Key Takeaways

Beauty-company stocks look like an attractive buy as tariffs threaten to weaken the broader fashion industry, Jefferies analysts said.

Many consumers see makeup and skincare products as staples and won't switch their beauty routine in response to price increases, Jefferies said in a note Thursday. Cosmetic, skincare and fragrance companies, such as Interparfums ( IPAR ), Estée Lauder Companies ( EL ) and Covergirl's parent company, Coty ( COTY ), are also fairly insulated from tariffs because they largely manufacture in the US, the analysts said.

E.l.f. Cosmetics ( ELF ) can be another wise investment despite making 80% of its products in China, Jefferies said. E.l.f. should be able to offset higher import taxes with $1 to $2 price increases, which would keep its products at a lower price point than many competitors, analysts said.

Other "defensive" beauty company investments highlighted by Jefferies include Bath & Body Works ( BBWI ) and Ulta ( ULTA ). (Read Investopedia's coverage of today's trading, in which stocks fell broadly and precipitously, here .)

The broader fashion industry is likely to face significant headwinds, according to Jefferies. Several clothing, accessory and shoe retailers source from Vietnam, which is slated to fall under a 46% tariff, Jefferies said. As retailers pass on growing expenses, consumer demand will likely soften, putting pressure on department-store operators such as Macy's ( M ) and Kohl's ( KSS ), the analysts said.

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