This week, Kylie Jenner sold a majority 51% stake of her business Kylie Cosmetics to beauty conglomerate Coty (COTY).
The whopping $600 million deal values Jenner’s business at roughly $1.2 billon — no small feat considering the reality star launched the line as a teenager back in 2015 — and hints at the industry’s shift toward celebrity branding and social media-savvy marketing.
In the past, the direct-to-consumer model has worked well for Jenner’s booming business, but sales have slipped as the industry continues to experience an overall slowdown amid a shift in consumer preferences.
Color cosmetics have taken an especially big hit with buyers opting for skincare products and natural tones rather than darker shades.
Kylie Cosmetics brought in an estimated $177 million in net revenue over the past twelve months — which means Coty’s $1.2 billion valuation is six times that.
Other analyst concerns include the brand not outliving the person, something industry staple Estee Lauder (EL) experienced first-hand with the recent slump of Bobbi Brown.
So why pay the high price?
Jenner has done well amidst the volatile market, and customers still seem to connect with her image — thanks in no small part to her 150 million+ Instagram following.
Coupled with the rise of influencer marketing and social media, traditional beauty houses have had to innovate in order to keep up — which is why Coty’s big bet on Kylie might just work.
For instance, Lady Gaga’s Haus Laboratories has already seen major success since exclusively partnering with Amazon (AMZN) — with the singer’s new holiday lipstick skyrocketing to the top of the site’s bestseller list.
Reuters recently reported that several consumer goods giants and buyout funds are exploring bids for some of Coty’s top beauty brands — specifically, its professional hair and nail care products — in a deal worth up to $7 billion.
The company has said it will continue focus on areas of high growth — and Kylie Cosmetics could pave the way, with some experts predicting that this could be the start of several acquisitions in the color cosmetics space.
But could this also be a ‘new normal’ when it comes to the future of celebrity makeup brands? Maybe — or not maybe not.
Alexandra Canal is a Producer at Yahoo Finance.
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