The Estee Lauder Companies Inc. Class A Barclays 19th Annual Global Consumer Conference

Akhil and I are very grateful to Barclays for hosting us again 12 months after, and to be back on stage and having the opportunity to share some of the updates as we are kicking off our fiscal 2027 fiscal year. Many of you know The Estée Lauder Companies, hopefully. Maybe some of you are new to the story, so I will just take a few minutes to highlight a little bit where we are in our turnaround and the momentum that we are seeing. I need to remind me to just do that. So the team remind me, I have to say that can we note that the information on this slide regarding forward-looking statements and non-GAAP disclosure, which applies to this presentation as well as Q&A with Lauren. So I had to say it.

It is not the most glamorous things to do, but now it is done. Okay. It has been really an exciting and busy 12 months since we were on stage here last year. Last year when we were discussing it with Lauren, we were moving with urgency to deploy the five action priorities of Beauty Reimagined. Today, what I am really happy is to say how different of a company we are 12 months later, and this is through Beauty Reimagined. We made our amazing brand portfolio even stronger. Jo Malone London and TOM FORD join an amazing portfolio of brand, of Clinique, Estée Lauder, La Mer and M·A·C into the Billion Dollar Club. This is actually unprecedented into the prestige industry and beauty industry.

Now we have six brands in the Billion Dollar Club, and as you may have listened during the earning calls, we have one, The Ordinary, that is coming very close to that for the near future. Five of the six delivered sequentially improved organic sales performance in fiscal 2026. With their scale, sorry, premier brand desirability, breakthrough innovation, and consumer reach, these brands are poised to just continuous acceleration in the near future. We also radically transform our company. One of the things I am extremely proud of what we have done is through our One ELC, which is our new model, our new operating model. We are now better positioned to compete in prestige beauty, accelerating our speed at which we are driving the pace of the demand of the consumers, but also the competition of the indie brands today.

As we move further, we won't just match the speed of the indie brand. Our intention is to push past their speed. Speed of innovation for us is absolutely key, and I'm sure we'll talk about it with Lauren in more detail. We are a simpler organization today, much more agile as one team, with fewer layers and silos and greater accountability as we are exiting the PRGP two-year restructuring program, as you know, that we've just concluded on June 30th. We're also a nimbler organization. We've refined ownership between who does what in the organization, between brand, between region, and between the operation within the company. That has really helped us to strengthen our brand building, between brand and around the world, and also to be much more strategic on how and where we are spending our consumer-facing investment.

We are much bolder organization, more united, and transformative-oriented organization through all the beauty commitment that we've deployed that now have been cascaded to all the written organization around the world. Finally, we are more efficient organization, having evolved how, and how we intend to work between us, but also with our partners. It's not always the most glamorous thing when we talk about our enterprise business services. Today, I have to say, the deployment and the work that we've done with our partners has helped us to consolidate dramatically the number of our partners that we are working with, and we are already seeing a lot more agility, simplification, and speed with the ability to scale.

In a certain way, think about a lot of the back of house that is not visible to our consumers are becoming increasingly efficient so we can deploy more resources towards investment into consumer facing. Also, I'm really proud, frankly, of what we've achieved in fiscal 2026. Many things have been achieved with great momentum. You're seeing here on the screen, reported sales rose 5% and organic like 3% with positive sales performance in every single quarter. Gross margin expanded 150 basis points, primarily driven by the benefit of the PRGP, our Profit Recovery and Growth Plan. Operating margin expanded 320 basis points as operating leverage enhanced the gross margin expansion. Diluted EPS grew 66%. We also increased our consumer-facing investment by 7%, and this is something was very clear last year and will continue to just accelerate our consumer facing.

Cash flow from the operation increased 39%, and that despite much higher restructuring costs, obviously, due to the PLGP. I think, frankly, it shows that our strategy, Beauty Reimagined, is really in motion. Obviously the PLGP has give us the benefit that we were looking for to just reinvest into the business. As we are exiting fiscal 2026, we're exiting with strong momentum into fiscal 2027. We have an amazing portfolio of brands today. We have an exceptional portfolio of 25 plus brands that spans across entry prestige with The Ordinary, to prestige with Estée Lauder, to name a few, and obviously luxury with brands like La Mer, Le Labo, and many others that we have in the portfolio. I just wanted to highlight three examples that are very important. Take M·A·C as the long-standing number one makeup brand in the world.

