Here's some pretty news for the pretty-makers: ahead of the holiday season, nearly half of shoppers at top cosmetics retailers and department stores plan on increasing their spend.
Some 20% of overall shoppers plan to spend more money on makeup, according to a consumer report from Stifel, published Tuesday, Oct. 3. But for prestige beauty, that number is even higher. An average of 47% of surveyed consumers say they will spend more money in department stores, Ulta Beauty Inc. (ULTA - Get Report) , Sephora (owned by LVMH Moet Hennessy Louis Vuitton SE (MC - Get Report) ) and M.A.C. stores, a brand owned by Estee Lauder Companies, Inc. (EL - Get Report) .
"We believe prestige beauty spending continues to outperform mass beauty, consistent with trends in recent years as consumers broadly see prestige as an affordable luxury," Stifel analysts wrote in the report. Only 28% of consumers plan to spend more money at mass beauty destinations like drug stores and supermarkets.
The stats are particularly promising for department stores.
"Interestingly, consumers ranking departments stores as a top three most frequented beauty destination" expressed heightened interest in not only buying more makeup there, but also doing so in person, according to the report.
"We find this notable as department stores such as Macy's Inc. (M - Get Report) and J. C. Penney Company, Inc. (JCP - Get Report) have been increasingly aggressive on beauty promotions to drive store traffic," the analysts wrote.
JCPenney emphasized the significance of its partnership with Sephora in its Q2 earnings call in August.
"As we continue to grow Sephora what we're seeing in the beauty area is taking up a little bit more of our store, which is great," said Trent Kruse, treasurer of the retailer. "That's a high productivity area and a great business for us that allows us to not only drive increased productivity but welcome new customers into our store and, in particular, younger customers into our store."
But department stores' gains may be specialty stores' loss, analysts predict. After Ulta posted better-than-expected second quarter earnings, shares somehow fell by up to 10%. This was because investors may be apprehensive of a market share war with department stores, BMO Capital Markets analyst Shannon Coyne said in a research note Aug. 28.
Either way, if one thing is clear, it's that makeup has yet to see its peak.
'The drivers of [the sector's] growth are evolving and changing," Jefferies analyst Stephanie Wissink told TheStreet in August, pointing to higher interest in skincare and lower in facial products. That said, she added, "the beauty market at large is still growing."
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