Prestige market shows clear signs of recovery

By Simon Pitman

- Last updated on GMT

Related tags Estée lauder Economics Luxury good Perfume

The economic crisis meant that 2009 was a struggle for prestige cosmetic players, but financial results show that in the last quarter of the year things started to improve.

Mainstream prestige and luxury players such as LVMH, Elizabeth Arden, Estee Lauder, together with leading fragrance providers Parlux and Inter Parfums have all announced that the final quarter of 2009 showed marked signs of recovery.

Signs of improvement came when many European and US retailers indicated that, although trading conditions remained tough, the all-important holiday season trading had shown signs of improvement.

This was followed at the end of January by indications from several global prestige personal care players that trading had improved, highlighted by Estee Lauder’s pre-results announcement that strong trading meant results would be ‘better than expected’.

Estee Lauder sales climb 11 per cent

A week later Estee Lauder went on to announce that its quarterly profits had doubled on the back of sales climbing nearly 11 percent to $2.26bn.

Likewise, the eponymous luxury goods provider LVMH last week revealed that its fourth and final quarter provided a distinct up-tick after a disappointing year for the company.

The results were driven by a particularly strong performance for its perfumes and cosmetics division, which reported a 2 percent sales growth in the final quarter, contrary to an overall 4 percent drop in sales for the full year.

2009 ended on a more positive note

The results came as considerable relief for a segment of the industry that has been hard hit by reduced consumer spend.

During the year the economic turmoil and resulting lower consumer spend led to a marked trend in both the North American and European markets for less expensive mass market products.

In fact, one of the few growth areas during the recession has been the market for private label products, which consumers have been opting for in the belief that they offer better value for money as a means of boosting stretched household budgets.

Will market experts be proven wrong?

A number of market analysts have suggested that the road to recovery would be a slow one as the recession has been drawn out, making consumers particularly cautious.

Market researcher Mintel reported towards the end of 2009 that ‘less will be more’ in 2010, and suggested that many consumers who made the switch to less expensive products might be slow to make the switch back because they had found them to be very effective.

Undoubtedly 2010 will prove to be another tough year for prestige and luxury players, but if the financial results for the last quarter of 2009 are anything to go by, improved trading conditions are on the horizon.

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