For the fourth time in less than four years, cosmetics maker Coty (NYSE:COTY) has named a new chief executive. Chairman Peter Harf, who served as the beauty brand's CEO between 1993 and 2001, is back in the position and hopefully ready to steer the struggling company into a turnaround.

Harf will succeed Pierre Laubies, replacing Pierre Denis who was supposed to take over the CEO role later this year. Laubies has grappled with an unprecedented clampdown on consumerism thanks to coronavirus-related lockdowns. He was also in charge at the time Coty inked a partnership with Kylie Jenner in January that implied Jenner's business was worth more than one billion dollars. More recent scrutiny suggests the value of Kylie Cosmetics is actually much, much less. Laubies took over for Camillo Pane in Nov. 2018, who took the helm in fall 2016.

Several different types of cosmetics, trays, lip glosses and brushes laying on a table.

Image source: Getty Images.

They weren't all bad years, despite what the revolving door in the CEO's office might imply. But they've been increasingly tough years, and they're not getting any easier. The business is changing, and there's little any of these companies seem able or willing to do in response to the paradigm shift. In fact, putting the industry veteran back in charge now may prove even more disruptive than simply leaving Laubies in place.

Paradigm shift

The beauty and cosmetics landscape has evolved. NPD Group reported in February that in 2019, makeup sales in the United States fell 5%, while skincare grew 5% year over year -- and that was before the coronavirus contagion was even on the radar.

The shift didn't go unnoticed before NPD crunched the numbers. Highlighting the fiscal second quarter revenue miss from L'Oreal, Vogue Business's Jessica Schiffer wrote in August of last year (also well before the cosmetics panic became palpable and well before COVID-19 took hold of the world) that traditional makeup sales were slowing as consumers sought out more non-cosmetic options. Estee Lauder lamented slowing growth around that time too, lowering its full-year profit outlook during October's earnings call. Ulta Beauty CEO Mary Dillon even commented during the company's third quarter conference call held in December that "growth in the overall U.S. beauty industry continues to be constrained by softness in the makeup category."

Piper Jaffray research analyst Erin Murphy said of the industrywide cracks that were starting to clearly show by October, "I think part of it is the fact that we're pivoting into more of a skincare-centric market: You've seen a really significant shift in behavior toward skincare and that's been kind of the big trend."

When most everyone in or watching the industry is saying the same thing, there's something to it. The headwind may have become evident last year, but it was likely brewing even before then. Coty's fiscal trajectory certainly suggests this may be the case.

Coty (COTY) revenue and per-share earnings, past and projected.

Data source: Thomson Reuters/Refinitiv. Chart by author.

Reasons for the headwind

Driving the paradigm shift away from prestige cosmetics and toward skincare is, unsurprisingly, greater interest in a more natural and less made-up look.

They're called VSCO (pronounced "visco") girls, borrowing the nickname given to photo editing app Visual Supply Company that's been widely embraced by teens aiming to look like someone not regularly seen on the cover of a fashion magazine. Casual is the key, but the casualness is a trendy look in and of itself. Most notably, this crowd is less interested in cosmetics and more interested in looks that don't require much -- if any -- makeup.

It's a trend that hits cosmetics companies where it hurts the most. Although younger consumers haven't abandoned makeup altogether, weakness from this all-important demographic is clear. Piper Jaffray's teen survey taken in the fall of last year found that 21% of these girls had decreased their spending on makeup, year over year.

Blame Amazon too, at least partially. While most beauty companies offer some sort of skincare product line, a willingness to try something other than prestige makeup is mirrored with a willingness to buy another brand from another venue. Amazon has become a key part of the beauty industry mix as a result, catering to a crowd that's increasingly comfortable with self-service beauty buying. That's particularly true of teens, most of whom have never known a world without the web. Amazon and other online-selling venues have connected consumers with brands that aren't readily available in stores.

And while the VSCO girl movement may be leading the charge, some older consumers are following. NPD Group's survey found that about one-fourth of all women in the U.S. now wear less makeup than they have in the past, trading in their traditional cosmetics for more natural products. It's a shift that aligns with growing interest in better diets.

Coty isn't built for the new normal

It's all anecdotal evidence of a cultural shift that Coty just isn't ready for.

That's not to suggest the company has nothing to offer consumers who are rethinking how they want to present themselves to the world. Kylie Skin, for instance, was just launched in Europe, aimed at the very VSCO girl crowd that's proven tough to target lately.

More traditional brands like CoverGirl and Max Factor are a couple of Coty's key breadwinners though, giving the company a strong presence in the weakening prestige sliver of the cosmetics market. Both are brands built on admittedly strong loyalty -- particularly CoverGirl -- but loyalty that's largely founded on store-based sales at a time when stores are struggling to draw a crowd. In a school's hallways, online, at work, and during friendly gatherings are where more and more beauty purchasing decisions are made. The internet has given rise to organic trends and fads that cosmetics companies have no control over, like the VSCO movement.

Peter Harf, now 74 years old, may fully appreciate these modern nuances of the makeup market. Or, he may not. Either way, understanding them doesn't mean it's easy to adapt to them. Coty may have to stop doing as much on the marketing front as it must start doing. And whatever it's going to do, it must do it quickly.