The severity of the global economic pullback is subjecting the old adage that beauty products are recession-resistant, if not recession-proof, to its toughest challenge yet.
Sales fell across the board, according to quarterly updates from Revlon Inc., The Procter & Gamble Co., Sally Beauty Holdings Inc., International Flavors & Fragrances Inc., Nu Skin Enterprises Inc. and Bare Escentuals Inc. and annual results from Shiseido in Japan.
Of those companies, only Revlon and Sally Beauty were able to pull better profits out of lower sales and were rewarded handsomely for the feat by investors on Thursday, as was Shiseido. In at least some cases, consumers are shifting to lower-priced stores for their beauty fix. Looking ahead, currency fluctuations are expected to continue to weigh on bottom and tops lines, and sales will likely remain weak.
A.G. Lafley, Procter & Gamble’s chairman and chief executive officer, told Wall Street on a conference call that the market had, in effect, come to him.
“One of the things that’s going on right now that’s good for us is [a] big part of the beauty trade-down is out of department stores and out of specialty stores into the array of self-select kinds of stores” where customers buy without the help of sales attendants, Lafley said.
But the stiffest competition might ultimately come from shoppers’ own cabinets.
“Consumers stock up on a number of these products,” said Erin Smith, an equity analyst covering consumer staples for Argus Research Co. “In a recession they can look through their cabinets and see they have five different skin creams.”
On Thursday shares of Revlon advanced 33.9 percent to $4.74 and Bare Escentuals’ moved up 39.5 percent to $9.26. Sally Beauty’s stock increased 5 percent to $7.40, but on the downswing were P&G, off 1.9 percent to $49.44; IFF, 4.2 percent to $31.20, and Nu Skin, 6.8 percent to $12.82. In Tokyo, shares of Shiseido closed at 1,731 yen, or $17.83 at current exchange, up 12.6 percent
Procter & Gamble’s beauty earnings dropped 14 percent to $504 million for its third quarter, which includes January, February and March, as sales fell 9 percent to $4.3 billion.
The firm’s shipments of prestige fragrances, which include Hugo Boss, Lacoste, Dolce & Gabbana and Gucci, decreased more than 20 percent as markets contracted and retailers cut inventories. Shipments of beauty goods were hurt by destocking in Central Eastern Europe, the Middle East and Africa after the company increased prices to offset currency fluctuations.
“We do expect some continued pressure from retailer and distributor destocking,” said Teri List, senior vice president and treasurer, who noted there has been strength in the Olay business.
The consumer products giant, which has 138,000 employees across 80 countries and a broad range of products, registered an overall 3.6 percent drop in profits on an 8 percent decline in sales.
Revlon went back to the black in the first quarter ended March 31, posting a profit of $12.7 million, or 25 cents a diluted share, compared with a loss of $2.5 million, or 5 cents a share, a year earlier, when restructuring charges crimped results. Sales declined 2.7 percent to $303.3 million, but would have risen 3.8 percent without currency fluctuations. Revlon acknowledged that earlier shipments of new products to retailers helped boost first-quarter sales.
David Kennedy — who effective today is vice chairman, handing over the president and ceo reins to Alan Ennis — said Revlon’s color cosmetics continued to gain traction globally, but added, “If the current currency rates do continue, they’ll obviously have an adverse impact.”
After several years of few launches, Revlon has begun to churn out more robust new product plans.
When asked on a conference call with analysts how many new products Revlon’s launch cycle can accommodate, Kennedy said, “It’s not a question of the number of [stockkeeping units] or the number of offerings. We’re planning out three years for our portfolio strategy.…Our end objective is to have profitable sales growth.”
At Sally Beauty Holdings, Gary Winterhalter, president and ceo, told analysts, “We had a good quarter and performed well in a difficult environment [and] continue to believe our business is recession resistant.”
Going into the next six months he said the company was “cautiously optimistic.”
Profits for the second fiscal quarter ended March 31 jumped 98.4 percent to $24.6 million on significantly lower interest costs. Sales slid 0.3 percent $641.5 million, with foreign currency exchange pulling the top line down $26.2 million.
@tradesy is turning the concept of a showroom upside down with its new space in Santa Monica. Here, the company plans to hold events, art exhibits and a showcase rare fashion pieces like this Louis Vuitton boxing set. Get all the details on Tradesy’s first showroom on WWD.com. #wwdnews
Spotted last night at the @erdem x @hm launch event: Kate Bosworth, Rashida Jones, Kirsten Dunst and Selma Blair. The party, which took place in LA, also marked the opening of their pop-up shop. “I was interested in creating a collection that wasn’t in any way disposable. It was about pieces you’d create and keep forever, things that have a permanence to it,” designer Erdem Moralioglu said. #wwdeye (📷: Katie Jones)
Renee Zellweger in yellow in 2001 and again in 2017. Chosen as one of the 12 @pantone Leading Spring Colors (and dubbed “Meadowlark”), it only makes sense that the bright hue stands the test of time and is making a resurgence this season, seen already on stars like @blakelively and @gigihadid. (📷: Donato Sardello & @rexfeatures) #wwdfashion #tbt
Dior’s 70th anniversary celebration continues with a new exhibition at the Royal Ontario Museum in Toronto. “Christian Dior,” which is scheduled to run through March 18, takes a look at the founders tenure from 1947 to 1057 and feature 40 designs. Pictured here is an evening gown from the Ailée, fall 1948-49 haute couture collection. #wwdfashion (📷: Brian Boyle)
As one of the most recognizable models in the world, Christy Turlington Burns has an insider’s view of the fashion industry and the allegations of sexual harassment swirling around it. “I can say that harassment and mistreatment have always been widely known and tolerated in the industry. The industry is surrounded by predators who thrive on the constant rejection and loneliness so many of us have experiences at some point in our careers,” Turlington told WWD, along with her suggestions for how the modeling world should protect younger women and men. Read more on WWD.com. Link in bio. (📷: Tony Palmieri) #wwdnews
@asics America has tapped a new brand ambassador: famed DJ/record producer @steveaoki. This initiative is intended to set the tone for the new brand identity and philosophy and will include partnerships with influencers and in-store and off-line activations that will continue into next year. This is Asics’ most significant marketing effort in two decades, and is expected to attract younger consumers to the brand. #wwdfashion
24-year-old Jean Prounis is redefining the rules of jewelry. Formerly a studio assistant to Jemima Kirke and a design apprentice at Ghuran, she focuses on handcrafted subtleties and ancient goldsmithing techniques. “There was a really sterile feel in the environment and I wanted to have jewelry with character that shapes how you wear it everyday,” Prounis said. Each piece is hand made in New York, either by Prounis or three other jewelers in the district. #wwdfashion
“These collections continue to build on that vision, empowering differently abled adults to express themselves through fashion,” said @tommyhilfiger of his line of adaptive apparel, which launches today. The line consists of 37 men’s and 34 women’s styles based upon the pieces from the spring Tommy Hilfiger sportswear collection. #wwdnews