Good morning, good afternoon, and good evening, everyone. Wherever you are joining us from, thanks for being with us, and welcome to our Capital Markets Experience, streaming live from Shanghai. For those who are joining us by the webcast, we are so glad you could be part of the event, even if it may be the middle of the night for you. For those in the room, I know it was a long flight for most of you, and I hope you feel a little rejuvenated by the, excuse me, amenities we left for you in your rooms. Since I am the first to hit the stage, I will introduce myself. I am Rainey Mancini, and I lead the investor relations team at The Estée Lauder Companies. Before we get the day started, you know what is coming next.
Kindly note the information on this slide regarding forward-looking statements and non-GAAP disclosures, which applies to today's events, both the presentations and Q&A sessions. As a reminder, references to online sales include sales we make directly to our consumers through our brand.com sites and through third-party platforms. It also includes estimated sales of our products through our retailers' websites. Throughout our discussion, our profit recovery and growth plan will be referred to as our PRGP. We have a great agenda ahead of us. Over the next few days, you will hear from our leaders about how Beauty Reimagined is driving sustainable sales growth and stronger profitability, and you will see how that strategy comes to life here in China all week long.
Stéphane, Akhil, and Brian, who is in charge of our technology and transformation, will begin, followed by Aude, René, and Roberto, our marketing, innovation, and value chain leaders, who will showcase how the Beauty Reimagined comes to life globally. After a short break, Joy, who leads our China team, will be joined by several of her brand leaders to highlight how Beauty Reimagined is driving outstanding performance in China. After that, Matthew, who runs APAC and Travel Retail Worldwide, will be joined by Olivier, our travel retail leader, to share how Beauty Reimagined thrives in their business. We will have plenty of opportunity for Q&A, so don't worry about that during the event.
With that, let me welcome Stéphane. The stage is all yours.
Thank you, Rainey, and hello, everyone. It is a real pleasure to welcome you here in China for this important milestone in the history of The Estée Lauder Companies. There is a very deliberate reason why we choose China to host the Capital Markets Experience. China is one of the world's most dynamic and sophisticated beauty markets. It is a market where consumers are constantly redefining beauty, where digital innovation is moving at an extraordinary speed, and where the future of prestige beauty is being shaped every day. It is also a market where our company has deep roots, tremendous opportunities, and an unwavering long-term commitment. Importantly, it is a market where we are demonstrating what Beauty Reimagined can deliver: strong execution, great consumer relevance, and sustained prestige beauty gain share.
Being here today is not about celebrating our progress in China. It is about demonstrating our confidence in the future of prestige beauty, in our brand, and in our ability to win, and how we are leveraging China as a blueprint for our next phase of acceleration. Today marks another important milestone in our Beauty Reimagined journey. When we launched our transformation, we made a commitment to restore growth, rebuild profitability, revitalizing our entrepreneurial spirit, and position The Estée Lauder Companies to become the world's best consumer-centric beauty company. We knew this would require bold decision, difficult choices, and a fundamental change on how we operate, and we have delivered. In fiscal 2026, we reignited organic sales growth and significantly improved our profitability. Now, fiscal 2027 is off to a strong start. We are moving beyond restoring growth to building sustained profitable growth and creating long-term value.
Today, together with Akhil and Brian, followed by many members of my leadership team, I want to demonstrate why we believe this momentum is real, why we believe it is durable, and why we are increasingly confident in our future. Let's start with the first quarter results. Our first quarter delivered another strong proof point for Beauty Reimagined and showing that Beauty Reimagined is working. Reported sales grew 7%. Organic sales increased 6%. We deliver growth in three of our four categories and across every geographical region. But what is particularly encouraging is not just the growth itself, it is the quality of that growth. Gross margin expanded 240 basis points, operating margin expanded 480 basis points, and diluted EPS increased 125%. At the same time, we increased consumer-facing investment by 8%. Think about what that means.
We are growing sales, we are expanding margin, and we are investing more behind our brands and consumer all at the same time. This is the virtuous cycle we set to create through Beauty Reimagined, and it is increasingly becoming a reality. Let me bring this performance to life, starting with fragrances. Organic sales grew an outstanding 20%. We made a deliberate choice to strengthen our leadership in luxury fragrances while accelerating our presence in the prestige price tier, and we have delivered against both priorities. Fragrance continues to demonstrate the power of our portfolio, the strength of our creativity, and our ability to capture consumer demand across price tiers. Today, we believe that we have the best performance in the industry, even as we build on the double-digit growth of fiscal 2026. Skincare, organic sales grew 4%.
Our performance was fueled by a powerful combination of iconic hero product and compelling innovation. From La Mer in luxury to Estée Lauder in the heart of prestige to The Ordinary in the entry prestige, we are demonstrating the strength of our brand across the consumer landscape, and as we see meaningful opportunity ahead to further accelerate our performance. In makeup, we delivered our second consecutive quarter of organic sales growth. It is an important milestone. We have been focused on reigniting this category through stronger innovation, greater consumer relevance, and expanded distribution. We are seeing the early results of those actions, and our ambition is to build on that momentum. In hair care, performance stabilized, improving sequentially from a modest decline. There is much more to do, but we are focused on returning this category to sustainable growth.
Turning to our region, the strength of our performance is equally encouraging. For the second consecutive quarter, every region delivered organic sales growth, with three of the four regions sequentially accelerating. Asia-Pacific led our performance, supported by strong growth in global travel retail. Here in mainland China, organic sales growth accelerated to 9%. Skincare and makeup each grew high single digits, while fragrances delivered double-digit growth in the market. Most importantly, we outperformed the prestige beauty industry and gained share for the seventh consecutive quarter, even against a significantly more challenging comparison. Seven consecutive quarters of share gain. This is not the result of one successful launch or one exceptional quarter. It reflects the progress that we are making to understand Chinese consumers, strengthening our innovation, investing behind our brand, and executing with greater speed and discipline. It also reinforces why we choose to be here today.
China is a critical market for our company, and we are committed to winning here for the long term. Our priority emerging market also delivered exceptional performance with organic sales growth of 15%. These markets represent a tremendous opportunity to reach new consumers and build the next generation of prestige beauty demand. With Forest Essentials officially joining our portfolio this past month, we have further strengthened our position in one of the world's most exciting beauty markets, India. We continue to expect emerging markets to represent 15% of our business in the next several years. We are not relying on one single geography, categories, or brand to deliver our future. We are building diverse growth drivers, and those drivers extend across channels. Our online business grew high single digits, organically supported by both established platforms and expanded distribution.
Asia-Pacific delivered double-digit growth online, with each of our other three regions grew high single digits. This is exactly the type of diversified, balanced growth that we want to see. Importantly, our physical retail business, including travel retail, grew mid-single digit organically. Our strategy is not about choosing between online and brick-and-mortar, it is about being where our consumer choose to discover, experience, and purchase our brand. Behind this result lies one of our company's greatest competitive advantages, our extraordinary portfolio of iconic and emerging brands. Brands with distinct identities, powerful consumer connection, and tremendous potential. Beauty Reimagined is today really helping us to unlock this potential. What excites me is that we are seeing success across brands of different size, different categories, different price tiers, and at different stages of development. Let me give you four examples.
Four different brands, four different opportunities, one common denominator, Beauty Reimagined. First, La Mer, a true luxury icon of luxury skincare. By combining breakthrough innovation in nighttime skincare with stronger consumer-facing investments, exceptional retail experience, and distinctive events, particular here in China, we have reinforced La Mer global leadership in luxury skincare. La Mer demonstrates that even our most established and successful brands have significant opportunity to elevate desirability, deepen consumer engagement, and unlock new growth. Let's look at MAC. MAC has always had extraordinary brand love and cultural relevance, but in fiscal 2025, the brand was declining. We knew the potential was there. What needed to change was how we captured it. We activated the full power of Beauty Reimagined. We expanded distribution into high-growth channel, such as Sephora in the U.S. and in the Middle East, to TikTok Shop in the U.S. and in Europe.
We accelerated innovation across key subcategories. We backed the brand with bigger and bolder campaigns. The result? MAC returned to growth in fiscal 2026. In the first quarter of fiscal 2027, we delivered double-digit growth on the brand that is already the leading brand around the world. From decline to double-digit growth. This is the power of taking decision into action and executing with speed. A different example, KILIAN PARIS tells a very different story, but equally exciting story. Here, Beauty Reimagined is not about turning around a brand. It is about taking a high-performing brand and accelerate it even further. From fiscal 2025 to fiscal 2026, KILIAN PARIS accelerated its organic sales growth by an extraordinary 19 percentage points, and the momentum continues into the first quarter. Its new collection was a breakthrough success in prestige, while the luxury portfolio delivered strong double-digit organic sales growth.
KILIAN was our fastest-growing brand in fiscal 2026, and again in the first quarter of fiscal 2027, with further sequential acceleration. This is what happen when you combine exceptional creativity, distinctive brand equity, and the power of our global organization. Finally, The Ordinary, a brand that continues to redefine the rules of beauty. The Ordinary demonstrate that we can preserve the entrepreneurial spirit and authenticity of an indie brand while unlocking the scale and capabilities of The Estée Lauder Companies. We expanded its reach across channels and geography. We accelerated fast-to-market innovation, and we invested in bold, clever, authentic marketing that speaks directly to the consumer. The result? Four consecutive quarters of double-digit organic sales growth through the first quarter of fiscal 2027. Four brand, four very different growth stories, one powerful strategy. Those are not isolated example. They demonstrate the potential we see across our portfolio.
This brings me back to Beauty Reimagined. When we introduced this strategy, it was designed to transform our business. Today, it is doing more than that. It is becoming our playbook for sustained profitable growth. We have made significant progress, but I believe we are still at the early stage of realizing the full potential of Beauty Reimagined. Beauty Reimagined is not a collection of short-term initiatives. It is a fundamental change in how we reach consumers, how we innovate, how we invest, and how we operate. Across each of our five action priorities, we see substantial opportunities ahead. Our first action plan priority, as you know, is to create best consumer coverage, well, best consumer class consumer coverage. We have made tremendous progress expanding our reach across high-growth online platform and retailers, but we are far from being finished.
Across brands and markets, there is still significant opportunity for us to reach consumer where they are already shopping, and the same is true for the physical retail. The biggest change is not simply where we are expanding, it is how we think. Historically, we spent too much time debating where the brand should be. Today, our mindset is fundamentally different. If a consumer have embraced a retailer or a platform and it strengthened our brands, we move quickly, decisively, without uncertainty debates. We are following the consumers, not asking the consumer to follow us. This is a profound cultural change. Our second priority is transformative innovation. Innovation has always been at the heart of The Estée Lauder Companies, but today, we are challenging ourself to be more creative, more disruptive, and much faster.
In fiscal 2027, we expect innovation as a percentage of sales to increase by 200 to 250 basis points. We are strengthening our portfolio of breakthrough, on-trend, and commercially impactful innovation. Critically, we are reducing the time it takes to bring great ideas to market. Take Clinique new Smart Clinical Repair Moisturizer with PDRN. From concept to launch in just six months. Yes, just six months. This is the kind of speed and agility we want to make the norm across the organization. The Ordinary Volufiline is another great example of us driving towards our commitment for 30% of innovation to be brought to market in less than 12 months. Our ambition is simple: combine the scientific excellence and scale of ELC with the speed and the creativity of an indie. Our third priority is to boost consumer-facing investments. Here, we have been absolutely consistent.
Now seven consecutive quarters of increased investment behind our consumers, even while improving profitability. This is a deliberate choice, because we are not transforming our company simply to become more efficient. We are becoming more efficient so we can invest more in growth. In fiscal 2027, we expect to increase this investment further, focus on our highest return opportunities, from extraordinary retail experience to campaign that attract new consumer and strengthen brand desirability. We are building this demand for tomorrow while delivering the result today. Our fourth opportunity is to fuel sustainable growth through bold efficiencies. We have now completed approval for the initiatives under our PRGP restructuring program, and we are focused on executing this final phase with excellence. This program has been instrumental in simplifying our organization, improving our cost structure, and creating the financial flexibility to reinvest behind our brand.
I want to be very clear. The PRGP may be coming to an end, but our commitment to efficiency is not. Continuous improvement is becoming part of how we operate. We are embracing AI, challenging complexity, and finding new ways to work smarter and faster. Akhil and Brian will share more about the next waves of opportunities. Our fifth action plan priority is perhaps the most transformational of all: reimagining the way we work. Because sustainable growth requires more than a great strategy. It requires an organization capable of executing the strategy with excellence every single day. Our ambition is to leverage the full power of our global scale while moving at the speed of an indie. We are making fundamental changes to deliver on that ambition. First, one team. We have simplified our organization. Fewer layers, fewer silos, clearer accountability.
We have refined ownership between brands and region and empowered our teams to make decisions faster. We are spending less time debating internally and more time creating for consumers and winning in the marketplace. Less complexity, more accountability, and greater speed. Importantly, a stronger sense that we succeed together as one ELC. Second, one culture. Our beauty commitments are helping us reignite the entrepreneurial spirit that has defined our company for 80 years. We are becoming bolder in our thinking, more agile in our execution, and more unified in how we work. We are building a culture where ideas matter more than hierarchy, where speed matters, and where teams are empowered to act. Because ultimately, culture is not what we say. It is how we behave, how we decide, and how we deliver as a team. That is changing across the company.
Third, our operating ecosystem. We are fundamentally modernizing how the company operates, building a simpler, more connected, scalable, and AI-enabled enterprise. We have made three major moves. First, enterprise business services. We selected Accenture as our strategic partner to help transform our shared service model. One integrated partner, greater consistency, stronger governance, and more efficiency. Through October, we have transitioned 85% of the role. This is a significant milestone at a speed rarely seen before. Brian will share how EBS is helping us unlock the power of One ELC. Second, our global media model. We consolidated more than 30 agencies into one global media partner, WPP. This is about far more than simplifying our agency landscape. It is about leveraging our scale, improving efficiency, and moving resources faster towards the opportunities that create the greatest consumer demand. Aude will share more about this transformation.
Third, our direct-to-consumer commerce. We are partnering with Shopify to modernize our capabilities and create more frictionless, engaging omnichannel experiences. We remain on track to deploy 80% of in-scope sales, along with 300 freestanding stores through fiscal 2027. Together, these three moves are helping us to create an operating ecosystem designed not just for the company we are today, but for the company we intend to become. Simpler, faster, more connected, and built for scale. Now, when you bring all of these five priorities together, the results speak for themselves. Five consecutive quarters of organic sales growth. Five consecutive quarters of gross margin expansion. Five consecutive quarters of operating margin expansion. This consistency matters, because one single strong quarter can reflect favorable condition. Five consecutive quarters reflect something more fundamental, a business that is changing, a strategy that is working, and an organization that is executing.
We are encouraged by our progress, but we are not satisfied yet. We know a lot more to do, and we remain intensively focused on delivering. That brings me to our fiscal 2027 outlook. Building on our strong first quarter performance, we have raised our outlook across the board. We now expect reported sales growth of 5%-6.5%, organic sales growth of 4%-5.5%, operating margin expansion of 170-250 basis points to 12.9%-13.7%, and diluted EPS growth of 28%-38%. This outlook reflects our expectation for accelerating organic sales growth and another year of significant improved profitability. We are entering a new phase of Beauty Reimagined, one where growth, profitability, and investment increasingly reinforce one another. Our confidence is not based on assumption that everything will go perfectly.
It is based on the progress that we have delivered, the action already underway, and the opportunities we see ahead. The next chapter of our growth is supported not only by what we are changing inside ELC, but also by the structural opportunity shaping the global prestige beauty industry. First, the consumer lifetime value is expanding. The younger generation is entering beauty category earlier, and the older generation is living longer. Both create exciting opportunities for the industry. Our longer expected lifetime is especially compelling as we increasingly innovate for longevity. The global population aged 65 and over is expected to more than double through 2050 to 1.5 billion people. Second, the middle class in emerging markets, as defined by households, is set to increase by over 80% in the next decade.
India, in particular, is set to triple, and the growth expectation for the rest of Asia, including India and China, is also quite meaningful. Third, when you look at a category like fragrances, it represents also another fascinating opportunity for prestige beauty global growth. The category is forecasted to deliver a high single-digit CAGR over the next five years. There is tremendous potential for the category in Asia-Pacific. Even if we envision its regional mix increase by 5 percentage points, there is still significant opportunity when you compare with the Americas and most certainly EMEA. As the consumer in Asia-Pacific enters the category, they are gravitating towards luxury, where we lead. These industry drivers reinforce our confidence in the long-term attractiveness of prestige beauty. In fiscal 2026, the global prestige industry grew nearly 3%, consistent with our initial forecast of 2%-3%.
In fiscal 2027, we expect growth to accelerate by 100- 150 basis points, reaching more than 4% at the midpoint. Looking further ahead, we expect the industry to deliver compound annual sales growth of 4%-5% from fiscal 2028 through fiscal 2030. Of course, the external environment will continue to evolve. Consumer behavior will change, market will fluctuate, competition will intensify. But we are convinced the structural fundamental of prestige beauty remains attractive. Importantly, we are convinced The Estée Lauder Companies is increasingly well-positioned to capture these opportunities. Not simply because of the markets in which we compete, but because of the company we are becoming, which brings me to our fiscal 2030 ambition. Today, we are looking beyond the recovery of our business. We are setting our sight on a sustained profitable growth and long-term value creation.
Powered by Beauty Reimagined and the increasing benefit of our One ELC operating model, we are driving to deliver mid-single-digit organic sales growth annually through fiscal 2030, with the goal to outperform the industry and gain prestige beauty share. Through the combination of sustained sales growth, operating leverage, and continued efficiency, we are driving to achieve an operating margin to 16.5%-18.5% in fiscal 2030. This is a meaningful ambition, and one that reflect both our confidence in the opportunities ahead and our commitment to discipline execution.
With that, let me turn it over to Akhil, who will give you more detail on how we will get to this ambition. Akhil, the stage is yours. Thank you.
Thank you, Stéphane. Hello, everyone, and welcome to China. We are excited to have you here. You just heard Stéphane outline our fiscal 2030 ambition and strategic priorities. We, as a team, are energized and are going after it. Let me walk you through our financial playbook for long-term sustainable value creation that solidly underpins this fiscal 2030 ambition. As you know, from the beginning of a Beauty Reimagined journey, we have maintained an unrelenting focus on fundamentals of long-term value creation. That means disciplined execution across three different priorities. First, driving sustainable and diversified sales growth. Second, delivering a step change in margins. Third, building an efficient and effective cash generation model. Let us start with growth, our number one value creation driver. We are building the best consumer-centric, growth-focused prestige beauty company.
Our goal is to lead growth in this industry, and we anticipate mid-single-digit sales growth, as Stéphane outlined. Second driver is strong profitability and margin expansion. With PRGP, we have built stronger financial model that translates sales growth into stronger profitability and margin expansion. We are focused on both gross margin and operating margin. With that, we now expect operating leverage at lower level of sales growth than we needed historically. Third, we are fueling strong cash conversion of earnings via efficient working capital and optimized CapEx investments. All of this translates into strong free cash flow. Throughout next few days, in our Capital Markets Experience, our teams will highlight the capabilities that support these value creation drivers.
