One of the industries expected to undergo significant growth over the coming years is the health & beauty industry, which has a projected CAGR of nearly 5% through 2025. Below are four stocks, each with its own unique approach to the health and beauty industry, that investors should consider for superior potential returns in 2023.
The largest American cosmetics company and second largest in the world, Estee Lauder operates three primary divisions: cosmetics, fragrances and haircare. In addition to Estee Lauder-branded products, they have several other preeminent names under their umbrella, including cosmetic brands Clinique, MAC, and haircare giant Aveda.
Management has heavily focused on expanding in China, rapidly embracing the skincare industry. The company grew revenue in the country by 50% over the past two years, despite the COVID-19 pandemic. Recently, the company’s skincare products have been driving revenue growth; in FY21, skincare accounted for more than half of total revenue.
Shares of Estee Lauder are currently trading at $203.98 per share, down -3.12% on the day.
Yoshitsu Co., Ltd is a Tokyo-based health & beauty products, home goods and food provider. The company has operations across the globe, with its primary focus being rapidly expanding throughout Southeast Asia, North America and Europe.
While Yoshitsu has a growing array of physical retail outlets, the company has also entered the e-commerce and wholesale industries. Despite starting out solely as a brick-and-mortar retailer, Yoshitsu has developed an omnichannel strategy for selling its products. Such a strategy makes Yoshitsu’s products available to a much larger customer base than if they focused only on brick-and-mortar outlets.
2023 should be a banner year for the company, thanks to the world fully emerging from COVID-19 lockdowns. Citizens of Southeast Asian countries are expected to return to growing their middle class and importing high-quality goods, especially status symbols like health & beauty products.
To capitalize on this significant opportunity, Yoshitsu is opening additional brick-and-mortar stores in major cities in the region. Yoshitsu recently opened a warehouse in China(Hong Kong) and will support inventory replenishment throughout China and the rest of Southeast Asia.
While China is their primary focus, the company will also open additional retail outlets in well-developed cities in North America, Australia and the U.K. These markets are expected to increase their imports of high-quality Asian goods thanks to their affordability. A forthcoming distribution center in the U.S. will improve order fulfillment times, increasing customer satisfaction and brand loyalty.
Yoshitsu is perhaps the most significant opportunity on our list, thanks to its smaller size and ambitious growth plans. Once China is fully reopened, and back to normal, the company should grow revenues and profits rapidly.
Shares of Yoshitsu are currently changing hands at $1.26 per share, down -3.08% on the day.
As the largest cosmetics company in the world, France-based L’Oreal operates in several fields, including hair care, skincare, sun protection, make-up and fragrances. Increased product costs have been driving down margins and making the stock less attractive. Supply chain issues and the other obstacles facing most companies have also been hurting L’Oreal.
Fortunately, 2023 should see most, if not all, of their COVID-19-related supply chain issues in the rearview mirror. L’Oreal should return to growing revenues and profits, making the beaten-down stock a potential value play moving forward. To prepare for the opportunities ahead, the company is spending $140 million to build a research and innovation (R&I) center in New Jersey. The R&I center will house more than 500 employees and support the company’s internal and external partnerships/research.
Shares of L’Oreal last traded at $64.84 per share, up +1.53% on the day.
One of the leading cosmetic suppliers in the United States, Ulta Beauty Inc., is expected to benefit significantly from a fully open U.S. during 2023. Ulta Beauty’s nationwide chain of stores has something that most retailers and CPG companies do not: in-house services that utilize its products. Hair and makeup services are some of the leading drivers for customers into the stores. These services use the company’s products, so they come at a higher profit margin.
Ulta has fared better than many companies in 2022; their most recent financial report saw them increase revenues by 17.8% YoY. The company noted that it is seeing strong growth in skin care thanks to customers placing growing importance on the “health” part of health & beauty. Look to the company to continue this trend as we come entirely out of COVID-19 restrictions.
Shares of Ulta Beauty are currently trading at $415.03 per share, down -0.79% on the day.
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Yoshitsu Co. Ltd. is a paid client of Wealthy V.C.
Wealthy VC’s parent company has been compensated $75,000 per month for four months for investor relations and market awareness services by Yoshitsu Co. Ltd. (NASDAQ: TKLF).
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