Business

People are spending a lot of money on makeup and retailers are collecting cash


Target added new brands to its beauty division. In more and more stores, there are also mini Ulta Beauty stores with reputable brands.

Melissa Repko | CNBC

As prices rose, some people decided not to buy new outfits, delay big purchases like TVs, or cancel Netflix Accounts.

But for now, they are still squandering on beauty.

For retailers, the beauty industry has become a rare bright spot as people pull back on spending amid rising inflation. Often seen as an affordable luxury item, it was the only discretionary retail category that saw sales increase in the first half of the year, according to The NPD Group, which tracks luxury goods. Categories include clothing, technology and toys, as well as specialty beauty products and department stores.

Olivia Tong, analyst at Raymond James, said: “You may not go out to eat much, but you can buy yourself a lipstick.

This spring, Target call out the power of its beauty sales, even if it twice cut its profit outlook been a year. Walmart is also investing in its portfolio and rolling out new beauty displays to hundreds of stores, though it warns that shoppers are ignoring arbitrary categories like clothing.

Other factors also benefit the industry. Weddings and parties are back. Many people are returning to the office and can no longer hide behind Launch filter. And during the pandemic, some people have made it a habit to take care of themselves at home with masks, hair conditioners and other beauty products.

Larissa Jensen, a beauty analyst for NPD, call it the return oflipstick index “- a famous term of Leonard Lauder, chairman of the board Estee Lauderto explain the soaring cosmetics sales during the recession in the early 2000s.

As consumer sentiment fell, sales of lipsticks increased, Jensen said. That increase has shifted to other beauty products. Sales of makeup, including lipsticks, were up 20%, skin care 12%, perfumes 15% and hair care 28% up in the first half of the year – and all by unit, as well as dollars, she said.

Much of the beauty industry’s growth has come from households with incomes above $100,000 a year, and Jensen said discounters may have a harder time capitalizing on this trend. However, the resilience of beauty could provide some stepping stone for big retailers in a downturn – if they can figure out how to cash in.

Beauty $3, $5, $9

Walmart and Target both cut their profit forecast after having to cut prices on apparel, homeware and other products that didn’t sell well. However, both companies are refreshing their beauty divisions and adding new brands to attract customers.

A year ago, Target started open hundreds of Ulta Beauty stores inside its stores with brands including MAC Cosmetics and Clinique. The company plans to add more than 250 stores this year, and will eventually have stores at 800 locations, representing about 40% of the company’s footprint in the United States.

And after seeing perfume become the biggest sales driver in the prestigious beauty sector this past holiday season, it has also added popular fragrance brands to Ulta’s stores, including including Jimmy Choo Man, Juicy Couture and Kate Spade New York.

Since January, Target has introduced more than 40 brands into its steady stream of beauty products, including “clean” products that don’t contain certain ingredients and black and non-black brands. Black established.

During an earnings press conference in mid-May, CEO Brian Cornell said beauty saw double-digit growth in comparable sales in its fiscal first quarter year-over-year. last year. This has disrupted other categories, besides food and drink and essential items, seeing a significant slowdown.

Walmart has added about a dozen reputable beauty brands to its selection of stores. It has struck an agreement with British beauty retailer, Space NK, to add varieties and develop a private label.

Melissa Repko | CNBC

At Walmart, new beauty displays were set up this summer at the company’s 250 locations, featuring Mario Badescu, Patchology and other brands typically found at specialty beauty stores or department stores. department store point.

A more affordable display called “Beauty Finds” is also starting to be available in nearly 1,400 stores, offering buyers lip gloss, lotion, and more for $3, $5, or 9 dollars.

Walmart has also done exclusive deals with direct-to-consumer companies like Bubble, a skin care brand with colorful packaging and a focus on Generation Z and younger customers. Over the past few quarters, the company has seen double-digit growth in its cosmetics business, said Creighton Kiper, Walmart’s vice president of cosmetics business.

He said in an interview earlier this summer: “Beauty is a fascinating category, it’s not like food and it’s not like health and wellness, but customers still interact and stick with it. daily. “You have this mental health component around confidence and feeling good about yourself.”

As budgets tighten, Kiper said customers may also take a drop in skills they acquired during the pandemic — like at-home manicures or hair color — and head to Walmart to shop in-store. .

Ashley Marie Lemons, a stay-at-home mom in suburban Atlanta, said her family eats out less often because they spend more on groceries, diapers and other necessities. She says she cooks more meatless meals and buys hot dogs instead of more expensive meats, such as ribs.

But she says she still allows herself to spend about $50 a month on beauty products like eyeshadow palettes and mascara.

“It was an outlet for me,” she said. “Some people like art. It’s a creative way for me to express myself.”



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