ADQ, Abu Dhabi’s sovereign wealth fund, has signed a definitive agreement to acquire a minority interest in Sotheby’s, the auction house announced. Its owner, the telecom billionaire Patrick Drahi, will also invest additional capital into the business.

Together, both investments amount to $1 billion. The bulk of the investment will come from ADQ, a Sotheby’s spokesperson confirmed. The spokesperson added that ADQ’s investment is in shares of the company that are newly issued, and that Drahi remains a majority shareholder.

The auction house declined to comment beyond providing a written statement that reads in part, “The capital will be used to strengthen our balance sheet, augment our plans to expand our business and further enhance our client experience and offerings.” The release continues: “In addition to its financial investment, ADQ brings a dedication to operational excellence and long-term planning to guide significant growth objectives. Having such a strong investment partner that is from the Middle East is a further boost to our position in the region in particular, which represents one of the fastest growing markets for art and luxury.”

The announcement comes during a turbulent period in the auction market. Last year, Sotheby’s reported consolidated sales of $7.9 billion, a total that includes car and real estate auctions. The total was very slightly lower than the year before. More broadly, the art market has contracted, with global sales dropping 4 percent from 2022 to 2023, according to a joint report from Art Basel and UBS Group AG.

The transaction is expected to close by the end of the year.

By James Tarmy

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When the economy takes a turn for the worse, consumers choose affordable treats such as cosmetics. That’s been the wisdom since the 2001 recession, when Leonard Lauder, then chairman of Estée Lauder Cos, coined the “Lipstick Index.”

The theory would suggest an uptick in women reaching for beauty products once more, as China’s recovery stutters and fears of a US recession resurface. But the phenomenon may not be so pronounced this time round.

Years of blockbuster growth in the beauty industry means there may be less need to stock up. Women did indeed buy more lipstick, as well as fragrance and pricey hair serums, when inflation surged and incomes came under pressure. Shares in Charlotte Tilbury owner Puig Brands SA have fallen about 5 percent since their debut in May, and independent names including Selena Gomez’s Rare Beauty and Makeup by Mario have recently been exploring exits. It’s hard not to think we’ve reached peak beauty.

Sales of skincare, cosmetics and scents have been on a tear for the past five years. Pandemic lockdowns sent everyone reaching for face masks and moisturisers. We rediscovered perfume as a way to lift our moods. And haircare became more like skincare, with more offerings of treatments, oils and mousse — all to help those Dyson Airwrap curls last longer. Then, as economies reopened and masks came off, attention turned to color cosmetics, including lip tints and blush.

Analysts at Jefferies estimate that the global beauty market expanded by 6 percent to 8 percent between 2021 and 2023. But there are increasing signs that demand is moderating.

For a start, Chinese consumers are cutting back and also turning to local brands, which are perceived as better value than the international names, according to LookLook, an insights company, which regularly surveys its panel of 100 high spending Chinese women.

So far, the US and Europe have been picking up the beauty baton. But this is becoming more difficult.

With such a strong expansion in Western markets over the preceding three years, it was inevitable sales would eventually retreat. This has been exacerbated by inflation and high borrowing costs pressuring lower and middle-income shoppers.

There are also signs that some of the micro TikTok trends, from Clean Girl to Office Siren, are running out of steam. There hasn’t been a major new “core” style since Mob Wife at the turn of the year, notes retail intelligence company EDITED. In fact, one of the notable TikTok trends to emerge has been “Underconsumption,” which encourages people to buy less.

Ulta Beauty Inc. said in early April that it had seen both the mass-market and luxury segments slow. In June, L’Oreal SA downgraded its forecast of global beauty market sales growth to 4.5-5 percent this year, from 5 percent previously. Even its new projection might be optimistic.

Demand has softened since January, according to a survey conducted by Lindsay Dutch, analyst at Bloomberg Intelligence.

Although more than 40 percent of the 650 respondents to the June survey said they would cut back on other purchases before reducing spending on beauty and personal care items this year, this is 10 percentage points below January’s result — the lowest since the survey began two years ago.

Sales of both the most upmarket and mass-market products are slowing. When it comes to prestige products, sales still rose 8 percent in the US in the first half of this year,  according to data provider Circana, although that’s a deceleration from double digit growth in each of  the preceding two years, mainly driven by weakness in makeup. The mass market was flat in the first half, although Elf Beauty Inc., with its affordable prices and savvy Gen-Z marketing, is outperforming.

Not all sectors are moving in tandem. Pricey fragrance and haircare are holding up although even here some younger consumers are trading down to mini sizes of scent and body mists priced below $25, to deliver what Larissa Jensen, global beauty industry adviser at Circana describes as “elevated value.” Dermatological beauty, which bridges the gap between cosmetics and specialist skin treatments, is another bright spot. This explains why L’Oreal this week acquired a 10 percent stake in Galderma Group AG, which makes products to treat a range of skin conditions, as well as injectable fillers.

