• by Sarah Mahoney  @mahoney_sarah, February 17, 2025

After years of steady growth, the beauty industry’s glow may be starting to fade. While prestige products still see gains, industry giants like Estée Lauder and E.L.F. are flashing warning signs -- profit drops, layoffs, and softer sales forecasts -- raising big questions about why consumers’ love affair with beauty is cooling.

While prestige beauty sales still posted gains in 2024 -- rising 7% to $33.9 billion, according to Circana -- troubling signs are emerging. Estée Lauder, one of the industry’s biggest players, just announced a 6% drop in quarterly revenues and a staggering 7,000 job cuts. E.L.F. Beauty, a longtime super-performer, shocked investors with a 36% profit decline and lowered sales forecasts. Even L’Oréal, the industry’s leader, posted softer-than-expected results.

The beauty boom may not be over. Circana notes this is the industry’s fourth straight year of growth. Amazon seems convinced beauty has plenty of potential and opened its first-ever physical retail beauty and personal care store. Located in Milan, Italy, the store offers plenty of interactive features for experimentation, and a derma-bar, offering free digital skin analysis.

But beauty is definitely losing some of its shine.

In 2024, fragrance was the biggest winner, jumping 12% and now making up 28% of the total prestige market. Demand for prestige makeup remained strong, up 5%. Within that, lip products soared 19% in dollar sales. But skincare squeaked out a gain of just 1%.

In mass beauty sales, which includes products sold in drugstores and supermarkets, sales gains were more muted, with mass-market makeup declining 3%.

Executives point to a few factors behind the slowdown. Inflation has squeezed discretionary spending, making even small luxuries harder to justify. After years of hypergrowth, consumers may be shifting focus. E.L.F. cited a January sales slump due to lower social media buzz around beauty. And there’s global uncertainty: Estée Lauder is struggling in China, and analysts now expect a 7% decline in the brand's sales for 2025.

Even brands that have thrived in a digital-first, influencer-driven landscape are feeling the shift. “Consumer mindshare is focused elsewhere,” admitted E.L.F. CEO Tarang Amin in a recent earnings call, citing everything from Los Angeles wildfires to uncertainty around TikTok as potential factors dampening engagement.

Perhaps the most surprising news came from Estée Lauder. After swinging to an operating loss of $580 million (a stunning reversal from a $574 million profit last year), the company announced an aggressive restructuring plan. That includes layoffs, which are expected to range between 5,800 and 7,000 people.

The changes also include a commitment to boost advertising spending, “optimizing marketing programs and eliminating low-return activities to accelerate new consumer acquisition.”

Lauder also shook up executive assignments and says it is searching for a new chief digital marketing officer.

The moves weren’t enough to reassure investors. S&P downgraded the company’s credit rating to A-, warning that Lauder’s turnaround will take longer than expected.