Billionaire at 21
In March 2019, reality TV star and entrepreneur Kylie Jenner was featured on the cover of Forbes magazine. At the age of 21, she was ranked No. 27 in the list of “America’s Richest Self-Made Women”, making her the youngest billionaire in history. Forbes highlighted the success of the cosmetics mogul, further describing her as “The Youngest Self-Made Billionaire Ever”, a title which she clinched from Facebook CEO Mark Zuckerberg after he reached the milestone in 2008 at the age of 23.
The youngest member of the Kardashian-Jenner family is the founder and sole owner of Kylie cosmetics, a cosmetics company that was valued at $900 million in 2019. Kylie launched the company in 2015 with a batch of Kylie lip kits (lip pencil and matching liquid lipstick) that were sold-out almost immediately. The much-hyped $29 lip kits were so popular that the company sold $420 million worth of products in just 18 months. In 2016, the company had the most successful launch, recording $19 million in sales on the launch date.
Controversy surrounding the title
Kylie’s title sparked a lot of controversy. People rushed to question whether the decision by Forbes was fair. Unlike other self-made stars, Kylie did not come from a marginalized neighborhood nor did she experience any adverse events while growing up. She comes from a famous and wealthy family and grew up as a TV star on E! Network’s reality TV show, ‘Keeping up with the Kardashians’.
Later in the year, Forbes came out to defend their position. Forbes, well-known for its global billionaire rankings, defined the term ‘self-made’ as used in the context and provided a scoring system used to identify a self-made billionaire. The company defined self-made as “someone who built a company or established a fortune on her own, rather than inheriting some or all of it.” Despite the wide-spread criticism, many stars and celebrities were quick to defend her title. After all, her entrepreneurial efforts were undeniable.
The valuation of Kylie Cosmetics
Although Forbes affirmed that Kylie was still the youngest self-made billionaire, a recent report by the magazine has reversed the title. This decision came after the entrepreneur announced plans to sell a 51% stake in Kylie Cosmetics to Coty, a giant in the beauty industry, for $600 million. The deal effectively valued Kylie’s business at $1.2 billion. The deal was mutually beneficial, the struggling giant got the much-needed injection of youthful energy while Kylie Cosmetics got a chance at expansion and lots of cash, improving its liquidity.
Kylie’s family accountant revealed that Kylie Cosmetics had earned $306 million in revenue in 2016 while Kylie had taken home about $110 million in personal income. These figures sparked a lot of speculation and controversy. It was hard to believe that a company had grown from nothing to a whopping $300 million in sales in a year. Later on, the company revealed the numbers for 2017. Sales revenue was up by 7%, translating to about $330 million. In the midst of her success, Kylie was featured on the cover of Forbes and in the list of the richest self-made women.
Doubts about Kylie’s status
Information shared by the beauty giant Coty, a publicly traded company, showed that Kylie Cosmetics was a significantly smaller company than Kylie had led the public to believe. A presentation to the Coty investors showed that the company had only generated revenues of $177 million in 2018, a figure that was significantly smaller than advertised.
Worse still, the analysts at Coty established that the company had only generated $125 million in sales in 2016. There was therefore no way that Kylie cosmetics could have generated $307 million and $330 million in 2016 and 2017. Then there was the issue of the company’s net margins. Forbes, using figures prepared by the family accountant, estimated that the company had 44% net margins. But Coty’s findings were far from this. Her profitability ratios were much lower than estimated, with the EBITDA margin coming in at about 25%.
Everyone, including the team at Forbes magazine was surprised. Kylie Cosmetics was in fact a much smaller and less profitable company than the family had led people to believe. Furthermore, data from an e-commerce firm indicated that there was a 62% decline in the company’s online sales in the same time period. This raised further questions on the deal that Coty had made with the company.
There were two possible explanations for this deviation in numbers. One, the company had experienced a significant decline of about 50% in sales from 2016 to 2018. Unfortunately, there was scanty evidence to support this explanation. Most analysts and industry experts affirmed that it was highly unlikely for that much revenue to disappear in a period of just two years. Professionals in the cosmetics industry were also quick to point out that the industry was yet to mature. As a result, this explanation did not hold water.
The second explanation, which was the more plausible of the two, was that the business had created a façade about its size. The business was thriving, but not as much as the Jenners had led people to believe. Analysts went a step further to imply that the company returns had actually been forged by the family and its accountant. Unfortunately, there was no evidence to corroborate this claim.
Kylie Jenner is not a billionaire after all
So considering all the new information that surfaced, Forbes magazine recalculated Kylie Jenner’s net worth to a figure just below $900 million, with more than a third of this valuation coming from the Coty deal. As a result, the magazine concluded that she is not a billionaire.
Despite the downgrade by Forbes magazine, Kylie Jenner claims that she is perfectly fine. After all, she is believed to have pocketed about $340 million in post-tax cash after the deal with Coty to sell a majority stake in her company. While responding to the news of the downgrade, Kylie went on Twitter to affirm that the downgrade was the least of her worries. She affirmed that she was blessed with a beautiful daughter, Stormi, and a thriving business and that she was perfectly fine!