Now, as you know, we began executing on our long-term value creation playbook almost two years ago. Our 2026 results, highlighted here, provide the clearest evidence of significant progress in reigniting growth and improving profitability. Let's touch upon growth. We delivered 3% organic sales growth in fiscal 2026, accelerating to 5% in quarter four. Just couple of days ago, we announced a first quarter growth of 6%. We are already demonstrating our ability to grow strongly. Let's look at gross margin. We improved gross margin last year by 150 basis points. This is in spite of tariffs, inflation, and while supporting sales growth. This is impressive work done by our value chain, brand, and regional teams.
Improved growth and gross margin provide fuel for our strategic priority of further igniting growth. You'll see here that we increased consumer-facing investments by 7% on a reported basis versus fiscal 2025. We have invested this across advertising, promotion, and in our stores. You see that in China here, and you'll see that in Travel Retail as well. On the other hand, when it came to non-consumer-facing expenses, we have made structural changes through PRGP and our everyday efficiency mindset and new muscle we are building. This resulted in margin expansion of 140 basis points.
All of this combined gave us adjusted operating margin expansion of 320 basis points and increased adjusted diluted EPS by 66% versus fiscal 2025. This proven value creation playbook is a driver of a fiscal 2027 revised outlook and will be a key enabler of our 2030 ambition. Now, let me start with our ambition for gross margin. We expect to reach approximately 76%-78% gross margin in fiscal 2030. There are multiple drivers for this. Let me touch upon them. The first one being that we will secure more competitive pricing on material, on freight, and various inputs that go into a product.
At the same time, we will leverage superior product and packaging design and platforming to produce products with efficacy and quality at efficient costs. Second, we will be having greater productivity as our volume and units grow, resulting in better absorption of fixed costs. Third, we will continue to drive our zero-waste mentality that we have leveraged to deliver already better inventory and reduced destruction costs. Overall optimization of our promotion and discounts will also help improve our margins. Hopefully, this graphic gives you confidence in what we are saying. Our track record of operational excellence has improved gross margin from 71.7% in fiscal 2024 to 75.5% in fiscal 2026. This is an improvement of nearly 400 basis points in just two years. This progress and our plans in place give us confidence that we can reach 76%-78% in the coming years.
Overall, our organizational transformation has created a more efficient, more resilient, and agile value chain, which we have demonstrated as we navigated tariffs and geopolitical volatility. You will hear from my partner, Roberto, about our very strong supply chain capabilities later today. You have seen our ambition on gross margin. Now let me talk to you about what we are going to do on non-consumer-facing expenses. Optimizing our non-consumer-facing expenses has been a key priority and will be a key priority, because it helps us to drive profitability, reduces fixed costs, and helps us fuel growth. The way we will drive non-consumer-facing expenses down is through following levers. First, we will execute with excellence our already approved PRGP business cases and bring them to completion.
We are committed to delivering the full run rate of savings by end of 2027 so that the benefits can flow through in 2028 and beyond. Second, we are embedding everyday efficiency mindset and muscle across an organization from brands, affiliates, regions, and all functions. As part of that, we expect to mitigate a portion of inflation and merit increases, leveraging AI and leveraging One ELC processes that Stéphane talked about. These efficiencies will allow us to grow sales without adding costs at the same pace. Third, post-PRGP, we are setting up a continuous transformation platform across procurement, organizational effectiveness, design, and AI leverage, to name a few. Brian will share more details about this. Having talked about non-consumer-facing expenses, let me talk about consumer-facing investments, the other side of the coin of our strategic approach to investment allocation.
First, to keep building momentum and drive sustainable long-term growth, we will fuel consumer-facing investments to grow more closely aligned with anticipated sales growth. These investments will go into targeted advertising and promotional activities and fuel our beautiful portfolio of brands. These investments are critical to build best-in-class awareness, trial, brand equity, desirability, and these bring our brands' creativity and innovation to more consumers around the world, as you see here in China. Second, and very importantly, our focus is to make these investments more effective and efficient. We will do so by better targeting investments through superior consumer insights, measurement, and latest technologies. This will continue to be a huge focus area for us. Third, I am sure the question on your mind is, "What about leverage on these costs, Akhil?" We are cognizant, and we will be driving leverage even on these investments.
However, in the near term, our focus remains to fuel growth and outpace the industry. Aude will share more on our overall approach to these investments and our superior ROI mentality. With the right ingredients for growth, gross margin, and a strategic approach to investment allocation, we are confident in our ability to deliver operating margin expansion. First and foremost, we are committed to delivering a fiscal 2027 outlook of 12.9%-13.7%, and our eyes are set on moving towards 2030 ambition of 16.5%-18.5%. That's 850 basis points to 1,050 basis points of expansion in just five years. It's worth noting that in fiscal 2028, we expect another step-up in profitability as we realize an entire year of the PRGP's full run rate benefits.
Now, let me touch upon another driver of net earnings, taxes. We have committed that we will continue to optimize our tax planning and improve our tax rate. We expect our effective tax rate to be 30% or below by fiscal 2030. The pace of improvement may vary. However, we are committed to this goal. Key drivers are, first, overall recovery of profit. Second, rebalancing of the profitability mix. Third, the tax planning initiatives aligned with the strategic changes we are making in our business. As we bring all the drivers of our 2030 ambition together, sales growth, margin expansion, and lower effective tax rate, we expect double-digit EPS growth through fiscal 2030. This sets us on the path of sustainable long-term value creation.
Very importantly, you know how much I love cash. More importantly, I know you do too. We expect very strong cash conversion of earnings through fiscal 2030. Let me touch upon key drivers. Higher earnings, tapering restructuring, and continued working capital efficiencies will support strong cash generation. As we have done over the last few years on working capital, we remain focused on disciplined collections, optimizing inventory, and extending payment terms. For CapEx, we are very focused on driving consumer-facing investments, accretive innovation, and those capabilities and technologies that not only fuel growth, but drive profitability. This has been our demonstrated focus for last two years, as you all know. We have optimized and focused our CapEx dramatically, and we will continue to do so.
All of this produces strong free cash flow and improves our financial flexibility. Now, I am sure, very importantly, the next question on your mind is capital allocation, which is very important to you and those in the room and those listening. We will stay extremely disciplined, and focus will always be on shareholder value creation. As priority one, we will invest CapEx in the business to fuel growth. Secondly, we will continue to deleverage the balance sheet to ensure that we continue to build a fortress balance sheet. We will balance all of that with return of cash to shareholders with whitespace M&A opportunities. Within M&A, as Stéphane has said, our focus is on minority investments and single-brand acquisitions.
As we wrap here, I leave you with three messages. First, we are in an attractive industry and are determined to be a growth leader. Second, our transformation has created a strong financial model and sustainable value creation playbook. Third, our progress to date and actions already underway give us confidence in our 2030 ambition. In summary, we are determined to deliver sustainable growth, margin, and long-term value creation through Beauty Reimagined. Thank you very much to all of you for joining us here and to all our teammates around the world.
With that, I would like to welcome to stage, one and only Brian Franz, our Chief Technology and Transformation Officer.
Thanks, Akhil. It is great to be here. As ELC's Chief Technology and Transformation Officer, I lead our enterprise-wide efforts to become faster, simpler, and more connected. Today, I will show you how our One ELC operating model, along with AI, technology, and data foundations, scale across the business to enable continuous optimization and drive growth, margin, productivity, and simplification. Over the past two years, our PRGP program has reset our cost base and built a stronger foundation. We are continuing that trajectory by embedding continuous optimization across the end-to-end journey, all to serve the consumer. Our competitive advantage is our ability to harness our most strategic asset, 80+ years of rich data and insights. This data, coupled with our scale and the power of AI as an enterprise capability, enables us to make the best decisions, simplify how we work, and drive productivity.
We are unified as an executive team on the objectives of how we drive transformation. Later, Aude, René, Roberto, and Joy will show how these capabilities support consumers, innovation, and the value chain. Now, let me start with our AI priorities. Since I joined, we have been focused on establishing the foundations that enable us to execute with agility, speed, and unity. We have a platform strategy around unified commerce and data, a strong ecosystem of strategic partners, and have rebuilt our technology, data, and analytics organization with an operating model that reduces silos, redundancies, and costs. We are moving from experimentation to scaling the highest impact AI initiatives that deliver on our strategy, and measuring success based on productivity, ROI, and business impact. Our priorities span three pillars.
First, new capabilities and growth, creating differentiated experiences and products, and a higher level of personalization for our consumers. Second, decision intelligence, using data and insights to move smarter and faster. Third, productivity and automation, enabling simplification and efficiency in the way we work. Let me bring our AI pillars to life with a few examples. Under new capabilities and growth, we are developing agentic experiences that connect personalized discovery, recommendations, and commerce. For example, our consumer could go to mac.com, chat with an AI agent, and ask, "I need a full glam look for an event I am going to this summer." The agent, which is trained by our expert MAC artists, will recommend products tailored to her skin tone and type, the weather, and any other inputs she might share.
She can then add those products straight to the cart and eventually purchase them directly through LLMs like ChatGPT, Gemini, or others. Under decision intelligence, conversational analytics is putting connected insights at our team's fingertips, allowing them to quickly surface available insights tailored to the questions they ask. We built a formula navigator that helps scientists compare formulation options earlier, reducing iterations and development time. You will hear more about that later from René. In the value chain, we deployed AI-enabled inventory tools that evaluate demand, supply, and constraints, and automatically execute approved allocation decisions, helping get product exactly where consumers need it. Finally, to advance personal productivity and enterprise automation, we are equipping employees with secure AI tools while automating repetitive manual tasks at enterprise scale.
We've deployed an AI-powered assistant called Ask ELC, which answers routine questions and guides employees through actions like, "How do I access my pay stub?" or "What are my healthcare benefits?" What I love about this is that these questions would have been answered by our people team. Now, leveraging AI, we're creating more capacity for our team to focus on strategic, high-value added work. To date, Ask ELC has addressed more than 45,000 queries in 49 countries, with more than 90% of the queries answered successfully with no human intervention at all. These pillars and examples are all in support of becoming the most consumer-centric prestige beauty company in the world. I mentioned platforms earlier. Unified commerce enhances the consumer experience while creating operational scale and efficiency. Today's consumer journey is no longer linear.
We're shifting from managing individual channels to creating lasting consumer relationships across channels through personalized, connected experiences. I'm proud of our enterprise-wide strategic partnership with Shopify. We're one of the first companies of our size to harness their solutions at this scale, allowing our teams to focus on our true differentiators: powerful brand storytelling, beauty expertise, consumer insights, and next-generation capabilities in personalization and agentic commerce. Early results prove the strength of the platform. Checkout completion increasing 12% means that we're driving higher cart-to-conversion rates. Shop Pay adoption reached 60%, which underscores the importance of offering frictionless payment options. We increased organic visibility across key consumer touchpoints, achieving an SEO score of 90. Reusable data, services, and APIs have reduced capital spend by approximately 60% and enable more efficient new launches while always preserving each brand's unique identity and consumer experience.
We've cut brand.com launch timelines from five to six months to six to eight weeks, which is incredible. We're now live across MAC, Clinique, TOM FORD, Lab Series, across both digital and retail experiences in the U.S. and U.K., and we're rapidly expanding that. Let me show you how unified commerce and AI are establishing a scalable foundation for continued growth with this video.
[Presentation]
This brings to life how we accelerate best-in-class consumer coverage and experiences. In China, we're also learning from key local ecosystems like Tmall, Douyin, JD, and WeChat. This market continues to lead in digital innovation, particularly through super app experiences that seamlessly integrate commerce, engagement, and services. Through ELC's scale, we can combine insights from China's advanced digital landscape with the global best practices to continuously evolve our capabilities and deliver more connected and personalized consumer experiences. I just talked about how connected data supports the consumer experience. Now, that same connected data also helps our teams make better decisions.
Leveraging AI, we can identify patterns earlier and translate insights into faster data-driven execution across research and innovation, marketing, value chain, and commercial. In addition to the examples I shared earlier, this means that in marketing, we can shift media investment toward the highest performing activities to increase effectiveness. In commercial, we can make more informed decisions on assortment, pricing, and promotions by connecting emerging trends with our proprietary consumer, product, and commercial data. That's how decision intelligence enhances our revenue. We're also continuously driving productivity and spend efficiency across ELC. Three actions to support this. First, we're implementing one global procurement model and making the process simpler, compliant, and AI-enabled, from purchase order to supplier payment.
A standard process gives us full visibility of our spend, reduces manual work, and lets us use our global scale when we negotiate with suppliers. Second, we are using zero-based budgeting selectively across our portfolio of expenses. Third, we are consolidating our long-tail spend to gain scale and better terms. These ongoing capabilities will allow us to create a recurring source of capacity for growth, innovation, and profit. Another enabler of our continuous optimization is our enterprise business services, or EBS. You heard from Stéphane earlier that as part of our one operating ecosystem, we are partnering with Accenture on EBS to drive standardization, efficiency, and scale across six connected enterprise functions. By consolidating vendors across brands, regions, and functions, we have simplified how we operate, strengthened governance, and created a scalable foundation to accelerate AI and automation.
By standardizing workflows and measurement, we get clearer accountability and transparency, driving performance and more informed resource allocation. This, in turn, allows ELC to focus on the capabilities that differentiate the company and ultimately drive growth. We have made significant progress with EBS. We launched approximately 700 marketing campaigns in 90 days through a unified briefing model, and we redesigned more than 230 global processes into standardized ways of working across functions and regions. Our priority is to improve end-to-end efficiency through process optimization, automation, and AI agents, with the ambition of reaching top quartile efficiency benchmarks. As we bring all this to life, we know people are the backbone of our AI-enabled transformation. This is why we are equipping employees to use AI responsibly and apply it to the work that matters most.
Over half of our office-based workforce has participated in AI training, and approximately 90% of enabled users actively adopt our enterprise AI tools. We will embed AI into role-specific workflows, redesigning work rather than simply automating individual tasks. This is how we will build an AI-forward mindset while keeping people, judgment, and creativity at the center of our transformation. Bringing us back to China. Later, Joy and her team will bring to life how continuous optimization is at work here through global capabilities and initiatives that are unique to the market. As I mentioned earlier, learnings in China can help advance our global capabilities. The goal is not to replicate every local solution. It is to identify the capabilities and the ways of working that can create value in other markets. That is why we partner with leading technology and AI companies around the world.
Alibaba is one of our key partners in China. We have already collaborated across cloud, data, and analytics, and are exploring consumer and trend intelligence and [Qwen] to strengthen how technology supports our brands and brings more relevant experiences to market. By combining Alibaba's deep market insights and technological capabilities with our own expertise, we can accelerate innovation and help our brands to grow in the AI era. In closing, we are in a place where we have built our foundations and strengthened our capabilities to drive continuous optimization. Together with our amazing talent, we are positioned to leverage our scale to drive growth and expand our operating margin. We are living our beauty commitments every day, which means we are making bold investments to delight our consumers while simplifying and driving productivity in everything we do.
With that, I will invite Stéphane and Akhil back for Q&A.
Okay. Who wants to be the first one to ask a question? Please, when you do, introduce yourself. Mic is going to come your way. Ready? Thank you. Sorry, I can't see with the lights basically who is raising.
It's Dara.
Dara, hi.
Dara Mohsenian from Morgan Stanley.
Hi, Dara.
The targets were great, a lot of detail behind there. Can you spend a little bit of time talking about the product category performance you expect as you look out over the next few years to those fiscal 2030 targets? Also within that, you have had very strong growth on the fragrance side, skincare growth has rebounded, we have seen margin expansion. Makeup has really been the big laggard, both from a top line standpoint, just as well as the margin contribution. Maybe you can touch on the makeup category specifically, what you need to do to sort of reinvigorate the top line piece of the equation, but also how you think about the margin opportunity in that business looking out over the next few years.
No, thank you, Dara. I will take on, and we can all tag team to just answer a question. To be very clear, part of Beauty Reimagined, what we said since the beginning, that we want to be much more diversified from a growth standpoint across brands, category, and region. That stays true for what we have done in the last two years, and that will stay true for the future. Obviously, I think you are referring to the last quarter where we had an exceptional growth on fragrances. I think it was a lot driven by strong innovation, but also our ambition to not only play in the luxury tier, but also in the prestige tier. We have had great success with Estée Lauder Glimmer, the cocktail of like, you know, KILIAN, Balmain, also signature of TOM FORD.
We have accelerated and we have seen very strong acceleration above the market in fragrances, but the ambition is for us to be much more diversified. We balance the growth between East and West, not at the expense of the East, but really by accelerating the West and continuing to balance the categories. Skincare will remain for the foreseeable future our lead category and the largest one, obviously because of the continuous opportunity that we are seeing in the East. I would say now with our multiple tier, when you think about La Mer at the luxury tier, Estée Lauder in the middle of prestige, and now The Ordinary that is having runaway success in pretty much every market around the world, we can play in all the tiers.
You will continue to see us accelerating innovation. I am quite excited for you tomorrow to experience what you will see at the Innovation Center of what we are doing here in China, but what we are doing around the world to accelerate the category, which leads me to makeup. Like I said in my prepared remark today, we are not satisfied with all the progress, but we are moving in the right direction. I think makeup, we went from obviously negative trend to flat to slightly positive in the last quarter. What I am quite excited in what is happening in makeup is what we have been able to demonstrate with MAC. MAC has been consistently the number one brand around the world, but we have been losing market share for quite some time, especially in fiscal 2025.
You have seen the transformation that we have done. This transformation has been obviously Beauty Reimagined in action, more diversified channel, faster innovation, and bolder innovation to market. It is only the beginning, and we are investing back in our brand. The playbook of the success of MAC is being applied as we speak across multiple brands. That is on Estée Lauder makeup, that it is on Clinique makeup, Too Faced, which we have announced that we were moving the operation from the West Coast of the U.S. to the East Coast to benefit from the capabilities that we have created under the makeup cluster for MAC, Bobbi Brown, and Too Faced. We are committing to accelerate.
One of the objective of accelerating the speed to market on innovation is really to benefit makeup, because makeup is actually the category where you can bring a lot of on-trend and new innovation to market in less than a year. Skincare, depending on the type of regulation, is it an OTC product or not, it is very hard to just bring product in less than six months to market, or even 12. We have demonstrated with Clinique, we have demonstrated with The Ordinary, but it will be more consistent in makeup, and that, we believe, will help to accelerate. Think about this great ambition that we have presented in terms of growth above the industry and continuing to be in the mid-single digit compound growth between now and fiscal 2030.
You will see a continuous diversification of the growth, rebalance between East and West, between category, between geography, but I would say also between channels. We do not talk a lot enough about the channel. We will continue to put more of our brands where the consumers are and in the growth channel, and that will benefit also makeup.
Maybe, Akhil, you can say a few things about the profitability.
