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Puig downgraded as fragrance cycle cools; pivot needed to protect EBIT

Bottom Line Impact

Absent proactive mix diversification and inventory normalization, revenue growth could decelerate by 200-300 bps and EBITDA margins compress 50-100 bps over the next 6-12 months, risking further multiple pressure; decisive pivot to hero-led sell-out and skincare adjacency can stabilize margins and support a valuation reset.

Key Facts

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  • JPMorgan reduced target price by 50% from €25 to €12.5 and turned negative on the stock
  • Puig shares fell 6% on the downgrade, following a Bank of America cut in late September
  • Fragrances account for 72% of revenue and 86% of EBIT in FY25e, amplifying cyclicality
  • EPS trimmed by about 2% for 2025 and up to 12% for 2026 on slower fragrance growth
  • H1 sales €2.299b (+5.9%), EBITDA €445m (+8.6%) at 19.4% margin; net debt reduced to €1.42b

Key Roles Affected

CEOCMOCFOCorporate Development

Executive Summary

JPMorgan halved Puig's target price to €12.5 and issued the first negative call, citing a cyclical fragrance slowdown that leaves Puig highly exposed given fragrances are 72% of revenue and 86% of EBIT in FY25e. With shares down 6% on the day and EPS cuts of about 2% for 2025 and up to 12% for 2026, management must rebalance mix, recalibrate launches, and tighten trade inventories while leveraging strong H1 profitability to defend margins and sustain share gains.

Actionable Insights

Immediate Actions (Next 30-90 days)
Publish a 12-month category diversification plan to reduce fragrance mix by 300-500 bps via skincare and makeup acceleration, and commit to a reduced launch cadence focused on hero lines
Rationale: Signals control of the cycle, preserves margin, and reframes the equity story from single-category exposure to balanced growth
Role affected:CEO
Urgency level:immediate
Tighten working capital by cutting retailer weeks of supply to 8-10 weeks and reduce SKU count by 15-20%; protect EBITDA margin with a 100-150 bps SG&A flex plan
Rationale: Faster inventory turns and cost flexibility offset slower sell-in and limit margin leakage
Role affected:CFO
Urgency level:immediate
Short-term Actions (6-12 months)
Reallocate 20-30% of launch and media spend from newness to top-3 hero franchises and DTC demand capture; target +300 bps DTC mix and +2-3% ASP hold on icons
Rationale: Hero concentration drives sell-out resilience while retailers destock, sustaining pricing power and share
Role affected:CMO
Urgency level:short-term
Strategic Actions
Advance a pipeline of 1-2 bolt-on deals in derma or color cosmetics totaling €200-400m to balance category mix and add recurring skincare revenue
Rationale: Selective M&A can accelerate diversification and support a rerating once the cycle stabilizes
Role affected:Corporate Development
Urgency level:strategic

Risks & Opportunities

Primary Risks
  • Prolonged fragrance downcycle and retailer destocking lasting 3-4 quarters
  • Margin pressure from elevated promotions and mix shift away from high-EBIT icons
  • Weaker China and travel retail recovery, muting premium fragrance demand
Primary Opportunities
  • Share gains as competitors reduce launches and shelf space opens for hero franchises
  • DTC and CRM-driven sell-out growth that decouples from retailer destocking
  • Category diversification into skincare and makeup with higher repeat rates

Supporting Details

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