Beauty brands often showcase resilience during market downturns. When budgets become strained, especially during recessions, people refuse to give up on smaller luxuries like beauty and skincare products. The trend of splurging money on beauty and affordable luxuries when cash is tight and the economy is weak was theorised as the "lipstick index."
However, the index is under pressure to retain its long-term reliability. The recent market downturn impacted shares of beauty giants like Estee Lauder and L'Oreal as cosmetics and lipstick sales slumped with the overall economy. Despite the divergence, it didn't deter Berkshire Hathaway chairman Warren Buffett from buying over 690,000 shares of cosmetics brand Ulta Beauty for $266.29 million in Q2. The Oracle of Omaha believes the purchase was a value buy as the beauty industry undergoes new changes, implying that the ongoing upheaval isn't a long-term trend.