You are absolutely right. Our profitability across segments, both from a geographic and category, is quite different. The interesting thing on makeup is that our gross margins on makeup are very attractive. Most people do not realize that. With very strong gross margins that we have and the scale that we have on brands like MAC, being the number one brand in the world, Clinique and MAC being number one and number two brand, we have the scale. One of the opportunities that we had was the overhead, and our go-to-market model was not very clear. What we have done as MAC has gone into Sephora, we are streamlining our freestanding store fleet. We are very committed to driving significant margin expansion on makeup while continuing to fuel consumer-facing.
The playbook will continue to be the same, which is attractive gross margins, dramatically redesign and resize non-consumer-facing, and fuel the business. The good news is gross margin on makeup is already very good, which is, of course, we do not report at that level, so you may not have seen that. We are confident that we will be able to get geographic movement, and you should see starting this year. I think you already saw in quarter one the progress we have made. It is not enough on an absolute, but sequentially, we made progress last year, we made the progress in quarter one. You will see the proof points this year itself.
Then to your point, we also have divergence geographically, and we are doing significant internal/external benchmarking to make sure there is a minimum threshold for all businesses, including our smaller brands. You should see diverse top line and diverse bottom line profitability improvement, which is embedded in this ambition.
Okay. So there, who is the mic? Hey, Bonnie.
Bonnie Herzog from Goldman Sachs. So, as we sit here today and think about all of the progress you've made with Beauty Reimagined, first, where do you feel you've excelled, and things have actually gone better than you would have expected? Then second, what aspects of your strategy do you feel like have taken longer to take hold or maybe generate the returns that you were expecting? Then finally, what have you tweaked, if anything, with your strategy in the last, what has it been, 1.5 year ? Thank you.
No, it's a very good question. I think it feel that we are tweaking things every day as we are moving forward. But I think where we've been really amazed by what the organization, what my leadership team, and you've seen, obviously Brian and Akhil, and you'll see more, is the speed at which we've executed Beauty Reimagined and the transformation. I think a company that is just turned 80 years young, you know of the history of the company, and we've not been the fastest historically in taking on some other things, like Brian talked about, like AI and technology. We've really approached it in a very pragmatic way. So, what we saw at the beginning of Beauty Reimagined and the five pillars, they're very clear. They were 24 months ago, or 18, 20 months ago, that they are now.
But I think the speed is what has really surprised me and encouraged me to just go even further and to be in front of you today to commit in our long-term ambition. Because in some way, we're still at the beginning of our transformation, yet so much has been achieved in the last five quarters in terms of sales, profit, gross margin, organizational design. If you ask me one other thing that has been more, I mean, I wouldn't say complex, it's been changing in the overall cultural transformation. That's absolutely key, and I'm saying it without any negative thought because we've reduced tremendously the size of the organization. You know that we've announced it, close to 10,000 positions. We've seen a lot of our colleagues leave. We've seen basically transformation. We've reduced complexities and layers and silos around the organization.
We are relearning new process. Brian shared, many processes that we are changing and changing fast. That basically takes some time. But the speed at which we are deploying and we are embedding that across the organization is telling me that while we are at the beginning, the potential, because of the new ways of working that are really starting to establish itself throughout the company, is really going to allow us to really unlock further growth. If you see everything that both Akhil and Brian discussed this morning, and you will see next, the P&L is built for leverage. The more the culture moves into being ambitious, bolder, entrepreneurial, all like the beauty commitment we presented this morning, the faster we believe that we are going to just go after new opportunities in the market.
I am incredibly proud, frankly, of what we have done. If you asked me on February 4th, 2025, when we presented Beauty Reimagined, this date is going to be anchored in my mind forever, to where we are now in front of you here in China, is just a remarkable transformation. Are we there yet? No, there is plenty. But I think the opportunities of both the industry plus what we are transforming tells me that, frankly, we are only at the beginning of fully realizing the benefit of Beauty Reimagined and what the team can achieve altogether.
I just wanted to add one thing, Bonnie. I did not want to miss this opportunity to say that. One of the things we are doing is we are setting goals in a way that there is no ambiguity. We did not say to you, "We are going to find billions of dollars of PRGP." We said, "We are going to deliver margin." Stéphane and I said, "It is going to be a marathon and solid double digit." But I think we really sprinted through the first part of getting to where we are this year, and then we are very committed to going to what we said today. I think from that perspective, it is the plain talk, clear goals, which frankly channelizes the whole organization, and you will see very consistently hearing that from everybody.
Brian?
The one thing I just wanted to say, I have been in multiple consumer goods companies, I have been in banking and financial services. One thing that is a huge differentiator here is the energy, experience, and capabilities of the entire executive team that, to Stéphane's credit, he put together. It is an amazing place where you can have speed sort of come through and change is really kind of something led from a broad base of all of this executive team penetrating the whole organization. So, I have been doing it a while, and I have not seen this really in a lot of places. It is quite special. When they talk about the magic at this company, it is more than just magic on our brands. I think it is now the way we have embraced Beauty Reimagined.
Yeah, go ahead. Everybody wants him. We'll need to expand the Q&A. Go ahead, please, Andrea .
Andrea Teixeira, J.P. Morgan. I was coming back from the top line, and I appreciate how you put out, obviously, the industry drivers. Accelerating to that 4%-6% coming from, I would think about how much of a balance you can have between volume and pricing or mix. Just coming off of a thinking, the younger consumer, recruiting that younger consumer ingredient base, like with The Ordinary, but also the fact that by doing so, you are obviously going to have a growing pain of that price decline, if you will, or mix headwind. How can you use that, and then how can you make sure that you continue to premiumize on the top end and basically get that volume balance, if you can elaborate on that?
Related to that, can you also make sure at the journey of that consumer? I think in the past, you were not able to use the information. I guess Brian can now get a lot of the information with some of your vendors, where you can see you have the data as a first party, or how you are going to be able to use that, and how along the journey are you in for using that data?
Oh, great question, Andrea . I think there are multiple parts to your question. I think, let me start with the last part of your question on the consumer, because you are going to see a lot in a minute with Aude coming on stage, how we are harnessing the power of the insights and leveraging a lot of the technology and AI platform that we are putting in place. I think one of the strengths of the company has always been its local relevance. What we have not been able is just to harness the understanding of the consumers around the world to just inform future innovation, campaigns, claim that we needed to develop, and the speed simply at where we needed to deploy our products. This is already embedded into the company. This is not how far we are. This is what is changing.
The fact that we've already been able to move so fast in bringing innovation to market faster was just not like, say, "Okay, let's bring new product." They were deeply informed by consumer insights, either that we are working with our partners. Do not forget also, we have 30% of our business globally that is direct to consumer, and we intend to continue to accelerate this part. 30% of the business, we own the relationship directly to the consumer. We have a very good understanding across geographies, across platform of what consumer. Now, to go to your first part of your question on the price point. What I am really proud of and why I am excited about the portfolio of The Estée company, and that I knew before we even communicated the strategy of Beauty Reimagined, is that we are about to tap into different price tier.
Now, different price tier does not mean necessarily the lower price tier is the younger consumer and the higher price tier is the more older or wealthy consumers, because we are seeing Estée Lauder, take Estée Lauder brand, the largest brand of The Estée Lauder Companies, 80 years today. When you think about a product like Double Wear, you are tapping into the younger generation. It goes as young as the early 30s into the 20s sometime. Now, when you go to Re-Nutriv, and you will be able to experience it as you are going into the store, now obviously, we are talking about longevity. You are talking about a consumer that wants to live better, younger. We are deploying our brands and our product different price tier, and obviously, sometime age is a driver, but not always.
Now, when you come to pricing, it is at this point we need to recognize very clearly that consumers around the world are under pressure. Okay? However we want to look at it. Beauty, in this moment in time, is a very resilient category, and that's why we are confident to see that the category is accelerating. Because remember one thing, we are still affordable luxury, affordable prestige. We are not hard luxury. In this moment in time, people want to still reward themselves with little luxuries, and that's where fragrances, that's where skincare, makeup, and even hair care is becoming very important. We are playing with prices. New innovation, every time I am telling my team, it needs to basically, the price of the new innovation needs to come into the price band of where 90% of the growth is coming.
I think you have heard me saying it multiple times. If a lip gloss, 90% of the growth is between $15 and $25, this is where we are going to launch it. Obviously, MAC will be at $15, and Lauder will be at $25, and we will target through different distribution, different type of consumers, different activities. But we are leveraging our brand, and we are leveraging the channels, and all of that we are doing it thanks to what you are going to see later with Roberto, exceptional operating excellence that allows us to continuously improve gross margin. We do not see price pressure necessarily as a barrier for us to improve gross margin. So, that's why we are committing. Now, it is, understand, I am sure everybody wanted like a tighter range on our gross margin, but it is what it is.
We are just at this point, three years out, 76%-78%, and that is with the ability to play at different price tier for our different brands. The volume, the last thing I would say, the more volume we have in our supply chain, the more leverage we are going to get. Remember one thing, the consumer cares about pricing. The supply chain folks, they only care about units. The more units you have in the manufacturing network, the more leverage we're going to get. This is what Akhil was saying earlier, that will continue to give us some leverage within our operations.
On the data part of the question, just to add, I think it's really important. We're really taking the resource allocation and focusing it on the things that matter in terms of looking horizontally end-to-end across how the company operates, simplifying those processes, because process really is one of the underpinnings, and to have really good clean data as well. Then finding that golden source data across the organization, so we can invest in the strategies that are much, much faster at yielding results and getting the right ROI. We focus on the consumer, and we deploy with our strategic partners all of our kind of ammunition against how we really kind of build those assets in consumer intelligence, which Aude will talk about, and all the other areas that really will drive profitability and growth across the organization.
We'll take two more. Lauren, and then after on the second row, I'm sorry, I have like a huge light in my light, so I don't know. So Lauren, and we'll take the second row. Lauren.
Hi. Hello. Okay. Oh, you'll hold it. Okay. That's weird. Lauren Lieberman from Barclays.
Yes, Lauren.
Okay. If you go back to February 5th, let's call it February 4th of 2025, one thing that we do not really talk about is how much underinvestment there was in the business. The aggregate number, obviously, the margins were not good. But when I look at the collection of brands you have displayed behind you, there is a lot of them that I am going to guess got almost no attention, very little resource, we had not heard about in ages. As you think about this path forward and where you are today, I do not know the best way to answer is like, is it a percentage of brands or how much of the portfolio, and we could talk about it by brand and by geography, required a real step-up in spending, even as you are taking money out from other places?
Because again, there are brands like, I mean, you mentioned Lab Series. I do not think I have heard anyone at Estée Lauder mention Lab Series in 15 years maybe? Darphin. There is a long list of them.
I know you love Darphin.
So I would just love some perspective. I know you know I love Darphin. Just some perspective on level of underinvestment across the portfolio by brand and by geography, and where you stand in sort of the process of getting, to get that balance, to get that breath back even more so than what you are already seeing today.
Lauren, I think it's a fantastic question. I think I cannot answer any differently that there was a significant level of underinvestment across our brand, maybe with the exception of our few largest brands. I think one other thing that's been really exciting at the end of fiscal 2026 is to bring two more brands into the billion-dollar club, so Jo Malone and TOM FORD, which now we have $6 billion brands. I would say generally speaking, what was happening in the past, we were really focusing on performance marketing spend and not enough on equity driving. At the end of the day, it will always work in any type of consumer goods industry, and especially more in beauty, you have a funnel, and at the top, you need to create the desirability.
As you go through the funnel, you just need to make sure that you have the right performance marketing tools to just create the retention. We were really focused on the retention of the consumer and not enough on the recruitment. We are changing, and this is what you are going to see again with Aude in a minute, how we are changing our investment mentality. That's where WPP, as one of the partners, is really helping us to shift the resources that we're fueling from the PRGP to not cutting performance marketing, because we need to do it. We need to make sure that we retain the consumer, but increasing tremendously at the top of the funnel. Many of the things you are going to experience here during this week will show that. But it's not specific to China.
It's Travel Retail, it's Europe, it's the U.S., where we've significantly put new investment at work into the market. Now, it is very clear we have three group of brands in the company. The large one, the billion-dollar club, and there is a seventh one that is knocking on the door, The Ordinary. I've said it very clearly, which is basically well-fueled and benefits from a lot of volatility in this moment because there's still a lot of organic demand. Then you have the mid-sized brand. Within the mid-sized brand, think about it, we have Le Labo, we have Bobbi Brown, we have Aveda, to name a few. Now, obviously, we have different things. When you think about Le Labo, the brand is flying and it's been growing, and we are using the store as the media.
So that has never been a problem, and we're continuing to do it. When we see the strengths, we double down on the strength. When it comes to Bobbi and to Aveda, there was a combination of not being fueled enough, but also not being in the right distribution. This is where, in the U.S., you saw us moving in high-growth channel when it comes to Bobbi. Also in the rest of the world with Aveda, when you think about the large majority of the consumption of hair care, it is on platforms like Amazon or TikTok Shop. We were not there. By being there, it allows us to really strengthen our position within the salon channels. Then you have the small brands. The small brand, their role is to just be the growth drivers. Now, in that front, we have a mix.
We have brands like KILIAN, we have brands like Frédéric Malle, we have now Balmain, that are flying. But we have brands that are still in transformation. Call it like Too Faced, and this is why we took the decision to bring Too Faced from West Coast to East Coast to just benefit from the capability we are building. Origins, another brand that you haven't heard for most for a long time. What we've done, we took a different take, because I really believe strongly that Origins has a strong potential in this moment to tap into nature and science at the same time. We moved Origins into the incubator at DECIEM, because I really believe that we've built capabilities there also to be much more agile. Think about what we've done. DECIEM acquisition has been absolutely amazing because there was obviously this beautiful asset of The Ordinary.
We accelerated, and there is plenty of opportunities. But we had dormant assets and brands that we are incubating from NIOD to Avestan and now Origins. We are benefiting from an end-to-end capabilities in Toronto, where we have manufacturing, we have R&D, we have marketing, and we will be digital first on this one to allow it. So, we are committed to reinvesting in this brand, but each of them, depending on the size and the role they have to play, will require different investment, different channels of distribution. But if the question behind, do we have more opportunities to develop other brands in the portfolio? Absolutely.
Darphin here, which I know you love, we've made a significant investment here in China because we believe with the repositioning of Darphin more in the luxury tier, that we have an opportunity down the road to just accelerate here. But we do it very strategically and very intentionally, where we don't spread thin our investment everywhere around the world when the brand is in turnaround. We are very strategic by geography, by a channel, to accelerate the brand, to get a little bit of a proof point, and then when we have the proof point, we accelerate.
Filippo? That would be the last question, because then Rainey is going to tell me we are going to be late.
Thank you. Filippo Falorni, Citi. First of all, thank you to the entire Estée Lauder team for organizing the event and giving us the opportunity to see your business firsthand in China. I wanted to ask about operating margins and cost savings. You've done an incredible job driving significant savings through the PRGP. Within your new target of 16.5%-18.5%, how much further savings are you assuming after the PRGP is finished? In terms of getting towards the upper end of the range or lower end of the range, what are the factors that could get you to the upper end? Is it reliant more on top-line growth versus your ability to find new savings?
Following up on Dara's questions, geographies and categories have different margins, but also channels have significant different margins. What are you assuming from a channel mix standpoint? Thank you.
Thanks, Filippo. Overall, look, first of all, we are confident based on the work we have done and the opportunity we see on getting to these margins. Of course, we have to demonstrate year by year, which is why at the beginning, we wanted to give you enough proof points before we established this goal. I would say, look, to get to the top of the range, which is, of course, when we put a range, that's always a goal, we want to get to gross margin. It would be a driver, but like Stéphane said, there will be important choices there between mix, the question you asked, between pricing and between other opportunities. But I would say even a midpoint on gross margin, if we get there, should still leave a lot of runway within the SG&A for us to get towards the top.
Now, we have not experienced 4%-6% growth in a while. Last year, we had 3%, and we delivered 66% EPS growth. The work we are doing, of course, allows us now to have more leverage at lower sales growth. Even at 4%, we should see that margin come through. Just to go back, I would say the building blocks are completing PRGP, and that should give us fuel even in 2028. Secondly, what we are doing is we're not resting on the work we're doing here, because PRGP opened so many doors, we are attaching the transformation, the continuous transformation platform right behind it. The work which Brian and I talked about, that is the work that attaches to PRGP. This becomes our internal constant transformation which attaches to PRGP. These two things should be a big one.
The second one is really that we want to build a mindset of zero-based budgeting. This organization, even when unit is not growing, has added costs in the past, and that muscle should allow us at lower level of sales to offset inflation, offset merit. Our goal is to get to this higher, towards the higher end. I think there can be multiple paths on that. We haven't even talked about consumer-facing leverage, where we have invested, and again, that will be another lever for us to attach to the work. From a mix of business perspective, you will see us get to minimum benchmark towards the higher benchmark on each one of these businesses. We have internal, external benchmarks.
Brian?
Yeah, just to add a couple things to what they both said, because I think number one, we have to look at this non-consumer-facing spend base, and we have to get productivity out of it every single year. That's one thing. You talked about zero-basing, but it's also about looking at how we spend and what we spend it on, looking for high ROI. We have to look at processes and what's the best in class and benchmark that's going to drive simplification. We have to take advantage of the AI agentic workflows we can create and focus all of our people on things that add value.
The second thing is this EBS strategy we talked about, we have to fully optimize that and make sure every year that contributes to what we can deliver. Thirdly, the consumer-facing piece, we have to reorient to the highest ROI, and it really leads into what Aude's going to talk about in a few minutes. If we do all three of those things, and then we really deploy technology and AI with the consumer at the heart, we're really going to be on the trajectory.
I would say, we have to close now, and we'll have plenty of opportunity for more questions. But if your question, Filippo, also is beyond 2030, we will continue to see opportunities, absolutely. Because think about it, we are gaining the full runway benefit of PRGP by fiscal 2028. We are embedding everyday efficiency now as a new mindset for the organization, call it zero-based budgeting, whatever, what EBS is going to bring us. The more growth we'll get, the more leverage we're going to get, because we've, take even the midpoint of the gross margin at 77%, that gives us a lot of room, basically, for us to, as we continue to invest to drive growth.
The more growth, the more gross margin improvement we'll get, and we're absolutely committed to continuing to reduce the fixed cost, i.e., the SG&A, which you've all personally challenged me when I took the job and challenged us, and I challenged my team, challenged myself, and that's what we are delivering today. With that, we need to just go to the next, and thanking Akhil and Brian for this amazing presentation. Thank you.
Now we have the next presentation where Aude, René, and Roberto are going to explain our consumer growth strategies from demand generation to R&I and value chain. Aude Gandon is our new Chief Digital, Marketing Officer and will now come to the stage. The stage is yours, Aude.
Thank you, Stéphane. Hello, everyone. You have heard today about our strategy to restore growth and create long-term value. Let me show you how digital and marketing organization is helping accelerate the journey across our portfolio of beautiful brands and diverse markets.
