Sephora’s Forthcoming London Flagship, Underwhelming Holiday Sales Reports, And Moda Operandi’s Beauty Launch: A Look At January 2023’s Big Retail News

For the retail industry, 2023 opened with a mixed picture of consumer behavior and business fortunes. Rocky economic conditions and rising interest rates caused a spending retreat in the United States. Still, the status of employment in the U.S. is favorable, allaying a serious shock to expenditures so far. As it has generally for retail of late, beauty provided a bright spot last month. Major retailers in the segment expanded their territories, and new players entered the category. Below, we summarize recent retail news.  

Retail Sales Stumble

After dropping 1% in November, retail sales slipped 1.1% in December, per the U.S. Census Bureau, as spending in stores, e-tailers, restaurants, car dealerships and gasoline stations contracted. December’s drop marked the steepest decline in retail spending last year.

Spending on electronics, furniture, health and personal care, clothing, general merchandise and online stores slowed during the month. Department stores saw a sharp 6.5% decline. Sales at bars and restaurants dipped .9%. Grocery, sporting goods and home improvement stores were the only retail categories with sales that progressed in December. Retail sales calculated by the U.S. Census Bureau are unadjusted for inflation and don’t account for spending on services such as transportation and travel, housing or utilities. 

The spending decreases came as consumers contended with the effects of inflation and mounting interest rates. However, inflation moderated in December for the sixth consecutive month. The consumer price index registered a 6.5% year-over-year increase compared to 7.1% in November, 7.7% in October and 8.2% in September. 

Hiring decelerated in December, when 223,000 new jobs were added to the labor market, representing a two-year low. November saw 263,000 new jobs. Leisure and hospitality, healthcare and construction had the biggest job jumps. Jobs in retail, financial services, transportation, warehousing and manufacturing were flat. For 2022 overall, 4.5 million new jobs were created versus 6.7 million in 2021. The national unemployment rate edged down to 3.5% in December from 3.7% in November.

Job opportunities looked bright at the outset of the year, though, as the job market saw a burst of 517,000 new jobs in January. The unemployment rate clocked in at 3.4%, the lowest it’s been since 1969.

 

 

Holiday Sales Underperform Expectations 

Retail sales from November through December increased by 5.3% year-over-year to $936.3 billion. The increase fell short of the National Retail Federation’s (NRF) holiday forecast of a 6% to 8% gain over 2021. Online spending also narrowly missed projections. It notched a 9.5% year-over-year increase to $261.6 billion.

While holiday sales growth last year underperformed expectations, it beat the previous 10-year average of 4.9% holiday sales growth. Additionally, total retail sales for 2022 spiked 7% to reach $4.9 trillion, an advancement that was in line with the NRF’s yearly forecast of 6% to 8% growth. The NRF’s retail calculations exclude spending at car dealerships, gasoline stations and restaurants.

Nordstrom Lowers Sales Guidance

After a disappointing third quarter that saw the department store retailer take a $20 million revenue hit, Nordstrom struggled with inventory issues and slowing demand through the holiday season. Its net sales decreased 3.5% year-over-year for the nine-week holiday period as it right-sized inventory levels via heavy markdowns. The problem was greater at Nordstrom Rack, the off-price banner, where sales dropped 7.6%. The signature Nordstrom banner experienced a more modest 1.7% dip. 

The retailer lowered its 2022 full-year guidance ahead of fourth-quarter reporting in March. Revenue growth, including retail sales and credit card revenue, is now expected to come in at the lower end of its prior estimate of 5% to 7%. Its EBIT or earnings before interest and taxes margin is forecast to land between 2.8% and 3.1% for the year, down from an earlier forecast of between 4.1% and 4.4%.

Sephora Set To Open UK Flagship Store

Sephora is set to plant its first brick-and-mortar store on British soil in over 15 years. The 6,500-square-foot store will open this March in Westfield London, a bustling shopping and entertainment center that’s home to over 40 other beauty stores, including Space NK, Charlotte Tilbury, Aesop, Deciem, Dermalogica, MAC Cosmetics and Boots. 

