High income shoppers have already spent nearly $9B on beauty in 2022: report

Dive Brief:

Consumers with an annual household income of over $100,000 have spent nearly $9 billion on beauty products in the first half of 2022, according to a report by The NPD Group.
That marks an increase of 14% year over year, with Gen X and millennials leading spending.
The double-digit growth is due to a combination of more buyers in the market and consumers spending more compared to 2021, per the report.

Dive Insight:

Even as many households have cut discretionary spending during a time of high inflation, the beauty category is showing signs of resilience.

Eighty-five percent of consumers have indicated a shift in their shopping behaviors, according to a recent Morning Consult survey. Yet, higher-income shoppers are more insulated from inflation and are less likely to alter shopping behaviors.

Moreover, high income U.S. households account for more than 40% of beauty sales revenue, according to NPD research.

“During this critical time when retail recovery is forced to coexist with mounting economic pressures, it is imperative for beauty brands and retailers to understand which consumers are most engaged and willing to spend,” Larissa Jensen, beauty industry adviser at NPD, said in a statement. “These behaviors can vary by beauty category but getting it right and acting on it can provide the competitive advantage necessary to succeed.”

Ulta, which sells a mix of mass and prestige beauty, defied most other retail’s earnings by reporting last week that net sales grew nearly 17%. The company said that its ongoing expansion of Mac and Chanel Beauty into more store locations contributed to a strong prestige performance, which saw double-digit growth in both skincare and beauty.

The beauty market is stronger than other discretionary retail categories, Neil Sanders, managing director of GlobalData, explained regarding Ulta’s earnings.

“Outside of indulgences, it is also the case that many beauty and skincare routines are very much embedded into people’s lives so there is great reluctance to cut back on any of the products associated with them,” Saunders said in an emailed note.

Coty also reported growth in its latest earnings, with sales increasing 10% year over year. Prestige in particular grew 20%.

“The beauty category is not showing any sign of slowdown, specifically when it comes to prestige,” Coty CEO Sue Nabi said on a call with analysts.

But, Ulta CEO Dave Kimbell did warn that the retail segment isn’t impervious to market conditions.

“We recognize beauty is not immune to macroeconomic challenges, but the category’s deep emotional connection has historically resulted in stronger resilience compared to other discretionary categories,” Kimbell said on a call with analysts Thursday, adding that the popularity of wellness and self-care has buoyed this further. “As we look to the future, we know there will be challenges, particularly with the wide-ranging impact of rising inflation, both on our business and our guests. But we remain confident in the resilience of the beauty category and our ability to lead the beauty category and drive long-term profitable growth.”