[Presentation]
At ELC, we increasingly view marketing as a strategic growth engine, one that help us understand demand earlier, invest more effectively, reach more consumers, and ultimately drive stronger business results. Let me walk you through the capabilities we're building to create consumer demand and support the next phase of consumer-centric growth. Let's begin with the overarching framework. Our digital and marketing strategy directly support two priorities within Beauty Reimagined: accelerating best-in-class consumer coverage and maximizing the effectiveness of our consumer-facing investments. We are focused on four strategic capabilities. First, embedding the consumer at the center of every decision through a next-generation consumer intelligence operating system.
Second, expanding consumer coverage and strengthening brand desirability through our culture, community, and commerce model. Third, transforming our media ecosystem to drive greater effectiveness, efficiency, and return on investment. Fourth, leveraging AI to improve decision-making, productivity, and consumer engagement at scale. Underlying the all four priorities is a new expertise-led marketing operating model that allows us to scale global capabilities while increasing local relevance in priority markets such as China. Together, these capabilities create a stronger, more intelligent growth engine designed for today's consumer. Everything starts with understanding the consumer better than anyone else. In prestige beauty, growth follows consumer demand. The companies that can identify shifts in consumer behavior earliest and act fastest gain a significant competitive advantage. That is why we are building a global consumer intelligence operating system.
This system combines first-party consumer data, cultural signals, category trends, competitive intelligence, and AI-enabled analytics into a single decision-making framework. Importantly, our goal is not about reporting. Our goal is better business decisions. Where should we invest? Which consumer segment are growing the fastest? Which demand spaces are emerging? Where do our brand have the strongest right to win? By creating a shared enterprise view of demand, we can improve resource allocation, we can identify growth opportunities faster, and we can strengthen our return on investment. Let me show you how that translates into growth opportunities in a market like China. China is one of the clearest examples of how consumer intelligence drive growth decisions. Our system help us identify where evolving consumer demand intersects with ELC strength.
In skincare, we continue to see opportunities through premiumization as consumers increasingly seek superior efficacy, luxury experiences, and trusted science. At the same time, we see increasing convergence between beauty and skin health, creating opportunities for clinically credible innovation and brands with deep scientific authority. In makeup, demand is shifting towards skin enhancement solutions that combine cosmetic benefits with skincare efficacy. In fragrance, we see opportunities to build scalable, personnel-led franchises that create stronger emotional connections and loyalty. In hair care, growing demand for leave-in treatment and care styling hybrids is creating attractive white space opportunities. These insights directly influence where we invest in innovation, marketing resources, and commercial support.
Once we have identified the opportunity, the next challenge is creating relevance and demand at scale. As you know, the consumer journey has fundamentally changed. Consumers no longer move through a traditional linear funnel. Discovery, engagement, and purchase increasingly happen simultaneously across culture, communities, and commerce ecosystems. Our response is a proprietary engagement model built around three connected drivers. Culture creates relevance and conversation. Community builds participation, trust, and advocacy. Commerce converts engagement into action.
Together, this element creates a continuous flywheel that strengthens brand desirability and expands consumer coverage. That framework comes to life across every consumer touchpoint. Our strategy is built around meeting consumers wherever they choose to discover, engage, and shop. We think about this across three dimensions. First, where we are winning. We continue investing in premium immersive experiences that deepen emotional connections and reinforce prestige positioning. For the ones who are going to go to Hainan on Saturday, you're going to see it firsthand. Second, where we are scaling. We are expanding digital commerce capabilities across owned and partner platforms to increase accessibility and improve consumer experience. Third, where we are accelerating. We're investing behind emerging growth behaviors such as creator commerce, live streaming, and conversational commerce.
We are accelerating globally into more interactive forms of engagement and creator-led and conversational commerce. Globally, that includes TikTok and WhatsApp. The Ordinary is one of our best-in-class TikTok Shop brands, with 70% of platform sales in the U.S. driven by creative content. We've established WhatsApp as a key growth pillar of our joint business partnership with Meta, with a strategic focus on Latin America, including Brazil and Mexico, with the ambition to scale further. China remains one of the world's most innovative beauty ecosystems, often serving as an early indicator of new consumer behaviors and commerce models. While the channels differ globally, our objectives remain consistent. We want to expand reach, deepen engagement, strengthen conversion, and create stronger lifetime consumer value. The best way to see this in action is through our brands.
What you are seeing is the power of connecting culture, community, and commerce in a consistent way across our portfolio. Media transformation, as mentioned already today, is one of the most significant opportunities we have to improve our effectiveness of our consumer-facing investments. Historically, our media model was highly fragmented. Today, we have transitioned to a globally integrated model with WPP, building on capabilities that have already been highly successful in China. This is more than agency consolidation. It is about creating a fundamentally better growth platform. A unified model gives us stronger audience intelligence, more effective measurement, faster learning cycles, and greater ability to scale successful practices across markets. 3,500 campaigns have now been launched with WPP since our transition. At the same time, improved buying efficiencies and reduced media waste allows us to redirect resources toward growth priorities.
Our objective is straightforward: generate greater business impact from every consumer-facing dollar we invest. The next major accelerator of that effectiveness is AI. We believe AI will become one of the most important growth and productivity enablers across the enterprise. Our approach is practical, focused, and business-driven. First, AI strengthens consumer intelligence and foresight, helping us identify growth opportunities earlier and improve decision quality. Second, AI improves marketing effectiveness through better targeting, audience intelligence, media optimization, and investment. Third, AI helps reimagine how work gets done, automating workflows, accelerating content development, and increasing productivity. We are also investing in generative engine optimization to ensure our brands remain visible and discoverable as consumers increasingly rely on AI-powered search and recommendation systems.
We do not view AI as a standalone initiative. We see it as a capability that amplifies every part of our growth engine. Let me show you how these capabilities work together.
[Presentation]
That flywheel illustrates how intelligence, creativity, media, commerce, and AI reinforce one another to create stronger outcomes. The common thread across everything you have seen today is creating demand more intelligently and converting opportunity into growth more effectively. By strengthening consumer intelligence, increasing cultural relevance, improving marketing effectiveness, and scaling AI throughout the organization, we are building a more modern growth engine for The Estée Lauder Companies. These capabilities help us make better investment decisions, deepen our consumer engagement, and position our brands to capture future growth opportunities globally and in strategically relevant markets such as China.
With that, it is my pleasure to hand over to René, who will discuss how we are translating demand into innovation-led growth across our portfolio. Thank you.
Thank you, Aude, for the work you and your team are doing to identify emerging cultural and consumer shifts. This is such an important starting point for our research and innovation teams. Hello, everyone. My name is René, and in our time together, I am excited to share how we are leveraging our innovation engine in three important ways. First, by using our scientific heritage and new AI-enabled capabilities to accelerate discovery. Second, by improving speed to market and the quality of innovation to support stronger business performance. Finally, by connecting our global research and innovation network with the China Innovation Center to build capabilities that can benefit ELC around the world. Let me start with the foundation that makes this possible, our scientific heritage and consumer obsession.
Decades of leadership in beauty science give us a deep understanding of skin, hair, color, fragrance, and the consumer needs we serve. We translate that science into high-quality innovation that delivers a superior product experience, and we stay consumer-obsessed. We do not innovate for science alone. That combination is powerful. Scientific leadership helps us discover what is possible. Our obsession with the consumer helps us decide what matters, and our product and innovation capabilities turn those insights into growth. Rather than describe that in words, let me show you in this short video.
[Presentation]
Don't tell me that scientists can make nice movies as well, yeah? So, great. What you just saw is how science and desirability come together. Building on our deep understanding of the consumer, our integrated innovation model makes that connection repeatable across categories. This translates into tangible value for our brands, new ingredient, formulation, and category opportunities, stronger predictive and testing capabilities, and disruptive claims brought to life through compelling consumer stories. The balance across that journey is not the same for every category.
Some categories, like skincare, are more performance-led, where scientific performance is critical. Others depend more heavily on desirability, creativity, and emotional connection. Our advantage is being able to bring both science and magic together with the right balance for each category and each consumer need. Our innovation engine is grounded in a strong heritage. ELC has been a leader in longevity science for more than 20 years, making us one of the early pioneers in a rapidly evolving field. But we are not resting on our laurels. We have set ambitious targets to strengthen the engine further. We aim to double our ingredient discovery output because disruptive, high-quality actives or ingredients are a critical input to breakthrough innovation.
This will help power fewer, bigger, better innovation pipeline to increase the contribution innovation to our business by 200- 250 basis points in fiscal 2027, that Stéphane already referenced. This matters because a healthy innovation mix keeps our portfolio fresh and creates new growth while strengthening our iconic hero products. At the same time, we are focused on increasing speed to market so we can respond more quickly to emerging and trending opportunities. We are pursuing this through better tools and smarter ways of working, reflecting the productivity and financial discipline of our research and innovation model. Delivering against these ambitions requires more than strong science in any one location. It requires a connected global research and innovation network that allows distinctive expertise, insights, and capabilities to move across the company.
Our global research and innovation network is designed around a simple but powerful principle: the best innovation can come from anywhere. Our advantage comes from connecting those capabilities so they can scale globally. Each location brings distinctive expertise, consumer understanding, and broad reach. Our newly opened Paris Atelier is our global center for fragrance innovation, bringing together perfumers, creative talent, and strategic partners. Most recently, India joined the network through our acquisition of Forest Essentials, bringing distinctive Ayurvedic skincare expertise. China is an increasingly important node in our global network. Its contribution is already material, with approximately 30% of our innovation sales in fiscal 2027 expected to come from this center. What makes the China Innovation Center distinctive is not any one capability, but the way it connects local consumer insights and strong scientific talent with the reach of a very dynamic ecosystem of suppliers, inventors, and partners.
BeautyX is an ELC-created incubator program and an important part of that reach. Through BeautyX, our team engaged a broad network of local partners, giving us early access to emerging technologies. Joy later will share more about this program in her presentation. On Friday at the CIIE, you will see BeautyX in action as we recognize its newest winners. The proof is speed. Our five most China-for-China launches reached the market in an average of nine months. Global makeup programs launched from the China Innovation Center over the last six months reached the market in under 15 months. This creates two-way value. China-for-China innovation translates local consumer insights into product designed for unique beauty needs. Then China-for-the-world innovation takes the ecosystem's learning, technology, and capabilities and scales them across the innovation network.
As Brian outlined earlier, digitized research and innovation is helping us scale AI-enabled innovation across the company. Let me share two complementary examples of how we are applying AI across our innovation engine. First, ELC scientists define the consumer need and biological target, then leverage specialized AI platforms from our key suppliers to quickly identify and screen promising ingredients. This helps us evaluate opportunities faster and focus our scientists on validating the highest potential discoveries. AI Formula Navigator represents a different opportunity. Here, we are applying AI to one of ELC's core competitive strengths, and that is formulation. By connecting decades of formulation knowledge with cost, compliance, and performance data, our scientists can evaluate trade-offs much, much earlier. The objective is right-first-time formula development, reducing iterations and late-stage changes while improving speed, quality, and decision confidence.
You have just seen AI applied to one of ELC's core internal strengths, as I just mentioned, formulation. Let me now show how AI-enabled external discovery can contribute to breakthrough innovation using Clinique CX PDRN as a powerful China-for-China example. This innovation begins with a first-to-market recombinant PDRN, developed through an AI-enabled biotechnology and fermentation platform. The rPDRN is then combined with three additional technologies. This innovative multi-platform approach is designed to address multiple pathways that are involved in skin rejuvenation. Lab research against a leading PDRN injection used mainly in Korea showed our ampoule had more soothing power at day three and comparable collagen-boosting activity after a week. And those are great results, believe you me. In clinical post-procedure testing of this ampoule and mask, which is sort of a topical regime, showed it enhanced the recovery from and benefits of the procedure.
Compared to the standard of care, the increase in moisturization was 538% more, and the barrier repair was 151% more just after two hours. The anti-redness soothing improvement was 344% more than the standard of care after just one day. The team brought this innovation to life in just nine months, demonstrating how the China Innovation Center can combine scientific ambition with speed of execution. Clinique CX PDRN shows the power of China-for-China innovation. Our largest projected skincare innovation for fiscal 2027 shows how the same ecosystem can power China for the world innovation with global relevance. This innovation builds on decades of ELC skin research and is informed by a new way of understanding facial aging as a dynamic process, as opposed to a static process. Our China team translated this scientific approach into a patent-pending biotech platform designed to address multiple pathways associated with facial aging.
Importantly, one of the technology partners supporting the platform was identified through BeautyX, the ELC incubator I just mentioned earlier. We are extremely proud of what this team has achieved. Across consumer and clinical studies, this breakthrough product has demonstrated measurable improvements in both biological markers and visible signs of facial aging. Tomorrow, and I can't wait, where I might see you all in white lab coats, when you tour the innovation center, I look forward to introducing you to this wonderful, talented team and giving you the opportunity to learn more about the science behind this beautiful product. Let me close by summarizing the power of our connected research and innovation engine. First, R&I is grounded in a deep scientific heritage, including more than 20 years of leadership in longevity science.
We are building on that foundation with ambitious targets to increase ingredient discovery, strengthen our innovation mix, and improve our speed to market. Second, we have a connected global research and innovation network that allows distinctive internal expertise, consumer understanding, and external partnerships to connect and scale across the company. Finally, and most importantly, our talented scientists, enabled by AI and data, are translating these capabilities to disruptive products and measurable consumer benefits. Together, these capabilities allow us to move from emerging consumer needs to breakthrough science and disruptive innovation delivered with greater speed and confidence to power the next wave of growth for ELC.
With that, I will hand it over to my good friend Roberto, whose global value chain team is a critical partner in translating the magic that we develop in our labs into products that reach the shelves and consumers every day. Roberto, my friend, come on stage.
Thank you, René, and thank you, Aude. And hello to everyone. You just heard from Aude how we create desire and demand for our beautiful brands, and from René, the fantastic innovation his team is driving. Now, let's turn to the value chain to see how we bring all of that into the hands of our consumer. Our synchronized value chain ecosystem brings together deep technical expertise across plan, source, make, and deliver, with teams orchestrating upstream processes for new product launches and downstream regional teams focusing on the best go-to-market setup. Quality is the foundation across the entire system. It is embedded from the earliest product choices through the whole product life cycle. I want to play now a short video to show you more about our value chain capabilities and our people.
[Presentation]
You've seen a lot of units in the video. You have already heard about the Beauty Reimagined strategy. Now, let me tell you about the role that our value chain plays in Beauty Reimagined. We have four strategic pillars. The first is customer and consumer centricity, and it tells us where the need is. The second, the dynamic value chain, gives us the speed, the agility, and the resilience to respond. The third, value creation, fuels sustainable growth through bold efficiencies. Lastly, technology and talent accelerate all of the three. Industry-leading technology combined with the quality, the capabilities, the energy of our people, and how we work together is our multiplier. Let's start with the first, consumer centricity. As you heard from Aude, the beauty consumer and the way they engage with our industry are changing. China makes this shift especially visible.
As an example, Douyin is a multimedia brand engine where discovery, influence, and purchase comes together to create demand at an extraordinary speed. That changes the requirement for our value chain. We must sense demand earlier, make thoughtful inventory and capacity choices, and adjust in real time. Consumer centricity is therefore an operating principle across how we plan, source, make, and deliver. Let's now move to the second pillar, our dynamic value chain. For us, dynamic value chain comes down to three connected capabilities: speed, agility, and resilience. Speed is both the time to market, the time to launch a new product from ideation to on shelf, and the lead time to replenish inventory for the recurring business. The second is the ability, the agility, sorry, the ability to pivot and adapt the network as the demand, channel, or market conditions change.
The third is resilience, the ability to continue delivering through disruptions and uncertainty. We need all three at the same time, and we need them at scale. You can see on screen, we have ambitious targets, such as launching more than 30% of our product in less than 12 months and transferring production from one to another location 2x faster than what we did in the past. They are ambitious, and we are well underway in achieving all of them. Let me now bring dynamic value chain more to life. One of our principle for our network design is regionalization. We source where we make, and we make where we deliver. More than 70% of our materials are sourced regionally, and that figure rises to 100% for the made in China product.
More than 50% of our finished products are manufactured in the region where they are sold. In just two years, we have increased our manufacturing capability in Asia, serving China, by over 200%. We have a highly diversified manufacturing network, which we are leveraging to improve responsiveness and creating options when conditions change. Still in the dynamic value chain pillar, we covered source and make. Now let's move to deliver through the lens of China. We have made significant investment to strengthen and diversify our distribution network in China. What was once a single hub model is expanded to four fulfillment center across the market, our main Shanghai hub, two regional fulfillment centers, and the Hainan hub dedicated to Travel Retail. This broader footprint extends our consumer coverage, brings inventory closer to the demand, and enables us to serve more consumers with greater speed.
We have state-of-the-art technology and automation, and with all of that, we have doubled our ability to fulfill orders within 24 hours. Let's look at two examples now. Starting with our China domestic network and our Shanghai hub, which you will get to see tomorrow. The Shanghai hub is the industry first customs integrated fulfillment center, accelerating inbound operations and enabling our network to respond as one. This connected capability becomes even more important during China's high traffic shopping moments today, when demand increases 44x , 44x compared to the average demand. You will see tomorrow live operations. We activate pop-up distributions capacity, calculated inventory bets, and real-time demand shaping, allowing our network to flex and operate as one responsive ecosystem. The technology and the capabilities developed in Shanghai are a blueprint for our company, which we are bringing from China to the rest of the world.
We also recently opened our new fulfillment center in Hainan. We are the first in our industry to establish a presence there, enabling Asia manufactured product to flow through Hainan for our Chinese travel retail consumer. For travel retail, this significant lead time reduction has allowed us to drive speed to market, optimize our inventory level, and manage inventory in line with retail, while reducing our carbon emission by up to 35%. Now let's move to the technology pillar of our strategy. We are applying artificial intelligence across value chain in three ways: creating new capabilities and accelerating growth, improving the quality and the speed of decisions, and simplifying work to release capacity for our people.
The example shown here provide an overview of the AI capabilities already in use or being developed, and we have additional opportunities being explored across the value chain. Today, we will focus on two powerful examples, Intelligent Pack Design and manufacturing digital twins, and they are helping us to deliver multimillion dollar efficiencies and reducing the time to market for new products by months. Let's take a look.
[Presentation]
I think you could see in the video the significant positive impact that digital technology is having in what we do. With this, we have covered three of the four pillars of our value chain strategy. Now let's move to the final one, value creation. We're working on three connected levers. Network simplification, which removes unnecessary complexity and fixed cost. As an example, over the last two years, we have right-sized our fulfillment network by more than 15% and shifted our cost base towards more variable costs by 50%. Second, operational excellence is a combination of two methodologies, accelerating step-changing performance and ensuring continuous and sustainable improvement. Third, strategic investment. We're investing in capabilities that matter most, particularly here in China, and our Shanghai hub is a great example of that. The outcome is a structural and systemic cost advantage and a value chain ready for growth.
