Nivea maker Beiersdorf reported on Thursday a rise in group sales for the first nine months of 2024, and said it expected a strong fourth quarter, despite persisting challenges in the Chinese luxury market.

Shares in the company rose 3.9 percent, to €132 in early trade, with analysts pointing to management confidence in the quarters ahead.

Nine-month sales rose 6.5 percent organically to €7.55 billion ($8.15 billion) from €7.26 billion a year earlier, helped by a rebound in North America and growth in its skincare segment.

“We expect strong performance overall in the fourth quarter,” chief executive Vincent Warnery said in a statement, flagging however that the luxury market, especially in China, continues to be challenging.

A slowdown in Chinese consumer demand amid a weak economy has hit the luxury sector, which is reliant on discretionary spending, weighing on quarterly sales at French peer L’Oreal and industry bellwether LVMH among others.

Sales in Beiersdorf’s luxury brand La Prairie dropped by 7.3 percent in organic terms in the first three quarters, driven by the continued weakness of the Greater China region, and its negative impact on the travel retail market, the company said.

Warnery said the company expects no recovery in the brand in the fourth quarter, but is optimistic about 2025, and pointed to current strong growth in Japan and opportunities in the US.

La Prairie accounted for 7 percent of total sales in 2023.

Aside from weaker consumer spending in China, the company is also grappling with parallel trading, as shoppers increasingly turn to secondhand and grey markets amid price hikes and economic pressures. Warnery said Beiersdorf is taking legal action to combat copycat products.

Elsewhere, the company’s core brands have remained resilient. Sales in the overall consumer segment rose 7.3 percent to €6.3 billion in the first nine months of 2024.

This was helped by double-digit growth rates for the skincare brands Eucerin and Aquaphor in North America and strong Nivea sales in emerging markets in the third quarter, the company said.

Beiersdorf still expects organic sales growth of 6-8 percent in 2024 and margin on earnings before interest and taxes (EBIT), excluding special factors, to be slightly above the previous year’s level.

“Given weak results and nervous commentary elsewhere in beauty this results season we think that the [management’s] positive tone ... is likely to be well received,” analysts at Barclays wrote in a note to clients.

By Elizaveta Gladun, Linda Pasquini and Matthias Inverardi; Editors: Rachel More, Lincoln Feast and Jacqueline Wong

Learn more:

Nivea Maker Beiersdorf’s Sales Grow Despite China’s Luxury Slowdown

Beiersdorf reported 7.1 percent organic sales growth for the first half of the year on Wednesday, driven by double-digit percentage growth in its flagship skincare brand Nivea.

Birkin bag maker Hermès reported on Thursday a hefty rise in third-quarter sales, continuing to outshine rivals hit hard by a downturn in China as its luxury handbags lure wealthy shoppers.

The French luxury company generated €3.7 billion ($3.99 billion) in revenue for the three months ending in September, an 11.3 percent rise at constant exchange rates, in line with an analyst consensus estimate cited by Jefferies.

The group said it was sticking with medium term guidance of revenue growth at constant exchange rate despite global economic, geopolitical and monetary uncertainties, adding that it would continue recruiting.

“We see Hermès as the best current opportunity to protect the portfolio from a difficult (second half of 2024) — suffering from a global cyclical slowdown exacerbated by structural issues in China,” said Bernstein analyst Luca Solca, noting that all divisions, except watches, posted higher growth than expected.

A sector-wide slowdown has affected labels across the high-end spectrum, but Hermès’ famously classic designs and tight management of production and stock have helped reinforce the label’s aura of exclusivity and made the company one of the most consistent performers in the industry.

Handbags like the coveted $10,000 plus Birkin model are affordable only for the wealthiest shoppers -- who are typically the more immune to choppy economic conditions.

Investing in China

The slowest growth came from the Asia Pacific region, excluding Japan, where sales were up 1 percent. The performance was fairly homogenous throughout the region, Eric du Halgouet, executive vice president finance for Hermès, told journalists in a call.

“In China, there hasn’t been an interruption in trends, we’re still facing the lower traffic that started after the Chinese New Year but there hasn’t been an additional decline,” said du Halgouet.

He added that Hermès was compensating for the lower traffic with higher average baskets, selling jewelry products, leather goods and ready-to-wear for men and women.

Du Halgouet said the group will continue to invest in China after inaugurating a store in Shenzhen’s Mixc shopping mall on Wednesday, with plans for a new flagship in Beijing next year.

Hermès shares have risen nearly 9 percent since the start of the year, outpacing rivals, with LVMH down nearly 15 percent, Moncler down 3.3 percent and Kering, which is working to turn around Gucci, down 40 percent.

