Ulta Beauty reported its second-quarter results yesterday, and while total sales rose 12%, the company missed expectations for revenue, profit, and same-store sales, causing shares to plunge over 20%. The beauty giant also lowered its earnings and revenue expectations for the rest of the year.
Though Ulta has hot competitors that include digitally native Glossier and LVMH-owned Sephora, on the company’s earnings call CEO Mary Dillon pegged macro cosmetics trends as largely responsible for the stumble. Specifically, she emphasized challenges in the makeup category, noting that innovative makeup routines—think highlighting, contouring, and even niche trends (remember unicorn makeup?)—weren’t as prevalent this quarter, making consumers less inclined to buy products to keep up with them.
Our increasingly boring makeup routines are far from the only issue. For several years, color cosmetics (lipsticks, eyeshadows, mascara, and other makeup) have been losing their supremacy in the beauty industry, while skincare (lotions and moisturizers, serums, cleansers, toners, masks, etc.) sees monster growth. Despite its makeup hiccup, Ulta did see returns in the skincare category. Recent earnings from L’Oréal and Estée Lauder—two of seven conglomerates that dominate the entire global beauty market—were also dominated by robust sales of prestige skincare.
A number of trends are driving this industry-wide pivot. One theory is that part of cosmetics’ downfall is the very influencer community it lifted up. “The influencer boom was an unexpected windfall for beauty,” a colleague of mine noted. “It uncovered, energized, and monetized a deeply hungry and deep-pocketed beauty-enthusiast community. This community became the 20 in the industry’s 80/20 rule.” (Note: She’s referring to the idea that 80% of results will come from 20% of action.) “The industry responded to this by accelerating the product development cycle and doing collaborations with influencers. Both worked swimmingly until the 20 ended up with mountains of makeup they can barely organize, let alone use.”
This glut of goods left the makeup market saturated—see: the cottage industry around makeup-organizing products, plus makeup declutter videos and even makeup destroying videos—and the pivot to skincare was partially a response to that saturation. The makeup trends whose fizzling out is affecting Ulta’s bottom line have been replaced with elaborate skincare routines, and companies are no longer seeing returns on cosmetics.
Also underlying the meteoric rise of skincare is a complex desire to defy the process of aging. As Chelsea Summers wrote in a widely shared essay on Medium, “no matter how low you turn the volume, the specter of aging wails, open-mouthed and horrified, at the core of skincare.” Likewise, the marketing language of cosmetics is changing to suggest a pivot to self-care, replacing aggressive instructions to “tackle” and “beat” blemishes with exhortations to “renew” and “revitalize” the skin.
But skincare, like makeup, could soon reach its own saturation point, as consumers shift from expensive, multi-step routines to a handful of reliable products. The industry will need to keep evolving, and potentially in more extreme ways. Already, a wave of Instagram-friendly clinics like Alchemy 43, Kate Somerville, and Skin Laundry are popularizing medical beauty treatments like Botox, fillers, lip injections and laser treatments for the under-30 crowd.
What’s clear is that the multibillion-dollar beauty industry is feeling the impact of volatile internet-fueled trends, and still figuring how to adapt.