Ultimately, the proof is in the results. We have seen great results. We have improved our gross margin by almost 400 basis points, reaching 75.5% by the end of last fiscal year. At the same time, we have reduced inventory by 8%. We're tackling all this across the entire value chain. For example, in manufacturing, we've improved productivity by 30%. In new products, while we're accelerating the time to market, we are bringing higher-margin products to market. The journey so far has been successful, and we have full confidence in our ability to continue to deliver value creation. Lastly, our people are our greatest asset, and we have delivered all this performance while ensuring the safety of our people. Indeed, we recorded in fiscal year 2026 the best safety performance in The Estée Lauder Companies history, and our commitment is to continue to improve.
Now, in closing, four key messages to take away. Number one, our value chain is delivering the Beauty Reimagined agenda and is powering our next chapter of growth. Number two, we're sensing shifting consumers, channels, and market, and responding through a dynamic regionalized value chain that is closer to the consumer and able to act with greater speed, agility, and resilience. Number three, through a disciplined multi-level approach to value creation, we are delivering greater value for our consumers and our enterprise while creating, again, the capacity to invest in future growth. Number four, this is one connected value chain ecosystem powered by our people, by data and technology, and designed to turn consumer insight into actions and enterprise results, enterprise ambition into results. We have the strategy, we have the capability, we have the momentum, and we're executing together to continue to bring Beauty Reimagined to life.
With that--
Dear Roberto, sorry to cut you off. It is my time now to better explain to investors and analysts the Beauty Reimagined strategy. Just kidding. It is time for Q&A. We will now open the floor for questions.
Okay. We just wanted to find a fun way, I hope it was a fun way, to anticipate a message for tomorrow. Tomorrow, you will go and see in both places lots of technology. Technology that we are using at scale, but also technology that we are pioneering, and that is the example. Now, let us really move to question and answer.
Hey, it is Steve Powers from Deutsche Bank. One question for Aude and René, and then one for you, Roberto. Aude, René, I was struck listening to each of your presentations. You have a lot of interaction between the two organizations. I am curious as to how much innovation comes from ingredient discovery that then is matched against consumer insights versus what comes from consumer insights that then goes into R&D looking for the ingredients that best match, and how that interaction with the businesses works.
Then, Roberto, for you, the supply chain efficiency, resilience, I think those are very demonstrable, and the way that that creates value as you articulate. The one value lever that I see, goes back to Akhil’s love of cash, is days of inventory. That is one area where it feels like The Estée Lauder Companies, despite all the efficiencies, still has a lot of opportunity. I guess, as you think about the 2030 journey, how does that fit into your objectives?
Shall I start?
Yeah, please.
Okay. Yes, we have been actually working very closely with René over the past 12 months, since we both arrived roughly at the same time, in really kind of working on how we can have a seamless kind of connection between the marketing team and especially our consumer intelligence team and research. It goes both ways. We are doing a lot of research in really understanding what are the consumer behaviors, what are some of what I call the demand spaces, so the places where today The Estée Lauder Companies portfolio is not playing yet and where we have huge opportunities. It is very clear for the R&D team on where we should focus in terms of innovation.
At the same time, R&D is obviously discovering new ingredients, and then we are working with marketing on how do we bring them to life. Because sometime a new technology may be incredible in terms of an innovation, but may not be easy to make it relevant or enticing for consumers. So how marketing actually kind of bring it to life in a way which feels differentiating and relevant for the consumer.
Steve, the way we think about it is a pipeline of new technologies. At the very beginning of the pipeline, you do scientific scanning, if you like, and then lots of ideas, and then they pass stage gate. Before we start allocating significant R&I dollars for clinicals and other work, we will have a clear eye on the consumer. That connection is better now since, I think, 12 months, but that's for others to judge. I think that is really where we've come together as a team to make sure that we don't progress technologies that the consumer doesn't need. It's that science and obsession with consumers. I want every scientist to understand what problem they are trying to solve for the consumer ultimately. That should be the mindset. That's how we think about it.
Now coming to your question on inventory. Look, with my fantastic partner, Akhil, we work super closely. We both love units and we both love cash. We recognize there are a number of things that we need to do that we are doing. As much as I'm very personally very proud of what we are doing in efficiency, in saving, in dynamic value chain, and the responsiveness in general, there are areas that we are now working on in terms of our demand, our forecasting capabilities. We have internalized our statistical forecast. We are investing in state-of-the-art technology in order to improve at that level in the demand sensing, but also, as Brian was showing before, in the decision intelligence for inventory deployment.
There are a lot of actions being taken from using the consumer insight from Aude, staying very close to our commercial regions and brands, and using those signal to improve better signal to improve the demand so that we have a better supply. That's one piece. Second piece, a lot of state-of-the-art technology, again, inventory deployment and AI in that area, decision intelligence in that area. Third, continue to work on optimizing our integrated business planning process. We've been working a lot on it. We continue to work on it. We know there are opportunities there. Fourth, we want to invest more time with our retailers, invest time in building together the collaborative planning and forecasting system so that we can continue to get better signal for our supply.
That said, the dynamic value chain is going in the direction anyhow that you are asking, because the more we increase our flexibility, our agility, the more we will be able to also continue to optimize our inventory.
Hi, it's Jeremy Fialko, HSBC. A question for Aude and then one for René. So the question for Aude is on your digital capabilities. Can you talk a bit more about how you benchmark your capabilities against your best-in-class competition. Obviously, we hear so many presentations about different companies, their digital strategies, how they're deploying AI. Very interested to hear where you think you're truly best in class and really competitive, and which are the areas where you still think that you have capabilities that you need to build further to get to where your best peers and competitors are.
Then the question on R&D is, can you talk a bit more about the balance between in-house and innovations which come from third parties or where you have innovation partnerships? Can you talk about how that balance has changed recently, and what you think the kind of ideal balance is between stuff that you're developing yourself, but then also the kind of harnessing the wider universe of third-party innovations? Thanks.
Thank you. I will start. Where we are, I think it depends of what capabilities within the overall kind of marketing organization. Our transformation with WPP has made us make a huge leap on everything which is linked to data, on consumer data, and media investments. We have been doing this transformation over the past kind of seven months at speed. For example, we are now piloting agentic media planning and buying, which is something which is still completely new. This is where we believe that we are now part of the best. We are also working on transforming our content organization, where here I think we were not at the level of our competition. We are transforming this where we can get a lot more of automation in our content, in our asset adaptation.
As you know, we now need a plethora of content for all the different platforms or different formats and so on. We're going to move to an automated, AI-led network over the next kind of few months. On consumer intelligence and consumer data, we've been very lucky because we actually have a lot of first-party data, because we have a very strong direct-to-consumer business. This, we believe, part of the best in being able to leverage this consumer data and to actively translate it into better targeting through our media. It's really like we are taking every subject of marketing, and we are making a very clear assessment of where we are. I think Shopify has been also for us a tremendous leap over the past 12 months. The last one is on GEO.
As I mentioned in my presentation, this is a new interaction for our brands with consumers, and so we also have been working, piloting for the past six months, and we've just signed a global partnership with Profound. This is the first of its kind at a global level. That's where here we know that we are going to be definitely part of the best.
Yeah, to your question in terms of thinking about in three buckets. When we talk about on-trend innovation, when everything is about speed, you probably work with a partner where proprietary knowledge, IP, is not that important. You just want to be there first, ideally, with the trend. Then second bucket is working with, could be technology partners, could be the more traditional ones, could be startups, where you do some sort of IP sharing. That's another type of work we do or partnerships we have. Then you have something that you completely do within, yeah? The Miracle Broth of La Mer, for instance, is a good example. That is an entirely end-to-end discovery scaling within the system. The shift that we are trying to bring about is moving it from more and more proprietary knowledge.
Work in this internal space for the real breakthrough technologies. That's how we like to see it. But overall, external partnerships, it is probably often the first question, who can we work with best? That's why we also have an external innovation team that is helping us to be much more efficient and quicker and smarter in terms of who you work with. Because you would be surprised sometimes how long these discussions take. It is really good to have a dedicated capability in place so that we can move fast. That's how we think about it from an overall partnership, external partnership perspective.
Okay, we're going to take one last question. We're running a little behind, so we're going to enforce our earnings rules. Everyone, one question.
Thanks. Ashley Wallace from Bank of America. I have a question on the supply chain. You mentioned earlier that during China shopping festivals, you see a surge of 44x the normal day. Can you help us understand maybe what that multiplier was a couple of years ago? Just how much more concentrated are the shopping festivals in terms of the way the consumer is shopping today? If you're seeing the same dynamics play out in markets outside China, then just how do you operate in a world in which you have such a big concentration of demand existing around specific parts of the year versus a normal day?
Yeah. Well, we will be there tomorrow together, and you will see tomorrow firsthand what is happening and how we manage that level of agility. Technology, the ability to work with flexibility with people, the pop-up distribution centers that I was mentioning in my remark, the ability to plan inventory then allocate capacity then deploy inventory according to all the signal that we're receiving, working super closely, really as one team with our regional team here, our supply chain, value chain people here, but also very closely connected with Joy and all the commercial team here to get the signal, deploy the inventory, and be able to manage through the automation and the flexibility that you will see tomorrow, this level of demand.
Now, at that magnitude, this is the place where it's the highest, if you want. This level of magnitude is the place where it's the highest. This flexibility, given the high-traffic shopping moments, is required in other places, and we are exchanging all those learnings that we have from China to the rest of the places where we have, and some learnings that we might find somewhere else, we immediately replicate also here in China. We stay very connected. That's why I was insisting into one value chain ecosystem, learning in one place, immediately developed in the others. The magnitude of the flexibility here is the highest one, and you will see tomorrow everything that is in place to answer that. Again, it's technology, it's flexibility with people, it's a lot of automation, and it's planning and fulfillment solutions like pop-up centers and inventory deployment.
I think with that, we really need to stop. Thanks a lot. You have all been very patient with us. Now, for your reward, we can take a break, 15 minutes. For the people online, we will be back in 15 minutes. Thank you.
[Break]
All right. Welcome back, everyone, here in the room and virtually. Hope it was a nice reset. I am so excited about what is next. Presentation showcasing our China ecosystem and Travel Retail Worldwide. Joy Fan, our CEO and President of China, will begin after a short video.
[Presentation]
Hello, everyone, and good afternoon, and thank you for joining us today. You have heard from Stéphane and our global team about our exciting Beauty Reimagined strategy. Now, let me show you how we bring it to life in China. Let me begin with my belief. The next China is still China. Over the past decade, China's prestige beauty market has tripled, growing from $8 billion to $27 billion. Looking ahead, the market is projected to reach $32 billion-$36 billion by 2030, at 4%-6% CAGR. In the same period, the portion of prestige beauty rose from 24% to 46%, reflecting ongoing premiumization. There is still meaningful headroom. Per capita spending on prestige beauty in China is still low compared to the U.S. At the same time, the exceptional growth previously enjoyed by leading C-beauty is normalizing, which creating a more balanced competitive landscape.
Taken together, China remains a sizable market with substantial long-term growth potential. According to Beauty Research, China's prestige beauty market grows 7.6% in fiscal 2026, with improvement starting from Q3 fiscal 2025. Beyond the overall market, we see structural opportunities across categories. Prestige skincare remains the largest category, while there is significant growth opportunity in under-penetrated makeup and fragrance categories. Makeup continues to benefit from strong consumer engagement across all age groups. Fragrance is growing at a double-digit rate, while penetration remains low at 4%, suggesting huge growth potential. ELC China is well-positioned to win in this dynamic market. We have been in China for 33 years and now operate 17 brands in the market. In fiscal 2026, our China domestic retail sales grew 10% year-over-year, while our prestige beauty market share reached 22.2%, an increase of 0.1 percentage points.
Across the broader Chinese consumer business, including China domestic, Travel Retail APAC, and Hong Kong, our retail sales exceeded $9 billion, with a 26.6% market share. By the end of fiscal 2026, we have established a retail presence across 154 cities with more than 1,000 retail doors. Our online channel complements this physical footprint, accounting for 57% of our net sales, growing 16% year-over-year. 53% of our total business in China is direct-to-consumer. This enables us to gain firsthand consumer insights, deepen direct relationships, and maximize customer lifetime value. In fiscal 2026, we acquired 12 million new consumers, up 25% year-over-year, bringing our cumulative consumer base to around 100 million. One of ELC's most distinctive competitive advantage is our portfolio of highly differentiated and desirable brands. Across skincare, makeup, fragrance, and hair care, our brands serve a broad range of consumer needs, occasions, and aspirations.
ELC has gained prestige beauty share for seven straight quarters from Q3 fiscal 2025 through last quarter. In fiscal 2026, we gained market share by 0.1 percentage points, winning across skincare, makeup, and fragrance. These achievements prove the effectiveness of China's strategy and the Beauty Reimagined, positioning us to win in a market as complex, dynamic, and competitive as China. I would like to focus on four action plan priorities. First, accelerate best-in-class consumer coverage. Second, create transformative innovation. Third, boost consumer-facing investment. Fourth, fuel growth through bold efficiencies. I will talk about our action plan priority number one from three angles: online, offline, and stakeholder relationship. I will start with online. As I said, our online sales accounts for 57% of our business.
For us, online is much more than a sales channel. It is also a brand window, allowing consumers, especially those in lower-tier cities, to discover, understand, and engage with our brands. In fiscal 2026, our online ecosystem attracted around 2.5 billion unique visits. As China's digital landscape has evolved, we have continued to expand our digital footprint alongside it. In fiscal 2019, we operated 30 online flagship stores across four platforms. By fiscal 2026, that number had grown to 84 flagship stores across nine platforms. This allow us to reach consumers across 690 cities, including those without physical stores in their home cities, while giving us a powerful platform to launch new products and tell our brand stories. We will continue to explore emerging opportunities for new platforms.
Meanwhile, we are also focused on making our digital efforts more effective, leveraging real-time insights to better understand our consumers, launch new products at the right time, optimize media, content, and assortment, and enhance end-to-end effectiveness, creating a seamless omnichannel experiences to maximize customer lifetime value. At the same time, brick-and-mortar retail remains a critical pillar of our consumer coverage. Our store number has grown from 837 doors in fiscal 2019 to 1,150 doors in fiscal 2026, targeting about 1,400 doors by fiscal 2030. We see significant potential for selective expansion. Take Le Labo as an example. Since entering China in fiscal 2023, the brand has strong retail productivity, yet its network has just 18 doors, leaving significant room for future expansion. Our stores are much more than point of sales. They are physical expression of brand identities.
They allow consumers to experience our products firsthand, receive personalized consultations, enjoy signature services, and build deeper emotional connections with our brands. La Mer is a compelling example. Every La Mer store has a dedicated treatment room that offers luxurious, personalized facial and spa services. In fiscal 2026, all our skincare brands delivered around 3 million service engagements. These experiences serve as powerful traffic drivers, bringing consumers into our stores with deepening engagement and build loyalty. You will see these stores tomorrow. Besides, we have very strong stakeholder partnership, so we can respond more quickly to every emerging opportunity. For example, to capture premium gifting opportunity from men, La Mer partnered with Porsche car through JD to launch a Chinese Valentine's Day campaign. It drove strong search interest and share of voice. New consumer acquisition grew 39%, and male consumer acquisition grew 15%.
As a result, men accounted for more than 70% of La Mer's Chinese Valentine's Day sales on JD. In social media, we partner with Douyin. MAC created the first-ever immersive livestream makeup competition, Beauty of Glory. With a real-time voting experience, it turned viewers into beauty judges. It delivered record-breaking engagement with more than 30,000 peak concurrent viewers, 7x GMV, and 50 million total views. Moreover, it became a renewable content asset, extending engagement beyond the event. Also, thanks to our longstanding relationships with shopping mall landlord, we secured a historic museum for Le Labo's first flagship store in China. We also leverage the heritage and influence of this iconic building to enrich the storytelling. It drove strong organic buzz, foot traffic, and more than $10 million annual productivity, representing best-in-class productivity in the industry.
Our second priority is creating transformative innovation, moving from China for China to China for the world, while also bringing global innovation to China in ways that are relevant to local consumers. In China, new beauty trends scale rapidly. Winning requires us to spot opportunities early and turn them into innovation with speed. The China Innovation Center is essential to this capability. In fiscal 2027, nearly 30% of global innovation sales is developed here. In fiscal 2026, the center led 60 new product launches, representing $700 million in gross sales. Our innovation is also China speed. Shortest project lead time from concept to market is only nine to 15 months. Today, China is not simply a market where global innovations are commercialized. It is also a source of innovation for the wider organization. Let me start with China for China innovations.
We identified emerging local ingredients and technologies, such as recombinant collagen and recombinant PDRN, and move from concept to shelf in less than nine months. At the same time, we stay very close to local consumer needs, from skin preferences to local benefits, supported by local testing and claims. By partnering with strong local TCM and professional institutions, we can move even faster. The second is China for the world innovations. China also leads to capture emerging trends that are relevant to the world. For example, oil-based skincare and post-derm skincare came from Chinese idea and then roll out to global. I want to introduce Beauty X to you. It is annual innovation competition we launched in China 2024. It connects us with leading startups, entrepreneurs, and tech partners in four fields: biotechnology, AI usage, consumer experiences, and operational excellence.
Since launch, Beauty X has attracted over 1,000 startups with 80% proof of concept, far above industry benchmarks. You will see them in CIIE on Friday. Beauty X is more than a competition. It's a scalable engine for supporting local cutting-edge technologies and turning them into real products, services, and capabilities. At the same time, our global R&D capabilities and proprietary technologies give us clear edge over local competitors. For example, sirtuin technology supports groundbreaking skin longevity with clinically proven visible age reversal, while La Mer's Miracle Broth remains a signature innovation at the heart of the brand. Le Labo's city exclusives are another highly distinctive proposition that drives the brand's success. These capabilities are difficult to replicate because they are built on years of investment, science expertise, and deeply rooted brand aesthetics. We then adapt the consumer proposition where necessary.
For example, we have tailored the texture of Re-Nutriv cream to be more easily absorbed, better suiting local skin, and we have adapted La Mer Soft Cream's texture in a similar way. Le Labo's Shanghai and Beijing city exclusives provide another example of combining global brand identity with local culture relevance. Our goal is clear. We want to preserve global excellence while delivering local relevance. Our third priority is to boost consumer-facing investment. In a fast-evolving prestige beauty market, brand persona, equity, and awareness are becoming even more important. We are evolving how we build brands across full consumer journey, spanning across advertising, social seeding, e-commerce, PR, physical activations, and high-touch retail services. We continue to invest in storytelling advertising to build awareness, brand equity, and product desirability.
In China, consumers also spend a lot of time on social platforms, discovering brands and products, and learning from creators and other users. We created a lot of engaging social content to connect with consumers in more relevant ways. Our digital and physical stores are more than just places to sell. We have strict standards for how our brands are presented. To us, these are also important media that build brand equity, launch new products, deliver seamless omnichannel experiences, and engage consumers. At the same time, it is also critical to bring our brands to life through physical experiences. Physical events, retail activations, and city takeovers turn our brands into tangible experiences within consumers' lives. They are opportunities to communicate craftsmanship, heritage, innovation, and brand identity in ways that consumers can see, touch, and share.
