Beauty-Industry Sales Start To Look A Little Better
October 27 2009 - 12:14PM
Dow Jones News
Sales of beauty products are starting to show a glimmer of
improvement after a sharp dip during the recession, suggesting
consumers may slowly be getting more willing to reach out for these
small discretionary purchases.
In recent weeks, several beauty companies have had
better-than-expected sales. Estee Lauder Cos. (EL) said in
mid-October that sales were better than expected in its fiscal
first quarter. Parlux Fragrances Inc. (PARL), which holds the
licenses for such brands as Paris Hilton fragrances, announced an
8% rise in second-quarter sales. And Inter Parfums Inc. (IPAR),
which distributes perfumes and cosmetics under license from such
brands as Burberry and Jimmy Choo, recently announced third-quarter
sales above estimates.
"These are data points that would support the view that beauty
is getting better," said Linda Bolton Weiser, an analyst at Caris
& Co.
To be sure, there has not been a dramatic rebound in beauty
sales so far. And consumers are likely to stay frugal even as
global economies rebound, prompting beauty companies to warn that
any recovery will be slow. But even small improvements could help
the sector.
The beauty industry is "still down, but there has been some
improvement in the cosmetics business," said Karen Grant, an
analyst at market research firm NPD Group. "September was one of
the best performing months of the year ... particularly for skin
care."
According to NPD data, between January and June, skin-care sales
were down 6%, makeup was off 7% and fragrances down 10%. There has
been some pickup from those declines. From the start of the year
through the end of the third quarter, skin care is now down 5%,
makeup is down 6%, although fragrance continues to struggle and is
down in the double digits. "I see it as some improvement, [but]
it's still a challenging time for the industry," Grant said.
Sales of beauty products held up well in previous recessions.
One theory is that women spend more on small extravagances, like
lipstick, in tough times. But that resilience didn't come through
in the latest downturn as sales, particularly in upscale department
stores, slumped. Companies exposed to the beauty industry range
from the upscale Estee Lauder to Procter & Gamble Co. (PG),
which sells such products as Olay face cream and Pantene shampoo.
These companies stand to benefit from any pickup in beauty
sales.
"I think globally you are seeing some of the growth [in beauty]
coming back, particularly in Asia. In the U.S., it's still a little
early to see consistent category growth returning. You are seeing
some companies doing better than others," said Sanford Bernstein
analyst Ali Dibadj. Some beauty companies may do better than
expected, he said, but they are not yet back to the levels they
were at before the recession.
Caris' Bolton Weiser says the signs of improvement in beauty
could "indicate some better things for P&G." Procter's more
discretionary lines of beauty products - like fragrances - were
hurt by the slump in consumer spending. P&G sells premium
fragrances through tie-ups with brands like Hugo Boss.
Similarly, direct-seller Avon Products Inc. (AVP) is another
potential beneficiary of improvements in beauty. Avon, Estee Lauder
and P&G all report earnings in coming days.
Estee Lauder, while disclosing better-than-expected sales, said
it is staying cautious in its expectations on consumer spending.
Along similar lines, St. Ives lotion and Nexxus hair products maker
Alberto-Culver Co. (ACV) has warned that any recovery in consumer
spending will be slow, particularly for premium products.
At the beauty counters of a New York City department store,
saleswomen recently said they have seen some pickup, but that
consumers are still a little tight fisted. "They buy only when they
need," said one saleswoman, adding that women are still not
stocking up as much as they used to on these little luxuries.
-By Anjali Cordeiro, Dow Jones Newswires; 212-416-2200;
anjali.cordeiro@dowjones.com