(Bloomberg Opinion) -- Whether or not Kylie Jenner really is a billionaire, there’s no arguing that when it comes to big, over-lined lips, she holds the crown. (She even named her company King Kylie LLC.) But the pouty lipstick trend that the 22-year-old Kardashian sister amplified and has made lots of money from — even if it is millions with an “m” — is fast fading in a world of face masks and work from home. That will hurt the cosmetics giants that chased the fad even more.
What else is hurting right now is Jenner’s reputation: After Forbes dubbed the former lip-injection aficionado the youngest “self-made” billionaire last year, the magazine stripped her of the title last week, saying that Jenner misrepresented sales of her Kylie Cosmetics products. The brand launched in 2015 and is still best known for its $29 “lip kits,” which come with a pencil to outline one’s lips bigger than they are and then a matte liquid lipstick to fill them in, like so:
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A post shared by Kylie ???? (@kyliejenner) on Sep 14, 2016 at 10:20pm PDT
In November, Jenner sold 51% of the company to Coty Inc., the parent of CoverGirl and Rimmel, for $600 million. That deal valued Kylie Cosmetics as a whole at $1.2 billion. Coty said that Kylie Cosmetics’ revenue in the 12 months leading up to the purchase was $177 million, sending a strong signal that it may have overpaid. Not only that, but the figure was also a far cry from the $360 million for 2018 that representatives for the reality-TV star and Kris Jenner, her mom and manager (“momager,” as she’s known), reportedly passed along to Forbes when it was trying to assess the younger Jenner’s net worth. Based on updated figures, “a more realistic accounting of her personal fortune puts it at just under $900 million,” Forbes reported May 29. Jenner Tweeted that the article contained “a number of inaccurate statements” and dismissed its relevance.
Fans and critics can have fun continuing to debate whether Jenner is a billionaire, or even “self-made” at that. She’s right that it doesn’t matter all that much (except maybe to Forbes). However, Coty and its peers that pursued the Kylie-pout trend do have a separate but related problem to worry about: the future of lipstick sales in the age of coronavirus.
While no one knows how long face coverings will be required or advised in public spaces, they do seem like a feature that will be around for a while even as the U.S. tries to get back to normal. And as long as we’re wearing masks, there’s no point in wearing lipstick. According to a McKinsey & Co. report citing Stackline data, lip care and color sales on Amazon dropped 15% in the four weeks ended April 11 from the year before. Mass-market makeup sales dropped 46% on a rolling four-week basis by mid-April and 26% by mid-May, according to Information Resources Inc. Euromonitor International estimates that the U.S. lip-products market specifically will shrink 6.5% this year to $3.59 billion — Coty has an almost 5% share.
It’s not just that lipstick is naturally taking a disproportionately larger hit than, say, eyeliner or mascara, which aren’t obscured by most masks. The social-media-driven obsession with full, painted-on lips was one of the top makeup fads in recent years, and therefore, lipstick has been at the very center of makeup businesses. Even now, a lipstick product is splashed across the top of Revlon Inc.’s homepage. Companies such as Coty and Revlon will have to shift gears and fast, which has never been easy for them to do. And what do you do when the trend is to go makeup-free and spend more time at home?
Coty is betting on Kylie’s direct-to-consumer sales and skincare products, which have been more resilient during the pandemic. “It means we have confirmation that the skincare range of Kylie has a lot of future in front of her and we need to develop that,” Chief Financial Officer Pierre-Andre Terisse said on last month’s earnings call. Even so, it’s hard to imagine that will take off the way Jenner’s lip kits did. After all, it’s her lips that she’s known for.
Coty replaced its CEO on Monday in conjunction with a deal involving KKR & Co. that sent the company’s shares up 21% (though they’re still near a record low). The private equity firm bought 60% of Coty’s Wella professional hair-dye business, a beauty category that is likely to recover more quickly as salons reopen.
Lipstick demand will come back eventually, too, but Coty may have overestimated the staying power of the Jenner lip fad — even without the pandemic. Knowing the Kardashian-Jenner clan, they’ll come up with something new in no time.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.
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