Is Puig going public at the right time?

Puig is in the final stages of his IPO -Price will be set tomorrow and is scheduled to debut on the site this Friday- taking into account the development of markets and, especially, competitors included in the list industryto beauty.

Spanish family firm expects to offer up to €3 billion via public offering by subscription (OPS) from new class B shares -with fewer political titles- 1,250 million and the IPO of the founding family.

It is estimated that it will host about 25%-30% of property rights, which would place Puig’s value, including debt, above 15,000 million on top of the fork. The company will thus be the star of the biggest stock market debut in the world this year and the most important in Spain since 2015.When Ena He jumped onto the hard wood.

Pooch arrives with his homework ready for a meeting at the stock market after “extraordinary results” of his latest exerciseaccording to its president, Marc Puig. In 2023, the group’s turnover amounted to 4.304 million (+19%), EBITDA amounted to 849 million (+33%), and net profit amounted to 465 million (+16%).

Your case is not isolated. The beauty sector is experiencing a pleasant moment, the results of which in many cases have been historic, although there are exceptions. Nevertheless, The strength of business has not transferred to the actions of the listed groups in the sectorwhose last twelve months have been generally subdued in the stock market.

Can Pooch look at himself in the mirror? L’Oréal, Estée Lauder, Coty, Shiseido, Interparfums. or beauty salons LVMH and Kering? How are all these groups similar and how are they different? And above all, what does the evolution of these companies say about the timing of the Spanish company to go public?

L’Oreal and Estee Lauder.

The brochure compares Puig to L’Oréal and Estée Lauder.two global giants of the beauty industry, with whom they have much in common, but also many differences.

The first and most obvious is size.Last year, L’Oréal’s turnover was 41,180 million euros, ten times more than Puig’s.and has a capitalization of more than 220,000 million, while Estee Lauder generated revenue of $15,937 million (€15,000 million), almost four times more than in the Spanish groupand its value on the stock market is about 46.3 billion euros.

The second big difference is business mix. Owner L’Oréal Paris, Garnier or Lancôme. The company generates 40% of its revenue from skin care products, with hair care (23%) and makeup (23%) being its next businesses. Perfume (Yves Saint Laurent, Prada or Valentino) represent the fourth largest business area, with a share of turnover of 13%, i.e. about 5.3 billion euros.

Estee Lauder has a similar income structure. Owner Estée Lauder, Clinique or MAC More than half of its turnover (52%) comes from skin care products, 28% from cosmetics and 16% from perfumes (Joe Malone or Tom Ford).

Instead of, Fragrances account for seven out of every ten euros (72%) of Puig’s turnover.thanks to brands like Paco Rabanne, Carolina Herrera or Jean Paul Gaultier. Thus, cosmetics (18%) and skin care (10%) are minority segments, although they have gained weight since the acquisition Charlotte Tilbury and Dr Barbara Sturm.

Puig’s attempt to grow in these categories and diversify its business is no coincidence. The global fragrance market pie is worth more than $50 billion, but represents a small portion of the beauty market. At a meeting with investors in February, L’Oréal indicated that by 2023 the turnover of the entire industry will reach 270 billion euros.

The good news for the Spanish group is that growing much larger than the two groups he tended to compare himself to. L’Oréal ended its latest fiscal year with sales up 7.6% (accelerating to 8.3% in the first quarter of 2024) and profits up 8.4%, both representing half of Puig’s revenue. progress. Meanwhile, Estée Lauder shrank revenue by 10% and profit by 58% last year and continued on the same path in the first half of 2024. One of Puig’s great advantages over them was his lesser influence in Asia.the most decaffeinated beauty market in recent quarters.

Puig’s outperformance and his differences with both rivals allows us to put into perspective the muted evolution of both in the stock market as of late. L’Oréal shares have accumulated a decline of 1.84% since the start of 2024. and over the past twelve months they have grown by only 1.14%. Estée Lauder shares are up 1.38% for the year but in twelve months they have accumulated a collapse of 40.24%.

