MW Budgets are tight - but Gen Z and millennial shoppers can't stop buying perfume

By Claudia Assis

In times of financial difficulty, people often turn to beauty products

Sales of beauty products are often viewed as a barometer of the health of the U.S. consumer.

Perfume is having a moment.

Sales of beauty products have grown faster in recent months than earlier in the year and are expected to shine during the holiday quarter. And among these classic last-minute gifts and stocking stuffers, sales of fragrances are growing most of all.

That's in part thanks to companies riding a wave of greater interest and offering more formulations and types of packaging, such as body mists and travel sizes, that are often cheaper. Fragrances are also appealing to different generations - whether they are millennials raised on a steady diet of Bath & Body Works $(BBWI)$ who are leaning on that nostalgia, or members of Generation Z embracing the Sol de Janeiro scents from Groupe L'Occitane that are being hyped in social-media videos.

"Fragrance, for whatever reason right now, is it," said Dylan Carden, an analyst with William Blair.

Market-research firm Circana said earlier this fall that roughly one in five people bought fragrance as a holiday gift last year, and buying intentions for this season are trending higher. Fragrance sales at both prestige and mass retailers have surged during the fourth quarter, Circana said.

Sales of beauty products are often viewed as a barometer of the health of the U.S. consumer. Estee Lauder heir Leonard Lauder is credited with coining the term "lipstick index" two decades ago, based on the idea that lipstick sells well in times of economic hardship, because even when people can't afford big-ticket items, they may still be able to treat themselves with a $50 Chanel lipstick.

To be sure, the "lipstick index" was never infallible, or even very popular, as far as economic theories go. The theory reportedly failed to hold true during the global financial crisis in 2008 - in part because data based on one product rather than a basket of products may be vulnerable to volatility and potentially skewed.

There are also those who argue that instead of lipstick or its shinier cousin, lip gloss, which had a cultural moment in the late 1990s and early aughts and has enjoyed a return to popularity in recent years, a more relevant beauty marker today would be nail polish, as the popularity of nail art has been soaring.

Along with fragrances, wellness products and devices are also doing well, riding on the years-long self-care trend. Circana pointed to sales of red-light-therapy facial masks as among the recent standouts.

And despite the economic uncertainty and talk of people spending less or trading down on everything from apparel to restaurant visits, people are generally still showing healthy levels of spending.

"You've got a strong consumer, counter to some of the narrative out there," Carden said. "I don't think we are in dire environment." The consumer is in a position of strength that may not be broad based but is certainly stronger than some people acknowledge, and the picture is more nuanced, he said.

Carden highlighted some apparel companies, such as Gap $(GAP)$, which includes lower-priced Old Navy stores, saying that they are still seeing lower-income consumers spending money, even though apparel sales are among the first to go down during an economic downturn.

Gap Chief Executive Richard Dickson said last month that Old Navy saw better demand "across all income cohorts." He called that "encouraging, despite widely reported macroeconomic pressure on the low-income consumer."

Ulta Beauty also saw signs of strength, last week reporting quarterly earnings that were above expectations and raising its outlook for the year.

The beauty industry had a "stellar" third quarter of accelerating sales compared with the previous three quarters, Circana said. "Beauty is in a position to shine this holiday, with one-third of consumers planning to gift beauty products - a meaningful increase from last year," the firm said.

According to Circana, sales of prestige fragrances increased 6% from a year ago to $5.9 billion in the third quarter. And on the other side of the spectrum, fragrance was the fastest-growing category in the mass-market beauty industry, up 17% based on dollar sales and also up by a double-digit percentage on a unit basis, Circana said.

Beauty in general is "an area that consumers prioritize," said Susan Anderson, an analyst at Canaccord Genuity.

"We are definitely hearing that they are looking for more value in the category, maybe trading down a little bit, but still willing to splurge for the name brand if that's something that works for them," she said.

But people are not necessarily trading down, she added. "They are not yet sacrificing what they perceive as better quality," she said, noting that fragrance continues to be a top category.

Some of the trend may fall along demographics lines as well. Younger people are typically more willing to try new things and new brands, whereas older consumers may be less willing to switch from tried and true brands that have worked for them, Anderson said.

Anderson has a buy rating on shares of Ulta Beauty $(ULTA)$ as well as E.l.f. Beauty $(ELF)$. She has a hold on shares of companies such as Coty $(COTY)$ and Estee Lauder $(EL)$ that - unlike Ulta with its standalone stores and E.l.f. with its heavy presence at mass retailers - are feeling the pinch of retailer destocking.

"The consumer is still buying, but retailers are bringing down their inventory level," Anderson said.

Whether it's perfume, skin care or other beauty products, consumers are still looking for "little bits of luxury," she said.

-Claudia Assis

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December 12, 2025 14:02 ET (19:02 GMT)

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