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As investors anxiously try to diagnose the state of the U.S. economy, one bright red indicator is flashing a warning - lipstick sales are on the rise.
The Lipstick Theory holds that sales of the beauty product spike when consumers are feeling especially threatened. It's a small luxury women feel comfortable indulging in, the theory holds, even as they turn away from other retail indulgences.
Leonard Lauder, the chairman of Estée Lauder Cos. Inc., voiced the theory after the 9/11 terrorist attacks when he noticed the company was suddenly moving more lipstick than usual. Kline Consumer Products Research Practice proceeded to analyze 50 years of sales data, and found lipstick sales did indeed increase during tough times.
So forget European debt woes and increasingly expensive barrels of oil - a study released Tuesday by NPD Group Inc. found sales in the "prestige lip segment" have spiked by 7 per cent so far this year in U.S. department stores to $185.2-million (U.S). Indeed, sales have been increasing since February, 2010.
"Coming out of the recession, it seems that the consumers thirst for colour and play was reawakened," said Karen Grant, vice-president and senior global industry analyst.
At Estée Lauder, overall sales reported in its last quarterly report increased by 16 per cent from last year. Unfortunately for the global economy, the company said lipstick contributed to the strong quarter.
It's not the only fashion indicator that warns of tougher times ahead - another theory holds that skirt lengths also provide a glimpse into our economic future. The longer the prevailing skirt length, the choppier the outlook.
The idea is that a short skirt can't be altered, whereas a long skirt's length can be changed several times to accommodate different seasons. With consumer spending accounting for about two-thirds of U.S. gross domestic product, economists may be watching hemlines more closely than usual.
Like a U.S. jobs report, the news is not good. "If you go into the stores you'll see skirts that go right down to the floor," said Toronto-based personal shopper Michelle Gallant of Looks Image Consulting. "Those are very, very hot right now."
Of course, those who watch the market closely know that the only indicator that matters warned of impending weakness months ago, when Russian Irina Shayk graced the cover of Sports Illustrated's swimsuit edition (it is a well-known fact that the markets perform better in a year when an American poses for the cover).
Bespoke Investments crunched the data: Since 1978, an American has appeared on the cover 17 times and average gains on the S&P 500 were 10 per cent with positive returns 92 per cent of the time. When a non-American has appeared, the S&P 500 returned 8 per cent with positive returns 75 per cent of the time.
"To be sure, we would note that the S&P 500's 38.5-per-cent decline in 2008 when an American appeared on the cover caused the spread between the two performance numbers to narrow considerably," the company's blog pointed out.