Companies in the Zacks Cosmetics industry are operating in a rapidly evolving macroeconomic landscape, grappling with external challenges that are dampening consumer demand and pressuring sector performance. Sluggish sales are being compounded by rising production and operational costs, which continue to impact profitability and efficiency.
Nevertheless, leading players such as The Estee Lauder Companies Inc. EL, Coty Inc. COTY, Helen of Troy Limited HELE and European Wax Center, Inc. EWCZ are benefiting from backed strategic investments in digital transformation, innovation and omnichannel engagement. These initiatives are enabling them to navigate economic headwinds to sustain growth in a competitive beauty industry.
About the Industry
The Zacks Cosmetics industry includes companies that provide beauty and personal care products. Players in the industry manufacture, distribute, sell and market skincare, fragrance, makeup and hair care products. Many firms in the market sell products via sales representatives, whereas some do the same through retailers, independent and chain drug stores and pharmacies, upscale perfumeries, department stores and beauty salons. These companies also operate through retailer websites, third-party distributors and in-flight and duty-free shops. Some products offered by industry participants include moisturizers, serums, toners and cleansers under skincare; perfume sprays, candles and soaps under fragrance; lipsticks, mascaras, powders, eye shadows, foundation and nail polishes under makeup; and shampoos, conditioner and hair color products under hair care.
Trends Shaping the Future of the Cosmetics Industry
Challenging Economic Conditions: Cosmetic companies are facing an increasingly uncertain economic environment due to ongoing trade tensions, reduced consumer spending and inconsistent retail replenishment cycles. With elevated living costs and shrinking savings, consumers are becoming more cautious, focusing on essential purchases and cutting back on discretionary items like cosmetics. This shift in consumer behavior is creating a difficult demand landscape for many beauty brands. At the same time, escalating costs for packaging, ingredients, logistics and promotional efforts are increasing operational expenses, tightening profit margins and intensifying competition in the beauty industry. In addition, a potential rise in tariffs could further strain global supply chains and lead to increased product pricing, laying more pressure on cosmetic companies navigating this volatile market.
International Risk Factors: Cosmetic companies with a global presence are exposed to international risk factors, including unfavorable foreign currency fluctuations that can affect revenues and profitability. Geopolitical tensions and political instability may disrupt market access, hinder supply-chain efficiency and affect overall operational continuity. The ongoing trade wars and potential new tariffs, sanctions, and regulatory restrictions pose significant challenges. This, in turn, may increase costs and affect product availability across key international markets.
Innovation & Digitization: Major Drivers: Innovation and digitization are key growth drivers in the beauty and skincare market. Consumers are increasingly seeking unique products that combine advanced technology with expert scientific formulations. In response to these evolving preferences, cosmetic companies are continuously innovating and introducing new products. The rising consumer interest in organic and clean beauty products has fueled market growth. Enhancing e-commerce capabilities is a key priority, with advancements like virtual try-on tools, seamless digital payment systems and enhanced online marketing strategies gaining traction. In addition, many beauty brands are expanding their product portfolios through strategic acquisitions and partnerships to stay competitive in this rapidly changing industry.
Zacks Industry Rank Indicates Dull Prospects
The Zacks Cosmetics industry is housed within the broader Zacks Consumer Staples sector. The industry currently carries a Zacks Industry Rank #213, which places it in the bottom 14% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
The industry’s position in the bottom 50% of the Zacks-ranked industries leads to a negative aggregate earnings outlook for the constituent companies. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually losing confidence in this group’s earnings growth potential. Since the beginning of February 2025, the industry’s consensus estimate for current financial year earnings has decreased 11.7%.
Before we present a few stocks that you may want to consider for your portfolio, let’s look at the industry’s recent stock market performance and valuation picture.
Industry vs. Broader Market
The Zacks Cosmetics industry has underperformed the Zacks S&P 500 composite and the broader Zacks Consumer Staples sector over the past year.
The industry has declined 59.6% over this period against the S&P 500’s and the broader sector’s growth of 6.4% and 6.2%, respectively.
One-Year Price Performance
Industry's Current Valuation
Based on forward 12-month Price-to-earnings (P/E), which is commonly used to value consumer staples stocks, the industry is currently trading at 19.21X, compared with the S&P 500’s 19.71X and the sector’s 17.4X.
In the past five years, the industry has traded as high as 42.58X and as low as 19.21X, with the median being 33.28X, as the chart below shows.
Price-to-Earnings Ratio (Past Five Years)
4 Cosmetic Stocks Worth Considering
The Estee Lauder Companies: The Zacks Rank #3 (Hold) company manufactures and markets skincare, makeup, fragrance and hair care products. The Estee Lauder Companies is strategically focused on restoring profitability and driving long-term growth through its expanded Profit Recovery and Growth Plan (“PRGP”). The transformative Beauty Reimagined vision aims to position the company as a leading consumer-centric prestige beauty brand by enhancing innovation, expanding in high-growth markets and digital channels, and streamlining operations for agility. With a strong online business, increased AI integration, and successful brand launches, The Estee Lauder Companies is well-positioned for growth. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for EL’s current fiscal year earnings per share (EPS) has moved up 2.2% in the last seven days to $1.39. EL’s shares have lost 39.6% in the past six months.
Price and Consensus: EL
Coty: A leading manufacturer, marketer, and distributor of beauty products, Coty holds a Zacks Rank #3 at present and continues to build sustainable growth through a well-defined strategic focus. The company is capitalizing on brand strength, digital acceleration, and cost optimization to drive performance. The six core pillars of Coty’s growth strategy are stabilizing its Consumer Beauty segment, expanding Prestige fragrances and makeup, building a strong skincare portfolio, and enhancing its e-commerce and Direct-to-Consumer (DTC) channels. The fragrance business remains a key revenue driver, supported by strong consumer demand and innovative product launches. Coty’s All In to Win cost-saving initiative is also delivering meaningful improvements in margins and operational efficiency.
The Zacks Consensus Estimate for COTY’s current fiscal year EPS has moved down 5.1% in the past 30 days to 37 cents. Coty’s shares have lost 36.4% in the past year.
Price and Consensus: COTY
Helen of Troy: This provider of consumer products across Beauty, Housewares and Health & Home segments is driving sustainable growth through a focused strategy centered on its high-performing Leadership Brands. These premium, high-margin brands are fueling market share gains through strategic investments in innovation, marketing and expanded distribution. The company’s long-term strategic plan, Elevate for Growth, enhances brand building and operational scale. The Zacks Rank #3 company is also making significant progress with Project Pegasus, a global restructuring initiative aimed at improving operating margins, streamlining operations and driving reinvestment in brand growth.
The Zacks Consensus Estimate for Helen of Troy’s current fiscal year EPS has moved down 0.4% in the past seven days to $7.20. The stock has lost 50.2% in the past six months.
Price and Consensus: HELE
European Wax Center: The largest and fastest-growing franchisor and operator of out-of-home waxing services in the United States, EWCZ holds a Zacks Rank #3 at present. With a highly committed network of franchise partners, the company is well-positioned for long-term expansion. European Wax Center is focused on increasing guest acquisition, boosting average ticket sales through customer retention and reactivation, and enhancing overall operational productivity. By leveraging innovative marketing strategies and advanced technology solutions, the brand aims to attract new clients while strengthening engagement with the existing ones. These efforts are strengthening customer relationships, improving brand loyalty and aiding sustainable long-term growth.
The Zacks Consensus Estimate for European Wax’s current fiscal year EPS has moved down a penny in the past 30 days to 31 cents. EWCZ stock has declined 49.1% in the past six months.
Price and Consensus: EWCZ
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
