The beauty industry has been a source of some pretty gorgeous gains lately. As inflation begins to retreat, consumers may finally catch a break, with just a bit more disposable income in their products to spend on those nice-to-have discretionary items that bring them joy.
When you combine luxury brands with beauty products, you may have the secret formula for the type of growth that’s helped mint one of the wealthiest men on the planet: Bernard Arnault, CEO of LVMH (OTCMKTS:LVMUY). The timeless brands backing some of the beautiful luxuries are tough to stack up against. Either way, there is more than one way to profit from the continued rise of beauty stocks.
LVMH (LVMUY)
While LVMH may be a more diversified high-end luxury company, we can’t ignore its skin in the beauty game. When it comes to high-end luxury makeup, fragrances and skin care products, LVMH is really in a league of its own.
LVMH’s beauty portfolio could contribute a growing share of its overall revenue over the next few years. Dior J’adore Eau de Parfum and Fenty Beauty Gloss Bomb lip luminizer are just a sample of some of the new products that could help LVMH level up its fragrances and cosmetics division. Social media trends — like morning skincare routine videos on TikTok — also stand to bolster demand for such premium products.
With the biggest and best luxury brands in the beauty scene, LVMH stands out as a great way to play that trend. Should consumers with more buying power trade up to high-status luxury beauty products, that trend could even get hotter.
elf Beauty (ELF)
elf Beauty (NYSE:ELF) has been a standout performer in recent years, with a jaw-dropping 156% in gains in just the past year. The $10.6 billion relative lightweight in the beauty market has found a way to really hit the spot with younger consumers.
Though the most explosive gains are now behind it, ELF stock still has room to run as it continues to receive viral appeal on social media platforms. Unlike LVMH, elf offers beauty at a reasonable price with products that seem to be a better value among its younger, less-affluent consumers.
It’s not just younger consumers that may be driving consumers toward higher-value cosmetics, though. Inflation and macro headwinds have caused many consumers to be more cost-conscious in recent years.
With that, elf Beauty has been able to gain by offering quality products that don’t break the bank. As elf Beauty continues to keep its foot on the pedal with new products, don’t expect the firm’s growth to dry up anytime soon.
“We can continue this momentum,” CEO Tarang Amin told CNBC.
Estee Lauder (EL)
Estee Lauder (NYSE:EL) is an established player in the beauty scene with a $52 billion market cap. Unlike elf and LMVH, EL stock has been struggling of late, now down 60% from its all-time high hit at the very end of 2021. Estee Lauder stands out as more of a value play as it looks to hit back at its rivals.
For now, the company may continue to be dragged down as its struggles in China, arguably the most important market for Estee Lauder. While the company stands to benefit from many of the same industry tailwinds as its better-performing rivals, it will be tough for EL stock to really turn a corner until the Chinese economy can recover from its epic slowdown.
In any case, the company may have recently hit an “inflection point,” at least according to its CEO, Fabrizio Freda. As the Chinese economy recovers and Estee Lauder continues seizing growth opportunities, it’s hard to view EL stock as dead money. In fact, it may very well be the greatest value opportunity in the space today.
On the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