Luxury bellwether LVMH missed expectations last week and flagged a drop in Chinese consumer confidence to COVID-era lows, with a deterioration in demand for fashion over the quarter.

Late on Wednesday, Kering warned its 2024 operating income would almost halve to its lowest in years as weak demand in China deepened the struggles of the French luxury goods group’s main label Gucci.

Showing limits of its resilience, executives earlier this year said that Hermès was seeing slightly less traffic from aspirational clients, impacting higher volume products like fashion accessories such as silk scarves.

By Mimosa Spencer and Ingrid Melander; Editors: Emelia Sithole-Matarise and Josephine Mason

Learn more:

Hermès Outshines Rivals With Big Sales Jump

Sales at the French luxury group grew to €3.7 billion ($4.02 billion), a 13 percent organic sales rise that strips out currency fluctuations.

L’Oréal’s third-quarter sales, announced Tuesday, had an unwelcome surprise: its dermatological beauty division, which operates buzzy and viral skincare brands like Cerave and Skinceuticals, hugely missed analyst expectations; it grew 0.8 percent to $1.77 billion against estimates of 11 percent.

The division had been a blockbuster since it was formed in 2022, growing more than 20 percent each quarter and becoming a key area for the French conglomerate. But in the second quarter, it missed expectations for the first time, with growth slowing to 10.8 percent compared to analyst expectations of 17.4 percent.

The segment’s decline contributed to 3.4 percent like-for-like sales growth overall, missing estimates of 6 percent, compounded by a not unexpected — but equally unwelcome — 6.5 percent sales contraction in China. In the aftermath of the report, the company’s share price dropped 3.7 percent, having already plummeted 20 percent since June.

Chief executive Nicolas Hieronimus said deceleration in the US was the “biggest culprit” for the dermatological beauty division’s poor performance on a call with analysts on Tuesday, reiterating a message from its half-year August earnings, though he also noted a slowdown in product innovation. An unfavourable comparison basis with the previous year, which included a one-time insurance payout also dragged on results, but even offsetting that, “It’s lower than the previous quarters without a shadow of a doubt,” said Hieronimus.

Softened spending in the US has been noted by L’Oréal’s peers, including Coty and the prestige beauty arm of personal care giant Unilever. But what’s more unique to L’Oréal’s dermatological division is its reliance on ailing American drug stores, a primary point of distribution for its Vichy, Cerave and La Roche Posay lines. In July, CVS reported a 5.1 percent drop in front-of-store revenues, Walgreens’ retail sales decreased 3.5 percent in its 2024 fiscal year, while Rite Aid emerged from bankruptcy in September after a year under administration.

The distinction of dermatologist-approved or at least clinically proven products is also no longer unique to L’Oréal. Competitive efforts by incumbents and the entrance of more indie brands are destabilising its grip.

Molly Wylenzek, an analyst at Jefferies, noted dermatological beauty was growing in other markets, describing the US as the most penetrated market for clinical skincare in the world. “It could be a channel issue, it could be saturation … maybe we’re reaching a natural ceiling,” she said.

Shifting Sands

L’Oréal created the dermatological beauty unit from the ashes of its former “active cosmetics division,” divesting poorer-performing natural skincare lines Sanoflore and Decléor and investing heavily in clinically-backed brands such as Cerave, Skinceuticals, and Skinbetter Science, which it acquired in 2022. The unit is diverse in terms of price: a Cerave cleanser might be as little as $14, while a Skinceuticals serum is as much as $150.

The move was perfectly timed; post-pandemic brands with a clinical pedigree skyrocketed in popularity, and the group invested heavily in dermatologist outreach, ensuring that its products would be recommended by and distributed in doctor’s offices. In 2021, Cerave claimed the title of most dermatologist-recommended brand from longtime holder Neutrogena.

In its second-quarter earnings in August, Hieronimus cited increased competition as a reason for its slowdown in addition to his first warnings about drugstore decline. Brands like Estée Lauder-owned The Ordinary and independent British label Byoma can compete on price — and increasingly, on buzz — and focus distribution solely on retailers like Target and Ulta Beauty, but for the likes of Vichy and Cerave, mass drugstores are the biggest channel. Neil Saunders, managing director at analytics firm GlobalData, said stores like Target have done a better job of curating the customer experience than drugstores, which have increasingly been keeping products behind locked glass doors.

Hieronimus and L’Oréal chief financial officer Christophe Babule said in markets other than the US, dermatological beauty had performed better, with Europe, Asia and Australia all noted as regions with more positive progress.

“In markets where dermatological skincare is really nascent, [L’Oréal] are building the market from the ground up,” said Wylenzek, adding that she thinks low double-digit growth for the division by year-end is realistic, buoyed by non-US markets. “A rising tide lifts all boats … but the US is no longer contributing to the rising tide,” she said.

