Forbes Exposes Kylie Jenner's "Web Of Lies", Says "Youngest Self-Made Billionaire" Only Worth $900M

Tyler Durden's Photo
by Tyler Durden
Friday, May 29, 2020 - 06:10 PM

During what was an extremely hectic last trading session in May, one headline somehow managed to cut through the clutter, compelling the world to turn away - even if only for a few brief moments - from the conflagration in Minneapolis, and click.

In a blockbuster report that relies on hundreds of pages of public securities filings and other documents, Forbes reported Friday that Kylie Jenner lied about being the world's youngest billionaire, strategically misleading Forbes and the rest of the world with calculated lies, including what appear to be falsified tax returns.

Based on the information uncovered by its reporting, the magazine has removed Jenner from its billionaires' list.

Instead, they'll be placing her on the close but no cigar list...

So, where did it all go wrong for Jenner? Forbes has more details.

Filings released by publicly traded Coty over the past six months lay bare one of the family’s best-kept secrets: Kylie’s business is significantly smaller, and less profitable, than the family has spent years leading the cosmetics industry and media outlets, including Forbes, to believe.

Of course, white lies, omissions and outright fabrications are to be expected from the family that perfected—then monetized—the concept of “famous for being famous.” But, similar to Donald Trump’s decades-long obsession with his net worth, the unusual lengths to which the Jenners have been willing to go—including inviting Forbes into their mansions and CPA’s offices, and even creating tax returns that were likely forged—reveals just how desperate some of the ultra-rich are to look even richer.

“It’s fair to say that everything the Kardashian-Jenner family does is oversized,” says Stephanie Wissink, an equity analyst covering consumer products at Jefferies. “To stay on-brand, it needs to be bigger than it is."

Based on this new information—plus the impact of Covid-19 on beauty stocks and consumer spending—Forbes now thinks that Kylie Jenner, even after pocketing an estimated $340 million after taxes from the sale, is not a billionaire.

Among other luridly interesting revelations that offer rare insight into the innerworkings of the Kardashian-Jenner clan, the Forbes story details how the ultra-influential strategically manipulate press coverage to perpetuate lies and myths that enhance their personal brand. For example, after Forbes placed Kylie at No. 59 on its celebrity income list for 2018 - provoking the ire of the Kardashian-Jenner family's gaggle of publicists - the family successfully sold the numbers to Women's Wear Daily. Though WWD - known in some circles as "the bible of fashion" - purports to cover "the business of fashion" as well as trends and key players in the industry, it clearly didn't have the account expertise to sniff out the bs in the forged tax returns that Kylie's publicists fed to the magazine's editors.

Here's the strategy that $250,000/month Hollywood publicists don't want you to read: first, you find a critically-respected but non-mainstream media organization to shower with attention with the implicit agreement that they uncritically parrot at least some of the BS you're spoon-feeding them. Step 2: say nothing while the mainstream media, strapped for cash and manpower, uncritically parrots that report. And poof - a lie is born.

During meetings at Kris Jenner’s palatial Hidden Hills, California, estate and the family accountant’s office nearby, Forbes was shown tax returns detailing $307 million in 2016 revenues and personal income of more than $110 million for Kylie that year. It would have been enough to put her at N0. 2 on the Celebrity 100 list, behind only Taylor Swift, the accountant was quick to point out. But the documents, despite looking authentic and bearing Kylie Jenner’s signature, weren’t exactly convincing since the story they told, of e-commerce brand Kylie Cosmetics growing from nothing to $300 million in sales in a single year, was hard to believe.

After speaking with a handful of analysts and industry experts who also found the Jenners’ claims implausible, we settled on a more reasonable estimate for our 2017 Celebrity 100 list: $41 million in overall earnings for Kylie, good for the No. 59 spot. Kris was “so frustrated,” the Jenners’ PR flack shot back. “We’ve done so much."

Two months later, a story appeared in WWD, a trade publication known as “the bible of fashion,” using the exact numbers the Jenners first tried to give Forbes. “There has been raging speculation about the size of her business, with guesstimates ranging from $50 million up to $300 million,” the story reads. “Well, here’s the bad news for more-established beauty players: Jenner’s surpassed the higher figure with ease. Kylie Cosmetics actually has done $420 million in retail sales—in just 18 months—Kris Jenner revealed. . . . ” It was the first time the Jenners had publicly disclosed the size of the business, the story boasted—“and they provided WWD with documentation.”

It's just another dismaying example of why public trust in the press is at an all-time low.

That sky-high revenue number—repeated everywhere from People to CNBC and Fortune—took hold. By the summer of 2018, when Forbes set out to calculate Kylie’s net worth for our list of the richest self-made women, the industry’s opinion of Kylie’s business had shifted. Those huge revenues were “totally possible,” said one analyst, adding that she had heard similar numbers herself. Another suggested revenues were around $350 million. The estimates kept climbing. Revenues were $400 million, according to a Piper Jaffray research note in 2018. An Oppenheimer report projected sales would top $700 million by 2020.

The Jenners offered us their own number: 2017 revenues were up 7%, they said, to $330 million. “No other influencer has ever gotten to the volume or had the rabid fans and consistency that Kylie has had for the last two and a half years,” an executive at e-commerce platform Shopify, which manages Kylie’s online store, told Forbes at the time. Based on her rapid success—certified by industry sources, plus those 2016 tax returns—Kylie appeared on the cover of Forbes magazine in July 2018, ranking No. 27 on our listing of the richest self-made women. At age 20, she was worth $900 million, we estimated, and would soon become the youngest self-made billionaire ever.