The forthcoming flagship will have self-checkout, wrapping stations and beauty services such as skin diagnostics, makeup consultations and a Benefit Cosmetics brow bar. Hydrafacial services are being considered, according to the publication Women’s Wear Daily. Brands like Skinfix, JVN, Vegamour, One/Size by Patrick Starrr, Glow Recipe and Makeup By Mario will be available to shoppers in the United Kingdom for the first time at a physical location in the Sephora store. 

Preceding its British brick-and-mortar reemergence, Sephora acquired the e-commerce platform Feelunique for 132 pounds or nearly $160 million at the current exchange rate and subsequently rebranded it last fall to be the retailer’s U.K. website. Returning to the U.K. is just one step in Sephora’s plan to double its business within the next five to 10 years as it expands its assortment and geographic reach.

Guillaume Motte, Sephora’s new CEO and president, will be leading the charge. Motte assumed the role on Jan. 1 after interim CEO Chris De Lapuente stepped down following Martin Brok’s abrupt departure last year.

Moda Operandi Launches Beauty 

After Farfetch and Amazon-owned Shopbop launched beauty verticals last year, Moda Operandi became the latest luxury fashion e-tailer to enter the category. Starting on Jan. 10, it introduced 300 skincare, makeup, fragrance, haircare and body care products from 55 established and emerging brands. An assortment of beauty tools will soon join its lineup. 

Skincare accounts for roughly half of the e-tailer’s brand roster, which includes 111Skin, Augustinus Bader, BeautyStat, Sisley Paris, Dr. Barbara Sturm, Eighth Day, Noble Panacea, Ellis Brooklyn, Roz, Tan Luxe, Crown Affair, Roen Beauty, Dr. Lara Devgan Scientific Beauty, Costa Brazil, Leonor Greyl, La Mer and Vintner’s Daughter.

The assortment includes a number of exclusive brands like Violette_FR, Ever Amid and The Beauty Sandwich, which are making their retail debuts at Moda. American shoppers have access to the French hand and foot care brand Révérence de Bastien for the first time due to its Moda’s beauty debut. 

The e-tailer doesn’t carry any brand’s full collection. Instead, it selects products based on each brand’s bestsellers and lesser-known favorites. It also offers customers immersive brand experiences like masterclasses with celebrity hairstylists and makeup artists as well as island spa getaways. 

According to industry sources cited by the publication Women’s Wear Daily, Moda generated between $150 million and $200 million in 2021 sales amid deep changes to its executive board. Its new beauty vertical is projected to generate 10% of the e-tailer’s total sales, per Moda CEO Jim Gold.

Morphe Shutters All Stores 

Once riding high on collaborations with big YouTube beauty influencers, Morphe parent company Forma Brands’ momentum has cooled considerably as it grapples with changing tastes, the rise of TikTok and declining sales. Last month, Morphe closed all 18 of its branded stores, and Forma Brands filed for bankruptcy.

Along with Morphe, the company’s portfolio contains Morphe 2, Jaclyn Cosmetics, Bad Habit, Lipstick Queen and Playa. Ariana Grande is reportedly buying her makeup brand R.e.m. Beauty from Forma Brands for $15 million. 

Valued at $2.2 billion when private equity firm General Atlantic took a majority stake in the business in 2019, Forma Brands’ assets are slated to be transferred to a set of lenders as it secures $33 million to sustain its day-to-day operations. Credit analytics firm Reorg Research estimates that Forma held between $600 and $700 million in debt last October, according to the publication The Business of Fashion.

Additional News

Adit Plots Big Growth As It Celebrates Its Second Anniversary [Beauty Independent]

Prestige Beauty Retail Concept Glove Beauty Springs Up In The Rocky Mountains [Beauty Independent]

New British Grocery Concept Raye The Store Is All About Emerging Wellness Brands [Beauty Independent]

Face Foundrie Plans To Nearly Triple Its Fleet Of Facial Bars This Year [Beauty Independent]

Thirteen Lune Closes $8M Funding Round [Beauty Independent]