The fragrance sector is showing signs of fatigue after years of outperformance, prompting downgrades of Puig and Interparfums by analysts at BofA Securities, in a note dated Monday.
Analysts cut Puig to “neutral” from “buy” with a reduced price objective of €15, down from €18, and lowered Interparfums to “underperform” from “neutral,” trimming its price objective to €25 from €35.
The moves follow evidence that growth in the category is slowing, with retailers destocking, exports weakening, and the product launch pipeline thinning.
“Regarding the fragrance demand, during the first half, our best estimation of the growth of the category as a whole was in the midsingle-digit number,” Puig Chairman and CEO Marc Puig said on the company’s first-half 2025 earnings call.
“And over the past couple of months, we’re seeing moderation even from this growth. So, we expect the second half to be more in the low-single digit.”
France, the world’s largest exporter of fragrance products, reported a 3% year-over-year decline in perfume exports in the third quarter to date, following a 2% drop in the second quarter.
Growth compared with 2019 also slowed sharply, from 116% in the second quarter to 35% in the third quarter to date.
The European market is under particular strain. “Where I think there’s a little bit more risk is Continental Europe and especially Northern Europe. Think about France, Germany, the UK. There’s a rapid slowdown of like consumption. I think consumer confidence is also very subdued,” Estée Lauder President and CEO Stéphane de La Faverie said at the Barclays Global Consumer Staples Conference.
Douglas CEO Sander van der Laan underscored the trend, saying, “France, that’s our number two market, is the only market which actually really showed a decline. The market in France, particularly in stores, continues to be challenging as evidenced by the fact that our negative store sales significantly outpaced the trend in the market last quarter, thus resulting in a growing market share.”
For Puig, analysts forecast top-line deceleration in the next three quarters and earnings per share cuts of 1% to 8% between 2025 and 2027, which are 5% to 8% below consensus estimates. The company trades at 14x 2026 PE for a stock expected to deliver 6% EPS CAGR.
Interparfums faces an even tougher outlook. With few major launches before 2027, analysts expect revenue growth of 3% CAGR from 2024 to 2027, with topline estimates running 1% to 5% below consensus.
Higher marketing spend and promotions are projected to reduce margins by 240 basis points, with EPS forecasts 4% to 14% below consensus.
Analysts noted that the fragrance cycle has entered its fifth year, approaching the historical length of beauty “super-cycles,” which usually last five to six years. Weakening launch momentum, with fragrance introductions falling 34% in the third quarter to date, is expected to add pressure as retailers move to reduce inventories.
BofA said both Puig and Interparfums remain highly exposed to a normalizing European market, leaving them vulnerable as the fragrance boom shows signs of coming to an end.
Source :
https://www.investing.com/news/stock-market-news/fragrance-slowdown-prompts-bofa-downgrades-of-puig-and-interparfums-4260435
