Overpriced? Kylie Cosmetics sells 51% stake for $600m amid beauty sales slump

Coty Inc. American beauty group controlled by Germany’s billionaire Reimann family paid $600 million for a majority stake in the cosmetics brand, Kylie Cosmetics, founded by Kylie Jenner, the youngest member of the Kardashian-Jenner clan.

Kylie Cosmetics Ulta (Photo: Kylie Jenner/Instagram)

The deal, in which Coty will acquire a 51 per cent stake, values Jenner’s Kylie Cosmetics business at about US$1.2 billion.

The New York Post writes that for the four year-old cosmetics brand, “the deal comes amid a nationwide slump in makeup sales, which had some Wall Street analysts Monday questioning whether Coty overpaid.” 

“Management was vague on the sales of the brand…Information about consumer purchases of the brand was not forthcoming.”

– Morningstar analyst, Rebecca Scheuneman in The Post.

“The acquisition [price] is higher than we’ve seen for other consumer related acquisitions,” Instinet analyst, Michael Baker told The Post.

The Post continues, “Indeed, the nine-figure deal comes at a time when beauty companies from Estee Lauder, Loreal, Elf and Sephora are complaining about sagging sales of colour cosmetics, including blush, eye shadow and lipstick — a product on which Jenner has staked her brand with her lip kits.

Coty’s reported sales of Kylie Cosmetics were far less than previously shared media reports.

Coty’s chief executive Pierre Laubies on Monday insisted that Kylie Cosmetics is immune to the trend, saying sales of Kylie Cosmetics have grown 40 per cent this year. Laubies added that her new skin care line launched in May has been a big driver. But skin care products in general have been rising, prompting financial analysts to blast Laubies response as “vague.”

“Management was vague on the sales of the brand,” Morningstar analyst, Rebecca Scheuneman told The Post. “Information about consumer purchases of the brand was not forthcoming.”

Kylie Jenner, creator of Kylie Cosmetics (Photo: Forbes.com)

Further, the Post writes that, “Analysts also pointed out that Coty said the youngest member of the Kardashian-Jenner clan generated sales of US$177 million in sales over past year, Coty said — far less than previous media reports on the brand’s sales. Forbes, for example, estimated sales at US$360 million for 2018, and CNBC said it was US$420 million in 2017. Earlier this year, The Post reported that Kylie Cosmetics saw a 14 percent sales decline through May, according to data from Rakuten Intelligence.”