Inflation is eating away at Americans' paychecks and forcing them to trade down in order to stretch their dollars, but strong demand for beauty products shows consumers are still spending on their looks.

With sales on the rise, companies are jockeying for position, and an increasing number are leaning into the beauty space for a piece of the action.

Ulta

Beauty brand Ulta saw a 16.8% year-over-year increase in net sales last quarter. (Brian Cassella/Chicago Tribune/Tribune News Service via Getty Images / Getty Images)

Ticker Security Last Change Change % ULTA ULTA BEAUTY INC. 418.53 +1.74 +0.42%

A slew of firms across the industry showed strong results last quarter, with Ulta Beauty reporting a 16.8% year-over-year increase in net sales to $2.3 billion. Cosmetic brand e.l.f. Beauty posted a 26% increase to $122.6 million.

Unlike in other retail categories, such as groceries, where customers are increasingly switching to off brands as their budgets are squeezed, some beauty companies say they haven't noticed a change in consumer activity.

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Ulta CEO Dave Kimbell said on the company's earnings call last month the company had not seen evidence customers were trading down.

Ulta beauty

Ulta Beauty CEO Dave Kimbell says the company has not noticed a trend of customers trading down despite high inflation. (Aimee Dilger/SOPA Images/LightRocket via Getty Images / Getty Images)

"We're seeing strong growth across all aspects of our business," Kimbell said. "Every category performed in double digits, strength across channels, stores, e-comm services. And, as we look at income levels of our guests, we're seeing healthy growth at all income levels. So no real signs or signals of trade down within the marketplace yet."

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But competition is getting stiff as more companies enter the space or expand their offerings.

In July, drugstore giant CVS Health announced it is opening skin care centers inside three CVS locations as part of a pilot program to introduce "new prestige brands to mass beauty retail" after having success with its in-store BeautyIRL shops.

CVS skin care center

CVS Health launched new skin care centers in three stores in a pilot for expanding beauty offerings. (CVS Health)

Even food retailers are getting in on the action. Grocery Dive reported last month that Thrive Market, an online natural food purveyor, also entered the beauty space.

Thrive introduced a full line of private label beauty products under the name f.a.e., including haircare, skincare, and body care options at budget-friendly prices.

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According to the outlet, the organic grocer said in a press release, "Thrive Market’s first foray into beauty with the launch of f.a.e. is an investment in their mission to make healthy living affordable and accessible to all."

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