As we approach the holiday season, we’re leveraging our consumer insights to curate the ultimate holiday stock watchlist.
We’ve noticed a surprising uptick in spending among a powerful cohort of young consumers, not Gen Z or millennials, but Generation Alpha, those born in 2010 or later.
This group is expected to become the largest generation in history and they’re showing an unexpected interest in skincare products over toys or electronics.
This skincare obsession is being fueled by social media platforms like TikTok, where over 80% of Gen Alpha kids are glued to the stream of quick-hit videos. The #skincare hashtag alone boasts 272.9 billion views.
Consumer searches for skincare products are trending at multi-year highs, with skincare sales up 10% year-over-year as of September. The more expensive “prestige” brands are selling at an even higher rate, up 14% over the same period. Teen spending on skincare products soared an even more impressive 19% this fall.
This affinity for skincare could give beauty retailers an unexpected boost this holiday season, especially as brands specifically cater to this group’s holiday wish list with targeted marketing campaigns.
We’ve identified two names that could trade higher on the back of strong gift-giving and growing consumer demand for skincare products.
1. E.l.f. Beauty
E.l.f. Beauty’s (ELF) products stand out on shelves filled with expensive beauty and makeup products. They’re simply packaged and more importantly, they’re affordable.
The value beauty brand has its products on shelves in Target (TGT), Walmart (WMT), and pretty much any other store where you’d normally find makeup.
Elf’s latest earnings report (for Q2 Fiscal 2024) revealed impressive figures: Net sales surged by 76% to $215.5 million, marking the 19th consecutive quarter of growth. This was largely fueled by strength in both retailer and e-commerce channels.
With Naturium, a high-performance skincare brand, now under its belt, Elf updated its fiscal 2024 outlook to account for a 55% to 57% year-over-year increase in net sales.
2. Ulta Beauty
Ulta Beauty (ULTA), the largest beauty retailer in the U.S., is in a unique position with 1,355 storefronts spanning all 50 states. It offers hundreds of beauty brands in store and online, catering to a range of budgets.
Its Ultamate Rewards loyalty program keeps customers coming back with special discounts, free gifts, early access to new products and deals, free shipping, and more.
In the second quarter, we saw that pay off in a 10.1% increase in net sales, reaching $2.5 billion, with a comparable sales increase of 8%. The company’s diverse product range and strategic initiatives significantly contributed to this growth.
As Ulta gears up to report earnings next week, the current setup for investors looks tantalizing.
Final Thoughts
We’ll be watching out for other major beneficiaries in this space. For now, be sure to add ELF and ULTA to your holiday stock watchlist.
Let us know what you think, please share your thoughts in the comments below.
