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Sephora, Ulta, and e.l.f. among the top beauty brands for US teens, per survey

Teens are crazy about cosmetics.

Scroll through TikTok, and you'll find Gen Zs (and Gen Alphas) sharing skincare routines, makeup tutorials, go-to fragrances, and hairdo how-tos.

In a new survey from Piper Sandler, Taking Stock With Teens, teens' overall "self-reported" spending was down 6% year over year to $2,263 — but they didn't hold back on beauty products.

Annual spending on beauty is up 8% to $339, the highest level since 2018, with makeup holding the highest share, but fragrance seeing the most growth.

Young fashionistas are giving some beauty companies a boost. Sephora (MC.PA) and Ulta (ULTA) are the top beauty retailers for teens, at 37% and 31%, respectively. Target (TGT) clocks in at No. 3, with 10% listing it as their favorite.

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Other retailers that teens favor for cosmetics include Amazon (AMZN), Walmart (WMT), SHEIN, e.l.f. Beauty (ELF), and CVS (CVS).

After Ulta reported its Q4 earnings in March, CEO David Kimbell said on an analyst call that young shoppers are interested in a spectrum of beauty products.

"Young consumers are engaged in mass [beauty], but they're also engaged in prestige [brands]," he said. "It's really not so much about price or promotion necessarily, as what brand is really delivering great innovation, great marketing, engaging with them in social media."

The increased sales from teens come as consumers pull back on overall beauty spending. Kimbell said at a conference last week that Ulta is seeing a slowdown across "price points and segments."

Overall, growth for US mass beauty brands is slowing, with sales increasing 3-4% year over year in Q1 compared to the 7% jump in Q4.

Ulta expects net sales of $11.7 billion to $11.8 billion for 2024, up 4% to 5% from fiscal 2023, with an operating margin of 14.0% to 14.3%, down from 15% last year.

Its stock has dropped 17% in the past month after the soft outlook and comments about the slowdown.

"Competitive intensity is definitely high, largely from Kohl's Sephora shop growth, and ULTA’s 2024 guidance implicitly bakes in some level of market share inflection, adding an element of risk," Evercore ISI analyst Michael Binetti wrote in a note to clients.

RIYADH, SAUDI ARABIA - JANUARY 16: (L-R) Daim Gaw Huda Kattan attend the Sephora x Huda Beauty – Pink vs Peach KSA at Sidra Arts on January 16, 2024 in Riyadh, Saudi Arabia. (Photo by Cedric Ribeiro/Getty Images for  Huda Beauty)
Daim Gaw and Huda Kattan attend the Sephora x Huda Beauty Pink vs Peach KSA at Sidra Arts on January 16, 2024, in Riyadh, Saudi Arabia. (Cedric Ribeiro/Getty Images for Huda Beauty) (Cedric Ribeiro via Getty Images)

When it comes to products, e.l.f. Beauty is the teen favorite with 38% of the votes, up 16 points compared to last spring.

Per JPMorgan analyst Andrea Teixeira, the 20-year brand is only getting started. "There is plenty of runaway as [a] disruptor of a large category, with nimble and fast execution," she wrote in a note to clients.

Its secret? The company has capitalized on social media, first as an early adopter of Facebook, then TikTok, with significant presence on Instagram, Twitch, and Roblox. Its digital sales made up 24% of revenue last quarter.

However, e.l.f. Beauty shares are also under pressure, down 12% in the past month. Jefferies analyst Ashley Helgans said now is the time to buy, asserting that the recent stock pullback was "driven by ULTA's commentary around a category slowdown," and adding that "demand remains robust" for e.l.f. Beauty.

Selena Gomez's Rare Beauty is a distant second, with 9% of teens pegging it as their favorite product. Others in the top 10 include Maybelline, Charlotte Tilbury, and Rihanna's Fenty.

Fragrance makers are in luck. Nearly three-quarters of female teens said they use a perfume every day, up from last year's 66%.

Their favorite brand is Bath and Body Works (BBWI), with 29% of the votes, while L'Occitane Group's Sol de Janeiro brand and Victoria's Secret (VSCO) took second and third, with 17% and 11%, respectively.

Bath and Body Works shares are up nearly 7% year to date, but underperform the S&P 500's (^GSPC) 10% gain. For fiscal 2024, the company is projecting flat to 3% decline in net sales, with a 2.5% to 4% year-over-year revenue drop in Q1.

Correction: A previous version of this article misspelled the names of Charlotte Tilbury and Sol de Janeiro. We regret the error.

Brooke DiPalma is a senior reporter for Yahoo Finance. Follow her on Twitter at @BrookeDiPalma or email her at bdipalma@yahoofinance.com.

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