Earlier today, Forbes released an upcoming cover story that claimed Kylie Jenner is worth $900 million. As you might imagine, the world was shocked by this headline. If true, it means that the 21 year old Kylie is 3 times richer than 37 year old sister Kim Kardashian. The article also implied that Kylie is on pace to be a paper billionaire within a year. That would be two years younger than when Mark Zuckerberg first achieved billionaire status. I have some major problems with this headline and article in general. Allow me to break it all down…
Ok so first off, I will say that I am frustrated by these Forbes articles because, in my opinion, they take a morsel of truth and massage it into a shocking headline purely for the purpose of selling magazines and getting attention. Everyone in the world is going to be stunned to hear that Kylie Jenner is nearly a billionaire. By the way, that's almost 10 times what CelebrityNetWorth and Forbes pegged her net worth at just one year ago. I'm frustrated because from now on, this headline will be perceived as gospel. If we here at CNW have anything other than $900 million as Kylie's net worth, we'll get 10 emails a day from angry Kylie fans telling us we're idiots.
More importantly, I'm frustrated because their math to come up with a $900 million net worth is just totally silly and not based in reality:
Forbes calculates her $900 million net worth by assuming Kylie Cosmetics is worth $800 million and that Kylie has a separate net worth of $100 million. Let's tackle the cosmetics valuation first.
Forbes states that Kylie Cosmetics grossed $330 million in 2017, roughly $100 million of which was profit. Therefore to achieve an $800 million valuation, they are assuming what they claim is a "conservative" 8X multiple (annual profits multiplied by 8). I believe that is an extraordinarily high multiple, nowhere near conservative. Private technology companies sell for 8-10X multiples. Consumer goods companies typically sell for much much lower multiples since the margins are lower and growth prospects vastly more challenging.
On that last point, it's crazy to me that Forbes would assume an 8X multiple when in the very same article they state that Kylie Cosmetics sales are basically tanking. In mid-2017, Kris Jenner told Forbes that Kylie Cosmetics was on pace to do $400 million in sales for 2017. Well, they actually did $330 million. That's 20% lower than what was promised. Did Christmas sales not turn out well?
If you read the Forbes article, they themselves state that 2017 Kylie Cosmetics revenue was only 7% higher than 2016. 7%. Not exactly rocket-ship growth.
Oh and did we mention that sales of Kylie's flagship lip-kit were down 35%, year over year? Forbes mentions this fact but that still doesn't deter them from giving the company an extraordinarily high multiple.
When pressed on these not-so-flattering sales figures, Kris Jenner told Forbes that "revenue was up considerably in the first six months of 2018 compared with the same period last year. A claim that Forbes couldn't verify."
This quote is coming from the same woman whose 2017 revenue predictions were off by $70 million. And Forbes can't verify it but they'll just assume it's true.
If we're truly being reasonable and "conservative", we're talking about an incredibly successful cosmetics company that's actually on the downside of popularity. We're talking about a company that missed revenue targets last year by $70 million, ended up posting extremely weak growth while seeing it's main product line TANK by 35%. Why on earth would anyone pay an extremely high multiple for the company I just described?
A more reality-based multiple would be 3-4X profits. Using 4x, if someone bought Kylie Cosmetics, it would sell for $400 million. After Kylie gave 20% to the US Treasury for long-term capital gains and 13% to the California Franchise Tax Board, she'd be left with $268 million. We estimate that Kylie's non-cosmetics assets are worth $40 million, not $100 million, which would mean after a sale she would be left with a net worth of $300 million. Using a 3X sale multiple, she'd be left with a $240 million net worth. Compare those numbers to the $900 million.
Another major criticism people are aiming at Forbes has to do with the words "self-made". The cover story says Kylie is "set to be the youngest-ever self-made billionaire." Lots of people are taking issue with anyone who calls a Kardashian/Jenner self-made. As comedian Franchesca Ramsey tweeted:
"Being born into extreme wealth and instant fame is the exact opposite of 'self made.'"
Even Dictionary.com took a shot over their official Twitter account:
Self-made means having succeeded in life unaided.
— Dictionary.com (@Dictionarycom) July 11, 2018
Sooo look. I'm not just being a hater. Clearly Kylie has been EXTREMELY successful and deserves a ton of praise and credit. My main issue is that Forbes is just so clearly bending the truth to invent a eyeball-grabbing headline which they hope will sell magazines and get them clicks. And at the same time, this invented number will be considered fact by most people from now on (unless they read this article!).
Personally, I would LOVE to see Kylie's cosmetics company become worth hundreds of millions or billions of dollars. It would result in a ton of traffic and dozens of great articles for CNW to cover.