Cosmetics climate: Coty, LVMH and Ulta Beauty predict slower growth amid “headwinds”
The global beauty landscape is grappling with weaker sales and many are revising growth outlooks. Coty says the global beauty market is still solid but predicts “slightly lower” growth in the short term.
It still sees “resilience” in many parts of the world, but noticed that the US market growth is slowing down. However, Coty remains confident about the prestige fragrance category which is “outperforming expectations.”
LVMH announced revenue was down 2% in the first nine months of the year but it achieved growth in perfume and cosmetics. It reported revenue of €60.8 billion (US$65.98 billion) in that period.
Ulta Beauty acknowledged that competition is stiffer as it vies for customers alongside beauty giants such as LVMH-owned Sephora.
Ulta’s Analyst Day
Ulta Beauty recently held its Analyst Day near its headquarters in Chicago, Illinois, US. At the event, held every three years, it presented a cautious outlook for the upcoming year, remaining conservative about earnings growth in the upcoming months.
While various Wall Street analysts revised their expectations for the company, JP Morgan just announced it was raising its price target and maintaining an “overweight” rating for the US beauty retailer’s stock. The investment bank’s retail analyst pointed to Ulta Beauty’s Analyst Day presentation and said it aligned with long-term earnings expectations despite the cautious outlook for 2025.
Coty owns Kylie Skin, Kylie Cosmetics and Kylie Baby (Image credit: Coty).Many analysts remain confident about Ulta Beauty, especially after it was revealed that legendary investor Warren Buffett’s conglomerate, Berkshire Hathaway, purchased a sizable stake in the company over the summer. The company also released its quarterly report at that time, with earnings falling short of Wall Street’s estimates. The retailer blamed growing market competition on the diversifying omnichannel playing field, particularly for premium beauty.
Coty’s supply and demand
To monitor unit demands, Coty has been keeping “very tight” orders and managing inventory by retailers. This has resulted in the company’s sell-in tracking well below sell-out in several markets, including the US, Australia, China and Travel Retail Asia.
Coty’s Q1 sales grew approximately 4–5% LFL, despite the “very elevated” comparison of the prior year, though moderately below its prior Q1 estimated growth of 6% LFL. Factoring in the ongoing retailer caution and incrementally slower US market, Coty anticipates Q2 LFL sales to “grow moderately,” with some growth acceleration expected in the second half.
The beauty company says the personal care industry anticipates a more uncertain demand backdrop, including cautious retailer behavior and a complex macroeconomic environment.
Coty is re-accelerating its cost reduction efforts to deliver savings above the initial FY25 target of approximately US$75 million.
Personal Care Insights recently spoke to machine intelligence platform Spate after it reported a 7.7% drop in online interest in makeup across Google and TikTok. The platform attributes the fall in engagement to lesser interest in eyeshadows and eyeliners and suggests companies create multifunctional lip products to attract cosmetics consumers.
LVMH’s Perfume &Cosmetics sector achieved growth despite a beauty industry slowdown.
LVMH perfume performance
LVMH’s Perfumes & Cosmetics business group achieved organic revenue growth of 5% in the first nine months of 2024, which it attributes to its innovation strategy and selective distribution policy.
Christian Dior was said to have an “excellent performance.” The French multinational holding company says the growth was driven by the Sauvage perfume, Rihanna becoming the new face of J’adore and the latest Miss Dior Parfum edition.
Makeup and premium skin care also contributed to the Maison’s strong performance. Guerlain had “solid momentum” in fragrances due to its L’Art & La Matière collection and the addition of its new Florabloom scent to the Aqua Allegoria line.
Givenchy continued to see growth from its new L’Interdit Absolu fragrance. Meanwhile, Fenty Beauty launched a new range of hair care products and expanded its retail presence in China.
Earlier this year, LVMH recorded revenue of €41.7 billion (US$45.2 billion), with a 14% slump in net profit in the first half of 2024. Its second quarter saw revenue growth of 1% and a 14% sales drop in Asia, mainly including China and excluding Japan. However, its beauty and Sephora businesses performed favorably.
Fenwick’s fall down
UK department store Fenwick fell into the red with its latest financial statement, indicating that “the market environment continued to provide a challenging backdrop to sales. The effects of the war in Ukraine continued to be felt, impacting the supply chain and costs,” says the retailer.
Beauty companies are trying to control their supply and demand as the beauty industry is experiencing slower sales.“Mortgage rates continued to be high, as did inflation, contributing further to the ongoing effects of the cost-of-living crisis. In the last quarter sales were further impacted by heavy discounting by competitors. This has impacted the company’s ability to limit discounting and contain costs relative to sales.”
Leading British retailers recently called on the UK government to help their bottom line by cutting business rates by 20%. Over 70 retail CEOs wrote a letter pleading for the government to “level the playing field” for retail properties. The British Retail Consortium tells Personal Care Insights that it is essential to assist UK retailers since the region has been losing 1,000 shops a year.
As the beauty industry prepares for the upcoming holiday season, Ulta Beauty says it will increase its focus on exclusive products and try to get ahead of beauty trends.
Monica Arnaudo, chief merchandising officer at Ulta Beauty, says, “We are experts in identifying [and] bringing key trends to the market with our brand partners. This will be more critical than ever as the market becomes increasingly competitive.”
