Beauty’s current mood is anything but pretty.
In the last two weeks, three of the world’s biggest beauty conglomerates – Estée Lauder Companies, Shiseido and Coty – reported a drop in fourth-quarter sales. L’Oréal, the biggest of the group, reported a paltry 2.5 percent increase, missing analysts’ forecasts.
The slowdown is hitting both mass and prestige, and once white-hot brands like Cerave and Drunk Elephant as well as slipping legacy lines like Tom Ford and Shiseido’s eponymous brand. E.l.f. Beauty shares lost more than 20 percent of their value after the cheap beauty upstart said it was off to a slow start in 2025. And while slow sales in China are no surprise at this point, many companies are now reporting weak business in the US as well. Even skincare-crazed Gen Alpha is starting to buy less, analysts say.
Beauty’s big conglomerates can’t seem to agree on why their sales are slowing — Coty said it was lower orders from retailers, E.l.f. blamed weak January sales on customers stocking up over the holidays. Others say inflation and economic uncertainty, or even the LA fires and the brief TikTok ban, are weighing on the market. L’Oréal and Estée Lauder Companies cited a lack of innovation at their core brands.
It may be all of the above. Or it could be that the post-pandemic boom, with its ultra-maximalist routines that saw consumers mixing legacy and indie brands, was something of a mirage: despite booming sales, it’s never been harder to create a lifetime consumer.
To rebound, some brands are choosing to go back to their roots. Estée Lauder Companies’ new leadership has pledged to reinvigorate its long-held lines like Clinique and MAC Cosmetics. Others, like Shiseido and L’Oréal, have spoken of a need to recapture their core customers who have abandoned their products for the next viral brand.
A comeback is certainly impossible for some or all of these companies. But what they’re up against is the fact that the life cycle for even the hottest brand is shorter than it used to be.
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“It’s easier to say our innovation hasn’t been good enough, than it is to say a consumer just keeps moving around,” said Lauren Lieberman, a managing director in Barclay’s consumer practice. “It’s a fickle consumer.”
The New “Cool”
In the beauty industry, growth is driven by buzzy brands, and the shoppers most motivated by them: young people. Gen-Z, and increasingly, Gen Alpha shoppers were voracious beauty consumers throughout the last few years, fuelling sales at brands like Drunk Elephant, Summer Fridays and Byoma.
But the Sephora tweens may have had their fill. Credit card data compiled by the Bank of America showed that beauty spending from Gen-Zs in the US dropped by around 5 percent between June and December 2024. Young shoppers also gravitated towards makeup and fragrance categories that have an inherently lower replenishment rate than staples like shampoo or moisturiser, meaning a customer might have spent heavily over a short period, and then not need to re-up for some time. Skincare tends to have a more regular purchase frequency, and while the category — and in particular, brands with brightly coloured packaging and playful names — certainly had its share of popularity with very young customers, some of that interest from shoppers seems to have waned.
“[Gen Alpha] has been a massive consumer in these categories, and probably has a drawer full of stuff,” Lieberman said.
Becoming a Gen-Z icon is a double-edged sword. The pricey skincare line Drunk Elephant saw a fresh wave of popularity when Gen Alpha shoppers began adding its colourful serums and moisturiser to their wishlists, while viral hits like its bronzing drops seemed to generate further buzz.
Yet parent company Shiseido said its sales declined 25 percent in the last year. While an inventory issue accounted for some loss, on a call with analysts, chief financial officer Ayako Hirofuji said the company also needed to “clarify its target customer base” to reinvigorate itself. One possible interpretation is that Drunk Elephant’s popularity with teens turned off more mature customers.
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“‘What is this brand about? What does it do for me?’ We need to communicate that with consumers,” said Hirofuji.
Reaching New Customers
Actually reaching consumers is another challenge.
Sephora, Ulta Beauty and other specialty beauty retailers long ago replaced department stores as the most direct way to reach customers. However, prestige brands haven’t quite managed to replicate the cozy relationships they could build with shoppers via the beauty counter.
A Sephora or Ulta display might drive sales, but they’re not as effective as a dedicated sales associate in talking a customer into adding a cleanser and toner to the moisturiser in their basket.
With so many more sales now coming via specialty retailers, market share can be ceded much faster if a hot new competitor appears on the next aisle. The discovery of new brands now comes more from social media rather than sales associates, said Marissa Lepor, a managing director and head of beauty at the investment bank The Sage Group, which makes brand loyalty much more complicated.
“The retailers don’t care which brand that customer leaves with, as long as they left with something,” she said.
Consumers can also only pay attention to so many brands and products.
“People feel burnt out. They’re looking at their beauty products, and they’re like, ‘I don’t need to buy anymore’,” said Lisa Payne, head of beauty at trends agency Stylus.
It’s a fine line to walk, as brands rely on new products to excite shoppers and create relevancy — according to Accenture research, on average around 30 percent of a brand’s sales will come from new products.
“Too much communication kills communication,” said Audrey Depraeter-Montacel, global beauty industry lead at consulting firm Accenture, saying brands need to grapple with limited customer bandwidth for marketing and new products.
“It can become a question of ‘Do I need to kill some of my brands? Do I need to remove the long tail, or do I need to focus on my four or five biggest [sellers]?’,” she said.
The Path Ahead
To try and stay on trend, big beauty companies have relied on mergers and acquisitions to continually fold new brands into their portfolios. Adding some hot brands into the mix could be a way to lift sales and restore momentum, though conglomerates are likely wary of buying into a brand at its peak. But deal flow has significantly slowed since 2023, with many popular brands holding out for higher offers, and potential acquirers worried about buying at the peak of the market.
Having key hero franchises is also vital. Sales staff at multi-brand stores can often feel just as overwhelmed as customers by the sheer number of brands and products. Ensuring that education and messaging is clear around a single franchise or product can mean it serves as an entry point into the brand, and also a hook for retention.
Market-leading new products are still important, but the timing of these launches is more important than ever. While virality or even new trends can be hard to predict, Lieberman said having the internal agility to respond deftly and quickly when a moment arises is key.
“You have to be so ready to grab on and then figure out what that means, and how you translate that into more visibility,” she said. LVMH-owned Dior has been especially good at this, with new lip and complexion offerings that dovetail well with the modern dewy trend, whilst still feeling luxurious.
Consumers haven’t stopped caring about beauty. They’re just more discerning, and more mindful of their overall discretionary spending. Simply put, they want bang for their buck.
“People want to buy things that are additive to their routine, versus just buying things because it looks cute on their counter,” said Lepor.
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