To beat the slump and regain the all-important US foothold, L’Oréal needs to keep investing in splashy marketing and new products – and also to avoid losing its competitive edge, especially with fickle Gen-Z shoppers. A new Cerave shampoo line and body care range are on the horizon, Hieronimus added.

“There’s a few young Gen-Z consumers in the US that left [L’Oreal brands] to try a few other brands,” said Hieronimus. “It’s up to us to recruit them.”

Sign up to The Business of Beauty newsletter, your complimentary, must-read source for the day’s most important beauty and wellness news and analysis.

Billionaire Mike Ashley’s Frasers Group is walking away from an attempted takeover of Mulberry Group Plc but is still pushing for a board seat at the British handbag maker.

Frasers said Mulberry had not properly engaged with its offer to buy the remainder of the company, in which it already holds a 37 percent stake.

Wednesday’s statement added that a slowdown in the luxury sector “and a clear lack of commercial plan place the company in a very difficult financial position.”

The decision comes after Mulberry turned down Frasers’ latest bid of 150 pence per share Tuesday, up from its first bid of 130 pence last month. Mulberry described the bid as “untenable” and said the initial offer undervalued the company and lacked the support of Singapore’s Ong family, its majority shareholder.

Frasers’ decision means it cannot make another bid for the company in the next six months under UK takeover rules, unless another party tries to buy the business or Mulberry’s board grants permission.

Mulberry revealed plans last month to raise £10 million ($13 million) from a subscription of shares by Challice — the Ong family’s investment vehicle — and a smaller retail offering. The move prompted Frasers to say it could have underwritten any offering, “potentially on better terms” for the business.

Frasers said Wednesday it “would not like to see another scenario where the board chooses to exclusively engage with Challice in private on significant matters.”

Founded by Ashley and previously known as Sports Direct, Frasers is known for its willingness to enter into boardroom battles and has had a number of high-profile clashes with rivals, including Debenhams and House of Fraser. The business is now run by Ashley’s son-in-law Michael Murray and has expanded its premium offering with upmarket outlet Flannels, as well as building stakes in Mulberry and Hugo Boss.

By Jennifer Creery

Learn more:

Mulberry Wants to Go It Alone, Rejects Frasers Takeover Bid

Mulberry Group Plc has rebuffed a 130 pence-a-share takeover bid from Mike Ashley’s Frasers Group, asserting confidence in its new CEO’s ability to revitalise the brand.

Kristen Noel Crawley would like to reintroduce herself.

Crawley, formerly a model for clothing retailer American Apparel and a jewellery designer, was one of the first beauty influencers to expand into product with the launch of her brand KNC Beauty in 2016. It was a boom time for direct-to-consumer beauty labels. She plugged the brand on Instagram, at the nucleus of the digital beauty conversation, and a platform where she already had hundreds of thousands of followers. Beginning with a single product, a lip mask coated in an “all natural” moisturising serum, she was able to capitalise on the mid-2010s popularity for sheet masks and obsession with super-plump lips.

But while it started with a bang, KNC Beauty has remained small and independent, with only a handful of launches and limited wholesale distribution. Crawley said that personal matters — a new baby, a cross-country move — claimed some of her focus. Annual sales, which hit around $1 million by 2020, have more or less stayed there since.

Recently, Crawley has decided to turn the page. She plans to double her current product offering — with a reusable eye mask and serum duo, a set of cryotherapy sticks (tools that harness cold temperatures to soothe the skin) and a foray into lip glosses — and usher the brand into a new stage of growth. Her goals include securing cash investment, amplifying her brand’s visibility, and landing a blue-chip wholesale partner like Target or Ulta Beauty.

“I’m back to business now,” she said. “The golden age of Instagram beauty, that 2015 to 2020 era, I’d love to get my brand back in that position.”

But that golden age is over, and Crawley will have to reckon with a completely different landscape for selling beauty products online — one that she admittedly isn’t as well-versed in. “I’m still trying to figure out TikTok,” she said.

Added competition from A-list celebrities and makeup artists and a dizzyingly rapid beauty trend cycle represent hurdles. But Crawley believes KNC can overcome the odds, in part by returning to the brand’s best asset: Herself.

Street Smart

It’s common enough today for celebrities, influencers, and beauty editors to start minting cosmetics indiscriminately, but in 2016, Crawley was a triple threat.

Born and raised in Chicago, Crawley found an entry into the world of celebrity after she and her husband, the designer Don Crawley, opened RSVP Gallery with Off-White founder Virgil Abloh in the city’s West Loop. The connection to Abloh and later, Ye, the artist formerly known as Kanye West placed Crawley in the Kardashian orbit, which helped raise her own profile at a time when Instagram was taking off. She gained industry recognition, too: In 2015, she was tapped by Julie Schott, the co-founder of acne sticker brand Starface who was then a beauty editor at Elle, to write a column called “KNC Beauty Crush.”

