We recently compiled a list of the 10 Best Skincare Stocks to Buy According to Hedge Funds. In this article, we are going to take a look at where Bath & Body Works, Inc. (NYSE:BBWI) stands against the other skincare stocks.
According to NielsenIQ, the global beauty market is expected to increase by 7.3% annually to reach $1 trillion in 2025, with Latin America by 19.1% and Africa-Middle East by 27.1% leading the way. Since TikTok Shop is the eighth-largest health and beauty shop in the US and generates around $1 billion in sales, e-commerce now accounts for 41% of US beauty sales. Nevertheless, 43% of customers believe that anti-theft methods like locked shelves discourage them from returning to a store. The fragrance and bath & shower segments drove the US beauty market’s 6.2% sales growth in 2024. Boomers choose product efficacy and anti-aging remedies, while Gen Z stresses skincare and values-driven companies. As a result, brands must implement data-driven generational strategies. To retain customer trust and relevance across changing demographics, successful beauty players will strike a balance between innovation and sustainability, integrating digital and physical shopping, and guaranteeing inclusivity and transparency.
On February 12, 2025, Circana reported that sales in the US beauty industry have increased for the fourth consecutive year. According to the report, mass-market beauty sales rose by 3% in 2024, while prestige beauty sales climbed 7% year over year to $33.9 billion. The fastest-growing prestige category was fragrance, which now accounts for 28% of prestige beauty sales and is the second-largest prestige category with double-digit unit growth and dollar sales up 12%. The growth rates for eau de parfums and parfums were 14% and 43%, respectively. Sales of high-end products surged by 12%, while sales of body sprays and hair fragrances jumped by 94% and 32%.
Specifically, skincare concluded the year as the slowest-growing category in the prestige market, with dollar sales up 2% and units expanding slightly faster—and a modest rise in both metrics in the mass market. Since top-performing masstige brands that are distributed across markets are propelling growth in both, skincare has emerged as the market that is best aligned across mass and prestige. Face cleansers and lip treatments were among the standout categories in the premium market. Body care products, such as lotions, creams, cleansers, and hand soaps, continued to outperform the facial market.
As per Circana’s report, the beauty industry continues to evolve as a result of the “skinification” of beauty, which involves incorporating skincare ingredients into body care, hair care, and makeup products. The first half of 2024 saw a 7% spike in U.S. skincare sales, with unit sales up 10% YoY. Body care and sun care are driving this growth, outpacing facial care as retinoids, AHAs, and vitamin C penetrate into these markets. Furthermore, this innovation drove double-digit growth in makeup sales, driven by serum foundations that give skin benefits and coverage and are packed with niacinamide, hyaluronic acid, and squalane. Hybrid makeup-skincare products are sought after by more than half of American consumers, with 60% of Gen Z and Millennials giving them top priority. Even the haircare industry has adopted skinification; salicylic and glycolic acids are popular for scalp care, and fragrance companies are experimenting with alcohol-free formulas to cater to sensitive skin. Brands must innovate and educate to remain competitive as consumers’ demands for multipurpose, benefit-driven products grow.
Larissa Jensen, global beauty industry advisor at Circana, stated:
“The beauty industry’s resilience continues to shine as consumers turn to beauty to not only look, but also feel good.” “With beauty products intertwined with consumers’ emotional needs and wellness routines, maximizing this opportunity will go a long way to ensure a healthy future for our industry.”
Looking ahead, according to Wendy Nicholson, managing director of Baird, commented:
“Skincare is one area where I think we’ll continue to see breakthroughs.”
She believes that when brands adapt to the change, consumer expenditure on injectibles and other treatments is likely to result in new product development.
A female customer browsing a variety of body care products in a retail store.
Methodology:
We sifted through holdings of Beauty ETFs and online rankings to form an initial list of 20 skincare stocks. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 1,009 hedge funds in Q4 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
Bath & Body Works, Inc. (NYSE:BBWI)
Number of Hedge Fund Holders: 57
Bath & Body Works, Inc. (NYSE:BBWI) is a company that manufactures scented personal care products and specialized home fragrances under the brand names White Barn, C.O. Bigelow, and Bath & Body Works. It is an established business among consumers seeking fragrances, skincare, personal care creams and soaps, candles, air fresheners, house fragrances, and other flavoring items. In addition to 1,850 locations in North America, the top personal care and home fragrance brand has 480 franchises internationally.
Bath & Body Works, Inc. (NYSE:BBWI) had record-breaking growth in loyalty memberships in 2024, with active membership rising 6% annually and loyalty customers accounting for 80% of sales. These consumers continue to spend more and shop across channels more frequently than non-members. The firm exceeded initial goals by delivering $155 million in incremental cost reductions through its Fuel for Growth program throughout the year, bringing the two-year total to over $300 million. The company’s diluted EPS of $2.09 was above forecasts, and its Q4 net sales of $2.8 billion exceeded the high end of guidance.
The Everyday Luxuries brand, inspired by prestige scents, appealed to a younger and more diversified customer base. Record-high retention rates can be attributed to improvements in the customer experience, as seen by the fact that 57% of North American stores are now located outside of malls. Last but not least, a 20% growth in areas not impacted by the Middle East crisis drove a roughly 10% increase in foreign retail sales.
Baird maintained its Outperform rating on Bath & Body Works, Inc. (NYSE:BBWI) shares and increased the company’s price target from $45 to $47. The company stated that the quarter exhibited a strong holiday season and that there is potential for improvement in the guidance. According to Baird, they would purchase the shares in the event of a decline.
Overall BBWI ranks 3rd on our list of the best skincare stocks to buy according to hedge funds. While we acknowledge the potential for BBWI as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than BBWI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.