"Thank you for this article and the recognition,” Kylie Instagrammed. Kim Kardashian West tweeted her congratulations—twice. “I am SO proud,” Kris Jenner wrote, finally pleased.

The next month Kylie celebrated her 21st birthday at West Hollywood nightclub Delilah, in a Barbie-themed blowout complete with a pink ball pit, performances by Travis Scott and Dave Chappelle—and bartenders in black T-shirts with Kylie’s Forbes cover printed on them, her face plastered next to the words “America’s Women Billionaires.” By early the next year, she officially crossed the ten-digit threshold.

Sell-side analysts, having little interest in a private company, first took an interest in Kylie Jenner's wealth when cosmetics brand Coty announced it would buy 51% of the business. Jenner sold that stake for a reported $600 million - more than half a billion dollars - for a largely untested e-commerce platform that owed all of its growth to trendy Instagram marketing.

At this point, we suspect bankers working on the deal immediately realized Jenner was massively inflated not just her personal wealth, but the relative success of her business.

Despite that, Forbes finally capitulated, granting Kylie Jenner the long-sought mantle of "the youngest self-made female billionaire," a label that elicited more than a few chuckles in the Zero Hedge newsroom, and across twitter.

During the first call with analysts after the deal was announced, the company's CFO endured a torrent of criticism.

“I think everybody was surprised,” says Wissink, the Jefferies analyst, who was on the call. “The negative that came out of that announcement was that the business was a lot smaller than everybody had expected."

So much smaller, in fact, that there’s virtually no way the numbers the Jenners were peddling in earlier years could be true either. If Kylie Cosmetics did $125 million in sales in 2018, how could it have done $307 million in 2016 (as the company’s supposed tax returns state) or $330 million in 2017?

Yet, the public perception of Jenner's wealth has somehow survived. Until now. As Forbes explained, the belief that the K-Js somehow faked Kylie's tax returns is based on the notion that there is "no way the numbers the Jenners were peddling in earlier years could be true...If Kylie Cosmetics did $125 million in sales in 2018, how could it have done $307 million in 2016 (as the company’s supposed tax returns state) or $330 million in 2017?

Securities analysts consulted by Forbes believe it's unlikely that the business saw its sales collapse during what had been billed as its most successful year to date. Rather, the sales likely were never anywhere near that big to begin with.

One explanation: Kylie’s business quietly fell by more than half in a single year. If so, Coty paid up for a “high-growth” brand that is actually a much smaller business than it was just a few years ago. (Coty would not answer any questions about Kylie Cosmetics for this story.) Data from e-commerce firm Rakuten, which tracks a select number of receipts, suggests there was a 62% decline in Kylie’s online sales between 2016 and 2018.

Still, virtually every industry expert polled by Forbes thinks the business couldn’t have collapsed by so much so quickly. “It seems unlikely that much revenue could have evaporated overnight," says Evercore analyst Omar Saad. “There doesn’t seem to be any evidence the business has cratered,” adds cosmetics veteran Jeffrey Ten, who has led companies like Note Cosmetics, Nyx and Calvin Klein Beauty. “If so, why would Coty buy it?"

More likely: The business was never that big to begin with, and the Jenners have lied about it every year since 2016—including having their accountant draft tax returns with false numbers—to help juice Forbes’ estimates of Kylie’s earnings and net worth. While we can’t prove that those documents were fake (though it’s likely), it’s clear that Kylie’s camp has been lying.

There’s also the issue of profit: Forbes had been estimating that her business, which has little overhead, was notching 44% net margins. But Coty’s filings indicate that Kylie’s profits are likely lower than we figured, since her Ebitda margin—which factors in some, but not all, of her expenses—is only around 25%.

Another shocking reveal: For years, the KJs insisted that all the profits from the business (which, like the revenue figures, were also vastly overstated) went to Kylie, as the sole owner. But filings by Coty showed a chunk of the private equity retained by the family is owned by an irrevocable trust belonging to Kylie's mother, Kris, her manager, who also takes a 10% chunk out of all her daughter's annual earnings from the business.

Accounting majors and reporters covering corporate finance will also appreciate this little nugget.

There’s also the issue of profit: Forbes had been estimating that her business, which has little overhead, was notching 44% net margins. But Coty’s filings indicate that Kylie’s profits are likely lower than we figured, since her Ebitda margin—which factors in some, but not all, of her expenses—is only around 25%.

Of course, as one of Forbes sources reportedly said, the family is in the entertainment business, where "everything is exaggerated." This strategy is undoubtedly part of the playbook that helped Kris Jenner build what has undoubtedly become one of the more profitable family businesses in the US.

But securities lawyers and compliance officials might look at it from a somewhat more serious perspective: Might the Jenners' aggressive and strategic manipulation of the press - a strategy that clearly duped a public company into grossly overpaying for a majority stake in Kylie's Cosmetics, leaving shareholders saddled with massive losses while Kylie cashed out - constitute some form of securities fraud? If an accountant actually helped clients forge tax returns, shouldn't he or she at least face some professional repercussions, if nothing else?

Only time will tell. As for Kylie's actual net worth, Forbes has an idea, and it's actually not all that far removed from the figure that Jenner was peddling: Thanks to the revenue from the Coty sale, Jenner is likely worth more than $900 million.

In short, it's probably too late for Kylie to ever become the youngest ever female billionaire. As for being "self-made", well...we'll let readers figure that one out for themselves.