Beautiful who came to cry: After two years in training, what happened to the beauty stocks?
Beauty stocks took a hit with the eruption of the corona, when we all stayed home, but a return to routine did them good - and even the apparent global slowdown, which is already causing declines, should not pose a real threat to their future.
Thursday, 23 June 2022, 08:17 Updated: 08:29
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The formula for increasing profits and launching shares: The international 'beauty' giants are rolling in billions of dollars a year, and have found the necessary component to eliminate the corona flaws that have begun to appear in their financial mirror, by showing double-digit growth and returning to handsome profits.
For example, the four most prominent cosmetics, perfumery and grooming companies in the US and Europe (see table) have risen by an average of 64% since the low of the corona during 2020, and by 21% since the end of 2019. Similar to the leading US indices such as the NASDAQ. K., which has climbed about 68% since the low of the corona and 23% since the end of 2019, and the S&P index, which has jumped 68% since the low of the corona and 116.5% since the end of 2019.
The double-digit growth in companies' business results was mainly due to consumer returns And for shopping, after the corona accumulated more money in its pockets, the cosmetics, grooming and perfumery industry is expected to bring in about $ 50 billion in the United States alone, and it is estimated that it is rolling in about NIS 8 billion in Israel.
The disappearance of corona loss stains has led corporate stocks to an all-time high in late 2021, but the Russia-Ukraine war, along with rising inflation, threatens to break the cover of sunscreen with the active earnings component they smeared in their latest reports, and stocks began to lose their facelift.
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Shares of grooming companies (Photo: Walla !, no)
Sergei Vaschonok, a senior analyst at Oppenheimer Investment House
, explained to Walla!
Money and Maariv Business, because "cosmetics and grooming companies showed relatively high growth in 2021 compared to 2020, which was achieved not only by re-adjusting the demand graph to its place as in the past, but also as a result of rising prices.
The brand is a key component The giant companies that own prestigious and well-known brands such
Estee Lauder or the French LVMH, one of whose brands is Chanel, have been able to show high sales and profit growth.
50% in its profit for 2021 achieved from a growth of about 14% in sales for that year.
It should be noted that a year earlier the company showed a negative growth of 4%, and its results a year later is in line with this decline.
Despite this, this is a relatively high growth for 2021 in this area.
The companies have also proven themselves to be resistant to Corona despite a tens of percent drop in their activity.
Estee Lauder experienced a decline of about 11% in its sales for the quarter ended March 2020, and of 40% in the quarter ended June that year.
The half-year was for Estee Lauder the end of a fiscal year, which, as mentioned, ended with a decrease of only 4%.
Returning to the routine, along with keeping the financial embers through online sales, leaving pharmacies and pharma shops open as 'essential businesses', and accumulating US government grant money for consumers who shopped at the time, allowed grooming and cosmetics companies to return to routine relatively quickly.
In addition, the return of flights and tourism has also begun to affect sales of these products, especially with regard to sales at duty-free shops at the various airports.
For example, Chinese and Indian tourists visiting the United States and Europe are known as customers who purchase cosmetics and grooming
brands abroad, due to their relatively more expensive sales in the countries they came from.
It is expected to come from the developing world, and in particular China and India, which contain about 40% of the world's population.
Sergei Vaschonok, Senior Analyst at Oppenheimer Investment House (Photo: PR)
The French connection
In the companies 'reports, it can be seen that the growth in the United States and Europe in the last two years, "continues Vashunok," has led to the bulk of the companies' revenues based in these countries.
But a consistent examination of the reports over the years shows a single-digit growth for each of the continents already occupied by them, while in Asia they manage to reach double-digit growth.
An examination of the French LVMH reports, for example, shows that its highest percentage of revenue came from Asia, and stood at 35% of its revenue.
This is even without Japan, which alone contributed an additional 7% to the 64.2 billion euros in revenue it generated in 2021. A
tenth of that revenue came from cosmetics and perfumes, and stood at 6.8 billion euros in 2021, after growing by 27% compared to 2020, when its revenues came from cosmetics. And perfume for about 5.2 billion euros.
LVMH's revenues from cosmetics and perfumes from Asia accounted for about 42% of its revenues in the field in 2021 and stood at about 2.8 billion euros, compared to 45% of the field's revenues in 2020, which stood at about 2.3 billion euros - a growth of 22%.
The growth is based on a growing increase in the purchasing power of consumers in these countries, as every $ 100 added to their income finds an increase in their consumption.
Companies are also showing immunity to rising inflation, mainly due to being brand-based, which allows them to raise product prices.
In addition, it should be remembered that these are products with high profit margins, especially in luxury brands, that people will continue to buy, and that part of the attraction of consumers to those brands is actually their high price. "
But not everything is rosy in the beauty kingdom, and some of their stocks have been suffering from a steady decline in their price over the past six months.
For example, the share of the French luxury brand giant LVMH has fallen by about 24% in the last six months, and next to the other French side on the list is L'Oreal, whose share also fell by about 20% over the same period.
"The decline in stock prices is due, among other things, to the Russia-Ukraine war," explains Vaschonok
, "for which many companies were forced to leave Russia, which was one of the largest consumers of cosmetics and grooming products, especially of field brands.
"They also led to the addition of uncertainty regarding the companies' results in the near future. And to them is added the decline in multipliers. In general, the companies showed the same known growth, at a cheaper share price, and led investors to think that there may have been overbought shares in the field."
Despite the recent declines in stocks, it is evident that in the struggle for consumer money in this area the latter have already lost.
Companies are in constant and consistent growth due to relatively stiff demand, and consumers continue to be driven by glittering presenters and images of fruit peels on creams and perfumes.
Now it remains only to examine whether investors in the companies' shares will also smell the sweetness of profits.
The section does not lie, will also be published in Maariv's Business magazine, Friday, June 24