Beauty Stocks Plunge: What’s Causing the Market Shake-Up?

The beauty industry is going through a tough period as several leading beauty stocks have seen sharp declines in recent days. Investors were unsettled when major brands like E.l.f. Beauty, Estée Lauder, and Ulta Beauty reported disappointing earnings, lowered projections, and concerning market trends. These struggles have raised questions about the industry’s future, but what exactly is driving these losses?

A Difficult Week for Beauty Stocks

Several beauty companies have reported weaker-than-expected results, leading to significant stock price drops. E.l.f. Beauty saw its stock plummet by nearly 29 percent—the worst weekly performance for the company since 2018. The struggles extended to Estée Lauder, which suffered a 22 percent decline and announced layoffs, further adding to investor concern. Ulta Beauty and Coty also saw their stocks fall by 9 percent and 8 percent, respectively.

This downturn reflects larger industry challenges, including changing consumer habits and trade pressures. A combination of weaker financial performance, economic uncertainty, and global trade issues has contributed to a difficult period for these companies.

Key Factors Behind the Decline

E.l.f. Beauty faced setbacks despite exceeding revenue expectations. The company’s earnings per share fell short, and it also lowered its full-year sales forecast. CEO Tarang Amin pointed to a 5 percent decline in the cosmetics sector in January, attributing it to slow post-holiday sales and decreasing online beauty engagement. Several investment firms, including Morgan Stanley and UBS, downgraded E.l.f.’s stock, signaling concerns about its future profitability.

Additionally, the company is facing cost pressures due to U.S. tariffs on Chinese-made goods. With nearly 80 percent of E.l.f.’s products manufactured in China, the recent 10 percent tariff hike raised concerns over higher production costs. However, there was some relief as the tariff increase was not as steep as the previously proposed 60 percent.

Estée Lauder also faced turbulence, announcing major layoffs that could impact as many as 7,000 employees by 2026. CEO Stéphane de La Faverie, who took over in January 2025, admitted the brand had lost agility and struggled to adjust to rapidly changing consumer trends. One of the company’s biggest challenges has been declining demand in Asian travel markets, where luxury beauty sales had historically been strong. Even though Estée Lauder posted solid second-quarter revenue and earnings, it slashed future forecasts, suggesting a difficult road ahead.

Wider Implications for the Beauty Industry

The downturn in leading beauty stocks has raised broader concerns about the industry’s health. Ulta Beauty’s stock fell by 9 percent as analysts questioned whether consumers are cutting back on discretionary beauty spending due to financial pressures. Similarly, Coty shares dropped by 8 percent, reflecting the wider struggles across the sector.

Economic uncertainty and rising tariffs also pose challenges. With the U.S. and China locked in a trade struggle, counter-tariffs on American exports could further disrupt beauty brands that rely on international production and distribution.

What Lies Ahead for Beauty Brands?

Despite recent setbacks, the beauty industry remains a strong player in the consumer goods sector. However, brands must adapt to changing market dynamics, shifting consumer purchasing habits, and global trade risks. Companies that can refine their pricing strategies, enhance digital engagement, and strengthen supply chain resilience may emerge stronger from this period of instability.

Investors will closely monitor whether E.l.f. and Estée Lauder can make necessary adjustments to regain profitability. For now, the industry faces a crucial period of realignment, and 2025 may be a pivotal year that defines the future trajectory of the beauty sector.

Final Thoughts

The recent declines in beauty stocks highlight both company-specific shortcomings and broader economic challenges. From E.l.f. Beauty adjusting its growth forecasts to Estée Lauder restructuring its workforce, the industry is facing a period of financial uncertainty. Additionally, trade disputes and shifting consumer spending habits could continue to pressure company earnings.

In the coming months, beauty brands will need to rethink their strategies to stay competitive. The ability to innovate and quickly respond to industry shifts will determine which companies can rebound and regain investor confidence. One thing is clear—beauty brands are facing a critical test, and how they navigate the coming months will shape the industry’s future.