Beauty stocks fell after Ulta issued a gloomy outlook for cosmetic spending
Beauty fades
The beauty industry has seen some unsightly setbacks this week. Shares of chain retailer Ulta Beauty fell 15% on Wednesday, following warnings from CEO Dave Kimbell that demand for beauty products was cooling — dragging cosmetic stocks E.l.f. Beauty (-12%), Estee Lauder (-4%), and Coty (-6%) down with it.
Ulta now forecasts comparable sales to slacken to 4-5% growth for the year ahead, down from more than 15% growth in fiscal 2022. With execs outlining the significant stalling of luxury makeup purchases, investors lost yet more confidence in Estée Lauder in particular, as the struggling legacy brand’s pivot away from department stores has yet to pay off.
Makeunder?
While beauty has long been considered a safe bet in retail, with consumer spending in the sector tending to stay relatively constant during times of financial hardship (see the “Lipstick Effect”), this slowdown indicates that perhaps beauty shoppers aren’t completely immune to 2-and-a-half years of inflation.
E.l.f Beauty especially could find itself on something of a powder keg with the impending fate of the TikTok bill. Having blown up on the ByteDance-owned app with Gen-Z-oriented marketing campaigns, and last week becoming the first brand to feature in a TikTok Shop Super Brand Day, the vegan cosmetics company has seen sales skyrocket, notching 17 consecutive years of growth. Indeed, all slowdowns are relative — and the brand has plenty of momentum to fall back on, reporting an 85% jump in sales in its most recent quarter.
