Most Prestige Cosmetics Shine -- But Estee Lauder Stumbles

Despite worries about the economy, consumers aren’t holding back on high-end lipsticks and pricey night creams. NPD Group says that sales of prestige beauty products climbed 15% in the U.S. last year, reaching $27.1 billion.

Estee Lauder, however, just reported its fiscal second-quarter financial results, including a disappointing 17% drop in revenue. And while it saw broad-based gains in much of the world, it couldn’t shake off the impact of COVID-19 pandemic restrictions in China.

Net sales slid to 17% to $4.62 billion, compared to $5.54 billion during the comparable period of the prior year. On a constant currency basis, sales dropped 12%.

Sales of skincare products decreased 20%, while makeup products declined 9%. Fragrance and haircare products both gained -- up 3% and 4% respectively, on a constant currency basis.



Net earnings tumbled to $394 million, compared with net earnings of $1.09 billion in the prior-year period.

“Many developed and emerging markets around the world outperformed to realize our organic sales growth outlook,” says Fabrizio Freda, president and chief executive officer, in its announcement. But it could not outrun the impact of closures in China, one of its most important markets. “Fragrance excelled globally, while makeup prospered in a great number of markets, as our brands are realizing the promise of the category’s renaissance as usage occasions resume.”

Those get-me-out-of-the-house occasions are likely fueling the big gains noted in the NPD report.

Every prestige beauty category increased in the double digits, led by makeup, which climbed 18%. Within makeup, lip products sizzled, surpassing 2019 levels by double-digits.

Sales of skincare products gained 12%, and sales for fragrances advanced 11%, while demand for prestige hair products jumped 22%.

Sales of prestige products -- those sold in department stores -- grew faster than any other segments, across more than $4 trillion in U.S. general merchandise consumer spending tracked by NPD and IRI.

And in a year when inflated prices masked many results, it says prestige beauty is the only industry experiencing unit sales growth in 2022.

NPD’s Larissa Jensen, beauty advisor to NPD, predicts the category will remain just as hot in the months ahead: “The factors supporting this phenomenon—including increased spending from higher income consumers, the redefinition of wellness emphasizing mental health, and an increase in socialization—will continue to fuel positive performance this year.”  

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