• by Christine Bittar , December 12, 2006

It may not be the happiest of holiday seasons this year for Estee Lauder, judging by lackluster November sales figures from NPD Beauty Trends.

Estee Lauder total department store sales declined 2.5 percent in November, the research firm reports. At the same time, the industry saw slight growth in the same month, with sales up .2 percent. Estee Lauder brands include Clinique, Bobbi Brown, Origins, and MAC.

Fragrance--one of the most popular beauty gifts--seems to be the softest area for the company, showing double-digit sales declines last month for three of the company's major brands: the Estee Lauder flagship brand, Clinique, and Prescriptives, according to Nik Modi, analyst at UBS Equities.

While the whole fragrance category was down 4.4 percent, per Modi, Estee Lauder brands were down 8.2 percent. Although Prescriptives is better known for custom color cosmetics and skin care, Clinique, with just a few offerings and its Happy franchise, has become more of a fragrance player, as well as being known for its sensitive skin facial care products.

Morgan Stanley analyst Bill Pecoriello chalks up weakness for Estee Lauder and the whole category to retail issues rather than marketing or brand problems.

"There's a negative channel shift in beauty away from department stores and into specialty retailing," Pecoriello wrote in a recent research report. He points to overall "decent" growth in department stores (with same store sales up 4 percent), and Bath & Body Works' same store sales up 16 percent as evidence.

Retail and beauty consultant Candice Corlett, managing partner at WSL Strategic Retail, has a different opinion and believes the downturn in fragrance and cosmetic sales may really have more to do with American women becoming more budget-conscious.

"We're starting to see people cut back on non-essentials on account of [previously] high gas prices," she said. Corlett says that when asked, 47 percent of women of all ages said they were cutting back on fragrance purchases specifically because of gas prices, a statistic she cited from WSL's recent "How America Shops Every Day" study.

The numbers for color cosmetics are similar, with 40 percent of women cutting back on those items due to gas prices. Overall, 63 percent said they consciously decide if any purchase is a "smart use of their money" before they buy, she said. The WSL study is based on interviews at retail outlets with 1,500 shoppers.