Beauty Industry Faces Slow Start in 2025: Recovery Hopes Remain

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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