The news: Estée Lauder and Puig ended merger talks last week—a move investors quickly applauded, sending Estée Lauder’s share price up 10% in trading following the announcement.

How we got here: The market’s relief at the aborted merger points to broader skepticism that the deal would lift Estée Lauder’s fortunes.

On paper, the deal had merits. The combined company would have had a diversified portfolio split evenly across skincare, fragrances, and makeup and hair care, making it less vulnerable to weakness in any one sector. It would have also been better positioned to compete with L’Oréal for shelf space and global influence, despite still being less than half its size in both sales and market capitalization.

But both Estée Lauder and Puig are on uncertain ground. Estée Lauder is in the early innings of a turnaround as it looks to revitalize ailing brands and reclaim share in the US and other key markets. While the company pointed to progress in its most recent quarter (ended March 31, 2026), it is still realigning its portfolio and distribution channels to better match growth opportunities in the beauty market.

Puig faces challenges of its own. Reports that Charlotte Tilbury was seeking to renegotiate buyout terms with the company may have spooked Estée Lauder, given the brand’s importance to Puig’s portfolio. Puig is also confronting a slowing fragrance market alongside rising competition from mass-market brands, which may have diminished its appeal as an acquisition target since that category accounts for over 70% of its revenues. Mass retail fragrance sales spiked 16% in the first three months of 2026, compared with 7% for prestige, according to Circana data.

Implications for retail: While both companies may have initially considered a merger their only choice to compete with L’Oréal, a combined organization may have proved too unwieldy and disjointed to pose a strong threat. Doubling down on prestige brands was also a risky move, given recent data pointing to increased momentum for mass labels. Beyond fragrance, mass sales in makeup and skincare also grew faster than prestige in Q1, pointing to value-seeking behavior among beauty shoppers.

With a merger off the table, both companies will have to focus on execution.

This content is part of EMARKETER’s subscription Briefings, where we pair daily updates with data and analysis from forecasts and research reports. Our Briefings prepare you to start your day informed, to provide critical insights in an important meeting, and to understand the context of what’s happening in your industry. Non-clients can click here to get a demo of our full platform and coverage.