For the last month, chief executives shared that in beauty, growth is still elusive.
The most recent crop of earnings displayed tepid results from almost every big beauty firm, with the likes of E.l.f. Beauty and Beiersdorf cutting guidance or setting it below analyst expectations. Already-pressured companies like Estée Lauder Companies and Shiseido slipped further, while the usually resilient L’Oréal saw its share price drop 6 percent on muted sales growth.
The deceleration has been sequential. In the years directly following the pandemic, growth was more readily found as customers had both pent-up savings and demand for consumer goods. Companies benefitted from both volume growth and price increases as customers seemed endlessly happy to premiumise. But the economic climate has shifted — in October, US consumer confidence dropped to near the lowest on record, according to data from the University of Michigan — and companies are under pressure to deliver.
“Purchase frequency is coming down — people are only buying when they need it,” said Filippo Falorni, a managing director at investment bank Citi, adding that customers might look to “stretch” their usage of products.
Though there are clear winners in beauty, E.l.f’s Rhode, L’Oréal’ Color Wow and Kérastase and Korean-made brands like Beauty of Joseon and Tirtir, more brands are fighting for customers’ dollars with less shelf space or advertising spend than before.
But overall gains in beauty will be minimal. In a research note, Jeremy Fialko, an analyst at HSBC, said beauty’s overall growth will be at or below the bottom end of the 4-5% historical range for the year.
“We do not see much of a pickup in 2026,” he wrote.
The American Beauty Problem
Almost every major beauty conglomerate saw losses in the US; Coty’s American business declined 6 percent, Shiseido’s sank 9 percent, and Estée Lauder Companies’ dropped 2 percent.
The rising dominance of Sephora and Ulta Beauty has meant that brands that are reliant on department stores, drugstores or direct-to-consumer selling are struggling to ratchet up sales. And even in those top specialty retailers, more brands are competing for less shelf space and attention. Even newer beauty channels like Amazon and TikTok Shop aren’t fool-proof sales vehicles as brands struggle to understand their places in the larger platforms ecosystem.
Falorni said retailers were placing smaller orders as consumption levels changed, leaving beauty firms with inventory surfeits. “Some of it is channel shift as customers shop elsewhere, so [conglomerates] need to readjust to this new reality,” he said. Both Coty and Estée Lauder Companies noted smaller retailer orders as a drag; the latter did note that its brands were growing on Amazon.
L’Oréal had previously noted the weakness in drugstores such as CVS and Duane Reade as weighing on its mass line Cerave, though chief executive Nicolas Hieronimus told analysts in an earnings call that it had “finally” gone back into “slightly positive territory”.
Companies are moving to offset the effects of a softer US market. For example, L’Oréal and Puig are pushing into emerging markets like India and Southeast Asia to try and rebalance growth.
China’s Green Shoots
China, too, has reemerged as a priority for global conglomerates after many years of shortfalls.
Amorepacific’s business grew 9 percent in the market, thanks to the international K-Beauty boom and the success of brands like Aestura and its namesake label. Coty’s chief executive officer Sue Nabi said the market is recovering across all its sectors, and that smaller brands like Lancaster are growing fast.
Estée Lauder Companies, which has been hampered by its overexposure to the market since 2022 saw sales increase 9 percent in the region, with share gains led by its more premium brands like La Mer, Le Labo and Tom Ford. However, Falorni noted that the company is still down on a two-year basis, as many firms are lapping an especially bad period in the prior year. It’s a wait and see game for now, as subsequent quarters could have more disappointing results, cautioned Falorni.
L’Oréal’s Hieronimus agreed that one quarter doesn’t make a trend. “Overall, the market has gone into a positive territory… we see a slight uptick in consumer confidence.”
The Fragrance Gold Rush
While fragrance is still a winning category, signs of a slowdown are becoming apparent.
Spanish firm Puig, which derives more than 70 percent of its income from popular fragrance lines like Carolina Herrera, Byredo and Paco Rabanne, said the wider fragrance market had become softer. Its fragrance unit grew just 2.8 percent — in the preceding two quarters, it grew more than double that.
Fragrance’s slowdown is not just a concern for specialist firms like Puig, Interparfums and Coty. Even L’Oréal is reliant on perfume. With its acquisition of Creed and the rest of Kering’s fragrance lines, its exposure to the category will increase around 6 percent, according to investment bank HSBC; It’s already close to 14 percent, per the same research.
Even though growth at Estée Lauder Companies will be incrementally positive (its fragrance business is smaller than most), banking too much on scents to grow is not a foolproof plan. It’s an intensely competitive category ruled by niche brands, and while the likes of Le Labo are still popular, its efforts are behind the curve.
In the year ahead, Oliver Chen, a managing director at the investment bank TD Cowen, said the industry is normalising, but with clear winners and losers. “It’s about who can compete with the channel changes,” he said referring to the rising tide of e-commerce and social shopping, and who can seize an opportunity to re-excite customers about makeup, an area he said had been less dynamic.
“We’re itching for more innovation in cosmetics,” he said.
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