The beauty industry has entered 2025 on a weak footing, with several major players—L'Oréal (EPA: OREP), Coty (NYSE: COTY), Estée Lauder, and Elf Beauty—reporting disappointing Q4 2024 results. The industry’s growth rate slowed to 3.5% in H2 2024, down from 5.5% in H1, reflecting broad-based weakness across regions and product categories, except for fragrances.
Industry Challenges and Regional Trends
1. Asia and North America Face Continued Weakness
- Asia Travel Retail is expected to contract further in Q1 2025.
- Mainland China remains in a slight decline, despite hopes for a rebound.
- North America’s makeup sector is under pressure, with dermocosmetics slowing.
2. Fragrances Buck the Downtrend
- The fragrance segment continues to show resilience, emerging as a bright spot in the industry.
3. Rising Costs Add to Industry Struggles
- UBS warns that a quick turnaround in Q2 may be unrealistic, citing:
- Higher costs affecting margins.
- Potential inventory rebuilding in North America.
- New product launches that could help, but may not be enough to offset broader weakness.
4. Beiersdorf’s Outlook in Focus
- Beiersdorf (ETR: BEIG) will report earnings on February 27.
- UBS expects 7.8% organic sales growth in Q4 but warns that the company may miss its 2025 outlook.
- Forecasted 5.1% growth for 2025 lags behind the market consensus of 6%.
Investment Takeaways: Monitoring Key Metrics
- Global beauty sector growth trends, especially in China and North America.
- Fragrance segment’s performance, as it continues to defy broader industry weakness.
- New product launches and their ability to drive demand recovery.
- Rising costs and inventory trends across major beauty brands.
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