People are spending big bucks on makeup and retailers are cashing in

Target has added new brands to its beauty department. In a growing number of stores, it also has Ulta Beauty mini-boutiques with prestige brands.

Melissa Repko | CNBC

As prices soar, some people have decided against buying a new outfit, 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 spending amid runaway inflation. Often seen as affordable luxury, it was the only discretionary retail category whose unit sales increased in the first half of the year, according to The NPD Group, which tracks categories such as apparel, technology and toys, as well as specialty beauty products and department stores.

“You might not be able to go out as much to eat out as much, but you can buy yourself a lipstick,” said Raymond James analyst Olivia Tong.

This spring, Target highlighted the strength of its beauty product sales, even as it twice cut its earnings outlook for the year. walmart is also investing in the category and rolling out new beauty displays in hundreds of stores, despite its warnings that shoppers are skipping over discretionary categories like apparel.

Other factors are also working in favor of the industry. Weddings and parties have resumed. More and more people are returning to the office and can no longer hide behind their Zoom filters. And during the pandemic, some people have taken to pampering themselves at home with face masks, hair care and other beauty products.

Larissa Jensen, beauty analyst for NPD, called it the return of thelipstick index” – a term made famous by Leonard Lauder, Chairman of the Board of Estee Lauderto explain the rise in cosmetics sales during the recession of the early 2000s.

As consumer sentiment plummeted, lipstick sales volume increased, Jensen said. This increase has spilled over to other beauty products. Makeup sales, including lipstick, increased 20%, skincare increased 12%, fragrance increased 15% and haircare increased 28% for the first half of the year — and they’re all increasing in units, as well as dollars, she says.

Much of the growth in the beauty category is coming from households earning more than $100,000 a year, and Jensen said discounters may find it harder to capitalize on the trend. Still, beauty’s resilience could provide a cushion for big-box retailers in a downturn — if they can figure out how to cash in.

Beauty at $3, $5, $9

walmart and Target both reduce their profit forecasts after having to lower the prices of clothing, home goods and other products that are not selling. Still, both companies are refreshing their beauty departments and adding new brands to attract customers.

A year ago, Target started opening hundreds of Ulta Beauty stores inside its stores with brands such as MAC Cosmetics and Clinique. The company plans to add more than 250 this year and eventually have stores in 800 locations, which represents about 40% of its footprint in the United States.

And after seeing fragrance become the biggest driver of prestige beauty sales this past holiday season, it has also added popular fragrance brands to Ulta stores, including Jimmy Choo Man, Juicy Couture and Kate. Spades New York.

Since January, Target has introduced more than 40 brands to its stable of beauty products, including “clean” products free of certain ingredients and Black-owned and Black-founded brands.

On an earnings call in mid-May, CEO Brian Cornell said the beauty saw double-digit comparable sales growth in the fiscal first quarter compared to the year-ago period. This broke with other categories, in addition to Food & Beverages and Staples, which saw a noticeable slowdown.

Walmart has added a dozen high-profile beauty brands to select stores. He struck a deal with British beauty retailer Space NK to add the assortment and develop a private label.

Melissa Repko | CNBC

At Walmart, new beauty displays were installed in 250 of the company’s locations this summer, featuring Mario Badescu, Patchology and other brands typically found in specialty beauty stores or counters. department store makeup.

A more affordable display called “Beauty Finds” has also started rolling in nearly 1,400 stores, offering shoppers lip glosses, lotions and more for $3, $5 or $9.

Walmart has also struck exclusive deals with direct-to-consumer companies like Bubble, a colorfully packaged skincare brand focused on Gen Z and younger millennial customers. she saw double-digit growth in her cosmetics business, said Creighton Kiper, vice president of beauty merchandising at Walmart.

“Beauty is that compelling category where it’s not like food and it’s not like health and wellness, yet the customer interacts and engages with it every day,” he said. he stated in an interview earlier this summer. “You have this mental well-being component around confidence and feeling good.”

When budgets get tight, Kiper said customers could also fall back on skills they picked up during the pandemic — like doing their nails or coloring their hair at home — and head to Walmart to buy a twist. at home on the living room.

Ashley Marie Lemons, a stay-at-home mom in suburban Atlanta, said her family ate out less often because they spent more on groceries, diapers and other necessities. She said she was cooking more meatless meals and buying hot dogs instead of more expensive meats, like ribs.

But she said she still affords to spend around $50 a month on beauty products like eyeshadow palettes and mascara.

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

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