As consumers increasingly purchase cosmetics online, their efforts to accelerate their digital operations are working in favor of companies in the Zachs cosmetics industry. Increasing interest in marketing campaigns and discreet product launches have contributed to the growth of players in this space. These investments, inflationary pressures and supply chain disruptions are costing profits.
Nevertheless, in addition to the above benefits, growing consumer interest in grooming and grooming The Estée Lauder Companies Inc. El, Coty Co., Ltd. Coty, Interparfums Co., Ltd. IPAR and Helen of Troy Exclusive Helle.
About the industry
The Zacks cosmetics industry includes companies that provide beauty and personal care products. Industry players manufacture, distribute, market and market skin care, fragrance, makeup and hair care products. Many companies in the space market sell through sales representatives, but some sell their products through retailers, independent and chain drug stores and pharmacies, luxury perfume stores, department stores, and beauty salons. . We also operate through retailer websites, third party distributors, onboard and duty free shops. Products offered by industry participants include moisturizers, serums, toners and cleansers for skin care. Perfume spray, candles and soap scents. Lipstick, mascara, powder, eyeshadow, foundation, and nail polish. Shampoo, conditioner and hair color products for hair care.
Trends Shaping the Future of the Cosmetics Industry
Demand for skin care is strong, makeup is making a comeback: The surge in demand for skincare and other personal care products has worked well for some cosmetic companies. Growing consumer interest in self-care and maintaining a healthy skin care routine lends itself well to this category. The makeup category is on track for a full recovery of cosmetic players. This may be attributed to the increasing demand for beauty products amid increasing socialization. Players in this space dominate the fragrance and hair care categories, with product novelty being a strong driver. Such a rise could continue to support the top-line performance of cosmetics companies. Additionally, increased consumer spending on cosmetics during the holiday season is a tailwind for these companies.
Innovation and digitization – the main drivers: When it comes to beauty and skin care, consumers continue to expect unique product offerings that incorporate the latest technology and expert scientific formulations. With a focus on resonating with the evolving tastes of consumers, cosmetic manufacturers are busy with innovation and product launches. Growing consumer awareness is also stimulating demand for organic skincare and “clean beauty” products. Additionally, the cosmetics manufacturer’s top priority was to enhance its e-commerce capabilities to expand its market reach. Due to the ease and convenience of online shopping, sales of cosmetics through online channels are steadily increasing. Cosmetics companies have made great strides on this front, as evidenced by tools such as virtual tries, new digital payment solutions, and digital marketing efforts. Other than this, players have strengthened their brand portfolios through discreet acquisitions and strategic alliances.
headwind of inflation: Companies in the cosmetics industry face inflationary pressure on operating costs such as labor, consumables and travel expenses. Some players are battling supply chain disruptions stemming from prolonged COVID-related factors, port congestion and reduced air cargo capacity, resulting in rising freight costs. In addition, increased marketing expenses and increased investment in strengthening in-store and digital operations, especially during the holiday season, may have pushed up selling, general and administrative expenses for cosmetics companies. These factors pose a threat to corporate margins. The impact of lower demand and lower discretionary spending due to inflationary pressures is also a major concern for payers.
Sachs industry ranks show bright outlook
Zacks Cosmetics Industry belongs to the broader Zacks Consumer Staples division. The industry currently holds a Zacks Industry Rank of #33, placing him in the top 13% of his 250+ Zacks industry.
The Group’s Zacks Industry Rank, which is essentially the average of the Zacks Ranks of all member stocks, shows a solid near-term outlook. Our research shows that the top 50% of industries ranked by Zacks are more than twice as good as the bottom 50%.
The overall earnings outlook for the constituent companies is good, as the industry is positioned in the top 50% of industries ranked by Zacks. Analysts seem increasingly confident in the group’s earnings growth potential, given the revised gross profit forecast. Since the beginning of December 2022, the industry’s consensus earnings forecast for this financial year is up 11.4%.
Before we dive into some of the stocks you might want to consider in your portfolio, let’s take a look at the industry’s recent stock market performance and valuations.
industry vs.wider market
The Zacks Cosmetics industry underperformed the Zacks S&P 500 Composite and the broader Zacks Consumer Staples sector over the past year.
The industry fell 33.7% over the period, compared to an 18.9% decline for the S&P 500. The broader sector fell 5.1% over the above timeframe.
1 year price performance
Industry Current Rating
Based on 12-month forward price/earnings ratios (P/E) commonly used to value consumer goods stocks, the industry is now trading at 35.42x compared to 17.30x for the S&P 500 and 17.4x for the sector It has been.
As the chart below shows, over the past five years the industry has traded at a high of 45.92x, a low of 19.64x and a median of 27.82x.
Price/earnings ratio (last 5 years)
4 cosmetics brands to watch
interparfum: The company is engaged in the manufacture, distribution and marketing of a wide range of fragrances and related products. The Zacks ranked #1 (Strong Buy) company is benefiting from solid growth across its European and US operations, thanks to the impressive performance of its brand. IPAR is expanding its business through new licenses and acquisitions. The management team’s focus on innovation and product launches means it is well-positioned to meet the growing demand in the fragrance space. you can see See the full list of today’s Zacks #1 ranked stocks here.
The Zacks Consensus estimate for IPAR’s 2022 earnings per share (EPS) has remained unchanged for the past 30 days at $3.40 per share. Interparfum’s share price is up 5.2% over the past year. IPAR’s expected EPS growth is 15% over three to five years.
Price and Consensus: IPAR
The Estée Lauder Companies: This New York-based company is engaged in the manufacturing and marketing of skin care, makeup, fragrance and hair care products. The Estee Lauder Companies’ online business is doing well and may continue to be a major growth engine. The company is implementing new technologies and digital experiences to accelerate growth. The Zacks Rank 3 (Hold) company plans to strategically expand its brand into new countries while expanding consumer reach with productive distribution across high-growth channels.
The Zacks consensus estimate for the company’s fiscal 2023 EPS has remained unchanged for the past 30 days at $5.35 per share. The Estee Lauder Companies’ projected EPS growth over three to five years is 9.6% for him. EL’s stock has fallen 26.4% over the past year.
Price and Consensus: EL
Coty: The manufacturer, marketer and distributor of this beauty product currently holds a Zacks Rank #3. Coty is committed to strategic partnerships to strengthen its brand portfolio. It’s a good sign that he’s focusing on six strategic pillars for sustainable growth, including expanding his make-up brands and mass fragrances, and building a strong skincare portfolio. COTY is enhancing its e-commerce and direct-to-consumer selling capabilities. Management is working to optimize the overall cost structure.
Zack’s Consensus estimate for Coty’s fiscal 2023 EPS has remained unchanged at 32 cents per share for the past 30 days. COTY’s stock has fallen 10.5% over this past year. The company’s projected EPS growth is 14.3% over three to five years.
Price and Consensus: COTY
Helen of Troy: Providers of consumer products across beauty, household, and health & home segments are benefiting from a focus on strengthening their leadership brand portfolio. The #3 Zachs Rank invests in key areas such as consumer-centric innovation, digital marketing, production enhancements, distribution capabilities and direct-to-consumer channels. HELE is developing a global restructuring plan, Project Pegasus, aimed at expanding operating margins
The Zachs Consensus estimate for Helen of Troy’s fiscal 2023 EPS has remained unchanged for the past 30 days at $9.23 per share. The company’s stock has fallen 52.2% over the past year. HELE’s expected EPS growth is 8% over three to five years.
Price and Consensus: HELE
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