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Takeaways
- Jefferies analysts stated that beauty companies may do relatively well under tariffs as consumers view them as staples, and many of their products are manufactured in the US.
- The analysts described investing in Interparfums, Estée Lauder and Covergirl's parent company, Coty, as a "defensive" move.
- Analysts said that the fashion industry as a whole is likely to be hit by more significant headwinds, because many retailers import products from Vietnam. These items may soon be subjected to a tariff of 46%.
Analysts at Jefferies said that beauty-company stocks are a good buy, as tariffs could weaken the fashion industry.
Jefferies said that many consumers view makeup and skincare as staples. They won’t change up their beauty routines because of price increases. Cosmetic, skincare and fragrance companies, such as Interparfums (IPAR), Estée Lauder Companies (EL) and Covergirl’s parent company, Coty (COTY), are also fairly insulated from tariffs because they largely manufacture in the US, the analysts said.
E.l.f. Jefferies said that cosmetics (ELF) is a good investment, despite the fact it makes 80% of its product in China. E.l.f. Analysts say that E.l.f. could offset higher import duties with price increases of $1 to $2, which would keep the products at a cheaper price than many of its competitors.
Other “defensive” beauty company investments highlighted by Jefferies include Bath & Body Works (BBWI) and Ulta (ULTA). (Read Investopedia’s coverage of today’s trading, which saw stocks fall broadly and precipitously)
Jefferies says that the fashion industry will likely face significant headwinds. Jefferies reported that several clothing, accessory, and shoe retailers are sourcing from Vietnam. This country is set to be subjected to a tariff of 46%. As retailers pass along rising costs, the analysts say that consumer demand will likely decrease, putting pressure department-store operators like Macy’s(M) and Kohl’s(KSS).
