Americans are splurging on beauty, despite withdrawals elsewhere

NEW YORK (AP) — Like many Americans, Karla Maldonado has cut spending to save her wallet from rising costs: she eats less at restaurants and attends fewer social events to limit the impact of high prices. ‘essence.

But the 26-year-old social worker from Portland, Oregon didn’t skimp on her eye makeup – the mascara, eyeliner and eyeshadow she typically wears to work just above his face mask.

“It’s something I can’t live without,” Maldonado said. And she doesn’t seem alone.

Many large retailers have cut their financial outlook for the year after seeing shoppers pull out of many discretionary items in the last quarter. But among the notable exceptions: beauty.

Target, Kohl’s, Macy’s and Nordstrom all highlighted strong beauty sales in their fiscal second quarter earnings reports released in recent weeks. Walmart, the nation’s largest retailer, said it saw increased momentum in its beauty business, citing strong sales in cosmetics as well as skin and hair businesses. Meanwhile, Ulta Beauty, the nation’s largest beauty retailer, said overall sales rose nearly 17% in its latest quarter, compared to the same period last year.

Americans, once stuck behind Zoom screens amid the pandemic, are on the go and want to look their best. Colleagues, some of whom are meeting for the first time, try to make a good impression. Meanwhile, people are going out on dates and gathering for summer parties and barbecues after months of pandemic-induced leisure wear and Netflix binge at home.

But another possible explanation for beauty’s prosperity when consumers are more fearful of their spending is a long-standing theory known as the “lipstick index,” which posits that lipstick sales increase in times of economic slowdown.

The reasoning goes like this: when consumer sentiment wanes, Americans seek escape by looking for small ways to indulge themselves, such as buying a new lipstick instead of more expensive alternatives than they already know. can no longer afford. For others, their version of lipstick might be a cheap beer or a $5 Caramel Macchiato from Starbucks, which posted record revenue in August for its fiscal third quarter.

The lipstick theory held, but not always. Makeup sales soared during the Great Depression and recession of the early 2000s. But sales declined during the 2008 economic meltdown, according to market research firm NPD Group. The same thing happened at the start of the pandemic as Americans stayed at home – or behind masks – and shifted their interests to wellness and skincare as stimulus payments flooded the bank accounts, helping to swell the savings of consumers who were already spending less on travel or food. due to pandemic closures.

Now makeup is back. Americans bought more eye, face and lip makeup — about 2%, 5% and 12% respectively — in a year-over-year analysis of store sales, the company says. IRI market studies.

At Macy’s, CEO Jeff Gennette noted on an earnings call late last month that consumers focused on deals and cut back on purchases amid high inflation. Still, they managed to buy beauty products as well as travel-related items like luggage, shoes and office wear, Gennette said.

Meanwhile, Kohl’s reported shoppers were taking fewer trips, spending less per transaction and shifting to value-oriented store brands. But at its Sephora beauty stores, launched last year as part of a partnership with the beauty chain, shoppers are free to spend on skincare, makeup and fragrance.

“Customers aren’t ready to give up on beauty product purchases,” Kohl CEO Michelle Gass recently told The Associated Press. “People need to feel good right now with so much pressure on them.”

Sephora’s sales mirror broader findings released in July by NPD Group, which showed that of 14 discretionary industries tracked by the group this year, beauty was the only category to see an increase in sales. However, beauty’s persistence in more high-profile markets — such as Macy’s, Sephora and Nordstrom — is primarily driven by high-income earners or those with annual salaries of $100,000 or more, according to Larissa Jensen, an advisor at the beauty industry at NPD.

“While we’re all feeling these inflationary pressures, it has less of an impact on a six-figure earning consumer than it does on a low-income consumer,” Jensen said.

Elsewhere, however, strong sales show that Americans of all income levels are participating in the rise. At Target, beauty saw single-digit sales increases, while homewares, apparel and electronics all suffered declines. As a result, for the winter holidays, Target said it would be more cautious with its discretionary merchandise orders, but would rely on beauty as well as basic necessities like groceries.

Rival Walmart launched high-end beauty sections in March in collaboration with UK retailer SpaceNK, and it says those sections have worked well. The retailer, which offers consumers select discounts, will host a beauty event in September where customers can find deals in-store and online.

Those gains, combined with low price increases and supply chain issues, have left the beauty industry feeling insulated from the challenges of the broader economy, Jensen said.

“But there’s still so much going around,” she warned. “And we have to be aware that things can change at any time.”

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