The beauty industry is in a slow recovery period — the sector grew by 3.5% in 2025, according to Kepler Cheuvreux, but still missed analyst forecasts.
“The acceleration has been driven by the recovery of the US mass market make-up category and the luxury beauty segment in China,” says Charles-Louis Scotti, head of luxury goods sector research at Kepler Cheuvreux, in regards to recent beauty earnings reports from the major conglomerates including Estée Lauder Companies (ELC), Puig, Coty, Unilever and L’Oréal Group.
Puig revenues rose 7.8% on a like-for-like basis to €5 billion in fiscal 2025. Unilever’s revenue increased by 4.3% to €12.8 billion, L’Oréal Group’s sales rose 6% to €11.2 billion, Coty’s revenue fell 2% to $5.89 billion and sales at ELC dropped 8% to $14.3 billion, over the same period. In the second quarter of fiscal 2026, Coty recorded a net revenue decline of 3% to $1.68 billion and ELC regained 4% in net sales to $4.16 billion.
According to Kepler Cheuvreux estimates, the beauty sector didn’t meet the long-term growth average of 4.2%. And its future could be dented by the impact of the ongoing war in the Middle East, says Scotti. The Middle East accounts for 5-6% of the global beauty market.
Despite slow growth, the beauty industry remains highly active in terms of strategic deal making, he adds, following Henkel’s acquisition of Not Your Mother’s, ELC’s takeover of Forest Essentials and KYT Group’s acquisition of Glo Skin Beauty.
US resilience
A recurring theme across recent earnings calls for industry leaders has been the continued resilience and strength of the US consumer, says Olivier Nicolai, consumer staples analyst at Goldman Sachs.
Puig’s Americas sales grew 7.7% in fiscal 2025, per the group’s most recent earnings and Unilever witnessed a 5.3% increase in North America sales over the same period. Meanwhile, L'Oréal Group delivered 8.6% growth in North America in its fourth-quarter sales. ELC saw incremental, 1% sales growth in the Americas in the second quarter of fiscal 2026.
Unilever’s chief financial officer Srinivas Phatak told analysts that North America was a “standout performer” for 2025. He added that the growth has been underpinned by the group’s reshaping of its beauty, wellbeing and personal care portfolio along with strong retail executions — name-checking Dove, which delivered high-single-digit growth in the US.
Unilever experienced strong performance in US digital commerce, particularly on Amazon and Walmart.com. Last year, the group acquired US-based Dr. Squatch. “Our focus on acquisition has been in digitally native brands with a strong exposure to e-commerce, and that has been working for us properly, particularly in the US and India,” said Unilever CEO Fernando Fernandez.
The rise of Amazon Beauty has had an impact on the sector through 2025 and the first two quarters of 2026. ELC’s Bobbi Brown Cosmetics, Origins, Aveda and Clinique, elsewhere Puig’s Charlotte Tilbury and L’Oréal Group’s Medik8 joined the platform. According to investment banking TD Cowen, Amazon’s market share in beauty is expected to reach 15% by 2030. “We strengthened our distribution footprint with Amazon in the US,” Puig chair and CEO Marc Puig told analysts. The Americas represent 35% of the group’s revenue. This week, the Spanish conglomerate named Jose Manuel Albesa as its new CEO as Marc Puig steps into the position of executive chairman.
Even though ELC had the smallest market share growth in the North America market, the group is finally recovering after a decade of decline. “We come out of 10 years of market share loss in the Americas, and I’m really proud of the momentum that the team have put into this market, because when you look at the calendar 2025, we’ve been able to gain share in volume,” de La Faverie told analysts, noting that The Ordinary has been leading the skincare category in the US. Mac Cosmetics will launch in Sephora this year. “We are seeing great momentum and we are moving in the right direction when it comes to North America,” he adds. “Overall, I want to say, I feel very strong. I do believe we will see additional momentum going forward into the market.”
Recovery in China
Western beauty brands are regaining some momentum in China after the downturn in travel beauty retail and softened consumer sentiment. “The primary focus has shifted to the recovery of demand in China after a three-year hiatus in terms of growth,” says Nicolai.
At ELC, after soft demand in Mainland China in fiscal 2025, retail sales grew 13%, for the second quarter of 2026, driven by growth across categories. La Mer, Tom Ford, and fragrance brand Le Labo were standouts in the region, according to the company. “We expect to see continued mid-single growth in China or better,” Akhil Shrivastava, executive vice president and chief financial officer, told analysts. He anticipates the Chinese market recovery to be steady.
“Consumer sentiment is also slightly rebounding,” says Scotti, with skincare and fragrances prevailing very competitively. Similarly, at L’Oréal, CEO Nicolas Hieronimus told analysts that “China is back to positive territory and also back to a positive luxury consumption.” Premium brands like Skinceuticals and Kérastase are “flying off shelves”, he adds, as Chinese consumer sentiment recovers. “In emerging [markets] and China, the brand achieves high-double-digit growth and continues to play a key role in recruiting new consumers,” he said.
Filippo Falorni, US beverages, household products and personal care analyst at Citi, notes that the China market is seeing improvement as it moves towards ‘masstige’ (high-quality, premium, or aspirational goods that are affordable such as The Ordinary, La Roche-Posay and Dr. Jart+). “The early checks from Chinese New Year [are] generally encouraging,” he adds.
