JP摩根美股个人护理行业美容行业入门奢侈品美容仍在扩大市场份额20196423页

NorthAmericaEquityResearch04June2019BeautyIndustryPrimerLuxuryBeautyStillGainingShare;ColorCosmeticsDeceleratinginUS;SkinCareandChinaStillStrongBeverage,Household&PersonalCareProductsAndreaTeixeira,CFAAC(1-212)[e-mail]tinaBrathwaite,CFA(1-212)[e-mail]KGrom(1-212)[e-mail]ling/Broadlines&HardlinesChristopherHorvers,CFA(1-212)[e-mail]akaria,CFA(1-212)[e-mail]eanConsumerGoodsandBeveragesCelinePannuti,CFA(44-20)[e-mail]ge19foranalystcertificationandimportantdisclosures,includingnon-USanalystdisclosures.J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.(OW-rated),L’Oreal(coveredbyCelinePannuti),Coty(N-rated),LVMH(coveredbyMelanieFlouquet)ande.l.f(N-rated).TheoutlookcontinuestolookpositiveinChina,althoughweareembeddingadecelerationgiventoughercomparisons,whiletheUShasdecelerated(negativeLSDforprestigemake-up).OurkeyconclusionforourcoverageuniverseisthatELcanstillmeetorevenexceedourestimatesandconsensusbecause2/3ofthecompany’sgrowthisactuallyaccelerating,theother1/3(USandUK)becamenegativebutdidnotoffsetthestrongergrowth,stillleadingtoHSDorganicgrowthinthenearfutureandatthehighendofitslong-termsalesalgorithm.WeremaincautiousonCoty(N-rated)andELF(N-rated)duetothestillsluggishmassbeautytrends.Yet,ithasbeenataleoftwocities:Coty’ssalestrendsdeterioratedinthelasttrackeddataintheUS,whileELF’strendshaveimproved,asweexplaininourrecentNielsenBeautyreport(link).DecelerationinUSColorCosmeticsComesfromToughComparisonsandCalendar.Mostrecently(startingin4Qcalendar2018),wehaveseenseveralbrandmanufacturersincludingL’Oréal,LVMH,andEsteeLaudercommentonadecelerationinprestigebeautyintheUS.TheslowdownseemstobemostlyconcentratedincolorcosmeticsintheUS,andparticularlyinthedepartmentstorechannel(~45%ofUSsalesforEL).EL’sCEOFabrizioFredamentionedthattheUSprestigecolorcategoryisnowdeclining-3%to-4%acrossallchannels,butisparticularlypressuredbymid-tierbrickandmortardepartmentstores.Thecategoryseemstostillbegrowinginotherchannels(onlineandspecialty),accordingtomanagementcommentaryfrombothELandUlta(coveredbyChrisHorvers).ThereareseveralfactorsthatmayhaveimpactedtheUSinthefirstquartermorethanothermarkets,including(1)thegovernmentshutdowninthebeginningoftheyear;(2)lowertaxrebatesvs.lastyear;and(3)theEastercalendarshiftthatimpactedtraffictostores.NotethatthebeautyindustryintheUSismoredependentonthedepartmentstorechannel(inparticularpremiumcosmetics)thananyothercountryorregion,socalendarandtrafficareveryrelevantandimpactsalesconversion.Netofthoseimpacts,ELestimatesthattheprestigebeautycategorywasflattoslightlyupinthe1Qcalendar2019(includingallchannelsandskincare,whichperformedbetterthancolorcosmetics).Whilethecompanyisnotpromisinganinflectionsoon,ELisexpectingasequentialrecovery;seemoredetailshereinandfromourrecentmeetingsinLondon(link,link).Wealsonotethatprestigecolorcosmeticsgrewatadouble-digitCAGRfrom2014-2017.IfUScolorcosmeticsturnouttobeflatin2019,theprestigemarketshouldstillgrowMSD(albeitatthelowendoftherange).2NorthAmericaEquityResearch04June2019AndreaTeixeira,CFA(1-212)[e-mail]ChinaDemandRemainsStrongand,DespiteFearofSlowdowninTravelRetail,TrendsRemainSupportiveandResilient.WebelievethegrowthinChinabeautyconsumption(especiallyprestigebeauty)ismainlyfueledbydemandcomingfromhigherlaborparticipation,urbanization,distributiontoadditionalcitiesbecauseofe-commerce,andpremiumization.Toillustratethedemand,ELhasrecentlylaunchedTomFordinTMall,whichbecamethelargeste-commercelaunchforELeverinChina(biggerthanM.A.C.).3NorthAmericaEquityResearch04June2019AndreaTeixeira,CFA(1-212)[e-mail]yGlobalBeautyIndustryGrowth.................................4PremiumContinuestoOutshineMass...................................5ChinaRemainstheKeyGrowthDriverAhead.........................................................7PrestigeBeautyDeceleratedintheUSMostRecently..............................................8SpecialtyBeautyRetailersDeceleratinginUS?..................10ChoppierGrowthinMassBeauty.........................................11DevelopedMarketGrowthLikelyRemainsSluggish.............................................12Acce