Is The Credit Crunch Affecting the Beauty Business?

When Leonard Lauder (chairman of Estee) coined the expression 'the leading lipstick indicator', he used it to underline the fact that during tough economic times, lipstick sales went up. It makes sense - a €20 lip product is an affordable luxury in hard times, whereas a €200 pair of shoes is not.

And while that maxim has  stayed true over the years, this time around, I'm wondering if our current recession is the one that's bucking the trend. I've been reading lots of rumours of cutbacks and profit warnings on beauty industry websites and it seems I'm not the only one to have noticed: British Beauty Blogger broke news that Space NK have let a PR staff member go, and now 150 Body Shop jobs in the UK face the axe, too.

That's on foot of reports that L'Oreal are set to release lower price products in an attempt to stop their customers moving away to cheaper offerings, and a second quarter drop in profit of 30% at the Estee Lauder Companies in the US, due to falling revenue and negative impacts from currency translations. The company will also lay off 2,000 workers (about 6% of its workforce) as part of a four-year restructuring plan it has launched.

Are you surprised at this news? Or have you already rationalised your spending and stopped splurging on products you want, but don't actually need?