Orient: Stable Demand for Beauty Products, Intensified Brand Differentiation

Orient released a report stating that in July, the beauty sector's retail sales significantly outperformed overall consumer spending, with online domestic brands resonating with international high-end brands, and increasing differentiation in Douyin channels. Currently, the fund holdings in the beauty and personal care sector are at a historical low, suggesting focus on the following three areas: 1) brands with validated GMV in H1 2026 and improved cost efficiency; 2) brands benefiting from structural trends such as premiumization and functional skincare; 3) brands with strong multi-platform operational capabilities and those expanding overseas to tap into new growth. Key points from Orient are as follows: The beauty sector continued to significantly outperform the overall consumer market in July. In July 2026, the total retail sales of consumer goods grew by 0.6% year-on-year, while the retail sales of above-designated size enterprises decreased by 3.4% year-on-year; during the same period, retail sales of cosmetics above designated size increased by 6.8% year-on-year, outperforming the overall market by about 6 percentage points. Cumulatively from January to July, the cosmetics category rose by 6.3% year-on-year, significantly faster than the overall retail sales increase of 1.2%. Despite the natural deceleration following a high base in June's promotional period, July's beauty sales maintained a growth rate in the mid-single digits, demonstrating resilience in demand and a relative advantage in market sentiment. In July, online beauty shifted from promotional efforts to normal operations, with leading domestic brands and international high-end brands sharing the top positions. 1) Overall online: According to data from Qingyan Intelligence, the monthly transaction volume for the top 20 skincare brands in July ranged from approximately 100 million to 400 million yuan, while the top 20 makeup and fragrance brands were around 70 million to just over 200 million yuan. Domestic brands such as HanShu, Proya, GuYu, Nature Hall, MAO GEPING, and Carcel remained at the forefront, while international brands like Lancme, L'Oral, Este Lauder, La Mer, Dior, and Yves Saint Laurent held strong positions, reflecting a scenario characterized by enhanced efficiency among domestic brands and resilience among premium international brands. 2) Douyin performance: According to data from ChanMama, Proya's main brand and CaiTeng showed declines, but OR demonstrated double-digit growth; CHICMAX's HanShu saw a slight decline, while YiYe and AnMingYou experienced significant growth; the main brand of Guangdong Marubi Biotechnology, Marubi, saw a double-digit decline, while LianHuo registered high double-digit growth; both YuZe and BaiCaoJi under Shanghai Jahwa United exhibited high growth; GIANT BIOGENE's KeFuMei experienced a slight decline, but KeLiJin showed significant growth; MAO GEPING's main brand grew by over 50%. Disclosed financial reports from overseas leading beauty enterprises for H1/Q2 2026 indicate that industry demand remains resilient, but regional and category differentiation continues. 1) LOral: Sales in H1 2026 increased by 6% year-on-year, with comparable sales growth adjusted to 6.5%. The high-end cosmetics segment achieved double-digit growth, while the skin science beauty and professional hairdressing businesses also saw approximately mid-double-digit growth. 2) Unilever: H1 2026 beauty and health business saw a baseline sales growth of about 6%, accelerating to high single digits in Q2, with Dove, Sunsilk, and Vaseline achieving double-digit growth; personal care business showed mid-single-digit growth. The Chinese market grew in mid-single digits, with beauty and health sectors being the main drivers. 3) Beiersdorf: H1 2026 organic revenue in the consumer goods segment declined by about 4%, mainly due to a mid-single-digit decline in NIVEA; the Derma business grew by approximately high single digits, achieving notable growth in Q2 in the Chinese market. 4) Shiseido: H1 2026 revenue grew by about 6%, but remained essentially flat after excluding impacts from exchange rates; the Chinese and travel retail businesses are still in a phase of weak recovery. 5) Kao: H1 2026 cosmetics business grew by about 7% on a comparable basis, with a significant improvement in operating profit, and the Asian market leading in growth. 6) Amorepacific: In Q2 2026, sales grew by approximately 15%, with operating profit increasing by over 50%, but income in the Greater China region still declined due to channel optimization impacts. 7) Procter & Gamble: The company's beauty revenue for fiscal year 2026 grew by about high single digits, with organic growth of around 4% from April to June, with hair care and personal care performing better than skincare, although the SK-II product portfolio improved, sales in the Greater China region are still under pressure. 8) Essity: In Q2, the companys personal care revenue grew by about double digits, with organic growth in mid-single digits, particularly strong in categories such as feminine hygiene. 9) LVMH: In H1 2026, the companys organic revenue from perfumes and cosmetics remained essentially flat, slightly declining in Q2; Dior perfumes and makeup, as well as Guerlain perfumes, performed well; meanwhile, the company sold its DFS business in the Greater China region, continuing to optimize its travel retail layout. Risk Warning: Continued weakening of terminal consumer demand, underperformance in new product promotions, and intensified industry competition.