Coty Inc on Thursday beat Wall Street expectations for fourth-quarter revenue and said the beauty category was blemish free with no signs of slowing in the face of decades-high inflation, lifting its shares up about 11 percent in morning trade.

Lipstick and foundations are flying out of shelves with higher-income consumers indulging in smaller luxuries as decades-high inflation renders their plans for bigger purchases unattainable — a phenomenon known as the “lipstick effect.”

The Hugo Boss perfume maker expects full-year 2023 adjusted profit per share to increase in the mid-teens from a year earlier.

Rivals Estee Lauder and L’Oreal also reported better-than-expected quarterly sales as higher-income consumers invest in beauty products to prioritise selfcare as socialising resumes after two years.

CFRA Research analyst Zachary Warring said “the high-end products should hold up better than others,” at a time when the broader retail sector is struggling with weakening consumers and piling stocks as the companies raise prices to combat inflation.

Coty Chief Executive Officer Sue Nabi told Reuters in an interview the company would undertake further price increases this year, following an initial round in fiscal 2022, to boost profit margins.

The company has also been accelerating marketing investments on livestreaming and promotions on social media sites such as TikTok, which play a big part in influencing young consumers’ shopping decisions.

Net revenue in the fourth quarter ended June 30 rose 10 percent to $1.17 billion, beating analysts’ average estimate of $1.14 billion, according to IBES data from Refinitiv.

Travel retail has been a key contributor to the company’s growth in the reported quarter, driven by a revival of worldwide tourism, Nabi said in an earnings call.

By Ananya Mariam Rajesh; Editing by Shinjini Ganguli

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