Report: An Ugly Year For Beauty

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For those in the skincare, fragrance and cosmetics business, it's hard to put a pretty face on 2009 results. NPD Group reports that overall, the total U.S. prestige beauty industry slid 6% in dollar sales from 2008, while sales of mass beauty products were flat.

The Port Washington, N.Y.-based trade group says there was evidence of some recovery, as well as signs of growth at many price points. Among the bright spots: Smaller-size women's fragrances, innovations in foundation and concealer, and anti-aging products.

More evidence of that recovery showed up in the quarterly results of both Estée Lauder and Procter & Gamble, which both beat industry expectations.

Lauder says its sales for the second quarter gained 11% to $2.26 billion -- a gain of 6% once currency translation was factored out. And net earnings jumped to $256.2 million, compared with $158 million last year, in part because it eliminated less efficient marketing in each product category and in every region.

The company says it plans to ramp up its spending "well above first-half levels, behind more effective advertising, merchandising and sampling."

"Our strong top-line growth indicates consumers have responded positively," CEO Fabrizio Freda says in a statement. "While certain businesses have shown signs of improvement, and the economic challenges and some external uncertainties have abated, we remain mindful that they have not completely disappeared. We continue to examine our business to more closely align our cost structure with expected sales growth and plan to make targeted incremental investments ... to grow our brands."

Sales of its skincare products, a category it calls a strategic priority and which got increased ad investment, showed double-digit growth around the world, and high single-digit gains in the Americas. Its new Advanced Night Repair Synchronized Recovery Complex, as well as the Re-Nutriv line of products, performed well.

Makeup also gained, fueled by makeup artist brands, which generated double-digit growth internationally.

Fragrance sales, however, declined., largely due to lower sales of designer fragrances, such as DKNY Delicious Night, Hilfiger Men from Tommy Hilfiger, as well as some Sean John and Estée Lauder fragrances. Haircare sales also declined, due in part to the weak salon retail environment in the U.S.

P&G says its beauty business also fared well in the second quarter, with sales climbing 7% to $5.2 billion. It increased marketing spending in the category, and it says it saw gains in its female skin care and personal cleansing products, while sales declined in its salon professional and prestige divisions.

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