Inter Parfums: Wake up and smell the perfume

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You may have lost your job but that doesn’t mean you can’t smell nice.

Judging by the recent success of Inter Parfums, Inc. (Nasdaq:IPAR), that’s exactly what a lot of people are thinking. The New York-based company, which sells high-end and affordable fragrances, and personal care products under a long list of labels from Lanvin to The Gap Inc. (NYSE:GPS), recently announced a 32% jump in fourth-quarter sales and an even more impressive 57.1% surge in net income over the same period.

It might seem that consumers would limit their spending to the barest of essentials in this tough economy, but clearly, plenty of people continue to buy perfume, one of the most frivolous consumer items out there.

That, in turn, has sent investors flocking to shares of Inter Parfums. The company’s shares have risen almost 30% since the start of the year, and closed Tuesday at $23.32 per share, up from $18.47 on Jan. 2 and a 52-week low of $13.55.

Inter Parfums’ success, however, is not so much an isolated phenomenon but part of a well-documented trend in which demand for unnecessary, feel-good items spikes during grim times. Estee Lauder (NYSE:EL) chairman Leonard Lauder coined the term “the lipstick indicator” in 2001 to explain a sharp rise in U.S. lipstick sales in the United States in the weeks following the Sept. 11 attacks.

The explanation for this pattern seems part psychological and part economic. There’s a basic human desire to make yourself look better on the outside when you’re not doing too well inside. There’s also the logic, which would apply to . . .

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