According to a research report from Guotai Haitong, the cosmetics industry's total retail sales and online GMV grew by 6% and 7% year-on-year, respectively, in Q1 2026. Makeup and hair care segments showed strong performance, while skincare faced pressure. High-end foreign brands showed signs of marginal recovery. Valuations in the beauty and personal care sector are gradually entering an attractive zone, with attention turning to the performance of the Q2 major sales promotions. Looking ahead to 2026, the broader cosmetics market is expected to maintain steady growth. The sector, characterized by frequent product innovation and the rising efficiency of domestic brands, shows a clear long-term growth trend. The report recommends a bottom-up approach to select companies with strong product and brand momentum for high growth, as well as those with potential for recovery driven by changes in products or channels. Suggestions include increasing holdings in: 1) high-growth companies with robust fundamentals, and 2) companies showing signs of improvement from a low base.
Key points from Guotai Haitong's report are as follows: The cosmetics industry maintained a good overall performance in Q1, with makeup and hair care standing out. Data from the National Bureau of Statistics showed that retail sales of cosmetics above a designated size increased by 8.3% year-on-year in March 2026, and grew 5.9% for the entire first quarter. This significantly outperformed the total retail sales growth of 1.7% in March and 2.4% in Q1, highlighting the sector's growth potential. According to industry data, the GMV for cosmetics on mainstream e-commerce platforms reached 132.3 billion yuan in Q1 2026, a year-on-year increase of 6.8%, which was largely consistent with the 6.6% growth seen in Q1 2025. By platform, Douyin and Tmall saw cosmetics GMV grow by 14% and 6% year-on-year respectively in Q1 2026, with Douyin maintaining rapid growth albeit at a moderated pace. By category, GMV for skincare, makeup, and hair care/wigs on mainstream e-commerce platforms grew by 1%, 19%, and 17% year-on-year respectively in Q1 2026, indicating strong performance in makeup and hair care, while skincare faced noticeable pressure.
High-end consumption continued a weak recovery, with foreign high-end brands showing marginal improvement. Data indicates a noticeable recovery for high-end foreign cosmetics brands in Q1 2026, with brands like Estée Lauder, Lancôme, La Mer, YSL, Helena Rubinstein, Clarins, and SkinCeuticals achieving double-digit GMV growth online. The report attributes this primarily to two factors: 1) Against a backdrop of weak recovery in high-end consumption, financial reports from luxury groups show that comparable revenue for Hermès and LVMH in the Asia-Pacific region (excluding Japan) increased by 2% and 7% year-on-year respectively in Q1 2026, marking a marginal improvement compared to the +1% growth for Hermès and -11% for LVMH in Q1 2025. 2) High-end foreign brands have a stable customer base and, after years of decline, are achieving stabilization and marginal improvement through adjustments in channels and product portfolios. In contrast, mass-market foreign brands performed relatively weaker, with L'Oréal and Olay seeing year-on-year declines.
The beauty and personal care sector has experienced significant pullbacks influenced by market sentiment and is gradually entering an attractive valuation zone. Recent setbacks in the sector are attributed to market sentiment and relatively weak online data for some leading brands. As of April 17, 2026, the 2026 estimated P/E ratios for leading companies have largely retreated to a range of 15-25x, with most PEG ratios below 1x. Looking ahead to 2026, the report believes the sector still offers numerous bottom-up high-growth opportunities due to abundant product innovation and the overall rising trend of domestic brands. With leading companies' valuations now at historically low levels, and as consumption stabilizes and improves through 2026 alongside catalysts like the Q2 618 shopping festival, the report judges that the sector is entering an attractive investment zone. Risks include weak consumer spending power, intensified brand competition, and new product incubation falling short of expectations.
Comments