Target has added new brands to its beauty department. In a growing number of stores, it also features Ulta Beauty mini-stores with prestige brands.
Melissa Repko | CNBC
As prices rise, some people have decided not to buy new clothes, delayed big purchases like TVs, or canceled Netflix accounts.
But for now, they’re still splurging on beauty.
For retailers, the beauty category has become a rare bright spot as people cut back amid rising inflation. Often seen as an affordable luxury, it’s the only discretionary retail category with unit sales rising in the first half of the year, according to The NPD Group, which tracks categories including apparel, tech and toys, as well as specialty beauty products. and department stores.
“You may not be able to go out to eat as much, but you can buy lipstick,” said Olivia Tong, an analyst at Raymond James.
This spring, Target highlighted the strength of its beauty product sales, even as it cut its earnings outlook for the year twice. Walmart is also investing in the category and launching new beauty displays in hundreds of stores, despite its warnings that shoppers are skipping discretionary categories like clothing.
Other factors also work in the industry’s favor. Weddings and parties are on the rise again. More people are coming back to the office and they can no longer hide behind their Zoom filters. And during the pandemic, some people have gotten into the habit of pampering themselves at home with face masks, hair treatments, and other beauty products.
Larissa Jensen, NPD Beauty Analyst, called it the return of “lipstick index,” a term made famous by Leonard Lauder, chairman of Estee Lauder’s board of directors, to explain the rise in cosmetics sales during the recession of the early 2000s.
As consumer confidence has fallen, lipstick sales volume has increased, Jensen said. That increase has carried over to other beauty products. Makeup sales, including lipstick, are up 20%, skin care is up 12%, fragrance is up 15%, and hair care is up 28% for the first half of the year, and all are growing in units as well as dollars, she said.
Much of the beauty category’s growth is coming from households earning more than $100,000 a year, and Jensen said discounters may have a harder time capitalizing on the trend. Still, the resilience of beauty could provide some cushion for big retailers in a downturn, if they can figure out how to cash in.
$3, $5, $9 Beauty
Walmart and Target cut their profit forecasts after having to cut prices on clothing, home goods and other items that aren’t selling. However, both companies are revamping their beauty departments and adding new brands to attract customers.
A year ago, Target began opening hundreds of Ulta Beauty stores within its stores with brands like MAC Cosmetics and Clinique. The company plans to add more than 250 this year and eventually have the stores in 800 locations, which is about 40% of its US footprint.
And after fragrance became the biggest sales driver in prestige beauty last holiday season, it also added popular fragrance brands to Ulta stores, including Jimmy Choo Man, Juicy Couture and Kate Spade New York.
Since January, Target has introduced more than 40 brands to its beauty catalog, including “clean” products that don’t contain certain ingredients and brands owned and founded by blacks.
In an earnings call in mid-May, CEO Brian Cornell said the beauty saw double-digit growth in comparable sales in the fiscal first quarter compared to the same period a year earlier. That was separated from other categories besides food and beverages and essentials, which saw a noticeable slowdown.
Walmart has added about a dozen prestigious beauty brands to select stores. It has struck a deal with UK beauty retailer, Space NK, to add the assortment and develop a private label.
Melissa Repko | CNBC
At Walmart, new beauty displays were installed this summer at 250 of the company’s locations, featuring Mario Badescu, Patchology and other brands typically found in specialty beauty stores or department store makeup counters.
A more affordable display called “Beauty Finds” also began hitting nearly 1,400 stores, offering shoppers $3, $5 or $9 lip glosses, lotions and more.
Walmart has also struck exclusive deals with direct-to-consumer companies like Bubble, a skincare brand with colorful packaging and a focus on Gen Z and young millennials. Over the past few quarters, it has seen double-digit growth in its cosmetics business, said Creighton Kiper, Walmart’s vice president of beauty merchandising.
“Beauty is a fascinating category where it’s not like food and it’s not like health and wellness, but the customer interacts and engages with it every day,” she said in an interview earlier this summer. “You have this mental wellness component around confidence and feeling good about yourself.”
When budgets get tighter, Kiper said customers could also draw on skills they picked up during the pandemic, like getting their nails done or dyeing their hair at home, and head to Walmart for a home touch at the salon.
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 said she cooks more meatless meals and buys hot dogs instead of more expensive meats like ribs.
But she said she still allows herself to spend about $50 a month on beauty products like eyeshadow palettes and mascara.
“It’s an outlet for me,” he said. “Some people like art. It’s a creative way for me to express myself.”
Source: www.cnbc.com