MAC had strong brand love, always had very strong brand love, but the sales been declined for many years, especially in fiscal 2025. Here we've deployed every single pillar of Beauty Reimagined. That is, one, making sure that we have the right distribution, especially in the U.S. We have the deployment of M·A·C at Sephora, but also in the Middle East. Accelerating Sephora's deployment on TikTok Shop with the U.S., the U.K., and Germany. But also really, frankly, accelerating innovation in makeup that is highly demanded by the consumer. All of that, we've seen M·A·C organic sales growth improve from a high single-digit decline in fiscal 2025 to mid-single digit increase in fiscal 2026. But also going back to market share again and the number one position in Q4 in the U.S.

That's really the proof that, again, when we apply Beauty Reimagined to all our brands, it's basically working. The second one, KILIAN PARIS, while a much smaller brand in our portfolio, is another great case study of how powerful Beauty Reimagined is. During the course of 2026, we've really deployed the brand in more channels, like more retailers around the world. We've invested in innovation, and today we are proud to say that we have a 19 percentage point acceleration in organic sales growth from fiscal 2025 to fiscal 2026. So again, from a large brand to a smaller brand, the model is working. Last but not least, The Ordinary, certainly the biggest of the indie brands that we have in the portfolio of The Estée Lauder Companies, it shows really the power of Beauty Reimagined as it really works as an indie brand. We're accelerating best-in-class consumer coverage.

We're continuing to just deploy more innovation. As a result, The Ordinary has been one of the three fastest growing brands in the company alongside KILIAN PARIS and Le Labo. Now, I just wanted to highlight all of that because it's very important for us, even the last two brands, KILIAN PARIS and The Ordinary, are two examples that the brand has created an alternative model to be able to accelerate indie brand within the portfolio of The Estée Lauder Companies. That's new from the model that we had in the past, and mainly operationalized by Beauty Reimagined, so we can create the next big brand for the future that will add more building block of growth for the company in the future. So we think that we really have a winning playbook. We expect to accelerate growth sales in fiscal 2027 from 3% to 5%.

This is what we said at the earning calls, and we confirm today again that the range of 3% to 5% on organic sales growth is what we are working towards. We are looking at operating margin expansion of 150 to 230 basis points on top of the great improvement that we've done in 2026. And diluted EPS to increase 24% to 34% over the prior year. So again, great expectation, great ambition that we have for fiscal 2027. I could go on a lot on the outlook, but then there will be nothing for Lauren to ask me. So I'll just leave it at that. I'll conclude soon. I just wanted before we start the discussion and Lauren grills me and Akhil on stage, just wanted to give few other things on innovation, because I think it's very important that part of the second pillar of Beauty Reimagined was this acceleration on innovation.

Across basically all category, we are accelerating it, and we are seeing actually really good momentum at the beginning of the fiscal year. To give you a few example, obviously the PDRN innovation that we have both on Clinique and The Ordinary. You know that the industry is moving to longevity at the speed of light, and this is actually also showing the speed at which we are adapting and bringing the right innovation to market. But also in night, with Lauder on luxury, Bobbi Brown, you name it, we have innovation in skincare, very strong throughout FY 2027.

When you look at the next categories, we have great innovation coming in M·A·C, which is fueling the momentum that we are seeing today. In fragrances, we have many new innovation that's coming from luxury fragrances, from TOM FORD to KILIAN PARIS with Cocktail, or even Jo Malone London. But also, we were very clear, the acceleration in prestige fragrances, especially with a brand like Estée Lauder Glimmer that is off to a very strong start, or the continuation of the push that we are making with TOM FORD that has been one of the highlights for us in 2026, and we're expecting it to just continue. Balmain Beauty, in prestige beauty, that is off to a very strong start. So we are really continuing to build strong momentum throughout our brands.