In today’s economic climate, some consumers are leaning away from luxury, but that doesn’t mean they are abandoning indulgence altogether. And L’Oréal is proving it.
For the first time since 2017, a non-luxury company has claimed the top spot on the Paris bourse (stock exchange) at the end of a trading day, with L’Oréal surpassing LVMH, the Louis Vuitton owner, as France’s most valuable publicly listed company. L’Oréal reached a market capitalization of roughly €203 billion ($234 billion), compared to LVMH’s €201 billion ($231 billion).
LVMH’s drop is significant to the broader conversation surrounding the luxury industry, which has been contracting over the last three years. It has been particularly impacted by the continued economic slump in China and the ongoing war in the Middle East. Reports by consultancy firm Bain showed that 60 million consumers are abandoning luxury goods as prices continue to skyrocket, pushing high-end fashion brands out of reach for many buyers.
But this plummet for luxury brands doesn’t seem to be impacting L’Oréal, even though the company produces high-end cosmetics for fashion labels like Armani and Yves Saint Laurent. In fact, L’Oréal shares are up about 5%, while LVMH has fallen around 35% this year, losing its place as one of Europe's 10 largest companies by market capitalization.
The cosmetics conglomerates’ improved fortunes may be partly attributable to the lipstick effect: the theory that it is easier to sell small treats when the economic mood is particularly bleak, compared to high-end goods like bags and shoes.
“People simply can't afford to buy these expensive luxury items and instead are indulging in small luxuries like the proverbial lipstick to make themselves feel better,” Berenberg analyst Nick Anderson said in a press release. Amid economic crises, it is more likely that a consumer will seek out more affordable products that still make them feel like they’re making an investment in their appearance and wellness, providing a critical economic opportunity for the beauty industry.
L’Oréal also benefits from the breadth of its portfolio, which spans categories and price points, allowing the company to adapt to changing consumer behavior. Its high-end makeup brands are increasingly borrowing codes from traditional luxury goods: YSL’s Skin Affair Soft Glow Cushion Foundation and Valentino’s Go-Clutch compacts, for example, evoke leather accessories.
That approach reflects beauty’s structural advantage in a cautious economy. Consumers may be pulling back on major purchases without abandoning luxury altogether, instead trading down in price while seeking products that still feel elevated. If a $40 lipstick or $100 serum can deliver some of the status, design, and indulgence of a designer handbag at a fraction of the cost—that’s a powerful draw for consumers right now.
