H1 2025 Beauty Tested, Not Broken
The first half of 2025 has delivered a revealing snapshot of the global beauty industry, one defined not by collapse, but by recalibration. Sales momentum has cooled across many leaders; profitability, however, has improved. This is the sector moving from an era of expansive, post-pandemic growth to one of disciplined value creation.
After years of outsized gains fueled by digital acceleration, a China and travel-retail boom, and a fragrance super-cycle, the market is normalizing. The easy growth of the early 2020s is over. What replaces it is a tougher, more competitive environment that rewards operational rigor.
The shift is being driven by five forces:
Softer consumer sentiment in China and lingering pressure in travel retail
Inventory normalization in U.S. prestige
Fragrance growth normalizing off very high bases
Cost inflation that forces harder choices
A consumer pivot toward functional, wellness-aligned products
Leaders are responding with tighter cost control, portfolio focus, and targeted investment in higher-margin, resilient segments-dermatological skincare, wellness-infused beauty, professional haircare, and premium fragrances built on strong brand equity.
Company-by-company: divergence in execution
Amorepacific +12.3% (Q1: +15.7%; FY24: +5.9%) - A disciplined Asian recovery
Double-digit growth despite a mixed regional backdrop. The company has pared back lower-return activity, leaned into hero brands, and accelerated beauty-tech (AI-enabled diagnosis and guidance) to sharpen conversion. The lesson: simplify, modernize, and push proven franchises.
Puig +5.9% (Q1: +7.8%; FY24: +11.3%) - Fragrance-led consistency
Puig’s curated portfolio (including Rabanne, Jean Paul Gaultier, Byredo and Charlotte Tilbury) again delivered above-market performance. Fewer, bigger launches and strong brand codes continue to work, with geographic mix helping offset softer spots.
L’Oréal +1.6% (Q1: +4.4%; FY24: +5.6%) - Defensive strength
The global leader leaned on its dermo and professional pillars to cushion slower prestige. China shows early signs of stabilization. The emphasis is clear: protect margins, scale innovation that demonstrably adds value, and avoid over-reliance on any one channel.
Interparfums +1.0% (Q1: +4.6%; FY24: +10.2%) - Solid, but comps are heavy
With licensed brands such as Montblanc, Jimmy Choo, Coach and Lanvin, Interparfums faced tough comparisons after a strong 2024. Growth slowed, but margins held up thanks to disciplined pricing and mix management.
Beiersdorf +0.3% (Q1: +3.3%; FY24: +4.3%) - Derma resilient, luxury under pressure
Eucerin and Aquaphor remain steady on clinical credibility, while La Prairie saw a double-digit decline in the half, with signs of sequential improvement late in the period. Message to the market: premium must prove its value.
Unilever +0.8% (Q1: +2.9%; FY24: +5.5%) - Wellness is structural
Although not included in the consolidated P&L here, Unilever’s Beauty & Wellbeing group continues to post strong momentum in Wellbeing brands such as Liquid I.V. and Nutrafol. The inside-out beauty thesis has legs.
Shiseido -4.1% (Q1: -8.5%; FY24: +1.8%) - Reshaping for durability
Shiseido is deep into its multi-year transformation (SHIFT 2025 and Beyond; Action Plan 2025–2026). Focus is on rebuilding profitable growth, re-weighting investment, and tightening execution in key markets and channels.
Coty -7.2% (Q1: -6.2%; FY24: +1.3%) - Navigating tariffs and a cautious U.S.
Retail destocking and tariff headwinds weighed on results. The luxury fragrance portfolio remains an anchor; the next wave of hero launches needs to fire to re-accelerate.
Estée Lauder -10.9% (Q1: -9.9%; FY24: +0.1%) - A hard reset
Exposure to China and travel retail continues to sting. Management is executing a large restructuring under its current transformation program, with thousands of roles being removed, significant cost-savings targeted, and the organization re-clustered. The aim is to restore growth and rebuild margins while rebalancing channel risk.
Consolidated P&L (8 groups, excl. Unilever): less revenue, more profit
Net sales: down ~1% year over year
Gross margin: up meaningfully (COGS ratio down)
A&P: down as a % of sales (from the high-20s to the low-20s)
SG&A: up, reflecting wage inflation and restructuring
Adjusted EBITDA margin: up modestly
In short, the sector is producing more profit from less revenue. That’s not a sign of decay; it’s a sign of maturity and stricter capital allocation.
What the Numbers Tell Us
1. Sales contraction, but not collapse
The -0.7% (-1% without Unilever) decline in net sales reflects the weaker demand environment we saw in China, travel retail, and U.S. prestige beauty. Mass-market resilience and fragrance pockets (Puig, Interparfums) were not enough to offset weakness at Estée Lauder, Coty, and Shiseido.
