Stock market today: Stocks fall as investors rotate out of tech into Jackson Hole
Investing.com -- Barclays (LON:BARC) downgraded L’Oréal, Essity, and Puig, citing structural changes and rising competition in the global beauty market, in a note dated Tuesday.
The bank lowered L’Oréal and Essity to “underweight” and Puig to “equal weight.” Henkel was upgraded to “overweight,” while Beiersdorf’s “overweight” rating was maintained.
L’Oréal’s downgrade reflects declining market outperformance, now at 1.1x in 2024, below the 20-year average of 1.2x and 30-year average of 1.4x.
Barclays forecasts FY25 like-for-like growth of 4.1% and FY26 at 5.2%. The price target was cut to €325 from €384, applying a 24x FY26E P/E.
Beiersdorf (ETR:BEIG) retained its "overweight" rating, supported by product innovation. Epicelline and S-biomedic are expected to contribute 270 basis points to organic sales growth between FY26 and FY28.
FY25 growth is forecast at 4.1%, with FY26 at 5.1%. The price target was reduced to €125 from €144.
Henkel’s upgrade follows easing comparisons and stabilizing U.S. volumes. Barclays projected FY25 group organic sales growth at 1.8%, with 1.2% in the consumer segment. The price target was raised to €80 from €75.
Puig was downgraded due to its heavy reliance on fragrances, which make up 69% of its portfolio.
Barclays noted strong Q1 2025 growth of 10.4% like-for-like but forecast a slowdown in EMEA.
Revised growth forecasts stand at 6.3% for FY26 and 5.4% for FY27, below consensus. The price target was trimmed to €21 from €22.6.
Essity’s downgrade stems from private-label pressure in Europe and softness in North America’s Professional Hygiene unit.
Barclays forecast FY25 organic sales growth at 1.5%, below the 2.1% consensus. The price target dropped to SEK 230 from SEK 290, representing an 11x FY26E P/E.
The report outlined five themes reshaping the sector: rising focus on value, digital-led marketing, online retail shifts, innovation-driven loyalty and brand originality.
Digital disruption has altered competitive dynamics. In the U.S., e-commerce accounts for 22% of beauty sales; in China, it is 41%.
TikTok’s share of online beauty sales in China increased from 26% to 35% in 2024. In the U.S., TikTok Shop reached $1.34 billion in beauty sales last year, or 2% of the total market.
Marketing spend remains high. L’Oréal devotes about 75% of its advertising to digital. Its AI tool, BETiq, reportedly improved ad ROI by 15%.
Margins vary across the sector. L’Oréal and Puig lead with gross margins of 74% and 75%, respectively. Essity remains lowest at 29%.
L’Oréal also posted EBIT margins above 20% in 2024. Beiersdorf is expected to show the strongest EBIT margin expansion by 2030.
Changing consumer habits are fragmenting the market. Younger demographics are driving fragrance growth, and skincare spending is less age-dependent. Functional efficacy is gaining importance over brand recognition or founder appeal.