Estée Lauder sinks 7.8% on Puig acquisition talks
Market skeptical of potential $40bn beauty deal as company struggles with declining revenues and turnaround challenges
Estée Lauder Companies shares plunged 7.8% to $79.22 on Monday following reports that the struggling cosmetics giant is nearing a deal to acquire Spanish beauty group Puig in a transaction that could create a combined entity valued at approximately $40 billion.
The steep sell-off reflects investor skepticism about a transformative acquisition at a time when Estée Lauder is grappling with declining revenues, negative earnings, and the early stages of a strategic turnaround. The stock has now fallen roughly 30% from its 52-week high of $121.25 reached last year, wiping out billions in market capitalization.
Puig, the Barcelona-based owner of fragrance brands including Jean Paul Gaultier and Paco Rabanne, confirmed in March that it is in discussions with Estée Lauder regarding a potential business combination. However, the Spanish company emphasized that no definitive agreement has been reached and there is no assurance that a transaction will materialize or what its terms might be.
Discussions have reportedly involved a mix of cash and stock for a potential combination, according to reports. Puig generated €5.04 billion in revenue during 2025 and has been pursuing its own acquisition strategy, including taking a majority stake in Charlotte Tilbury with options for full ownership exercisable between 2026 and 2031.
The market's negative reaction underscores concerns about Estée Lauder's financial position as it considers a major acquisition. The company reported a net loss of $546 million in its fiscal fourth quarter ended June 30, 2025, with diluted earnings per share of $0.09—representing an 86% decrease from the prior year. For the full fiscal year 2025, organic sales declined 8% to $14.326 billion.
Estée Lauder's challenges have been particularly pronounced in key markets. Global travel retail sales plummeted 28% organically in the third quarter of 2025, while muted consumer sentiment in China and softness in North America have compounded headwinds. The company's current trailing earnings per share stands at negative $0.52, and its market capitalization has contracted to approximately $31 billion.
Analysts have grown increasingly cautious about Estée Lauder's prospects. TD Cowen cut its price target to $95 from $115 on March 20 while maintaining a "Hold" rating, reflecting concerns about the company's turnaround trajectory. The average analyst target price of $108.83 suggests significant upside from current levels, but investors appear skeptical that a large acquisition will accelerate recovery rather than compounding existing challenges.
Estée Lauder Chief Executive Stéphane de La Faverie stated in February that the company was open to acquisitions as part of its strategy to accelerate growth and rebuild profitability. The company has been implementing its "Beauty Reimagined" transformation plan, which includes restructuring costs aimed at right-sizing the business.
However, investors question whether adding the complexity of integrating Puig's portfolio—while shouldering the debt that would likely be required to fund such a transaction—is prudent at this juncture. The broader beauty sector M&A market is expected to see increased activity in 2026 as buyer confidence improves, but premium valuations for quality assets remain a concern for acquisitive companies.
For Estée Lauder, the fundamental challenge remains demonstrating that its core business can return to sustainable growth before expanding through costly acquisitions. The company has projected a return to sales and EPS growth in fiscal year 2026, with organic net sales expected to be flat to up 3% and diluted earnings per share between $2.03 and $2.23. Second-quarter fiscal 2026 results showed a 43% rise in EPS, offering some evidence of early turnaround progress.
Yet Monday's sharp decline suggests investors believe that a Puig acquisition would represent an unnecessary strategic detour at a time when the company's primary focus should be on stabilizing its existing operations and delivering on its turnaround promises. With the stock trading below $80 per share—far below its 52-week highs—the market is sending a clear message that financial discipline, not expansion, should be Estée Lauder's priority.