By  on March 4, 1994

NEW YORK -- Ultima II is back in the eye of controversy.Earlier this week, May Department Stores Co. said it has decided to discontinue the business, confirming a report that appeared in WWD on Monday."The line no longer fits in our cosmetics department and its performance has been sluggish," the St. Louis-based retailer said in a statement. "In addition, Ultima's interest in broadening its channels of distribution beyond department stores has diluted its cachet."Asked to elaborate, a May Co. spokesman said Ultima is "widely distributed in a variety of retail formats.""The focus of our cosmetics business has always been with vendors dealing with department and better specialty stores," the spokesman said.Ultima is sold in the majority of May Co. divisions, with 1993 retail sales estimated by industry sources at $15 million to $20 million.The Revlon division found itself in the midst of a small furor when it entered J.C. Penney Co. in 1991. The New York-based R.H. Macy & Co. discontinued the business completely, although executives denied that Penney's was the reason. Other stores cut back the number of doors stocking Ultima II.But since then, Ultima executives have insisted that their focus remains steadfastly and solely on department stores, with a national distribution of 2,000 doors.This week, Revlon rebutted May Co.'s assessment with its own statement, maintaining that Ultima's business is anything but sluggish."We never comment on our business with a specific customer, but retail sales for Ultima II in 1993 were up 18 percent from 1992 in comparable prestige doors," said Jerry Levin, president and chief executive officer of Revlon Inc. "To our knowledge, May Co. participated in that growth."We are totally committed to growing our specialty and department store business," Levin continued. "Ultima's cachet is fabulous, as evidenced by our rapid growth in prestige doors."May Co.'s explosive decision comes at a time when Ultima appears on the verge of generating some momentum. The division, which previously has relied on its color cosmetics business, is preparing to reenter the fragrance arena in September after a four-year absence According to industry sources, Ultima's wholesale volume climbed to $80 million last year.By pointing to Ultima's performance, May Co. dismissed cosmetics industry speculation that its action may have been in response to competitive pressure from Penney's. The surfacing of the report, however, points up the competitive sensitivity of retailing today. Wall Street and retail analysts say the Dallas retailer has become more of a force. "Penney's has done a very good job in the cosmetics arena, and the companies can make money with them," said Diana Temple, director in research at Salomon Bros.She noted that expanding distribution to a national department store like Penney's makes sense. "Women are not shopping in department stores as much as they used to," she continued. "You have to reach out to the consumer or you're going to miss her."Bill Flately, managing director of Levy & Kerson Associates, a retail and management consulting firm, said May Co. views Penney's "as head-to-head competition." But it is doubtful the St. Louis retailer would turn its back on opportunity out of spite, Flately said, noting, "May Co. wouldn't shoot themselves in the foot just to make a statement."When Ultima went into Penney's, Dayton Hudson dropped the line from 33 doors, but the business remains in 24 of the corporation's 60 doors, according to Allen Burke, divisional merchandise manager."We have had a difficult time maintaining the Ultima business," Burke said, acknowledging the ongoing competition from Penney's.Penney's, of course, has a different view. "We are very pleased with the Ultima business," said Ann Gravseth, divisional merchandise manager at Penney's. "Sales have exceeded expectations," Gravseth continued. She added: "The American consumer wants the product, and we have it."

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