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Beauty Slowdown Reflects Cracks in Consumer Spending


Households splurged for years during the pandemic, but Ulta Beauty’s CEO says a broad pullback is evident

Published April 3, 2024

By Natasha Khan


Makers of consumer goods have been bracing for a slowdown in consumer spending after ebullient pandemic times. Ulta Beauty ULTA 1.08%increase; green up pointing triangle is now saying that the decline is happening faster than it expected. 

The entire beauty category is experiencing weaker spending across price points and product segments, said Dave Kimbell, Ulta’s chief executive, at an investor conference Wednesday. The retail chain is among beauty companies that reported strong growth in revenue and profits over the past three years as consumers stepped up purchases of makeup, perfumes and skin-care items.

“Things that are going on in our consumers’ lives has led to a bit slower growth than we had anticipated in the category,” Kimbell said.

Ulta also isn’t expecting much growth in comparable sales in the current quarter from the first quarter last year. Comparable sales reflect sales at Ulta stores open at least 14 months and from e-commerce.

The comments helped send Ulta shares down 15% in Wednesday trading. Other beauty companies, including e.l.f. Beauty, Coty and Estée Lauder, also fell.

Ulta’s shares have lost about a fifth of their value after closing at a record of $567.18 on March 13, the day before the company released its fourth-quarter earnings.

“We do expect a normalization to occur this year in the category,” said Jessica Ramirez, senior research analyst at Jane Hali & Associates. “However, we believe the consumer will continue to prioritize the beauty category as products across skin care and wellness are replenishable.”

The competitive landscape is also shifting in beauty. Sephora, the LVMH Moët Hennessy Louis Vuitton-owned rival to Ulta, is expanding its bricks-and-mortar presence in Kohl’s stores. Other retailers are also increasing their presence in the beauty business, Ulta executives said. New products are expected to help drive traffic to Ulta, including those from tennis star Serena Williams’s new line Wyn Beauty, executives said.   

U.S. retail sales are expected to rise this year from 2023, but at a slower pace than during the Covid-19 pandemic period, according to the National Retail Federation. The trade group forecast that retail sales would increase between 2.5% and 3.5% this year, just below the 10-year average of 3.6% before the health crisis.

“The foundation of the economy is relatively sturdy and still on a sustainable path,” NRF Chief Economist Jack Kleinhenz said Wednesday. “Barring unexpected shocks, it should continue growing in 2024, although not spectacularly” as a result of slower job and wage gains.

Other consumer-goods companies are bracing for a slowdown. PVH, the company behind brands Calvin Klein and Tommy Hilfiger, said on Tuesday that it has taken a cautious approach to planning in 2024 as a result of softer consumer spending in January and February. It forecast overall revenue this year would fall between 6% and 7% from 2023.  

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