In stores, we are also developing signature services and unique in-store experiences that reinforce each brand's strengths. For example, our skincare brands offer in-store skin diagnostics and personalized solutions. Our luxury brands, including La Mer and Estée Lauder Re-Nutriv, provide indulgent facial treatment and cabin experiences, while Aveda offers professional hair diagnostics and salon services. Through these experiences, we attract foot traffic, deepen loyalty, and ultimately increase their lifetime value. Our fourth priority is to fuel growth through bold efficiencies. We believe growth and efficiencies should reinforce one another. We leverage AI to improve efficiency. AI tools support livestream execution, from lighting control to prompt displays. AI hosts complement our human hosts during lower traffic period, enabling us to livestream 24 hours every day. AI-generated creative contents allow us to iterate rapidly and convert static assets into dynamic formats at scale, with rising engagement rates.
AI-generated customer service now handles a meaningful portion of inquiries, primarily during overnight hours. We have also deployed smart beauty advisors so our in-store BA can give personalized recommendations based on each consumer's diagnostic results. Furthermore, AI has embedded into our daily operations, such as finance, business analysis, supply chain, and human resources. We have established one operation model in China since 2012. This model enables us to build a leaner and more agile organization. I will give you some example. First, our Shanghai fulfillment center integrates customs warehousing, main DC, and online DC into one connected system under one roof. Working with leading logistic players in China, we have built a highly automated 24-hour operation with a maximum capacity of over 400,000 orders per day, supporting the fast-growing online business. We can deliver 56% of the orders to consumers within 24 hours.
Second, we have centralized capabilities such as store design, visual merchandising, creative, e-commerce, data analysis, insights, and media into shared platforms. This allows us to support multiple brands more efficiently while reducing duplication and complexity. Third, we use carefully selected top external partners in each function, where they can bring specialized expertise and operational efficiency. This model has been in place for more than a decade, supported by stringent service level agreement. As a result, our people cost represents less than 5% of net sales, compared with a China multi-industry average of around 10%. This is evidence of a lean operating structure that can support a scaled business. It enables us to maximize consumer-facing investment and fuel future growth.
This brings me back to the message I begin with. China's prestige beauty market remains large, important, and full of opportunity. Winning in this environment requires strong global brands, local insights, speed, differentiated innovation, effective consumer engagement, and operational excellence. At ELC China, we are bringing Beauty Reimagined strategy to life by building these capabilities. What we are building here is bigger than China. It is helping us to shape the future of ELC. Thank you.
Next, you will hear from my team how we grow different brands in China. First, Ginger, GM of Estée Lauder, on elevating brand leadership. Then Daisy Jiang on La Mer, luxury skincare leadership. Gao Yan follows MAC's incredible youth engagement. Sherry will share The Ordinary momentum. We will close with Neo Ye on luxury artisanal fragrance. Thank you.
Now I will hand it over to Ginger.
Thank you, Joy. I am Ginger Yang , Senior Vice President and the Brand General Manager of Estée Lauder China. Today, I would like to share what has driven our leadership in China and how we are taking it further through two strategic strengths: our distinctive digital growth model and science-led innovation. Estée Lauder's leadership in China reflects decades of commitment, iconic franchises, breakthrough innovation, and a deep consumer understanding. In our latest brand health track, we are number one in prestige skincare brand awareness. Across total Chinese consumers, including China domestic, Travel Retail APAC, Hong Kong, we generate about $3.8 billion in retail sales only in fiscal year 2026, with 11% prestige beauty share and 14% prestige skincare share. In China domestic region, we reached nearly 5 million consumers, and half of them are new to the brand. This gives us a very strong foundation for future growth.
We have two clear priorities. First, accelerate consumer growth through our distinctive digital competitive advantage. Second, strengthen our prestige skincare leadership through transformative innovation, especially in skin longevity. Let me start with our first priority, digital. We have built strong capabilities in China's digital market with clear results. In fiscal 2026, online retail sales of Estée Lauder brand grew 17% with 35 basis points of share gain and 3.8 million consumers reached online. We are not only number one in prestige beauty on Douyin, we are also number two on Tmall and Jingdong. Our competitive advantage combines deep platform expertise and also with our marketing and storytelling strengths. We have built online into a powerful engine for brand building, consumer education, and recruitment, not simply sales. We give each platform a very distinct role. On Douyin, we engage different consumers groups through five franchise-led accounts.
On Tmall, we turn our innovation launches into major brand moments. On Jingdong, we capture gifting opportunities around key celebrations. Our Chinese New Year campaign last year is one powerful example. Across our digital ecosystem, we generated 600 million impressions in just two months, and 70% of the consumers reached online during Chinese New Year are new to the brand. It shows how we turn a major cultural occasion into a powerful omnichannel brand moment, building awareness, relevance, and recruitment at scale. Our second priority is about skin longevity. Innovation represents about 26% of our business in fiscal year 2026 and brought in 1.2 million new consumers.
Our Re-Nutriv franchise is backed by 20 years of skin longevity research and more than 20 patents. As Joy highlighted, bringing science to life through consumer experience is a key opportunity for us. At Estée Lauder, we have put this into practice on a national scale. We took our breakthrough Skin Longevity Institute on a tour across China's top retailers, including Beijing SKP and Nanjing Deji, creating an immersive luxury journey that brings our science to life. The experience has impressed retail partners and VIP consumers, creating excitement and attention in the market. This is how we make our scientific difference tangible and position Estée Lauder at the forefront of skin longevity.
To conclude, our two priorities work very closely together to drive the next chapter of Estée Lauder China's growth. Our digital growth allows us to reach and engage more consumers, while breakthrough innovation on skin longevity sets us apart. Together, they position us not simply to maintain our leadership in prestige skincare, but to redefine our future leadership, what it means, and shape the future of the category.
I would like to invite Daisy to share La Mer's strategy in China. Daisy, over to you.
Hello, everyone. I'm Daisy Jiang, Brand General Manager of La Mer China. Today, I would like to share how we will further reinforce La Mer's leadership in luxury skincare in China. Our ambition is clear, not only to lead the market today, but to continuously redefine what luxury skincare means for Chinese consumers. As the number one luxury skincare brand, La Mer continues to raise the bar. In fiscal 2026, China domestic retail sales grew nearly 12% to $1.3 billion. Chinese consumer retail sales reached close to $3.2 billion. We drive this growth with our ability to build a strong brand equity and desirability, recruit, and retain consumers. New consumers contribute 45% of our business, while offline retention remains strong at 44%, reflecting the strength of exceptional consumer experience we have built. This is the foundation of our leadership in China luxury skincare.
Importantly, even with our very high market share, we continue to gain share. Looking ahead, our strategy is centered on two powerful growth engines. First, create transformative innovation, making new launches a stronger engine for both brand equity and portfolio growth. Second, boost consumer-facing investment, creating truly distinctive luxury experience through our retail excellence. Innovation brings excitement and recruits the next generation of consumers. Experience builds desire and loyalty. On innovation, our rejuvenating night franchise is a new advanced anti-aging portfolio. It is already generating strong growth and a powerful new consumer recruitment. In fiscal 2026, our night franchise grew 25%, and 53% of franchise buyers were new to file. It was really driven by the combination of strong product efficacy performance and breakthrough scientific claims. We unlock the scientific potential of La Mer's iconic ingredient, Miracle Broth, strengthening its differentiation in bioenergetics and cellular energy.
The SMASH equivalent efficacy claim give consumers a very tangible and compelling proof point, while also strengthening La Mer's scientific authority in anti-aging. Beyond science, we are building an emotional story. Our campaign, The Night Before Miracle, transformed product functionality into a lifestyle, aspirational, intimate, and uniquely La Mer. We want innovation to do three things: strengthen efficacy leadership, elevate emotional connection, and build powerful anti-aging franchise. Our second opportunity is to redefine what luxury experience truly means. We have evolved our store beyond the point of transaction into immersive brand experience centers. Every touchpoint is thoughtful, elevated, and deeply personal. We offer personalized consultation through advanced skin analysis, tailor-made treatments, and customized CRM programs are designed to deepen individual relationship and drive lifetime value. We are connecting online and offline touchpoints to enable every consumer to immerse themself in the full world of La Mer.
At the same time, we have dedicated spa rooms in each single door, offering our signature pampering rituals and back bar products. We have taken the spa experience beyond our own retail doors. We now have a paid spa presence in 34 luxury hotels and resort destination across China. We benchmark La Mer Spa against the leading luxury hotel spas and wellness institution beyond the beauty competitors. Genaissance is La Mer's top-tier, top luxury line. We host invite-only luxury events to cultivate Genaissance VIP communities to elevate top-tier brand exclusivity. In a word, La Mer defines the pinnacle of luxury skincare service. Looking ahead, we will continue to push both growth opportunities. On innovation, we will expand our frontier. We are partnering with global R&D on breakthrough anti-aging technologies. We are leveraging the China Innovation Center to unlock Chinese consumer-relevant opportunities.
We will continue to elevate our spa experience as a powerful brand expression. Beyond that, we are exploring partnership with world's leading luxury wellness destination to redefine the future of luxury skincare. Our ambition is clear. We will convert both of these priorities, innovation and experience, into stronger consumer desirability, deep loyalty, and sustainable leadership. Thank you.
Now, it is my pleasure to introduce Yan to talk on MAC.
Thank you, Daisy. Hello, everyone. I am Yan, Brand General Manager for MAC in China. Let me begin with makeup matters in China today. As Joy shared, skincare penetration is 26% and makeup only 12%. Prestige makeup market size is $4.3 billion. This is a massive headroom. Makeup in China is no longer for special occasions. It is a daily essential, an emotional tool to express themself. This is where MAC belongs, the intersection of artistry, self-expression, and the trendy edginess. Our ambition is to lead makeup artistry in China. Let us look at where we are. Brand desirability. We are number one brand awareness in makeup artistry with the largest social fan base. We have a vast consumer coverage with over 4.4 million active consumers and 79% them young consumer. We also are recruitment power engine with over 70% of new consumer every year. Business impact.
We are the volume mover. Every six seconds, one MAC lipstick is sold in China. We are number one online in makeup artistry and the number two on Douyin for prestige makeup. Our strategy focuses on two priorities. First, accelerate consumer coverage. Go where consumers go. Second, create transformative innovation. Let me elaborate. First, priority one, accelerate the best-in-class consumer coverage. To win in China, we capture the consumer, especially the young generation, in 360 degrees, offline, online, and in culture. Offline, we go where it is cool, from our makeup toolbox in Xintiandi to Nanjing Deji Piano Store. The store itself becomes a media, expressing our trendy persona, and creating unforgettable experiences. Online, we turn channels, livestream room into brand windows and show stage. On Douyin, we are number two prestige makeup brand, number one on lip category, and powered by over 900 KOL and affiliated partners.
In culture, we go deep. Take street dance, a massive trend culture for China Gen Z. We tapped into top universities and connect with over 1,000 street dance communities. That is how we stay native to young culture, creating energy and positioning MAC as the go-to edgy brand. Priority two, create transformative innovation. Consumer coverage is not just about where we show up. It is about what we create. We turn local insight into fast innovation, spot the trend, move fast, and connect emotionally. As you can see on the slides, our China team spotted a massive behavioral trend shift. Consumers nowadays are falling in love with trendy collectibles and emotional value. We act immediately. We partnered with Pop Mart SKULLPANDA, one of the hottest IP, and co-created a limited collection, 100% locally led, from concept to go-to-market in less than nine months.
We launched on Chinese Valentine Day, the ultimate emotional moment. The results were phenomena. It brought massive traffic, boosting business, generated over 600 million impressions, and powerfully enhanced our trendy brand persona. Looking ahead, we will accelerate through our two priorities. First, accelerate consumer coverage. We capture today, anticipate tomorrow. Decode the places and the platforms of young consumers to broaden our reach. We reinvent retail through flexible formats across every touchpoint, and we define the next hotspot, getting there first with the right stores and experiences. Second, create transformative innovation.
Harness global and China trend. We bring the world's fashion and cultural trend to China and adapt it for local consumers. We are also partnering with local trendsetters and artists. We rapidly turn insight into market-ready product and commercial innovation. Every breakthrough elevates our trendy edgy brand persona. Makeup matters in China, and MAC is here to earn that leadership. We listen, we move fast, and we will shape the trend. Thank you.
Now, I will hand it over to Sherry to introduce the phenomenon of The Ordinary.
Thank you, Yan. Good afternoon, everyone. I'm Sherry Bai, the Brand General Manager for The Ordinary in China. Today, I am very excited to share with you how we're recruiting the next generation of skincare users through social engagement and innovation. Our strategy is supported by two of ELC's Beauty Reimagined pillars. First, accelerating best-in-class consumer coverage, and second, creating transformative innovation. Let me start with the results. The Ordinary first entered into China through cross-border e-commerce, and we launched domestically in February 2025 through Sephora before expanding to domestic e-commerce channels in July, at the beginning of fiscal 2026. Sales have grown rapidly. In one year, we have achieved over $60 million in retail sales, up over 80%. We have recruited over 3 million consumers, 60% under the age of 30.
On Tmall, we grew 129%, reaching over $35 million. We ranked among the top two brand in serum and top four in lotion by the number of unique buyers. On Douyin, we grew 259%, reaching $11 million in six months. We're also gaining consumer desire. On Little Red Book, we ranked among the top 10 most searchable brand in serum and lotion in June, across all price tiers. This was very exciting for us, considering there were 17,000 beauty brands coming to China in 2025 alone. We are confident that this surge in consumer desire will continue to drive sales momentum as we build brand love. So, who are the consumers behind this growth? First, they're young. 35% of our consumers are between 18- 24 years old, compared with 20% for prestige skincare.
Second, they're new to the ELC portfolio. Through Tmall Strategy Center, we saw that The Ordinary primarily recruits from ingredient-led C-beauty brands, giving us an opportunity to expand on the entire ELC consumer base. Third, they discover beauty differently. On Tmall, 37% of our search starts with an ingredient, a skincare category, or a concern. That is why we focus on social content, clear scientific education, and creator development, rather than the traditional skincare playbook. Our goal is simple: be the brand that consumers search for when they're looking for a skincare solution. Our second pillar is innovation, and one of our biggest success stories is that of glycolic acid, a global hero known for exfoliation. In China, its main ingredient, alpha hydroxy acid, is limited at 6% due to regulations, but our global hero contains 7%.
When we launched domestically, instead of seeing this regulatory constraint as a limitation, we saw it as an opportunity to innovate and make this global hero even more loved. Through social listening, we saw that there is an increasing trend and increasing demand for antioxidant benefits in this market, with one ingredient, ergothioneine, growing ninefold in search in 12 months. So, working with our global lab, we combined a 5% glycolic acid with ergothioneine. Concept to shelf, it only took us eight months, and the results are phenomenal. Glycolic acid sales grew 137%, from $7 million to $16 million. We didn't simply replace an existing hero; we expanded the entire franchise.
Now, looking ahead, we want The Ordinary to become a recruiting powerhouse for ELC, all the while protecting what makes the brand different. To achieve this, we will focus on three things. First, continue to recruit, including but not exclusively Gen Z. Second, keep experimenting with the ways of how we build brands. Focus on social and search, and bring locally relevant innovation to market even faster. Third, protecting the brand's DNA. Science-led products, clear social-driven communications, limited promotions, and transparent pricing. Thank you.
Now, please join me in welcoming Neo to the stage to share about fragrances.
Thank you so much, Sherry. Hello, everyone. Good afternoon. I'm Neo, Brand General Manager of Fragrance Cluster in China region. I'm excited to share with you the amazing result and the winning strategy of the fastest-growing category in China, fragrance. The Estée Lauder Companies is leading the growth in China domestic fragrance market, with a portfolio of beautiful brands, including Jo Malone London, Le Labo, TOM FORD, KILIAN, and Editions de Parfums Frédéric Malle. Collectively, we have delivered over $300 million retail sales for fragrance category in fiscal year 2026, with 24% year-on-year growth and gained 1 point of market share. We are the number one beauty company in China artisanal fragrance market, with Jo Malone London being the number one brand in the category and Le Labo being one of the fastest growing, delivering 75% year-on-year growth. We have continued to enforce our brick-and-mortar retail leadership.
Le Labo has become the number one brand in terms of offline productivity, surpassing 4 million annual retail sales per door. Fueled by strong brand desirability, ELC has delivered robust customer acquisition, nearly 1 million new users in last fiscal year. All this fascinating performance is driven by the laser focus on our winning strategy. Out of the five action priority of Beauty Reimagined, the two that are key driver of artisanal fragrance brand are create transformative innovation and boost consumer-facing investment. The Estée Lauder Companies owns a brand portfolio that are uniquely positioned, each so distinct from one another. It is critical to execute this strategy to mirror each brand's unique universe and deliver its intended consumer mood and experience. Now, let's double-click into what we have done. There are three major innovations that will make significant impact in China fragrance market.
First, core fragrance innovation. Great fragrance innovation is a combination of global impact and local relevance. Taking Le Labo's SHIU 25 as example. The Beijing City Exclusive fragrance, created to pay tribute to Beijing and its enduring heritage and culture. It has helped to double the business of the brand in Beijing since its launch. In September, this mindful creation has traveled to Le Labo labs around the world as a limited-time offering and became one of the top-selling scents globally. Second, to expand into more scented lifestyle category. It is vital to extend fragrance into meaningful everyday lifestyle moment to cultivate category habits. A few great examples, including Le Labo incense that bring moments of stillness and meditations, and Jo Malone London's WildWash dog shampoo that create intimate grooming time for the four-legged friend of our consumers.
Third, capture local gifting moment. There are four highly relevant gifting occasions in China for the fragrance category. The three love moments along the year, and of course, the Lunar New Year. Commercial innovation with 360 gifting campaigns, thematic collaterals, and visual merchandising will drive strong purchase intent for gifts. Having said that, each fragrance brand owns distinct emotional words, aesthetic, and points of view. Therefore, we prioritize all our consumer-facing investment to build immersive end-to-end brand experience. The centerpiece of that is our brick-and-mortar retail space, brought to life through iconic design concept and personalized experience. You will see by your eyes and experience that in tomorrow's store visit sessions. Let's take a few examples. Le Labo Heyuan House 19 Lab in Beijing. In a heritage Qing Dynasty Beizi mansion, we built a sanctuary to celebrate the craft of slow perfumery and honor rich local culture.
At selected locations, this brand offers fresh blending to share the backstage of the perfume-making process, creating the one and only piece just for you. In the boutique of the new Kilian bar concept, we bring consumers into the fragrance world of nightlife and entertainment, with personalized cocktail service pairing with the scent they choose. Beyond the retail space, we broaden our reach through major brand events. You can see from here a few great examples, the gorgeous Tom Ford Oud Voyage launch event, and very unexpected Le Labo on Wheels, where we connect with ambassadors, creators, and consumers, generating hundreds of millions of impressions and engagement. Lastly, it is critical to reach out to an even wider group of customers around China with advertising that tells authentic brand story.
