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The Ratings Game: Kim Kardashian and Kylie Jenner gain momentum on social media, which is good for Coty, Bank of America says

The Ratings Game

Coty shares fall 11% on Tuesday, and are down nearly 52% year to date

Having a relationship with both Kim Kardashian and Kylie Jenner, and their hundreds of millions of social-media followers, could be good for Coty, analysts say


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Sisters Kim Kardashian and Kylie Jenner are building on their already tremendous social-media mojo, which is a plus for global beauty company Coty Inc., according to Bank of America.

Coty
COTY,
-7.32%

signed a $600 million deal with Kylie Jenner and her beauty brands, Kylie Cosmetics and Kylie Skin, in November 2019. Coty acknowledged that one of the benefits of the deal is the social-media exposure that Kylie has with more than 270 million followers.

See: Kylie Jenner tops the world’s highest-paid celebrity list a week after Forbes revoked her billionaire status

Last week it was announced that Coty was in talks with Kylie’s sister Kim for a possible collaboration, sending Coty shares higher. Kim Kardashian has about 280 million followers across Twitter, Facebook, Tik Tok and Instagram. Her company is called KKW Beauty by Kim Kardashian West.

Coty stock tumbled 11% on Tuesday, and has slumped 51.2% for the year to date. The S&P 500 index
SPX,
-0.48%

is down 0.5% for 2020 so far.

“Overall, both the Kylie and Kim brands lost momentum for much of 2019, with declining volume of social media conversations and visits to their respective websites, but trends have accelerated in 2020,” wrote Bank of America analysts led by Olivia Tong. Analysts worked with the bank’s predictive analytics team to examine social-media activity for the Kardashian brands.

Much of the recent chatter around Jenner focused on the loss of her billionaire status after Forbes accused her of inflating the success of her company.

“The volume of social media conversations on Kylie Cosmetics is more volatile than KKW (larger peak to trough), but visits to their respective brand websites and absolute number of conversations is four-to-five times higher for Kylie than Kim in recent months,” Bank of America wrote.

For Coty, having proximity to these social-media powerhouses could benefit the whole company. Other Coty brands include Rimmel and CoverGirl.

And:More consumers are willing to head back to stores that to dine out at restaurants, S&P Global finds

“In our view, celebrity brands could drive strong initial trial, but factors like enhanced product claims and greater distribution will be necessary to maintain the momentum,” Bank of America said. “Key for Coty will be an ability to leverage Kylie’s digital reach further and into other portfolio brands.”

Bank of America rates Coty stock neutral and raised its price target $1 to $7.

D.A. Davidson’s biannual review of social media ranking for prestige beauty brands finds that Kylie Cosmetics has momentum even if the number of social media followers isn’t growing as much as it once was.

“Nevertheless, it’s impressive, in our view, that a brand with such a significant social media presence is still able to grow its followers in the mid-single digits,” Linda Bolton Weiser wrote in the report.

Kylie Cosmetics ranks number five, with Louis Vuitton Moet Hennessy Louis Vuitton SE’s
MC,
-0.20%

Dior Beauty topping the list.

Weiser said there are positives and negatives to signing a deal with Kim, just as there were with Kylie.

“The downside, in our view, of partnering with or acquiring KKW is similar to that with Kylie — the brand is inextricably linked forever to a celebrity, which creates risk, as we saw with the recent negative Forbes article on Kylie Jenner,” the note said.

Coty made another big announcement in recent weeks: the sale of a majority interest in its hair business to KKR & Co. Inc.
KKR,
-1.45%

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