ELC CEO and president Stéphane de La Faverie said the group is laser focusing on “retailtainment” with its teams in travel retail China and in China Mainland creating “VVIP” events to reach the consumer.
Continuing to innovate in China is on the top of the to-do list at Unilever, too. “We have made some significant interventions in the route-to-market of e-commerce. More work to do there, but we expect a better year in China in 2026,” said Fernandez.
Fragrances preserve
The fragrance market continues to normalize off a post-pandemic boom period. But opportunity remains, particularly in the niche and “couture” (fashion house) sub-categories.
“While we expect growth in the fragrance market to continue to normalize, we enter the new financial year with confidence,” Puig told analysts. Fragrance and fashion accounted for 72% of the Spanish conglomerate’s total revenue in 2025, up 6.4% on a like-for-like basis. Puig referenced fragrance brands Carolina Herrera and Jean Paul Gaultier as standout performers, while Byredo witnessed double-digit growth in the niche fragrance category.
Right now, fragrance growth in the market is “supported by the expansion of consumer cohorts, increased usage frequency, and deeper penetration into emerging markets”, Nicolai says.
Looking ahead, Puig is certain in its potential. “Young people and teenage boys are jumping into the category via TikTok and it has had an impact on sales. This gives us confidence that the category has momentum,” he said. That said, Puig is facing growing competition, as the fragrance market becomes more saturated, and competitors increase marketing activity, particularly in emerging markets like Latin America.
As Coty begins its transformation under executive chairman and interim CEO Markus Strobel, it’s also betting on fragrance to bring the business back to profitability with big opportunities in the masstige category. “It’s very clear to me that Coty has many top-notch assets and competitive advantages: highly attractive brands, best-in-class fragrance innovation capabilities, a vertically integrated business model, and a creative, entrepreneurial organization,” Strobel told investors.
Strobel said the company plans to continue its success with Boss’s Bottled Beyond fragrance, which launched in fall 2025, and that Cosmic Kylie Jenner Intense from Kylie Cosmetics is performing well ahead of expectations. The company also relaunched Calvin Klein’s Euphoria fragrance fronted by Rosalía with a higher concentration and price tag, putting it on par with other niche fragrance players. A Swarovski fragrance is slated for launch in 2027.
At L’Oréal Luxe, president Cyril Chapuy hinted that in Q2, the group will complete its takeover of Kering Beauté’s Creed, Balenciaga and Bottega Veneta. “Creed is the number three player in collectsion fragrances, which is the part of the fragrance market that grows the fastest. The brand [generates] around €350 million, and we think it can quickly become a billionaire brand,” she said. “Regarding Bottega Veneta and Balenciaga, they are solid fashion brands with distinctive territories — one is exceptional craftsmanship, and the other is disruptive high fashion statements, which is great DNA for beauty.” The group also has plans for its other brands later down the line.
“From a very low basis, fragrances are booming, still dominated by niche ultra-premium players but couture brands are also enjoying a solid momentum,” says Scotti, referring to the success of fragrances in China, namely Prada and Valentino Beauty.
The ongoing war in the Middle East — an important territory for fragrance — may affect the category’s outlook for fiscal 2026. The region accounts for 5-6% of the global beauty market. “The fragrance category is the region’s leading category because it’s a growth engine. It was, for instance, the fifth contributor to L’Oréal’s top-line growth last year,” says Scotti.
The Middle East is a market of interest even outside of fragrance. De La Faverie told analysts that he’s most excited about the “new organization we’ve put in place in emerging markets” such as Türkiye and the Middle East.
Makeup gets competitive
Based on recent earnings, makeup is a growth opportunity for brands that can innovate in the space.
Puig saw makeup sales grow 13.7% to €845 million in fiscal 2025, representing 17% of group revenues. Charlotte Tilbury contributed largely to the success, with strong double-digit growth propeled by Amazon in the US and entry into the Mexico market. The company said the brand ranks in first place in the prestige makeup category in the UK and third in the US.
L’Oréal noted that makeup was a growth accelerator with double-digit growth overall (4.5% for L’Oréal Luxe and 4.8% for consumer products — the group does not break out numbers by traditional categories). Growth was led by the L’Oréal Paris and Nyx Professional brands. Maybelline New York’s Colossal Bubble Mascara, L’Oréal Paris’s Infallible Setting Spray and the Nyx Lip IV were bestselling products for the group.
“Makeup is dependent on innovation intensity, which has to accelerate to remain competitive in an environment where dupes are proliferating rapidly. The groups that are currently succeeding are those consistently delivering newness and high-quality innovation,” says Goldman Sachs’s Nicolai.
At Coty, Burberry and Kylie Cosmetics led the prestige makeup category with mid-single-digit percentage growth. The group is planning on relaunching Marc Jacobs Beauty makeup later this year.
The makeup category at ELC has faced losses for two consecutive quarters, decreasing 1% to $1.1 billion. “We have a lot more work to do on makeup. And frankly, with all our teams around the world, we’re continuing to just improve things. Makeup requires more scale,” said de la Faverie, adding that the group will be “accelerating innovation” to resolve the issue in the makeup category.
Challenger brands are also capturing market share from the major groups. “There are several small brands, like Rare Beauty, that have been able to grow fast with social media, digital marketing and driving demand and market share gains from other larger players,” says Falorni.
Overall, the beauty industry is cautiously optimistic for 2026, with early signs of recovery in China and US demand pointing to gradual growth against the backdrop of geo-political instability.
