This past week brought a lot of news on the beauty market with earnings from Procter & Gamble, e.l.f. Beauty, Estée Lauder, and L’Oréal. The takeaway from those is that luxury part of the market remains robust, but L’Oréal is taking a lot of share from Estée, which is in trouble. The mass part of the market has experienced a further slowdown. That divergence demonstrates that the K-shaped consumer economy in the U.S. has become even more distinct, a trend now two years in growing. Additionally, the troubles in the drug store industry and the closing of locations are also hitting the mass segment. e.l.f. reported that trends slowed at retail in January and that retailers were slower in their spring orders. In the views of its management, one of the culprits of the January slowdown was a pull-forward of purchasing into December as consumers grabbed hot promotions, resulting in fuller pantries and purses going into January. And so, what’s been the trend for beauty specialty retail in January?
Advan shows that traffic, transactions, and spend for **Ulta Beauty** slowed modestly in January from December’s and Q4’s trend. Additionally, Q4 in total also looks to have been a step down from Q3, leading to deterioration in the 2- and 3-year comp-store CAGRs. (Yes, Q4 revenue will likely to be below the current Visible Alpha figure of $3.46B).
Sephora also experienced a slowdown with spend and transactions down in January with Q4 also slower than Q3, How the period looks in visits and spend is shown in the chart below. As is evident, the season brings a large burst of traffic and activity. However, the spend lags traffic and transactions which likely reflects more considered purchasing behavior and fewer items per basket. We also observe that traffic to Kohl’s stores was very soft in January at -5%, again aligned with the K-shaped economy and e.l.f.’s outlook.
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