Lipstick empire
Gloss gains at L'Oreal
Good morning, glam gurus. This is your Stock Market Rundown for April 22nd, 2024. Thanks for joining me for another week of finance follies. Let’s dig in:
TODAY’S TOP STORY: SASSY SHADES AND BEAUTY BILLIONS
Beauty giant L’Oreal recently reported quarterly earnings that beat expectations, thanks to robust global sales growth. Could this be an example of the “lipstick effect”?
That’s a theory positing that, during downturns, consumers are more likely to indulge in cheap luxuries—like tubes of Tropical Coral or Blushing Berry.
As the world’s biggest cosmetic conglomerate, L’Oreal is a bellwether of female consumption activity. And historically, they’ve enjoyed growth in both recessions and expansions. (Hiring celebrities like Kendall Jenner to shill their products helps.)
The company was founded over a hundred years ago, when a young French chemist developed a formula for hair dye in his kitchen. It transformed into a global conglomerate under the stewardship of the founder’s daughter, Liliane Bettencourt.
Most shoppers assume Maybelline, NYX, Lancome, and Urban Decay are competitors, but they’re all owned by L’Oreal. Imagine getting a few cents every time a woman swipes on mascara or spritzes her coif with hairspray.
L’Oreal’s success made Bettencourt the world’s wealthiest woman. But with mo’ money comes mo’ problems, and Bettencourt’s later years were marred by controversy. She was accused of tax evasion, and became estranged from her only child (who eventually inherited her billions).
While the family may have feuded, patient investors were rewarded. But not everybody is a fan: one French investment manager is publicly betting against the stock based on valuation.
So is the stock overvalued? Well, the CEO of the company recently claimed L’Oreal isn’t just a beauty company, it’s “a tech company” too. Unclear whether that implies mascara deserves the same multiple as microchips.
SO WHAT ELSE IS GOING ON?
Morgan Stanley’s loafer-clad bankers are back in the office, and back to business. The firm beat estimates as acquisition and IPO activity stepped up on Wall Street.
Some top strategists are forecasting that the S&P 500 will end the year way below current levels. Fellas, nobody likes a Debbie Downer.
Succeeding in the luxury market these days is like walking on cobblestones in six-inch heels. But LVMH, owners of Louis Vuitton, managed to beat expectations thanks to purchases by Chinese shoppers growing 10%.
US regulators are planning to slap concert giant Live Nation (owner of Ticketmaster) with an antitrust lawsuit. Frustrated Taylor Swift fans who blame Ticketmaster for missing out on front-row seats at her last tour will be shrieking with glee.
That’s it for today, my friends; catch you back here at the usual time tomorrow morning. Yours in capitalism, The Axe
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