Kochi, the most similar

Founded in Paris, headquartered in Amsterdam and registered in New York, Coty is probably the beauty band that most closely resembles Puig. although there are differences between them. Owner Lancaster or Max Factor It is similar in size to the Spanish company – its turnover was $5.554 million (€5.220 million) in the last financial year – and has a similar business structure.

Perfume (Chloé, Calvin Klein, Burberry or Hugo Boss) are its main driver, accounting for 62% of its revenue in the last fiscal year, compared with 28% for cosmetics and 11% for skin and body care products.

Moreover, as in the case of the Spaniards, The key market is EMEA (Europe, Middle East and Africa).which accounts for about 50% of its business, followed by America, with Asia playing a secondary role.

Coty began the first half of fiscal 2024, which begins in July. will grow by 16% and increase EBITDA in the same proportion, which represents an evolution comparable to the latest results announced by Puig. The group has set a goal of achieving revenue of $7.5 billion by 2027. And despite this, The stock market is also dark. Coty shares are down 6.22% year to date and have accumulated a decline of 3.45% over the twelve months.

Shiseido, Interperfums…

Shiseido or Interperfums. These are very different groups, both among themselves and in relation to Puig, although their evolution also represents a good example of the moment that the beauty market is experiencing.

The Japanese with banners like Shiseido, Ginza or Anessa, is primarily a cosmetics company, although it also has a cosmetics and fragrance business. In addition, his getting to know AsiaThe company, which accounts for two-thirds of turnover, was hit hard in the last financial year when it saw sales fall by 8.8% to 973,038 million yen (nearly €6 billion) and profits by 36%. Shiseido forecasts positive fiscal year 2024with an increase of 2.5%, which halted the stock market’s decline to 2.55% for the year, compared with the 39.4% decline accumulated over the past twelve months.

Interperfums, for whom perfumery is the main business –Coach, Montblanc, Jimmy Choo or Guess– and represents a similar mix of markets to that of Puig – with Europe concentrating two-thirds of the business – however it also has differences with the Spanish company. On the one side in size – the bill is almost four times smaller – and, on the other hand, thanks to its lack of diversification. His accounts soared last year, increasing his income and profits by more than 20%, but the market didn’t reward him either. Its share will fall by 4.64% in 2024 and by 26.3% in twelve months.

Giants of luxury

The evolution of such luxury giants as LVMH or Kering It is useless to draw conclusions related to Puig. Perfume and cosmetics division LVMH (Acqua di Parma, Givenchy or Kenzo and Loewe fragrances.) barely makes up 10% of its turnover – it’s the second smallest business to contribute, only after drinks – and it’s the group’s bottom division in terms of profit.

Meanwhile the owner Gucci just created in 2023 Keering Beauty division develop brands under this auspices Balenciaga, Bottega Veneta or Alexander McQueen discovering “a wonderful opportunity for beauty.”

Case Douglaswhich accumulates the stock market has fallen by almost 20% since it went public in March is also not significant, since its business model is not a product, but retail. It’s like comparing Unilever or Coca-Cola to Mercadona or Carrefour.

However, its poor debut as a listed company also does not reflect its performance, with the group growing 11% last year to earn €17 million, compared with a loss of €314 million in 2022.

Puig’s strengths

Subdued in some cases, or chaotic in others, the stock market evolution of the major cosmetics groups over the past year does not point to a positive path for Puig. although there are big nuances. Puig’s growth exceeds industry average, its potential for development in the cosmetics business or its lesser dependence on Asiaand some. There is one more.

Overall, all firms analyzed have improved their stock market performance in recent weeks, showing significant improvements compared to their performance in previous months, suggesting a friendlier market context for the beauty sector that Puig can take advantage of. L’Oréal predicts the beauty industry will grow 5% this year.