The acquisition raised eyebrows, as L’Oréal previously owned a 50 percent stake in Galderma, which it sold to Nestle SA in a complex deal in 2014.

Yet the global aesthetic injectables market could be worth $9 billion to $15 billion according to Bloomberg Intelligence. That’s a fraction of the overall beauty market, which generated sales of about $570 billion in 2023, according to Euromonitor International. But if consumers are diverting money from traditional skincare to such categories, then L’Oréal must be present.

The two companies will form a strategic partnership, and it’s not hard to see the lines blurring between products that are applied to the skin, such as topical creams, and those that go into the skin, such as fillers. L’Oréal could take aesthetic treatments mainstream, as it did with anti-aging ingredients such hyaluronic acid and hair oils. Future possibilities could include at-home injectables, permanent makeup or effective lip pumping creams.

The move also underlines that, as the world’s biggest beauty group, L’Oréal has the flexibility to pivot into adjacent categories. Right now that puts it ahead of other rivals, such as Estée Lauder. The US company has embarked on a turnaround plan to become leaner and more profitable so that it can react more nimbly to just these sort of developments.

Still, even the strongest will have to put their best face forward if beauty sales don’t get a glow-up from a downturn.

By Andrea Felsted

Take a walk down Madison Avenue in New York and the familiar sounds of summer in the city will ring out: cars honking, gleefully chattering pedestrians, and more recently, the ever-present hiss of circular saws and thuds of new construction.

After a decade of falling rents and rampant vacancies, New York’s most prestigious stretch of real estate is buzzing once again. In the second quarter of 2024, retail availability crept down to 12.3 percent from a high of 40 percent in 2021, according to data from brokerage Cushman and Wakefield.

It’s been a long time coming. Rents in the famous retail district soared dangerously high in the early 2010s, just as e-commerce began to surge. This contradictory dynamic pushed tenants out in droves; by the time the pandemic struck, nearly half of the neighbourhood’s storefronts sat empty. Between 2015 and 2021, the average asking rent more than halved, from $1,600 per square foot to $700, data from CBRE shows.

At that point, retailers were already on the rebound, fuelled by stimulus checks and voracious consumer appetite for newness. Suddenly, the low rents on Madison Avenue became an opportunity for luxury brands to expand their presence in the area and lowered the barrier to entry for new tenants, which will soon include Khaite, Toteme and French jeweller Boucheron.

The revival of Madison Avenue mirrors an overall boom in brick-and-mortar retail, in which the years-long trend of supply outpacing demand has reversed. Competition for coveted real estate is more fierce than ever — including an eight-block area on Madison between 62nd Street and 70th Street that’s particularly hot right now, brokers said. Outsize demand has already pushed up the parameters of the 20-block retail area (57th Street to 79th Street) to 86th Street, where Todd Snyder opened a new store on Aug. 1, joining Alex Mill, Faherty, James Perse and Brooks Brothers on the block.

“[Madison Avenue] is back in full swing,” said Sonia Mosseri, creative director of Still Here, a downtown-favourite denim line that recently opened a location on the street. “Everyone who lives up there hasn’t left and they’re excited to see it bounce back.”

Still Here joins a growing number of younger premium brands looking to find new customers in the affluent Upper East Side zip code. Their demand has already driven up rent prices, from an average of $718 per square foot in the fourth quarter of 2021 to $884 in the second quarter of 2024, according to CBRE.

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But for newcomers on the street, serving the area’s customers poses as much of a learning curve as it does an opportunity. The wealthy older clientele of the Upper East Side are used to a higher level of service than their downtown counterparts, brands say, but they are more likely to stay loyal to the brands they connect with the most.

A Game of Musical Chairs

In 2019, the closure of Barneys’ 275,000-square-foot flagship seemed to signal end times for the avenue. The loss of its anchor retailer meant waning foot traffic and overall excitement in the neighbourhood. It was also symbolic of larger shifts across the industry, where brick-and-mortar looked increasingly unattractive in the e-commerce era.

Today, the former Barneys space still sits vacant — landlord Ben Ashkenazy has said he is waiting for one big retailer to buy it. But the storefronts around it have rebounded en masse, driven by not only new retailers hoping to capture the area’s affluent residents but also existing tenants looking to upgrade their space and visibility on the street, brokers said.

“It’s a bit like musical chairs. But in musical chairs everything shrinks; this is a musical chairs of expansion,” said Corey Shuster, a broker at Douglas Elliman. “People are taking bigger stores and going after more prominence on the avenue.”

