L’Oréal is acquiring IT Cosmetics, the fast-growing beauty brand built by Jamie Kern Lima, for $1.2 billion.
The business has been projected by industry sources to be on track to do $400 million in retail sales for 2016. IT Cosmetics had $182 million in net sales for 2015, a 56 percent year-over-year increase. L’Oréal expects IT Cosmetics’ focus on hero sku’s and a more natural look to complement its colorful and on-trend Urban Decay line, which was acquired in 2012.
The acquisition also gives L’Oréal access to QVC, which is one of IT Cosmetics’ primary sales points. The brand is sold at Sephora and Ulta as well.
“We’re already strong in Ulta and Sephora, where we’re not strong is in QVC, and we admired what Jamie has accomplished with QVC because her charismatic spokesperson presence on television has converted so many women to the brand,” said Carol Hamilton, group president of L’Oréal Luxe USA. “That will be a new powerful channel for us. It’s not brand new, but having strength there is brand new for us.
“What turned me on about the brand were several things. First, Jamie builds confidence in women in such a meaningful way…and it’s authentic,” Hamilton said. “The second thing was that she’s an absolute magical formulator. Her products have not only true performance, but they create an addiction with their consumers because they are just so great to use in a sensorial way and a performance way.”
IT Cosmetics makes more than 300 beauty products, focusing on color cosmetics, brushes, tools, and most recently, skin care, which the company launched earlier this year. On QVC, Lima is known to remove her makeup to show the rosacea that prompted her to start the business in the first place – and then reapply her cosmetics live on television.
Before IT Cosmetics, Lima was a news anchor and journalist, and she had a hard time finding makeup that didn’t look bad on camera that would also cover rosacea. Once, during a four-hour broadcast, Lima said she accidentally wiped off half an eyebrow. “You can’t go to the bathroom, you’re there, you’re on and you just smile really big and you are totally screwed, and you just keep going,” Lima said at the WWD Beauty CEO Summit this past spring.
That problem inspired her to start her own beauty business, which she did with husband and cofounder Paulo Lima in 2008. Less than two years later, she did her first spot on QVC.
“At that point, you have one chance, 10 minutes and if you do well, wonderful — and if not, you won’t come back,” Lima said of her first appearance on QVC. “I showed my bare face — rosacea and hyper pigmentation and all. That had never been done before. Women want to see, ‘Does this really work?’ They deal with acne and want to know if it will cover it…[so] I showed my bare fact. It was a big risk.”
The brand is now sold in every Ulta location and in 100 Sephora stores.
“When we starting having success as a brand is when real women started spreading our authentic brand mission and DNA,” Lima said. “When women find a product that actually truly works for them, they tell people. They spread the word. It was real women getting real results — that’s what kept our company alive in the early years.”
TSG Consumer Partners acquired a minority stake in 2012, followed by Guthy Renker in 2013 — and the price L’Oréal paid gave them each a hefty return. A source said TSG alone will receive 25 times its original investment. At one point, IT Cosmetics was said to be considering an initial public offering. For the acquisition, Goldman Sachs acted as IT Cosmetics’ financial adviser, while Lazard advised L’Oréal.
“IT [Cosmetics] is a perfect example, as well as the Unilever acquisition of Dollar Shave Club, that this direct sales model is really resonating,” said Guthy Renker co-founder Greg Renker. “America has gotten totally comfortable with direct shopping. The fears are way down, but the expectations are way up.”
IT Cosmetics’s sales projections for the year indicate 30 percent year-over-year growth. When asked what it is that allows Lima to grow the company so fast, Hamilton said: “It’s Jamie. She’s brilliant.” Lima, her husband and the remaining will remain involved with the brand going forward.
“The biggest thing that I’m most excited about is utilizing L’Oréal ’s global infrastructure to really take our mission to a whole new level so much quicker and so much bigger than we could on our own,” Lima said.
The brand will be part of the Luxe division at L’Oréal, and will continue to operate out of its Jersey City, N.J., headquarters under the current leadership team.
“IT Cosmetics will perfectly complement the L’Oréal Luxe’s brand portfolio to satisfy the rising demand for make-up as well as hybrid skincare,” said Nicolas Hieronimus, president L’Oréal selective divisions. “The brand has earned the devotion of its highly engaged consumers and we see potential for significant growth in the years to come,” said Freedéric Rozé, president and chief executive officer of L’Oréal USA.
IT Cosmetics is the latest acquisition in L’Oréal ‘s recent deal spree. The company said it made an offer to buy Société des Thermes de Saint-Gervais-les-Bains and the license to use the San-Gervais Mont-Blanc beauty brand earlier in July. In June, L’Oréal signed an agreement to buy Atelier Cologne.
Source : https://wwd.com/business-news/financial/loreal-to-acquire-it-cosmetics-for-1-2b-10495227/