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When budgets get tight, there\u2019s nothing a tube of lipstick can\u2019t solve. Or at least, that\u2019s what economists seem to believe. Even when people are scrambling to save every last penny, the \u201clipstick effect<\/a>\u201d has proved time and again that shoppers will indulge in small luxuries as a compromise since they can\u2019t spend on big ones.<\/p>\n Cosmetics giant Sephora couldn\u2019t be happier about it.\u00a0<\/p>\n The LVMH-owned chain, which performed \u201cexceptionally<\/a>\u201d in 2023, was the French conglomerate\u2019s fastest growing segment by sales at a time when luxury spending has been on a rollercoaster ride. Sephora contributed to a 76% profit rise in the selective retailing segment, which includes Duty Free shops and raked in \u20ac17.9 billion ($19.4 billion) in sales last year.\u00a0\u00a0<\/p>\n Now, Sephora is eyeing more growth in the coming years as people continue spending on its makeup and skincare products, the company\u2019s CEO Guillaume Motte said.\u00a0<\/p>\n \u201cI think that Sephora has the potential to reach \u20ac20bn in sales\u2026\u2009[and] the reality of our 2023 performance confirms this dream, and even tells me that we will undoubtedly reach it sooner rather than later,\u201d Motte told the Financial Times<\/em><\/a> in comments published Tuesday.<\/p>\n The Sephora chief also added that the \u201clipstick effect,\u201d a term coined in 2001 by Est\u00e9e Lauder heir Leonard Lauder to describe how people boosted lipstick sales<\/a> during periods of economic downturn to treat themselves in small ways, had a part to play in Sephora\u2019s heyday.<\/p>\n \u201cWe have a product that makes people happy, an accessible product. Are we going to have explosive growth? The answer is no. Am I concerned? The answer is also no,\u201d Motte told the FT<\/em>. He added that much of 2023\u2019s expansion was driven by in-store sales as people got to experience different brands on display at Sephora stores.<\/p>\n Representatives at Sephora didn\u2019t immediately return Fortune<\/em>\u2019s request for comment.\u00a0<\/p>\n Sephora was clearly a bright-spot for LVMH through 2023\u2014the French behemoth\u2019s head, Bernard Arnault, described its growth \u201cremarkable<\/a>\u201d during an earnings call in January. The beauty chain\u2019s performance is a contrast from the peak pandemic years<\/a> when low foot traffic in Sephora\u2019s retail locations hurt its revenue and profitability (bear in mind, that\u2019s when luxury demand<\/a> boomed). <\/p>\n In 2022, as lockdowns were eased and people began venturing out of their homes again, Sephora\u2019s sales rebounded<\/a>. Interestingly, that\u2019s also the year inflation hit record highs<\/a> (at least in recent memory) and drove up the cost of living, pointing to the \u201clipstick effect\u201d in action.\u00a0Inflation has cooled since, but interest rates remain elevated and consumer confidence<\/a> is still on shaky ground.<\/p>\n \u201cBeing short of money is psychologically daunting for people and the way to make yourself feel better, even if it\u2019s ever so little, is to purchase something that you think will cheer you up,\u201d Jansson-Boyd, associate professor in consumer psychology at Anglia Ruskin University, told the BBC<\/em><\/a> in 2022.<\/p>\n Sephora isn\u2019t alone in the rising tide that is increasing sales of beauty products. Take the company\u2019s American rival Ulta Beauty, for instance\u2014its sales have soared through 2023<\/a> as shoppers are \u201cready to celebrate\u201d amid a challenging economic environment, CEO Dave Kimbell said.\u00a0<\/p>\n To be sure, the theory of lipstick sales and economic health being inversely proportional can be hard to break down in the broader beauty category. The economic indicator also didn\u2019t really apply for the Great Recession<\/a> of 2007-2009, and has had competition with other products like face masks<\/a> in recent years.\u00a0<\/p>\n Whether tubes of lipstick will reign supreme in future economic crises remains to be seen. For now, at least, people clearly aren\u2019t shying away from splurging a little on their favorite beauty products.\u00a0 \u00a0<\/p>\n<\/div>\n\nLVMH bright spot<\/h2>\n
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