Saks Fifth Avenue, NYC

In 2011, the U.S. cosmetics and toiletries market should grow by 3.1% to 3.6%, as opposed to last year’s 2.4%, according Kline & Company.

In a “fall preview”, the market research firm estimates that, after spotty sales in the past five years, prestige cosmetics and toiletries brands will drive most of the market growth in 2011. “Early estimates indicate that the whole year 2011, including the upcoming holiday season, may see growth of 7% to 8% over 2010 levels.” High-end retailers, such as Saks and Nordstrom, have reported September same-store sales well ahead of estimates, with cosmetics being one of their strongest-performing categories.

Sales of mass products are expected to increase by 2% to 3% in 2011, not significantly faster than during the recession and post recession years.

In the direct sales channel, Kline estimates that U.S. sales should slightly improve and show a 2% to 3% growth in 2011. Kline cites the example of Avon, which is not having a very good year so far, with declining revenue in North America.

As per the specialty trade class, which includes vertically-integrated store brands like L’Occitane, sales are estimated to grow between 4% and 5% in 2011. But the performance of brands in this category is very contrasted, with some of them doing poorly in 2011, and others, such as Bath & Body Works, reporting robust growth of same-store sales.

According to Kline, brands in the professional channel should grow about 1% to 2% in 2011. “Professional skin care brands should hold their own from 2010, while salon hair care brands are expected to pull down the average somewhat.

Perspectives by product categories are very positive for skin care, the largest product class in the whole U.S. cosmetics and toiletries market, with growth estimated between 3% and 4% in 2011, and prestige brands also performing well here. Nail polishes are continuing to soar in the makeup product class, with continued high double-digit increases. Fragrances may grow an unusually high 4% to 5% for the year.

However, Kline recognises that, in a context of steep decline in consumer confidence, “the holiday season remains a big unknown and will have a large impact on the overall market performance, particularly for giftable categories like fragrances.