LIVE MARKETS-'Lipstick effect' keeps beauty sector growing, BofA says
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'LIPSTICK EFFECT' KEEPS BEAUTY SECTOR GROWING, BOFA SAYS
Global beauty demand has started getting its color back, lifted by China's steadying consumer, a rebound in travel retail and a familiar dose of the "lipstick effect", the small-luxury impulse that keeps shoppers buying even when the world feels short on gloss.
BofA Global Research's latest industry overview shows listed beauty companies grew 3.8% in Q4 2025, a modest but meaningful acceleration that signals firming demand across several major markets. Early 2026 data suggests that momentum is broadly carrying forward.
At the heart of the recovery is a stabilising Chinese consumer and a powerful swing back in travel retail, particularly in Hainan, which remains the sector's biggest swing factor. After 19 consecutive months of negative sell-out trends, Hainan duty-free surged 26% in the first two months of 2026, driven by policy relaxation, deeper price discounts, and a surge in shopper numbers. Korea's duty-free cosmetics channel also turned positive for the first time in nearly a year, reaching up 6% in January 2026.
China's beauty market, up 5% in 2025, continued to improve into Q1 2026, with online sales rising 12% as Tmall and JD.com 9618.HK led gains. International brands outperformed domestic rivals during Women's Day promotions, with L'Oréal and Estée Lauder posting 30%-plus growth.
Macro uncertainty has not disappeared. Soft European consumption, fragile Chinese consumer confidence, disrupted Asian travel-retail channels, weak U.S. department-store traffic, and broader geopolitical tensions all linger. Middle East conflict poses the latest risk, though BofA estimates revenue exposure at 1.5%–3% for the global listed conglomerates, and companies have so far described the impact as manageable.
Yet none of these headwinds derailed the sector's momentum, precisely because beauty behaves differently in a downturn.
The global beauty industry in early 2026 is a story of resilience, with pockets of disruption. As BofA puts it the "lipstick effect" thesis, that consumers maintain beauty spending even in uncertain times, appears to be holding.
(Ragini Mathur & Rashika Singh)
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