Retail Report

Department stores offer discounts at long-exempt cosmetics counters

Key Points
  • Beauty counters at department stores have long been exempt from discounts.
  • Macy's and Bloomingdale's both started offering promotions on their beauty products.
  • It's difficult to restore original prices, say former department store CEOs.
Discount cosmetics prove dept. store doomsday clock 'moving a little faster'

Beauty bars, the centerpieces of many department stores, have almost always been exempt from discounts and storewide sales. But as aging retail giants continue to sag, the cosmetics counter is losing its protected status.

"The department store doomsday clock, which has been ticking away for quite a few years, just started moving a little faster," said Mark Cohen, former CEO of Sears Canada.

Retail shares were down nearly without exception on Monday afternoon, with retailers comprising 14 of the 15 biggest money-losing stocks on the S&P 500 stock index. Among the hardest hit were Macy's and the Gap, with stocks of both falling nearly 7 percent on the day, leaving both on the cusp of 52-week lows.

While a few department stores have flirted with cosmetics sales in the past, the products sold under glass at the beauty counter were generally excluded from any sort of discount. But Macy's recently offered a discount on makeup and skin care products, and Bloomingdale's gave their "loyalist" customers discounts on makeup both online and in-store through 2017.

Cohen told CNBC's "Power Lunch" on Monday that the change in department stores' last bulwark against cost-cutting promotions is a point of no return, and it still won't help the stores.

"The view that this cat can be walked back is completely foolish. There's no classification in the department store genre that's ever gone promotional and then retrenched and become regular price," Cohen said.

"This isn't going to change the path that they're on. It may accelerate the decline that they're facing," he said.

A few department stores, such as Lord & Taylor and Bloomingdale's, have offered discounts on cosmetics for some customers in the past, and saw their stocks decline when the sales ended, according to former Bloomingdale's CEO Michael Gould. Still, Gould recognizes that the new promotions represent a more permanent shift for the industry.

"There's no question that we've crossed the river here with beauty being on sale," Gould told "Power Lunch." "I think it's very hard to put the genie back in."

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