Lipstick index? Americans spend on makeup despite inflation

The “Lipstick Index” theory assumes that lipstick sales increase during economic downturns.

NEW YORK — Like many Americans, Karla Maldonado has cut spending to protect her wallet from rising expenses: She is eating less and attending fewer social events to help stem the impact of high gas prices.

But the 26-year-old social worker from Portland, Oregon, hasn’t skimped on her eye makeup — mascara, eyeliner and eye shadow, which she usually wears just over her face mask to work.

“I can’t do without that,” Maldonado said. And she doesn’t seem to be alone.

Many large retailers lowered their financial forecasts for the year after seeing shoppers forego many discretionary items in the most recent quarter. But among the notable exceptions: beauty.

Target, Kohl’s, Macy’s and Nordstrom all highlighted strong beauty sales in their second-quarter earnings reports released in recent weeks. Walmart, the country’s largest retailer, said it was seeing increasing momentum in its beauty business, citing strong sales in cosmetics and skin and hair. Meanwhile, Ulta Beauty, the country’s largest beauty retailer, announced that total sales rose nearly 17% in the most recent quarter compared to the same period last year.

Americans, once stuck behind Zoom screens in the midst of the pandemic, are on the go looking to do their best. Colleagues – some meeting for the first time – try to make an impression. Meanwhile, after months of pandemic-related casual wear and Netflix binges at home, people are going on dates and gathering for summer parties and barbecues.

But another possible explanation for why beauty thrives when consumers are more concerned about their spending is a long-held theory known as the “Lipstick Index,” which posits that lipstick sales rise during times of economic downturn.

The reasoning goes that when consumer sentiment plummets, Americans look for escapes by looking for small ways to treat themselves, such as a drink. B. by buying a new lipstick instead of more expensive alternatives that they can no longer afford. For others, their version of the lipstick might be cheap beer or a $5 caramel macchiato from Starbucks, which reported record sales in August for its third quarter.

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The lipstick theory has held, if not always. During the Great Depression and recession in the early 2000s, makeup sales soared. However, sales fell during the 2008 economic meltdown, according to market research firm NPD Group. The same happened in the early days of the pandemic, when Americans stayed home — or behind masks — and shifted their interests to wellness and skincare, as stimulus payments flooded bank accounts and helped bloat the savings of consumers already less likely to spend on travel or Food expenses out due to pandemic lockdowns.

Now makeup is roaring back. According to market research firm IRI, Americans bought more eye, face, and lip makeup — about 2%, 5%, and 12%, respectively — in a year-over-year analysis of in-store sales.

At Macy’s, CEO Jeff Gennette noted on a conference call late last month that consumers are focused on deals and have scaled back purchases amid high inflation. Still, they managed to buy beauty products as well as travel-related items like luggage, shoes and clothes for the office, Gennette said.

Meanwhile, Kohl’s reported that shoppers are taking fewer trips, spending less per transaction and shifting to value-based private label. But at the Sephora beauty stores, which opened last year as part of a partnership with the beauty chain, shoppers are spending lavishly on skincare, makeup and fragrances.

“Customers aren’t ready to give up on their beauty purchases,” Kohl CEO Michelle Gass recently told The Associated Press. “People need to feel good about themselves with so much pressure on them at this time.”

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

“Although we are all feeling these inflationary pressures, it has less of an impact on a six-figure consumer than on a lower-income consumer,” Jensen said.

Elsewhere, however, strong selling shows that Americans of all income levels are participating in the uptrend. At Target, the beauty industry posted sales increases in the low single digits, while home goods, apparel, and electronics all suffered declines. As a result, Target said it will be more cautious about its orders for discretionary goods for the winter holidays, but will base it on both beauty and necessities like groceries.

Competitor Walmart launched high-end beauty spaces in March in partnership with British retailer SpaceNK, which have performed 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 achievements, combined with low price increases and supply chain issues, have left the beauty industry feeling insulated from challenges in the broader economy, Jensen said.

“But there’s still so much floating around,” she warned. “And we have to be aware that things can change at any time.” Lipstick index? Americans spend on makeup despite inflation

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