04: Is Kylie a billionaire? #NSQ
In #NSQ: No Stupid Questions, we answer your burning questions. To start us off: What was all that hoopla about Kylie's billionaire status, anyway?
We’ve been getting so many questions and requests for beauty industry topics to cover, that we’re starting a column called "No Stupid Questions” or #NSQ for short where we deep dive into your burning questions. To start us off, just what was the deal with the whole Forbes - Kylie Jenner billionaire fiasco? Let’s take a look.
Background: in 2019, Forbes named Kylie Jenner, the youngest self-made billionaire in the world, at 21. This was not without immediate controversy, especially by critics who took issue with the term “self-made,” as they point out Kylie, besides being born into wealth and privilege, had tangible advantages too. In addition to Keeping Up With the Kardashians, the reality show that is the family’s bread and butter that net them their following, their business deals gave her a big boost too.
A year later however, in 2020, Forbes rescinded her billionaire designation, accusing her (or her team) of forging tax documents to make her appear as a billionaire, which Kylie and the Kardashian team have denied. It’s also worth mentioning, Forbes additionally cited public Coty filings to back up their reversal.
The numbers: The majority of Kylie’s net worth comes from Kylie Cosmetics, LLC which originally started in late 2015 as Kylie Lip Kits, in partnership with Seed Beauty. At the time of release, Kylie Lip Kits capitalized on Kylie’s then attention-grabbing scandal surrounding her use of lip fillers, and were quickly sold out in under a minute. It legitimized the power of DTC, and perhaps created the playbook that celebrity beauty brands aspire to emulate to this day. Realizing the lip kits could be serious business, Kylie Lip Kits were soon rebranded into Kylie Cosmetics. By the end of 2016, Kylie Cosmetics reportedly earned $300 million.
Forbes had at various points valued Kylie Cosmetics at $800M and $900M, but it wasn’t until Coty, Inc. bought a 51% controlling stake in November 2019 for $600 million that the company valuation was determined at $1.2 billion.
Where it all fell apart: Industry analysts started to get word that something was amiss. Coty, Inc., a publicly traded French company, didn’t have the luxury of pulling a wool over financials that privately-held companies do. According to their presentations, revenue for a 12-mo period prior to the 2019 deal was only at $177 million, not bad by any means, but not at all what was being touted (the Kardashian-Jenners volunteered that their 2017 revenue was $330 million, and 2018 revenue was $360 million). Additionally, Coty, Inc. reported that the $177 million was up 40% from 2018, which means actual 2018 revenue was only $125 million. Similarly, where Kylie Cosmetics reported that Kylie Skin, the skincare line, did $100 million in sales in just 1.5 months in May 2019, the filing showed the skincare line was forecasted to generate $25 million for the entire year.
Possible Explanations:
1. Business fell significantly between launch and 2018. Perhaps the luster of the lip kits died down, and new releases were not finding the audience, which explains how the business went from $300+ million in sales to just $100 million. According to some e-commerce trackers, Kylie Cosmetics did experience a decline in sales anywhere from 50% to 65% between 2016 to 2018.
If this were true, it would be considered a catastrophic collapse namely because the company was continually releasing new products, and actively promoting, only to sell less than half of what the bare-bones 2016 lip kits were generating. Moreover, if Kylie Cosmetics were hemorrhaging half its customer purchases, it doesn’t make sense that Coty, Inc. would be eager to buy it, especially at a valuation of $1.2 billion, no less.
2. More realistically is that the business was not hitting those numbers, and the post-acquisition Coty, Inc. numbers are aligned with realistic sales.
What does this mean for her net worth?
Well, Kylie is still very rich. Not as rich as they’d like you to believe, but ostentatiously rich enough that it’s ridiculous to split hairs. The majority of her wealth comes from what Coty, Inc. did pay, which would net her around $340 million after tax, followed by her 40%+ equity of her business which generates what we assume is $100+ million in annual sales with a 25% profit margin (as reported by Coty, Inc. filings), and other business ventures including her cut of The Kardashians on Hulu (reportedly $900K per episode).
So back to the question: is Kylie a billionaire? At this point, she probably is, but materially it doesn’t matter, it never did. This is all for show.
Disclaimer: By nature, some analysis may be speculative, and should not be taken as fact. Views and opinion expressed are just that, and should not be taken as endorsements, nor advice (financial or otherwise).
Disclosures: Newsletter may use affiliate links. Underneath It All is run by Garçon’s Media, which is not a shareholder of any beauty company, nor vice versa.