Sept 2, 2019: Elisabeth King reports on this week’s business news

Revlon seeks buyers for entire business; Coty to exit Younique; Ulta Beauty posts double digit growth but warns against slowdown; and IPSOS tracks impact of major beauty trends.

Revlon seeks buyers for entire business
We recently reported that Revlon had hired Goldman Sachs to scout for companies interested in buying parts or all of its brands and interests. An article from media and business heavyweight, Bloomberg, reveals that selling off segments of the iconic beauty company is off the table and the entire business is on the block. Revlon will begin a formal marketing process as it seeks to secure a buyer that will help turnaround the company without taking it private, says the report.

The initial strategy will follow up with US companies and investors who have indicated an interest in a buyout. Revlon's Q2 2019 results saw a 3.3 percent decline in sales to US$570.2 million, largely due to dropping revenues in the Portfolio and Fragrances divisions. Elizabeth Arden was the only sector to deliver sales growth for the period.

Coty to exit Younique
Two years ago, Coty acquired a 60 per cent controlling stake in Younique for US$600 million in cash. The US-based direct-selling company aimed at younger consumers was founded in 2012 by Derek Maxfield and Melanie Huscroft and was generating US$400 million at the time. The two companies have announced they have come to a mutual decision to terminate the partnership.

Coty will sell back its stake to Maxfield and Huscroft, who will continue to run the company. No further details of the agreement will be made public. Coty invested in Younique to boost its business in Brazil and to increase its digital expertise.

Coty also announced its full year 2019 revenues, which declined 8 per cent to US$8.648 billion compared to the same period in 2018. The luxury division, including core franchises such as Burberry, Marc Jacobs, Calvin Klein and Gucci, was the only sector to show growth of 2.6 per cent to US$3.294 billion. Declines in the North American and European markets prompted a revenue drop of 17.1 per cent in the consumer beauty division to US$3.539 million. North America was also a drag on the professional beauty division - down 5.4 per cent to US$1.814 billion.

CEO Pierre Laubies remains upbeat about the multinational's Turnaround Plan. "Our plan will deliver gradually, but we expect dynamics to start changing as soon as this upcoming year, as reflected in our targets for FY20".

Ulta Beauty posts double digit growth but warns against slowdown
Ulta Beauty has posted major growth diluted by an earnings prediction of a slowdown in the US beauty market. The largest specialist beauty chain in the US saw net sales rise 12.5 per cent to US$3.409 billion in the first half of the year. But double digit growth of 12 per cent in Q2 to US$1.666 billion also came with a revised estimate for the rest of the fiscal year, triggering a 20 per cent fall in the company's share price.

According to CEO Mary Dillon: "The Ulta Beauty team delivered another quarter of solid top-line performance, gross margin expansion and double digit earning growth. Looking forward, we have updated our fiscal 2019 outlook to reflect the headwinds we are currently seeing in the US cosmetics market".

Dillon retains a positive outlook and there's certainly plenty of action in the second half, including the opening of 80 new stores and 300 remodels and refreshes of existing stores. Ulta Beauty also expects to increase total sales between 9 and 12 per cent to achieve comparable sales growth between 4 to 6 per cent, boosted by a surge in e-commerce of 20 per cent to 30 percent.

IPSOS tracks impact of major beauty trends
Many trends come and go with little impact on sales or long term beauty habits. While age-old truths continue to sway new generations. That's the takeaway from What the Future: Beauty, the quarterly report from IPSOS, the global market research and consulting firm. Most of the results are skewed towards the North American market, but are equally relevant in Australia.

  • Gen Zers and Millennials are most tuned into Asian trends. More than 50 per cent take guidance from Korea's K-Beauty, but 58 per cent prefer J-Beauty from Japan. In the overall beauty market, only 18 per cent of American women are aware of the multi-step beauty regimens promoted by both countries.
  • Family and friends are still the dominant influencers when it comes to beauty purchasing. Close to half of respondents listened to their mothers (49%), followed by friends (48%) and family (45%). Online videos and Instagram were a long way behind in the influence stakes at 34 per cent and 31 per cent, respectively.
  • The natural revolution rolls on. More than 50 per cent of American women are loyal to their favourite beauty brands, but 66 per cent would try a new product if it was labelled natural or organic.
  • AI and try-on apps have had limited impact. Only 28 per cent of respondents said they would buy a tinted moisturiser or foundation without experiencing it personally. Low percentages were also the norm for hair dye (29%) and concealer (34%). The most successful segments when it comes to virtual try-ons were: false eyelashes (69%) and nail polish and artificial nails - both 45 per cent.

Snippets from the Wires

  • L'Oreal bought IT Cosmetics in 2016 for US$1.2 billion. The brand has doubled its global sales under the ownership of the French titan, extending to 20 additional markets. Founder Jamie Kern Lima became the first female brand CEO in L’Oreal's history and earned US$410 million from the sale. The three year contract to stay on with the brand has expired and Kern Lima is moving on to "an exciting new professional and personal chapter".
  • According to a new survey by the NPD Group, nearly 50 per cent of new skincare launches in the US prestige beauty market contain retinol, collagen and hyaluronic acid.
  • The Estee Lauder Companies have revealed that 75 per cent of the marketing budget in the US goes to influencers, including high profile spokesmodels and micro-influencers on YouTube and Instagram.