This Lunar New Year campaign from Jo Malone London featuring global brand ambassador Crystal Liu Yifei has brought Britishness and elegant persona to life. All these major accomplishments of ELC China validate the success of our winning strategy. Having said that, penetration of fragrance is only 4%, and the headroom for this category is huge. We are firmly focused on our strategy to further maximize major global launches, to empower more innovation that is deeply rooted in China insights and consumer needs. We will further amplify brand storytelling and its unique persona to more and more Chinese consumers, and to reinforce our leadership in the China fragrance market. Thank you.
Now, please allow me to invite Joy and the China team back on stage for the Q&A session.
Dara Mohsenian, Morgan Stanley. Joy, the new consumer numbers you gave in China were pretty striking. You've been able to recruit new consumers into the business. Can you talk about how you've done that? I imagine part of that is greater penetration of online platforms and bringing more brands to the platforms. Part of it's probably innovation. What do you think have been the key factors driving that?
Then second, how applicable do you think some of those strategies might be to other emerging markets around the world, as you think about recruiting new consumers into the franchise?
Okay. Thank you for your question. If I come back to how we recruit consumers, I think there are three factors. First is the strong brand equity. Second, strong innovation. Then very strong retail experience. Regarding the brand equity, actually, we have a big, good portfolio of brands. Each of them have very individual, very distinctive brand equity. Actually, we pay high attention on that. Every touchpoint, we really reinforce the tone and manner, make the brand with their unique, consistent equity. It is like a persona, brand persona. Once consumers purchase one product, they are not only falling in love with this product, but they also fell in love with this brand. Then we talk about retail experience. We have very unique experience that each individual brand has very unique retail concept that attracts traffic.
At the same time, each store retail, we provide very unique, we call signature services. Le Labo provides personalized labeling, and for some stores, they provide fresh blending. La Mer, every La Mer store has a salon, provide luxury facial treatment, so which allow us to recruit but also to retain consumers. We have very strong consumer relationship program. Once consumers became a member, we will provide lifetime value and connection with them. Innovation, our innovation is very strong. You heard from our presentation, we have very strong local relevant innovation that we partner with China lab, Shanghai lab. The whole brand team here work together with the China lab at the same time zone, seamless work. Whenever we find a consumer insight, it turns into foresight, and turns into product concept, and turns into product development, and commercialize it very quickly.
That is how we make relevant and attract local Chinese consumers. Beyond that, we have very strong global innovation, and we bring the global technology, global trend into China that also attract local consumers a lot. If you ask me, I think it is a strong brand persona, equity, breakthrough innovation, and really differentiated retail experience really help us to attract consumers and recruit consumers. Actually, we recruit consumers both online and offline. We have very standard request online. To all of us, it is not only a sales channel, it is really our flagship store. For some lower tier city, they do not have chance to experience our freestanding store or our department store, but the online store is their flagship store.
W e really be very careful about tone and manner, make sure online, offline, every touchpoint, we have the same tone and manner, same equity in this way to attract consumers and recruit consumers. I think this is something our other market are also, they are doing and implementing it. I hope I answered your question.
I think if I can just add just like one thing to add, like first off, I think Joy's answer was just like perfect. I think Joy is not also taking the credit for what her and her team are doing. This is an extremely competitive market. There is a lot of consumers that are coming into beauty, as Joy has demonstrated, and they are really fighting really hard, like every day, and very competitive to just go after this consumer acquisition through brand equity, innovation, and so on and so forth. But it is actually interesting because Joy many years ago started with like a vision of what China needed to be, the new platform, the new consumers, innovation. We set a blueprint, and we called it at the time, there was a vision of like, it was 2020, and it became 2025, and now 2030.
We are actually replicating the same model in the emerging market around the world. Because all this market, like China is no longer an emerging market, it is a mature market, but it used to be an emerging market when we were talking about it like 10, 20 years ago. This blueprint, and they have something in common, this market between China and the West, is the increased number of consumers that are at disposal to just go after. We are looking in every single market in replicating the same model, the same blueprint. That is why Joy finished with this beautiful headline that China is the blueprint for ELC acceleration in the future, because we are looking at channel, we are looking at consumer, we are looking at brand equity.
You see this beautiful visual from La Mer behind the screen to everything that has been presented is tailored to each market, and the local relevance that we have in China, we are replicating in India, in Turkey, in the Middle East, and so on and so forth, that is allowing us to go after consumer recruitment. But in the emerging market and in China, and frankly everywhere around the world, consumer recruitment is a key priority for us, and there is a benefit to having a lot more consumer gravitating to this category.
Thank you. Odette from Logis [audio distortion]. I think, actually Stéphane just preempted my question, is on competition. I think it goes through phases. So one phase, the locals are catching up on the R&D, and then especially last or this year, that global companies are catching up on media and the social content. What the next phase is? What do you think is the most important to compete? Especially given your brand, I suppose, heritage and being a global business, what to do and what not to do in this competition? Thank you.
We have a very strong portfolio of brand, and we always emphasize, if you ask me, I want to always say that brand equity is something we can never sacrifice and never give up. Every brand, we have a strict standard to enhance the equity. For some brands, the heritage equity has been built for years that we invest, keep on consistency, build on the equity. Like I just say, each brand is like a persona. They are each individual brand personality that connect with consumers. Regarding the innovation strengths, we have a very strong China lab. The scientists, they understand the China market. We work seamlessly with China team on the same ground. We meet each other so frequently, so we can catch the insight, not only insight, really foresee what will happen in the future.
Also, one thing is our advantage, that we have super strong global technology and expertise as well. For example, like Lauder, we have 20 years longevity study. We started skin longevity study 20 years ago, and we have more than 20 patents. Then we bring this high science, cutting-edge technology into Lauder Re-Nutriv, and we bring Re-Nutriv in China. We launch Re-Nutriv in China. At the same time, I want to give a good example that when we launch the Re-Nutriv cream in China, we also consider the China needs, the Chinese consumer use more complicated or multiple layers on the face, so the texture make sure they are easy absorbed on Chinese face. Also, leverage this high science, like sirtuin longevity technology. We launched oil products. That oil, we perceive that whether in winter, people tend to have a dry skin, especially in northern China.
Skin become very dry, and we foresee the oil will be popular. So, we developed in China lab, which is very China relevant, oil products and the Lauder Re-Nutriv products. At the same time, we take the global technology of skin longevity, age reversal technology, to bring into Lauder Re-Nutriv oil. At the same time, Chinese people don't like greasy, so we launch the oil with less oil, less oily texture. So, in this way, to both combine the local relevance, foresee the opportunity, foresee the trend, meanwhile, we have the best global technology to support us. This is our winning advantage.
Beyond that, regarding communication, you have seen we always provide very dynamic equity-building advertising, social assets, and PR effectiveness, PR activities. We believe eventually people fall in love with the brand because of the brand persona. This is something we never compromise during the whole process. That's how we outperform the market.
We are going to take one last question for the China team.
Sorry, it is two questions, but I never do this. I do not. I do not. Okay. The first thing is just a quick one. I managed to, despite the rain today, made myself get outside and walked around a little bit, and the visual presence of your brands is overwhelming. It is unbelievable, and I did not have to go very far. I am curious because it is clear the rest of China cannot be like the center of Jing'an in Shanghai. How would you compare the degree, the intensity of the visual presence of your brands, what I saw in a five or 10-block radius, to the other Tier 1 cities? Is it comparable? Is it like this everywhere? That is question one.
The second was just about the health of The Estée Lauder brand. Clearly the performance has been good. A big question after the challenges of the post-COVID period, with there being so much inventory in the market, inventory in people's homes, inventory on sale and big discount, I guess, what is your finding of the health? It is clear the brand is healthy, but maybe how did you get through that? How did you get through that period to make sure that the brand was not devalued in consumers' minds after it became so prevalent and so frequently discounted? Thanks.
Maybe I answer first. If, Ginger, if I miss anything, you can complement.
Sure.
Estée Lauder brand, in the past several years, we launched lots of new innovation, lots of new products. They are super successful. Like what I just said, we bring the world-class innovation, Re-Nutriv Age Reversal, which has really strong skin longevity technology, very unique in the market. Actually, we are almost the first, one of the first to really bring the skin longevity technology into the skincare, like I just described. It is not only technology, but also huge relevance with Chinese skin. Also, for the communication, you have seen the beautiful picture that Shu Qi, who is a famous pop celebrity, who is elegant, who is very famous, very popular, will also help to convey the luxury and high-end imagery. Also, we always try to optimize our operation.
We always try to reduce promotion and move the budget to do a funnel, adding advertising, adding PR event, adding equity building. We keep consistent both online, offline, and every online channel. Also, actually, you will see many retail stores in China. Every store, actually, we also provide very unique service. We provide makeup services, and also we provide renewal and skincare consultation. Also, many of our stores, we have spa room, facial treatment provide to our consumers. We build on the strong brand equity and build on strong brand awareness. Actually, Lauder has enjoyed the highest brand awareness in China among all the prestige brand.
Also, I am very proud, according to the brand health check, we have very strong brand love. Consumers love this brand, love Estée Lauder. So, that is my answer to the Lauder. Come back to your another question, may I clarify? You are talking about our brand portfolio, they are appealing to primary city. Are they also has the same appealing in the secondary city?
Is the advertising, like the outdoor advertising, as intense in other cities as it is here?
Oh, yes. So, actually, for example, secondary city also, they are huge group of consumers. In China, we have so many cities. Definitely, it is not only primary city. It is really, we actually have a very balanced investment on Tier 1 city, Tier 2 city, and also we have very balanced investment in East China, South China, Central China, and different area of China. We have a pretty balanced planning, and we have a pretty balanced investment, especially like the big brand like Lauder. Thank you.
Thank you so much. [crosstalk] Okay. Thank you so much.
Thank you. Thank you to my team.
And thank you.
Thank you. Also, thank you again on behalf of China team. Now, let's welcome Matthew Growdon and Global Travel Retail team. Thank you.
Firstly, thank you to Joy and the China team for that very compelling opening. We are going to continue with the ecosystem with travel retail. Firstly, good afternoon, everybody. My name is Matthew Growdon, and I am the President of Travel Retail Worldwide and our Asia Pacific Domestic region. I am joined today by Olivier Dubos, who is our Senior Vice President of Travel Retail Worldwide, and we are delighted to be here with you to share an overview of travel retail. Travel retail offers a unique way to connect with consumers around the world at a time when they are especially open to discovery, experiences, and self-reward. At ELC, we view travel retail as more than a simple retail destination, but as a global platform to recruit consumers, build brand desirability, and create luxury experiences that strengthen relationships beyond the journey.
Today, I will cover the channel's strategic role, our new global operating model, and how we are reshaping the traveler experience to support sustainable growth. Olivier will then share how we are applying this strategy to our important travel retail business here in China. Let's start by looking at the global travel retail industry, and the outlook is encouraging, with strong indicators pointing to continued growth in travel and related spend. In 2026, international departures are projected to reach 2 billion passengers, a 3% increase versus the prior year, and a 12% increase compared to pre-pandemic levels in 2019. This momentum is reflected in tourism-related revenue, which is forecast to grow 9% for the year, underscoring the strength of travel-related consumption. We are also witnessing significant investment in travel retail infrastructure to facilitate the continued growth of travel.
Examples include a new terminal at Dubai International, a new terminal in Singapore Changi Airport, 50 new airports slated across India over the next five years, and right here in Shanghai, a beautiful state-of-the-art new terminal planned for 2028. Within this expanding travel retail channel, beauty remains the largest product category, representing $30 billion of sales annually. As a result, travel retail has become one of the largest global channels for prestige beauty. Beyond its scale, travel retail serves as an important showcase for beauty brands, a true window to the world. Many consumers make their first purchase of a brand in the channel, and consumer sentiment towards travel retail is improving, with a recent Oliver Wyman study reporting that 79% of surveyed consumers have a higher willingness to spend in duty-free over the coming year.
Against this positive industry perspective, ELC has made steady progress in restoring sustainable and profitable growth, most recently achieving market share gains across both Asian and Western markets. In order to build sustainable growth on a consistent basis, it is important that we understand the structure of global Travel Retail as a beauty market, and clear differences emerge between Eastern and Western hemispheres, driven by distinct consumer preferences. The East today represents 63% of total prestige beauty, with skincare accounting for 63% of those sales. It is also fairly concentrated in a few highly sophisticated travel retail ecosystems, with China as the largest market operating across airports, downtown stores, and online. In contrast to this, the market in the West, representing 37% of global sales, is predominantly fragrance-driven, with 78% of their sales coming from fragrance.
The West also serves a more diverse mix of consumers, with high-growth emerging markets such as the Middle East, Turkey, India, Africa, and Latin America becoming increasingly important drivers of growth. Given the significant differences in demographics, purchasing behavior across regions, success requires region-specific strategies tailored by category, brand, and consumer preferences. Based on this reality, 18 months ago, we embarked on a comprehensive transformation of our travel retail division. Our objective: to create a more diversified, sustainable model supported by a leaner, more agile, and consumer-focused team. Our strategy was built on three simple key priorities. Firstly, capabilities to deliver best-in-class retail execution, with a clear focus on generating consumer demand. Secondly, expanding our consumer reach to capture growth opportunities across both Eastern, but also importantly, Western markets.
And thirdly, leveraging the power of our unparalleled brand portfolio to fully capture and scale across diverse consumer preferences. These priorities are supported by a new organizational structure. We transitioned from a centralized head office team to a model based in regional hubs, located in London for Western markets and Singapore for Eastern markets, and we expanded our go-to-market retail teams in key locations like Shanghai and Hainan. This brings our decision-makers closer to consumers, retailers, and opportunities while reducing spans and layers. The teams are supported by new capabilities in finance, HR, and supply chain to ensure disciplined operational focus on inventory management, gross margin expansion, as well as the careful monitoring of the Travel Retail Worldwide's overall contribution to the company's sales performance.
Each region then has defined objectives aligned with our key priorities. In Travel Retail West, we are the market's number five challenger, with significant headroom for growth and market share gain. As previously shared, fragrance remains a key growth driver for the West. For ELC, we have been unlocking this growth through expansion and innovation, bringing new products to consumers across brands and price points. For example, we are accelerating TOM FORD across all our Western markets in terms of distribution and advertising support, and it is now our number one brand in Travel Retail West, while we are selectively expanding Le Labo, including its city-exclusive fragrances.
Our brand expansion is not just limited to fragrance, as we have also recently introduced The Ordinary, a highly successful brand among Gen Z consumers, who are projected to be 25% of all airline travelers by 2030. We are also expanding our retail footprint through our new partnership with Duty Free Americas, with significant new locations in New York, Miami, and Washington, while we continue to work with our regional partners to expand our footprint in emerging markets across the Middle East and India.
Now, in TR East, we are the market leader, supported by established teams and strong retail partnerships with the China Duty Free Group as a key growth partner. Our focus here is to reinforce our number one position in skincare by expanding on our luxury experiences and service while unlocking more of our portfolio, including our mid-sized makeup and fragrance brands in priority locations such as Hainan. We are also aligning our investments with our evolving travel patterns. So, for example, South Korea is a high-growth and influential destination where we have renovated stores and opened stores in both Seoul and Jeju Island. In Japan, strong inbound tourism has supported further airport expansion for us, including at Haneda in Tokyo. Together, these actions enable us to respond more effectively to opportunities in each region.
By reducing our organizational layers, we are accelerating decision-making and moving closer to both consumers and our important retail partners. Furthermore, this transformation has driven significant cost savings and enabled greater investment in consumer-facing activities. In addition to our new focused organization, our global channel ecosystem is a distinctive advantage. Engaging consumers requires us to meet them wherever they are in the journey. With approximately 1,900 physical locations across airports and downtown duty-free locations worldwide, we are uniquely positioned to connect with consumers at multiple touchpoints. Each travel retail sub-channel plays a critical role in shaping the consumer journey. Airports deliver global visibility and recruitment, while downtown stores create destination-based luxury experiences. Digital then extends relationships before and after travel, and in-flight and cruise offer additional discovery moments.
Now, while downtown duty-free is a relatively less common retail format in the West, it is far more prevalent across Asia and plays a significant role in the consumer journey. Visitors typically arrive with a clear purchase intent, providing greater opportunities to showcase the brand, deliver personalized service, and create a more engaging customer experience. Our stores in Seoul and Macau, as examples, are shared on screen of how destination retail can connect with tourism, luxury hospitality, and a broader city experience. Perhaps the best global example is in Hainan, which many of you will visit later this week. Online duty-free is becoming a critical part of the traveler journey and gives us more opportunities to engage with shoppers beyond the airport.
By partnering with key retailers' online apps, such as the China Duty Free Hainan replenishment site, we can extend our consumer reach and create a more seamless shopper journey. The focus here is on quality and personalization, with a stronger shop-in-shop and elevated brand experience, as well as targeted CRM activities. In-flight, it is smaller but strategically valuable, providing an additional touchpoint to build brand visibility, encourage discovery, and create purchase opportunities during the journey. Recent ELC examples include MAC's new Powder Kiss lipstick featured on the cover of Korean Air's shop magazine. Estée Lauder has also elevated its presence beyond traditional in-flight retail, becoming the first brand to activate within Korean Air's first-class lounge. Together, these initiatives demonstrate how the channel can go beyond transactional sales to create premium, high-visibility brand experiences.
Now, retail footprint is a means, it is not the objective. Every retail investment needs to serve a clear strategic purpose, and we are very focused on the luxification and service experiences of our stores, creating destinations and experiences that elevate our brands. Our recent openings demonstrate how Travel Retail is elevating execution. This recent Jo Malone London opening at Heathrow Terminal 2 brings the brand's distinctive codes and a sense of place to a major global gateway. More than an additional door, it is a prominent showcase for the brand that encourages discovery, gifting, and engagement. The Estée Lauder store at Macau's Venetian Hotel creates an elevated downtown experience, while the new La Mer store provides another example of premium brand expression. These locations and many more show how prime space, strong design, and service translate brand desirability into discovery and conversion.
Our regionalization strategy brings us closer to consumers and markets, and our established retail footprint creates the platform for engagement. However, consumers experience brands across one connected journey, from both domestic markets to Travel Retail, from inspiration and planning to discovery, purchase, and replenishment. We work closely with our colleagues on the domestic teams, like China, to connect these five moments across both domestic and Travel Retail, especially as AI and digital platforms influence decisions earlier. Retail partners also play a critical role in extending our reach. For example, China Duty Free's network of 50 million members enables meaningful engagement with consumers before, during, and after their travels. By combining the strengths of our brands with the capabilities of our retail partners, we can connect with consumers earlier, maintain engagement long after the journey ends.
