Beauty stocks experienced sharp declines this week as major companies reported underwhelming earnings and revised their sales outlooks downward. E.l.f. Beauty suffered its worst week since 2018, with shares plunging nearly 29% over five days. The company exceeded revenue expectations for its fiscal third quarter but missed on adjusted earnings per share and lowered its full-year sales forecast to between $1.3 billion and $1.31 billion, down from its previous estimate of $1.32 billion to $1.34 billion.
CEO Tarang Amin pointed to a 5% decline in the cosmetics sector in January, attributing it to post-holiday discount fatigue and waning online interest in beauty products. Following the disappointing report, analysts from Morgan Stanley, D.A. Davidson, and UBS downgraded E.l.f.’s stock to neutral or equal weight.
Estee Lauder also faced significant losses, with shares dropping 22%, marking its worst performance since November. The company announced plans to cut between 5,800 and 7,000 jobs by the end of fiscal 2026 due to weakening travel retail demand in Asia, which is expected to negatively impact third-quarter net sales. Despite beating revenue and earnings estimates for its second quarter, the stock took a substantial hit.
Newly appointed CEO Stéphane de La Faverie acknowledged the company’s struggles, stating that they had failed to act swiftly and capitalize on high-growth opportunities.
Other beauty stocks also suffered, with Ulta Beauty declining 9%—its worst week since April—and Coty losing nearly 8%, marking its biggest drop since October. E.l.f. Beauty’s CEO noted signs of softness at Ulta in January, further adding to concerns about slowing consumer demand.
The beauty industry now faces additional challenges as trade tensions escalate. China recently imposed tariffs on select U.S. imports in response to new American tariffs. Given that E.l.f. Beauty produces around 80% of its products in China, these tariffs could impact profitability. However, the company expressed relief that the imposed tariffs were only 10%, significantly lower than the previously discussed rate of up to 60%.
As market volatility continues, beauty brands must navigate shifting consumer trends, economic headwinds, and trade uncertainties to regain investor confidence.
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