4 Cosmetics Stocks Worth Watching Amid Industry Challenges

Core Insights - The Zacks Cosmetics industry is currently facing challenges due to inflationary pressures and a decline in discretionary spending, which has negatively impacted consumer demand across the sector [1][4]. Industry Overview - The Zacks Cosmetics industry encompasses companies that manufacture, distribute, and market beauty and personal care products, including skincare, fragrance, makeup, and hair care [3]. - Companies in this industry utilize various sales channels, including sales representatives, retailers, drug stores, pharmacies, and e-commerce platforms [3]. Current Trends - Inflationary pressures are increasing costs for raw materials, energy, labor, and packaging, leading to squeezed profit margins for cosmetic companies [4]. - The demand for cosmetic products is being affected by elevated living costs and interest rates, prompting consumers to cut back on discretionary spending [4]. - Innovation and digitization are crucial for growth, with companies focusing on unique products and enhancing e-commerce capabilities [6]. Market Performance - The Zacks Cosmetics industry has underperformed compared to the S&P 500 and the broader Consumer Staples sector, with a decline of 40.5% over the past year [12]. - The industry's current forward Price-to-Earnings (P/E) ratio is 20.49X, slightly lower than the S&P 500's 20.71X [13]. Company Highlights - Coty Inc. (COTY): Focuses on sustainable growth through core categories like skincare and e-commerce, with a Zacks Rank of 3. The consensus estimate for EPS is 44 cents, with shares down 21.3% in the past six months [14][15]. - Inter Parfums, Inc. (IPAR): Capitalizes on the fragrance market with a Zacks Rank of 3. The consensus estimate for EPS is $5.15, with shares down 13.1% in the past six months [16][17]. - Olaplex Holdings, Inc. (OLPX): Positioned for growth through innovative products and strong brand equity, with a Zacks Rank of 3. The consensus estimate for EPS is 14 cents, with shares down 13.1% in the past six months [19][20]. - Waldencast plc (WALD): Focuses on clean beauty products and innovation, with a Zacks Rank of 3. The consensus estimate indicates a loss of 9 cents, with shares down 62.9% in the past six months [21].