Recession Proof Beauty

Even when times are tough, gals can't let go of their favorite brands. They want them so bad they'll even steal them.

According to a survey from the Food Marketing Institute, cosmetics top the list of shoplifted goods. The hottest sticky finger item? Oil of Olay skin cream. It tops the most stolen cosmetics list. A Brand Keys report said that even in a bad economy, consumers stick with their expensive favorites over cheaper alternatives (I guess the ones that pay for them). Customers have forged an emotional connection to the brand and linked with their self-image.

Even at the worst of the recession, Ibis World Reports noted that the U.S. cosmetics and toiletries sector generated more than $10 billion in revenue. And those metrosexual men? Men's cosmetics is the fastest growing segment in skin care. It has grown from $40.9 million in 1997 to $217 million in 2009.


And girls are spending money on cosmetics at an even younger age. In 2005, the average age was 17 when a girl started buying products, today it is 13.7. Experian Market Research shows that 43% of six- to nine-year-olds are already using lipstick or lip gloss, 38% use hairstyling products and 12% use other cosmetics

So the question is "did the stocks follow these reports and surveys?" Luxury stocks did. I compared the returns of Estee Lauder (EL) and Elizabeth Arden (RDEN) versus Avon (AVP) and Revlon (RE). Estee Lauder went up 61% over the last year and E. Arden went up 67%. While cheaper brand Avon actually went down 5.6% and Revlon returned a 7% gain. That is a huge difference between luxury and common brands. Ulta Salon and Cosmetics (ULTA) chain delivered a whopping 124% increase over the past year.

You would think that if women were struggling with job losses or reduced salaries that would trade down with cosmetics, but that doesn't seem to be the case. Analysts seem to be mixed as to whether the group can go any higher. But if women kept buying when things were tough, won't they keep buying as the economy improves? I think the analysts are being too cautious on this group. I can't say whether I think the stocks will keep climbing, but I bet the sales will.