💄 The new “lipstick effect”

Buying a cherry-red smile… but the outlook is more matte than glossy. Beauty titans are often shielded during economic downturns thanks to the so-called lipstick effect. In gloomy times, cash-stressed consumers can’t afford big-ticket items, so they console themselves by indulging in small luxuries (think: $38 Dior Lip Glow).

• $20 gloss > $200 hydrafacial: As the US economy shrank in the first quarter, lipstick sales jumped 48% from last year (2X as fast as other beauty products).
• Lipstuck: But now even cosmetics giants are struggling to cover up ugly economic effects.

Losing luster… Last week Estée Lauder said its quarterly makeup sales fell 10%, and it lowered its outlook on weakening demand. Rival L’Oréal reported slowing growth as its profit-puppy luxe division (think: Prada, Lancôme) underperformed. FYI: Cover Girl owner Coty reports next week. But while consumers are cutting back on makeup, spending rose more than expected in September as Americans splurged on “experiential” indulgences.

• Travel go-tos are booming. Airbnb reported its best quarter ever last week while Marriott joined Hilton in lifting its annual forecast. Booking’s profit more than doubled.
• Chains including Burger King, Starbucks, and KFC and Taco Bell owner Yum Brands had robust sales growth as Americans opened their wallets for premium items like PSLs.
• Big food staples like Kellogg, Pepsi, and Kraft have reported strong sales this season as consumers kept stocking Frosted Flakes and Cheetos despite price hikes. Booze big shots like Smirnoff maker Diageo have also proved resilient.

A whole new world… While streaming entertainment powered Disney through the pandemic, real-life entertainment is propelling growth now. Revenue for the first nine months of the year was up 28% as US parks and resorts recovered and is expected to be up 25% for the year (Disney reports tomorrow). With Disney+, Hulu, and ESPN+, Disney surpassed Netflix’s total subs in August but lowered its 2024 forecast for Disney+ as growth slows. If the streamer hadn’t added 9M subs last quarter, as expected, investors might be bummed despite Disney's strong overall growth.

Insert (more) coins to continue... Gaming behemoths are struggling to beat their own high scores as the pandemic video-game boom slows. In the second quarter, NBA 2K maker Take-Two Interactive and tween fave Roblox fell short of quarterly earnings expectations after reporting fewer new gamers. Meanwhile, Microsoft’s $70B purchase of Activision — which makes Call of Duty — remains stalled in a lengthy regulatory review. Analysts expect earnings to keep falling when Take-Two and Roblox report this week, but revenues are forecast to rise as in-game spending stays strong.

“The future of Twitter”… Every Twitter thread last week. ICYMI: Elon Musk now runs Twitter (in his words: “the bird is freed”). Top execs have left the company and advertisers are skittish. After GM paused Twitter campaigns, ad giant IPG recommended its clients pause their spend too. Meanwhile, Elon seems focused on cutting costs and boosting non-ad revenue: On Friday, Twitter laid off half its employees, and over the weekend started rolling out an $8/month charge for blue check marks. There are many opinions about the Twitter-quisition, but only time will tell if it’ll help the embattled platform rise or sink.

Giving mixed signals… US employers added 261K jobs in October, and there are roughly two open jobs for every unemployed worker (a sign the Fed’s hikes aren’t cooling the economy enough). But job growth slowed and unemployment ticked up to 3.7%. Microsoft, Netflix, Snap, and Meta are laying off employees, and Amazon and (reportedly) Apple have frozen corporate hiring. Last week Lyft and Stripe also announced cuts. Non-tech industries may also slow: last week Ford offered buyouts to underperformers.

• #Phygital: Ralph Lauren and Epic Games announced a Fortnite fashion collection. The collab is both physical and digital, living in closets and in Fortnite avatars. It could help the preppy retailer gain younger fans.
• BnBest: Airbnb is on top of the world (and can maybe rent you a yurt there). By embracing WFH trends, the rental platform posted its best quarter as consumers seek IRL experiences in an always-online world.
• Scored: Dick’s Sporting Goods launched a $50M venture-capital fund to invest in sports-related startups. Corporate VC is booming, with companies from Google to GE to J&J building major funds.

• Gap: An NYC pay-transparency law now requires employers who hire in the city to share salary ranges for job listings. But with broad ranges being posted, it may not help close the wage gap as intended.
• Subs: Social platforms like Facebook, Twitter, and Snap are at the mercy of advertisers' budgets, but a growing push toward subscriptions (picture: monthly fees for added features) could break Madison Avenue's grip.
• Funged: Reddit saw $10M+ in collectible avatar sales even as the broader NFT market tanked 97% from its January peak. One possible reason: Reddit didn't mention that the polygon-based NFTs, dubbed "Snoos," were NFTs.

• Monday: Earnings expected from Activision Blizzard, BioNTech, Take-Two Interactive, Palantir, Ryanair, Lyft, and TripAdvisor
• Tuesday: Earnings expected from Disney, Occidental Petroleum, Constellation Energy, GlobalFoundries, Norwegian Cruise Lines, Coty, AMC, Affirm, Planet Fitness, and Sweetgreen
• Wednesday: Earnings expected from Rivian, Coupang, Roblox, Manulife Financial, Unity Software, Starwood Property, Wendy’s, Bumble, and SeaWorld
• Thursday: Jobless claims. Earnings expected from AstraZeneca, Nio, Toast, Ralph Lauren, Duolingo, Weibo, WeWork, Six Flags, Warby Parker, Aurora Cannabis, and Brookfield Asset Management
• Friday: Earnings expected from Innovid

Authors of this Snacks own: matic and shares of Amazon, Take-Two Interactive, Disney, Snap, Netflix, Apple, Ford, Twitter, Microsoft, Apple, GM, Yum Brands, Aurora Cannabis, and Starbucks

ID: 2577983