In doing so, Travel Retail becomes a powerful engine for consumer recruitment and long-term value. Being consumer-centric also means understanding the cultural moments that inspire travel and gift-giving. These occasions create significant commercial opportunities for Travel Retail to connect with consumers in meaningful and relevant ways. Chinese New Year, Diwali, Ramadan, Eid, Golden Week, year-end holidays, and many more, each shape distinct demand patterns and travel corridors. By identifying the moments that matter most to each consumer group, we align domestic and Travel Retail activities around a consistent brand story, thoughtfully tailored to the traveler. Beyond the commercial value generated during these key periods, there is a bigger opportunity to create sustained brand impact by connecting domestic and Travel Retail activity more intentionally. Integrated campaigns and assets with global brands and domestic teams extend successful local activations into major travel hubs across the travel journey.
This enables us to engage consumers at multiple touchpoints, reinforce a consistent and compelling brand story, and build stronger brand equity along these important travel corridors. We apply the same principle to innovation. As you heard from the China team earlier today, we've seen some very successful innovation launches over the past year. Estée Lauder Double Wear launch is a strong example. The China domestic and Hainan launches were anchored in the same core storytelling and hero assets, while the execution was thoughtfully adapted to the different shopping environments, traveler mindset, and occasions. The objective is not to create identical execution, but to build coordinated launches around a consistent and compelling brand idea, while tailoring the experience and the product offer to what is most relevant to travelers.
This approach allows us to impact the innovation and extend its reach across the journey of the consumer and create a more connected brand experience. Another way that we unlock synergies across our one consumer journey is by extending domestic media and celebrity investments into travel retail through traveler-relevant campaigns and destination partnerships. As an example, Jay Chou, a renowned singer across Asia and La Mer's global brand ambassador, is a great example with the brand building on his Sanya concert partnerships through complementary in-store activations. In this way, travel retail amplifies domestic investment rather than replicating it, creating additional opportunities to attract consumers. Together, our new organization, industry-leading multi-channel ecosystem, and focus on one connected consumer journey gives us a powerful foundation for the next chapter of travel retail.
Our opportunity is to connect every touchpoint with greater purpose, creating distinctive moments of discovery, deepening relationships, and strengthening brand desirability well beyond the journey. This is how we will continue to evolve travel retail from a traditional distribution channel into a true global engine of growth, one that brings our brands to life in more meaningful ways, unlocks long-term consumer value, and helps build a more dynamic, diversified, and sustainable future for the business. From traditional retail and merchandising to iconic expressions of place, from transaction-driven price-led shopping to immersive retail entertainment and distinctive consumer experiences, from the same product in domestic markets to innovation designed for travelers, building stronger brands overall.
Now, I believe that the market that demonstrates this best is actually right here in China. I'm going to hand over to Olivier, who will take you through how we bring this to life in the China market. Olivier.
Hi, everybody, and thank you, Matthew. I'm Olivier, the head of Travel Retail Global. We've just heard our global vision for travel retail, and now let's bring that vision to life in China and look at the opportunities across Chinese travelers, airports, and Hainan. Chinese travelers remain one of the world's most important consumer groups, but their travel patterns are becoming more varied and continue to change. In 2026, Chinese international departures reached approximately 117 million, up 10% versus 2025, but still at 86% of 2019 levels. Recovery varies across Southeast Asia, Korea, Japan, Europe, the Middle East, and North America, shaped by exchange rates, visa rules, global events, flight availability, and cultural trends.
The scale of Hainan is unheard of. It welcomed nearly 110 million visitors in 2025, up 9% year over year, supported by favorable duty-free policy, destination investment, convenient domestic travel, and a mature and highly dynamic retail ecosystem. For ELC, this is a portfolio opportunity, not a choice between outbound travel and Hainan. By sharing insights across China domestic and travel retail, having Mandarin-speaking beauty advisors at key locations worldwide, and tailoring assortments, exclusive products, and offers, we can serve Chinese consumers wherever they travel. As you've heard from Aude earlier and then from Joy on the China team, consumers is always at the center of everything we do. For us to win with Chinese travelers, we must understand both what remains core and what is changing. Beauty still accounts for more than half of the duty-free shopping budgets.
The journey is highly planned. Over 60% of duty-free beauty purchases are planned before travel, and value remains important. Digital influences the journey throughout. 98% of surveyed Chinese travelers use digital platforms for pre-trip beauty research. Limited editions on exclusive travel retail products drive purchases for 41%. Hence, the importance of tailored travel retail offerings. This creates two priorities. First, engage early enough. Second, use exclusivity, discovery, and experience to expand baskets and recruit consumers. China's major aviation hubs are entering a new, exciting phase of development, combining world-class infrastructure with enhanced traveler experiences. Beijing Capital Airport is upgrading Terminal 2, while Shanghai Pudong is renovating T1 and T2. If you return in a few months, you will be able to see not only the new facilities in the airports themselves, but also refreshed retail spaces and brand experiences.
Additionally, the new Shanghai Pudong Terminal 3 will span almost 900,000 sq m, with a capacity for around 50 million passengers annually. Expected to be completed in 2028, it will significantly expand the airport capacity and strengthen Shanghai's position as a major aviation and travel retail hub. For ELC, these investments create opportunities to secure high-quality retail space, introduce new brand concepts, and elevate the traveler experience. Beyond China, our prime retail presence enable us to follow Chinese travelers across APAC and other global destinations, including Macau, Tokyo, London, Dubai, Paris, New York, and many more. The capability extends beyond Chinese consumers. We understand different travelers in different destinations around the world. Hainan is the world's largest duty-free island, but its significance goes beyond scale. In 2025, visitors spent approximately $32 billion there.
CDF data shows that around 75% of its beauty consumers came from Tier 2 and lower-tier cities, making prestige beauty accessible to more consumers in a luxury setting. For ELC, Hainan is a powerful recruitment platform. We have approximately 6,000 sq m of retail space. Our survey found that 28% of ELC consumers there are new to the brand. Our footprint spans multiple retailers, physical stores, and online doors across four cities. Hainan is both a commercial engine and a gateway to long-term consumer acquisition. Winning in Hainan requires a deep, long-term partnerships with a broad ecosystem. As Joy shared in the previous presentations, our engagement with government and policymakers is important in shaping the environment for the industry.
The Hainan Expo, or the China International Consumer Products Expo, jointly hosted by the Ministry of Commerce and the Hainan provincial government, is an important platform for global brands to engage with government, showcase innovation, and support Hainan's development as a prime international consumption destination. Beyond policy engagement, we have made tangible investments in Hainan, including our newly opened distribution center, the first fully operational distribution center for prestige beauty in Hainan. Of course, we are investing in local talents, building local expertise and market understanding to serve our consumers in the best way possible. Our success also depends on connecting every stage of the consumer journey. Our brands are flagships everywhere, and to animate them, we work closely with our retail partners and with hospitality and tourism players to create a seamless and exciting shopping experience.
By bringing all these partners and touchpoint together, we can engage consumers throughout their journey and unlock the full potential of ELC's portfolio in Hainan. Now, let's look at how we bring everything to life. As you've heard from Joy on the China brands presentation, we have top-class stores on brand activation across China. Same in travel retail. Hainan features some of our most distinctive stores, including our number one global stores for Estée Lauder and La Mer. Estée Lauder's duplex spans more than 500 sq m, alongside flagship stores for MAC, Jo Malone, TOM FORD, and Le Labo. The goal is not simply more space, but where we bring together brand equity, luxury service, innovation, and discovery together. You will be able to see them with us in Hainan on Saturday. Services move beyond transactional shopping.
Estée Lauder and La Mer service spas offer consultations, treatments, and personalized rituals in luxury settings. I encourage you, our guests, to experience these services in Hainan. We scale engagements around travel moments with the greatest traffic and cultural relevancies. High-impact activations during Chinese New Year, summer, and other peak periods turn traffic into trial, engagement, and lasting relationships. We also move beyond traditional retail into experiences that turn discovery into customized, active engagement. These experiences are more than entertainment. They encourage consumers to spend time with the brand, deepen product understanding, generate social sharing, and also ultimately increase conversion. Beyond traditional activations, we are leveraging partnerships that connects our brand with IP crossover. Clinique's hero product, Dramatically Different Moisturizing Lotion, is affectionately nicknamed Butter in Chinese. The hugely popular Butter Bear IP is a natural fit.
We also curate special VIP experiences to build stronger relationship. The Estée Lauder Double Wear Foundation launch shows how hospitality partnerships can create a more elevated setting. To summarize, Hainan brings together infrastructure, partnership, and experiential retail to create a world-class travel retail ecosystem. Now, let's watch the video and experience it together.
[Presentation]
That brings me to the key takeaway from this presentation. Travel retail is more than a channel for capturing travel demand. It is a strategic platform to recruit consumers, build brand desirability, global heroes, and create lasting and loving relationships with our brands. That is how we will shape the next chapter of travel retail.
Now, let's invite Matthew back to the stage and our amazing Lina, Head of Travel Retail East, to answer your question. Thank you very much.
Hey. We are expecting many questions on Travel Retail, so who is going to start?
Hi there. Duane Cable with Ninety One. I mean, congratulations on some of the very positive changes you have made within Travel Retail. Can you maybe just talk about how you have thought about your evolution on pricing architecture, specifically within Travel Retail and maybe some of the regional locations, and the impact that has had on daigou sellers?
Thank you, Duane . Pricing for us is a suggested retail price because we work with retail partners in terms of we wholesale to them effectively with suggested retail price. Our focus is very much on driving high-quality retail sell-through. Our big step change for us as a division has been putting teams that can create the type of activations that you have seen in the various locations, where we can focus on experiences, creating service-led retail as well, to move away from a simply price-driven proposition for the consumer and to create something that we believe is a longer-term value for them as well.
That is a lesson that we have taken on from past practice and seeing some of our best practice across the company, whether it is in China domestic or other locations that we have got where we have seen the value of focusing more on looking after the consumer with service, with experience, with a beautiful retail environment, and to move away from price being the only proposition that would drive that.
And if I may, we have also with, for the new organization, it's an expertise center in Singapore where we can craft, create exclusive product for Travel Retail and head to some differentiation of offering as well between channels. So, the idea is really to bring value together on top of all the engagement, the activations you have seen, and to be relevant in different manners to the consumers, and particularly the travelers.
Yes. I may add the idea that we are creating with our retailers per destination some exclusive product, and we also create with them sense of place, sense of destination. And maybe you have the chance to see in your room, we have a very limited edition only for you of our serum, ANR. And you see it's been engraved with Shanghai icons, and also we have an illustration, also only for this event, made in collaboration by the team and the global brand, and a local artist to showcase Shanghai. So, this is how we create a sense of place.
Andrea Teixeira from J.P. Morgan. I was hoping to see if you can talk about what was asked in the prior question on the daigous and how to make sure that you allow all this experience and also affordability to the final consumer. How much visibility you have in order to see how is the final consumer really engaging with your experiences and the price points and the growth that you can find within the brands that you are offering? In the conversion, you are seeing a lot of growth in travel across the globe. How are you going to increase that conversion not only in the travel around China, but also outside of China?
Sure. That is a great question. I mean, the first point is that this is a high-growth channel, as you said, and there are very few channels that we operate in globally as a company that have 2+ billion , what we call qualified consumers, because these are people that can afford to travel internationally, and it is growing. That as an opening metric, as a foundational metric, is very compelling for us. Then within that, our job as marketers and custodians of brands is how do we connect our brands to those consumers and how do we drive their consumption? We have shown you some examples, and I believe we have started, we have really seen some terrific results from that over the past 12 months in terms of our performance on brands.
The headroom that we have got for growth is that we have historically had a very strong base in the East. As I shared with you, we were still number one company in Travel Retail East. We had not necessarily captured that opportunity in the West. We were company number five. Our focus in the West has been deploying our fragrance brands. You have to understand that this is not something that you can do overnight, because typically you have to wait for airport concessions to change, for floor plans to be relaid. It is quite a process of us working with our retail partners to get these opportunities to put a Tom Ford Beauty store in or to put a Le Labo store or Jo Malone store like we shared with you in Heathrow.
That has really started to give us some momentum in the West. Even if you said the market would grow at 5%, our ability, we should be able to outperform that market because we are coming off a much lower base. That is one piece of that. The other part is the actual portfolio itself. Historically, our business in travel retail has been quite concentrated on two core brands. Now we have the clear mandate and directive to open up the portfolio to bring other brands that are very successful in domestic, including the example that we shared of The Ordinary, which we have launched in the West. China shared a great example of how they have just launched here. We have not even introduced it yet in the East.
In the West, it is a phenomenally successful brand, and we have just started to bring that in. So this opportunity between our brand portfolio and looking for where we have opportunities, where we have a low base of market share and we can expand off that is how we believe we will have sustained growth going forward.
Thank you. Filippo Falorni, Citi. I was hoping to get a little more color how the collaboration has evolved with the China team versus in prior years to better forecast demand around peak seasons, and also to how to better address the consumer needs in the Travel Retail East. Thank you.
Yeah. It is also a great question, and one of the things that is really important to me, wanted to reinforce that, is our understanding of that this is one consumer. It is not a travel retail consumer or a China domestic consumer. And we need to look after them in a way that does not put us in conflict with the channels, but that complements the journey for the consumer with a consumer-first mindset. We have forums in the company, not just in China. We have them for Japan, we have them for Korea, we have them for the Middle East, wherever we have a prominent travel retail business, where we triangulate between our global brands, our domestic teams, and our travel retail teams.
The global brands are often the coordinator to help us in terms of innovation cadence, what might be differentiated for the travel retail channel versus the domestic market like China. And that is something that we have stood up over the last two years, and we are building that out, even now in India, for example, which is becoming a more important travel retail destination for the company as well. So those forums have been established and well-established, and we work with them.
In addition to that, the China team that was presenting, Joy and I have both been in the company for over 20 years. We know each other very well. We pick up the phone at any moment if there is something that we want to discuss. So those channels of communication are open both at a leadership perspective, but also for the teams from a meeting process and formalizing that.
Steve Powers from Deutsche Bank. Maybe you could expand a bit on the approach to assortment in Travel Retail, if it's different East versus West. I'm just curious in terms of how much uniqueness you're bringing to the channel versus overlap with what's going on in the domestic market. It seems like there's a lot of thought to how do you curate the right assortment, but just any rules of thumb or approach as to what you found has been optimal.
Yeah. I think, well, one of the big changes for us and having a view of the West versus the East, and the understandings go deeper than what we shared. It's all the different consumer preferences, even within brands, makeup assortments, skincare preferences, et cetera, is that the lineup that we put in these different locations is for the consumer that lives there. Historically, we had a more one-size-fits-all approach with our assortment, and we've become far more targeted with this consumer-first mindset to make sure that if we're in the Middle East, we range products that's relevant for Middle Eastern consumers. And likewise, the brands that perform well in the Middle East, like Tom Ford Beauty, would get prominence in terms of the space and location within our footprint, within our retail footprint in that sense.
That would be how we look at it geographically, and that does take a lot of planning with the teams from Lina's side in the East and overseen by Olivier for the globe. And then within that, with the global brands, we look at unique products that we could bring to market. Not to put us in competition with our domestic partners, but to maybe add an element that is unique to travel. It's one of the ways in which the team was sharing, how do we get away from price being the only proposition? You create something that's only available in travel, or maybe only available in the domestic market for a period, but not to disadvantage one versus the other, just to create something interesting.
Brands like TOM FORD, we have summer fragrances for the summer travel period in Europe, just in Travel Retail as an example. We have done a lot of work on optimizing our assortment for productivity, for efficiency on brands that are not necessarily performing. In makeup, we typically carry a tighter lineup. Makeup as a category in our business is a very big SKU count , so you have a lot of stock keeping units in that lineup. We have to be quite specific about what are the products that sell, so we are not over-ranging, and we are not building up inventory in a way that would not be productive for us as well.
Actually being very consumer-focused, it goes even beyond the East and West. We go to the granularity of an airport. Take Heathrow, for instance, the terminal where you would have the Middle East flight, you would find differences in the assortment, the shades, et cetera, and even fragrances actually, from the terminal that would carry more, let us say, the American or British packs. We go to a level of, I would say, sophistication in the way we articulate our portfolio and assortment within each brand that is pretty impressive, right?
Yeah. The obsession the whole time is consumer-centric, but also sell-through retail. We want to put productive inventory into these locations. That we can move it through and improve our productivity across.
It's all about the speed of rotation of the SKU. I mean, in travel retail, you can't have a SKU, a long tail or a big tail. You really need the SKU to move fast. We work very closely with Avolta, Heinemann, and all our great partners to really fine-tune all this together, be it assortment-wise, order-wise, or even obviously inventory management as well.
That looked like it was the last question.
Okay. That's the last question. Well, we will have more time, I'm sure, over dinner and other moments where we can keep the conversation going. Thank you very much for your engaging questions, and that brings to an end the formal presentations for the day.
Now I have the pleasure to welcome back to the stage our president and CEO, Stéphane, to deliver some closing remarks.
Before I do my closing remark, I just want to give credit to Matthew, Olivier, and Lina, the team, and the entire Travel Retail Worldwide, because some of the transformation that we've done in this channel over the past two years has been absolutely remarkable. I just want to reinforce what we've said publicly, and we are absolutely committed today to deliver, is Travel Retail is back to being as a penetration of our overall global business in line with industry standard. We are really shipping to the demand, controlling really the demand and the retail. So inventories are back into the right place, and this allows us today to be able now to invest in retail experience and capture the consumers with the really new model that both Matthew and Olivier have portrayed.
Very confident in the future, the how, but also how we're operating in this channel to capture the consumers. Thank you for the team. As we come to the end of what I've hoped has been an exciting afternoon for all of you, I want to leave you with three critical thoughts. First, Beauty Reimagined is working. The progress is tangible, broad-based, and increasingly consistent. Second, we are building a fundamentally stronger company, more consumer-centric, faster, more agile, with incredible talent across the company, as you hope you've seen and demonstrated by the speakers today. Really better positioned to convert growth into profitability. Third, our greatest opportunities are still ahead of us. We have revitalized our entrepreneurial spirit. We've amplified the potential of our extraordinary portfolio of brand.
We are beginning to realize the full benefits of operating as One ELC while continuing to enable future efficiencies. The prestige beauty industry, as demonstrating, remain very dynamic and attractive. 80 years ago, this company was founded on the bold belief in the power of beauty and the possibilities of entrepreneurship. Today, we are bringing that same spirit into the next chapter of our history. We are really proud of the progress that we've made. We are confident in the direction that we are taking, and we are more ambitious than ever about what we can achieve all together. Because in so many ways, we are only beginning to unlock the full potential of Beauty Reimagined, driving our confidence in our new fiscal 2030 ambition.
For those of us in Shanghai, we have a fantastic slate of activities tomorrow. We want you to see firsthand how we have hardwired our business with AI, integrated data analytics, and built exceptional capabilities across experiential retail in our freestanding stores, R&I at our end-to-end China Innovation Center, and value chain at our state-of-the-art Shanghai Fulfillment Center. Thank you to everyone in the room and those who joined us virtually. That concludes our presentation for today.