Crawley discovered the concept of the lip sheet mask while on a press trip in Tokyo; KNC Beauty was the byproduct of her attempt to reverse-engineer the mask with “all natural” ingredients. The launch timing was serendipitous: At the time, lips crowded the beauty conversation, thanks in large part to Kylie Jenner’s viral “lip kits” and speculation over her use of filler. In 2016, the category grew over 13 percent, according to a survey conducted by cosmetics conglomerate L’Oréal.

Its cartoonish appearance was made for Instagram. The product was a quick hit, earning KNC Beauty an early supporter in Cassandra Grey, whose influential beauty retailer Violet Grey has stocked KNC Beauty since launch. Grey included KNC’s lip mask in a mailer she sent out to artists during award show season, which is how it wound up on Emma Stone’s face — and her makeup artist’s Instagram — shortly before she won the Golden Globe for “La La Land”.

Cute and quirky product design became the brand’s signature. In 2018, KNC debuted its Star eye masks made with a retinol alternative. While under-eye masks were starting to trend, the shooting star shape of KNC’s version was optimised for selfie photography.

“I knew I couldn’t pay people to post,” Crawley said. “So I thought about, besides formulation, efficacy, what can I do to make my product stand out?” To date, the Star eye masks are the brand’s highest-selling SKU.

Crawley’s point of view has been at the centre of the brand, part of the reasons why she’s kept her product assortment small and stuck with niche collaborative partners, like streetwear event ComplexCon, where she launched her “Self-Care” reusable eye masks, and smaller-footprint retailers like Cos Bar and Violet Grey. She refers to her customer as “the girl who wears Jordans with Chanel.”

KNC Beauty has what Cassandra Grey considered “legacy brand material.” “Kristen is just born-this-way cool,” the Violet Grey founder wrote.

But KNC is only one of a few legacy brands Crawley promotes on her Instagram, where she also partners with companies like Revlon and Dior. Crawley has a higher rate of engagement compared to those with similarly sized followings, according to an analysis from the influencer marketing firm Billion Dollar Boy. “Her sponsored posts perform well, sometimes better than her personal content — which is a great sign for brands wanting to collaborate,” said Andrea Ahern, senior vice president and head of accounts at Billion Dollar Boy.

A Star Is Born

Since KNC Beauty’s 2016 launch, other the success of influencer-led brands has been a mixed bag. Influencer Susan Yara’s skincare brand Naturium, born out of an accelerator, was acquired by E.l.f. Beauty for $355 in 2023. Meanwhile, TikTok-turned-pop star Addison Rae’s ill-timed makeup line Item Beauty went on an indefinite pause two years after its debut.

And while Crawley’s business was well suited to the Instagram age, which operated at the speed of a leisurely scroll, the brand has struggled to keep pace with the churn of TikTok, where virality can blow through an unsuspecting brand’s inventory in moments. When KNC’s monstera leaf-shaped eye masks went viral earlier this year, it took nearly eight months to get them back in stock.

This was a new problem for KNC Beauty, even if it was also kind of a champagne one. “You make all these sales from going viral,” Crawley said, “And then you wait months and months to restock your best-selling products.”

Maintaining steady distribution and a tight product assortment has helped keep KNC’s brand identity intact, but it’s also strapped its growth, Crawley acknowledged. Today, the brand is stocked in over 150 stores across North America, including a number of boutiques, but Crawley expressed her desire to ink a bigger box wholesale partner in 2025.

The brand may also benefit from getting in front of consumers who weren’t around on Instagram in the 2010s. A platform like TikTok Shop could help KNC “access to that Gen-Z audience that she hasn’t tapped into yet, because she’s targeting me, who shops at Net-a-Porter,” Ahern said.

KNC is also expanding its product lineup to meet current trends. The lip market continues to bloom, with growth rates reported between 7 and 12 percent thanks to product extensions. Crawley wants to keep the brand’s focus tight, and will be continuing to focus on eye and lips. More eye masks, a lip scrub, and a lip gloss are forthcoming.

Crawley also wants to grow her team — and is hoping to take on investment to do so. Still, she intends to remain fully in the drivers’ seat.

“There’ve been a lot of people that have come in and tried to tell me what to do, and I feel like because I know myself, my brand, and that I have the best intuition,” she said. “But I’m always open to ideas.”

Sign up to The Business of Beauty newsletter, your complimentary, must-read source for the day’s most important beauty and wellness news and analysis.