.

“We’ve expanded MAC into Sephora, both into the U.S. and into the Middle East, which gives us access to the largest part of the makeup business in these regions,” de La Faverie said last week. “We’ve gone after more innovation, like Powder Kiss, which has been a global success in the lipstick area, at the lower price point. We’ve reignited the retail. Then third, we’ve put back the brand into culture. We’ve hired ambassadors like Doja Cat, Kris Jenner. As a result in the U.S., for the first quarter of the calendar year, the MAC brand grew 250 basis points of market share in lip gloss and close to triple digits in lip in total. So that’s actually the model that we are applying on every single [one] of our brands.”

At least at Sephora, there is a long way to go for MAC. Research from YipitData showed MAC ranked as the number-five makeup brand at Sephora at Kohl’s during its first month, and the number-19 makeup brand at Sephora.

Statistics from Navigo Marketing tracking online sales during Sephora’s Spring Savings Event, held April 10 through April 20, found that The Ordinary was the only Lauder-owned brand in the top 10.

Still, skin care sales, the majority of the business, were flat in the third quarter of fiscal 2026, as was makeup and hair care. Fragrance was the outlier, growing by 10 percent. Overall net sales increased 5 percent to $3.7 billion. Net sales grew just 1 percent in North America in the most recent quarter.

One of the biggest pressures is that for the past few years Lauder has been locked in a prestige market share war with L’Oréal, which only gathered paced when the French group revealed that it was entering a joint venture with Kering. Many sources believe that was a big driving factor behind the Lauder-Puig talks.

L’Oréal’s sales totaled $49.72 billion last year, per WWD Beauty Inc’s annual ranking of the world’s largest beauty companies. Within that, L’Oréal Luxe was flat at 15.60 billion euros, while North America sales grew 0.7 percent to 11.72 billion euros. In comparison, the Estée Lauder Cos.’ total sales came in at $14.7 billion, down 3 percent compared with 2024. Sales in the Americas were also down 3 percent at $4.4 billion.

Divestitures are also firmly on the table, with de La Faverie previously revealing that he’s assessing the current portfolio.

WWD reported on May 15 that final bids were in for Too Faced, Smashbox and Dr. Jart and the process could be completed in a matter of weeks. The brands were originally marketed together, but the strategy was altered, with the makeup brands later being offered together and Dr. Jart by itself, sources said.

According to sources, there was at least one interested party looking at all three brands and a handful interested in the color brands. A few were also looking at just acquiring Dr. Jart.

One source speculated that the beauty company will likely broker a deal with two parties, but the structure of the deals will be very complex so it will take time.

Other brands could also be under consideration for sale in the future.

Tong said: “If there are brands that maybe have been deemed non-core, perhaps that are complicating things a little bit, maybe that’s a divestiture candidate, as opposed to looking at potential M&A right now. Focus on what you have, maybe some exiting of things.”

On acquisitions, following the failed merger talks with Puig, de La Faverie indicated last week that fragrance is still top of mind.

“We are extremely proud of the portfolio of luxury brands — artisanal niche — however people are calling them that we have, from Le Labo to Tom Ford, Jo Malone, Kilian and so on,” de La Faverie said. “But it is true that when you go from East to West, the more west you go, the higher the penetration of prestige fragrances is, especially in Europe and in Latin America.

“We have less of a presence on this,” he continued. “So when — if — an opportunity comes, we can look at it. But I want to be very clear: It has to be accretive from a growth standpoint. It has to be accretive from a profitability standpoint over time. It has to create shareholder value. If we cannot reach the growth and the profitability at the right price point, then that is not an option. This is why this deal didn’t go through, because it was not at the right price.”

He said as the president and CEO of the Estée Lauder Cos., he would never do anything that does not make sense financially for the company or its shareholders.

“Strategically it may make sense because the complementarity of the portfolio [is] very interesting, but it has to make sense financially,” de La Faverie said, adding that Lauder will continue to look at opportunities, even though M&A is not at the heart of Beauty Reimagined.

One source said: “The Estée Lauder Cos. used to have top three fragrances in North America….Now, they don’t have enough horses in the barn.”

Data from predictive commerce insights platform Daash Intelligence showed that YSL Beauty, licensed by L’Oréal, came out as the number-one brand by prestige fragrance sales in April, with four of the top 10 fragrances sold during the month belonging to YSL. Those were: Myslf, Libre, Y Eau de Parfum and Myslf Le Parfum, three of which are men’s fragrances. The rest of the list included Valentino Beauty, Sol de Janeiro, Kayali, Carolina Herrera (owned by Puig), Burberry, Dior Beauty, Prada Beauty, Dolce & Gabbana and Armani Beauty.

As men’s and designer fragrances continue to surge in popularity, Lauder has brands like Tom Ford, Balmain, Killian Paris, Le Labo and Aramis, among others, but its offering is far less broad than its major competitors.

While the beauty company could continue adding artisanal fragrances through acquisitions, the same sources questioned what Lauder could actually buy that would make a difference, given it appears to be very price-conscious when it comes to M&A.

A different source said: “Maybe these divestitures free up some cash, so maybe they buy something, but I don’t see them buying anything in the billion-plus zip code.”

As whether more billion-dollar mergers are in its future, speculation continues to persist that Unilever could see the Estée Lauder Cos. as a target.

“I just don’t think it’s near term,” said one source. “The food deal has to happen first for Unilever [with McCormick]. It was announced, but it hasn’t been completed.”

At the latest check, the Unilever-McCormick deal is meant to close in mid 2027.

Another source added that while there are likely parties interested in a merger, with so many cooks in the Lauder kitchen (family, executives and investors), anything in the near term is unlikely.

“I just don’t think that as an organization specifically with as many voices as this company they can just pivot like that that quickly and get everyone to go along with it. But in a few years, could it make more sense? I think that’s absolutely correct.”