Beauty brands face post-pandemic financial woes

What you probably already know: Beauty and cosmetic brands are under increasing financial pressure. Big-name companies including Revlon and Avon have filed for Chapter 11 bankruptcy in the past few years. This month, beauty technology company Cutera and cosmetics brand SBLA filed for protections to reorganize their business models and restructure their debts. Hims & Hers, a telehealth personalized care company, also shuttered an acne treatment brand it bought in 2021 for $190 million. Some celebrity-owned brands are also struggling.

Why? A number of factors are contributing to the beauty market’s slowdown, including rising interest rates and production costs, supply-chain issues, inflation, lawsuits, and shifting consumer trends. Last year, total U.S. bankruptcy filings increased 14% over 2023 (though they were still lower than pre-pandemic levels). Analysts say the rise of indie and challenger brands is also making the playing field more competitive for legacy names.

The pandemic years opened pathways for up-and-coming indie brands and gave consumers more time to develop multi-step skincare routines, but those benefits have worn away like non-waterproof mascara in a rainstorm. Buy now, pay later apps with high interest rates like Klarna and Afterpay combined with inflation have led to a lot of credit card debt.

What it means: More brands are expected to sunset as companies work to manage their debts and find financial stability, which means consumers will undoubtedly see changes to what product lines are available on shelves. Companies that have filed for bankruptcy may try to move inventory, resulting in sales or promotional deals — or entire product lines could disappear. 

What happens now? Trade wars sparked by President Donald Trump’s tariffs on various countries could eventually reach the beauty industry, as well. Increased tariffs on aluminum and steel imports prompted retaliatory tariffs from Canada and the EU on everything from American beef and bourbon to jeans and motorcycles. Now, Trump has threatened to slap a 200% tariff on wine and other alcohol imports from Europe. The U.S. is the second-largest beauty export market for France — if the trade wars continue to escalate, they could result in significant price increases for consumers.