2. Gross margin improvement
COGS fell faster than sales (-6.6% vs. -1.0%), lifting gross margin to 73.4%. This suggests:
Lower input costs (packaging, freight, some raw materials easing).
Favorable product mix (fragrance and derma tend to have higher margins than luxury skincare under discount pressure).
Pricing discipline, even in softer markets.
3. A&P rationalization
Advertising & promotion dropped from $13.1bn to $10.7bn, going from 27% to 23% of sales. This is a clear strategic lever: groups are cutting spend where ROI is weak (notably in discount-driven China/travel retail) and reallocating selectively behind hero launches (Puig, L’Oréal, Interparfums).
The cut in A&P explains a big portion of the operating margin expansion - but it raises the long-term question: can reduced media spend coexist with the need for constant brand heat in beauty?
4. R&D under control
R&D spend edged down to 2.1% of sales (vs. 2.4%). Companies are still investing in dermocosmetics, biotech actives, and new delivery systems, but there’s evidence of efficiency measures - likely linked to restructuring (e.g., Estée Lauder’s simplification program, Shiseido’s focus on fewer innovation hubs).
5. SG&A inflation
Selling, general & admin costs jumped from $12.2bn to $13.6bn (+12%), rising to 29% of sales (vs. 25%). This points to wage inflation, higher logistics/distribution costs, and restructuring expenses flowing through overheads. For some players (ELC, Shiseido), severance and network rationalization costs might be part of the story.
6. EBITDA growth shows resilience
Adj. EBITDA rose to $8.4bn (+9%), margin at 17.6% mainly driven by lower input costs and freight, a mix shift toward higher-margin categories, and sharper discipline in advertising (pulling back where ROI is weak; concentrating behind scalable heroes). This result confirms that, operationally, the sector remains highly cash-generative even in a slowdown.
Why growth slowed (and why that’s not fatal)
China & travel retail: Stabilizing, not (yet) rebounding. Discounting has hurt luxury optics; brands are recalibrating price and channel strategy.
U.S. prestige: Retailers have right-sized inventory; consumers are value-seeking; mass/masstige trends feel firmer.
Fragrance: From turbo-charged to healthy-growth moderates but remains positive.
Derma & wellness: Structural tailwinds from efficacy, self-care, and health adjacency continue to support outperformance.
Restructuring: Several houses are simplifying portfolios and costs. This suppresses near-term sales, but lays a stronger base.
The paradox of H1-25
Beauty isn’t in crisis; it’s maturing. Slower sales alongside rising profits simply means the industry is moving from expansion to optimization. The winners will:
Balance cost discipline with brand investment
Double down on derma, wellness, and professional hair
Diversify channels and reduce single-market exposure
Innovate meaningfully (not just frequently)
What to watch in H2-25
China and travel retail: real recovery or another false start?
Brand heat with lower A&P: can performance marketing and community keep momentum?
Hero launches: a few big bets from leading houses must land.
SG&A pressure: restructuring now needs to convert to operating leverage.
Wellness and derma: expect continued outperformance versus discretionary prestige skincare.
Final take
The beauty industry is not collapsing. It is being tested.
The first half of 2025 shows that the fundamentals remain intact: high gross margins, strong cash generation, and resilient consumer demand. Yet the era of easy growth - driven by prestige price increases, expanding distribution, and insatiable demand from China - is clearly behind us. What lies ahead is not decline, but recalibration.
The winners in this new cycle will be those who strike a careful balance between operational efficiency and long-term brand equity. They will not abandon investment in storytelling, innovation, and consumer connection in the name of cost-cutting. Instead, they will sharpen their focus, doubling down on categories that intersect with broader cultural currents around health, wellness, and self-care. They will manage their exposure to volatile channels - especially travel retail - with more discipline, while still exploring new opportunities for growth in digital ecosystems, specialty retail, and emerging markets. Above all, they will innovate with purpose. Frequency without meaning is noise; meaning without execution is wasted potential.
The sector is maturing. What once resembled exuberant, momentum-driven expansion is shifting toward a more measured, sustainable progression. For investors, this means adjusting expectations: beauty remains one of the most attractive categories in consumer goods, but the playbook is changing. For operators, it means resilience will no longer come from scale alone, but from clarity of vision, the courage to make sharper choices, and the discipline to stay the course when the market demands quick fixes.
H1 2025 should not be read as a disappointment. It is a reminder that beauty remains a powerhouse - but one whose rules of success are evolving.
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