These perfume stocks should continue performing impressively in the post-pandemic reality
During the past couple of years, booming fragrance sales would’ve come as a major surprise to most. You probably weren’t thinking about perfume stocks.
With lockdown restrictions in place, makeup and beauty sales dipped considerably. However, fragrance sales continued to grow during the pandemic and are likely to continue growing at a healthy pace for the foreseeable future.
According to market research firm NPD, perfume sales increased by 45% in 2021 from the prior year. Moreover, the performance was 18% higher than in the first quarter of 2019. According to Larisa Jensen, the vice president of the NPD group, the surge was unlike any other she had seen in her career.
Fragrances were an affordable luxury during the pandemic, which severely impacted the purchasing power of consumers. On top of that, perfumes were a source of escapism for people during the dark time brought about the pandemic.
Perfume sales are expected to continue growing this year, which is why perfume stocks remain an attractive buy. Here are three which you should probably place your bets on.
- Estee Lauder(NYSE:EL)
- Ulta Beauty Inc(NASDAQ:ULTA)
- Inter Parfums, Inc.(NASDAQ:IPAR)
Perfume Stocks To Buy: Estee Lauder (EL)
Estee Lauder is one of the leading cosmetic giants operating some of the most popular brands globally. Moreover, it has consistently acquired up-and-coming cosmetics stock to expand its massive market share further. EL stock has been an incredible performer over the past decade, comfortably outperforming the S&P 500.
After its slump during the pandemic, the company backfires on all cylinders. Revenue and EBITDA growth on a year-over-year basis is tremendous 25% and 53%, respectively. These numbers are head and shoulders above its five-year average results.
Makeup sales were a downer in the past couple of years, but results from that segment have also started picking up of late. In the past couple of years, fragrances, in particular, have seen their sales grow by 29% on an organic basis. New launches have bolstered growth in its fragrances division, a stand-out performer.
Demand for its hair care and makeup segments have also increased by double-digits during the fourth quarter from the prior-year period. Expect Estee Lauder to continue steamrolling its competition for the foreseeable future.
Ulta Beauty (ULTA)
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Ulta Beauty is a top beauty chain stores operator in the United States. It sells skin care, cosmetics, fragrances, and other related products across its sprawling number of stores across the country. Its financials have been firmly in the green for several years, marked by strong margins and cash flow growth.
The beauty-focused firm has performed impressively over the past year. Perhaps its most remarkable metric is its EBITDA growth which has soared over 144% over the past year. Revenue growth has been excellent, with healthy growth across all its divisions. Fragrance sales constitute 12% of overall sales and have grown faster than other divisions in the past couple of years.
Moreover, the company’s financial flexibility is exceptional, with incredible asset turnover and free cash flow growth. These elements make ULTA one of the strongest bets in the cosmetics business.
Perfume Stocks to Buy: Inter Parfums (IPAR)
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Inter Parfums is U.S.-based fragrance giant that operates some of the most iconic brands in its segment. It operates an asset-light business where it’s essentially a distributor and marketer for most of its brands. Some of the brands in its portfolio include Coach, Kate Spade, Jimmy Choo, and others.
The perfume giant had a stellar 2021 with multiple releases. Most of its product releases in 2020 were delayed to 2021, and the company took advantage of the pent-up demand. Net sales have grown at a staggering 60% year-over-year basis.
A few months ago, its management guided the company’s 2022 sales to be in the range of $925 million to $950 million. Judging from its recent performance, it can comfortably achieve such lofty numbers.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article.The opinions expressed in this article are those of the writer, subject to the InvestorPlace.comPublishing Guidelines
Muslim Farooque is a keen investor and an optimist at heart. A life-long gamer and tech enthusiast, he has a particular affinity for analyzing technology stocks. Muslim holds a bachelor’s of science degree in applied accounting from Oxford Brookes University.