Hermès kicked off the streak, opening a new airy flagship on 63rd in 2022. Its old space on 62nd was snapped up by Dolce and Gabbana. Goyard, which has operated a boutique on 63rd since 2014, announced plans to move into a larger spot on the avenue in 2025. A bigger store is also in the works for Lafayette 148, whose outpost on 76th Street will now be occupied by L’Agence.

What’s in Store?

Simply being on Madison isn’t enough to drive sales; tenants must cater to the particular tastes and needs of the multigenerational Upper East Side shopper and find new ways to lure them in.

The most successful Madison Avenue retailers focus on service, said Matthew Bauer, president of Madison Avenue Business Improvement District. Top salespeople on the avenue will often go to lunch with top clients and call them personally to talk through new arrivals.

Conversion rates on Madison are higher and the cart size is bigger than that of its downtown store, said Still Here’s Mosseri. But serving this customer requires investment beyond rent. Still Here doubled its store staff on Madison Avenue since it opened and developed a 30-page guide on best practices.

“I always joke downtown that if I look at someone the wrong way or am too friendly, we’ve lost the sale,” said Mosseri. “Uptown, clients want two people catering to them, they want attention.”

Amenities and a special product range are also important components of service. Hermès’ flagship offers multiple lounge areas across its five floors, creating an inviting atmosphere for the brand to throw parties for its local customers. Todd Snyder’s new location boasts a more elevated product mix, a tailor shop and an assortment of vintage accessories in collaboration with Foundwell, aimed specifically at the neighbourhood’s resident, said chief product officer Alejandro Rhett.

Beyond Luxury

As Madison Avenue returns to growth, the scope of retail offering has also expanded. New tenants aren’t just traditional luxury labels; many are emerging contemporary brands or international labels having recently expanded to the US.

Being on the same street as Prada and The Row gives French contemporary line Officine Générale a nice glean, said founder Pierre Mahéo. But its prices are more affordable, which has helped drive sales, he added. In the midst of price hikes and challenging economic conditions, many luxury consumers are trading down.

As well, a wave of international brands, including Italy’s Del Core and France’s Destree are adding a sense of dynamism the avenue had been missing.

“Just pure, true, luxury, 200 year-old brands … doesn’t create enough of a merchandising mix,” said Steve Soutendijk executive managing director, Cushman and Wakefield.

Madison Avenue is also welcoming a number of new food and beverage concepts. British nightlife entrepreneur Robin Birley is set to unveil a members club between 69th and 70th Streets on Madison, while the newly-renovated Surrey Hotel will reopen with buzzy Miami restaurant Casa Tua in September. As of this week, residences at Giorgio Armani’s mixed-use complex at 760 Madison — fit with Armani shops and restaurants on the ground floor — have officially sold out.

“There’s fresh blood, new experiences,” said Shuster. “When you see excitement from both the small independent houses and the massive publicly traded ones, it’s a testament to the resurgence.”

Elf Beauty raised annual sales and profit forecasts after topping first-quarter estimates on Thursday, as more customers visited stores and websites to buy its affordable cosmetics and skincare products.

Beauty company Elf, like its peers in the segment, has sustained the post-pandemic boom in demand, as low-cost products from its brands such as Naturium, Skin, and cosmetics continue to attract customers, including those having strained budgets due to a sticky inflation.

Retailers, such as Target, which house Elf’s products, have also seen sales surge for beauty products in recent months.

“We have seen consumers are getting choosier, but they’re choosing Elf,” CEO Tarang Amin told Reuters.

Elf’s stock, however, has dropped about 14 percent quarter-to-date, after investors raised concerns around possibility of rising tariffs on imports of its nearly 80 percent finished products manufactured in China and higher ocean freight costs, among other factors.

CEO Amin said that an increase in tariffs on imports from China, if Republican presidential candidate Donald Trump comes to power, would mostly impact the company in fiscal 2026.

Earlier this year, Trump had floated the idea of imposing tariffs on China again if he wins the presidential election in November and said the rate for such tariffs could exceed 60 percent.

“We don’t like 60 percent tariff just because we feel it is a tax on American consumers,” Amin said, adding, the tariffs impact would be addressed by raising product prices and diversifying supply chain operations.

Elf now sees 2025 sales to be between $1.28 billion and $1.30 billion, compared to previous expectations of $1.23 billion and $1.25 billion.

It now expects annual adjusted per-share profit to be between $3.36 and $3.41, versus prior projections of $3.20 and $3.25.

Net sales rose 50 percent to $324.5 million in the quarter ended June 30, beating estimates of about $304.7 million. Adjusted profit of $1.10 per share also topped LSEG expectations of 84 cents.

By Granth Vanaik; Editing by Mohammed Safi Shamsi

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