Estée Lauder Companies (ELC) has spoken about the impact of the Middle East conflict on its business, as it upgraded its outlook for the year.
The conflict in the Middle East negatively impacted ELC’s third quarter sales growth by around one percentage point, said the beauty company’s CFO, Akhil Shrivastava.
However, the impact on ELC’s consolidated results was not material, he added, speaking on a call with investors to discuss the beauty giant’s third quarter financial results.
The Clinique and MAC Cosmetics owner reported sales grew 5% in the third quarter to US$3.7bn, beating analysts’ forecasts.
ELC upgraded its full year outlook on the back of the performance, which signals progress in its ‘Beauty Reimagined’ turnaround plan, despite uncertainty around the Middle East conflict.
Shrivastava said: “The current geopolitical and macroeconomic environment remains uncertain and continues to drive global volatility, starting with fiscal 2026 our solid year to date results supported by continued net benefits from PRGP [Profit Growth Recovery Plan] and disciplined cost management give us confidence in raising our fiscal 2026 outlook.
“In terms of the conflict in the Middle East, our outlook assumes a greater year-on-year impact from disruption to our business in the fourth quarter relative to the third as shipments for key shopping moments had already gone out before the conflict began.
“This helped to minimise the impact to our third quarter sales.”
In the fourth quarter, ELC expects “an unfavourable impact of approximately two percentage points to sales growth and six cents to EPS [earnings per share]”, he said.
For the full year, the impact of business disruptions in the Middle East is expected to be less than 1%.
Coty and Unilever outline conflict’s impact on business
Meanwhile, Coty yesterday said that a 7% decline in net revenue in the third quarter included 1.4% headwinds from the Middle East conflict.
Within its prestige division, the headwind was 2%, and in consumer beauty, it was 1%.
“The reason the Middle East impact is more pronounced for Coty is primarily portfolio and channel mix,” said Interim CEO Markus Strobel.
“The region represents a mid-single-digit percentage of our total sales, including local travel retail, and given fragrances are a dominant category in the Middle East, we are seeing a more sizable impact on our prestige business.
“The disruption to the Middle East region had a larger effect on our near-term trends because we had anticipated stronger Middle East growth this quarter.
“As the conflict in the Middle East continues, we expect it to remain a headwind to sales in the near term, particularly in prestige.
“That said, it is important to look beyond the reported top line and focus on the underlying category and sell-out trends across the portfolio, which we’ll walk you through next.”
Last week Unilever said the Middle East conflict had not impacted its first quarter financial results.
“The Middle East represents around 2% of our turnover, and our operations in the region remained intact in Q1, with no material disruption to supply,” said Unilever CFO Srinivas Phatak on a call with investors discussing its financial results.
“Until now, we have not seen any material impact in consumption level or disruptions in the operations.
“Of course, the closure of the Strait of Hormuz may have potential implications in terms of availability of petrochemical materials.
“But this can be an opportunity for us, because we have a very resilient supply chain, a multipolar supply chain with multiple sources of materials, and this resilience can imply a competitive advantage.”
Phatak said that the Middle East conflict has created uncertainties that made the inflation outlook more challenging, and that it is taking Brent crude at $100 per barrel as a “working assumption” in its guidance.
“While there is crude and everyone really anchors around crude, it is complex because thereare many crude linked derivatives,” he said.
“There is forex, there are elements of supply chain costs, wage inflation, and others.
“So at a commodity level, there are elements which then start to play out differently.
“Our expectation for the full year inflation is in the range of about €750m to €900m.
“This is the total inflation, this is just not material inflation, but also the non-material costs, including logistics and our factory operations.
“If you were to put it into context, this will be about €350m to €500m higher than our prior expectations when we began the year.”
L’Oréal and Beiersdorf also outlined at the end of April how the conflict was impacting business.
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