By and  on November 2, 2007

New York & Company Inc. is the latest specialty apparel retailer climbing onto the beauty bandwagon.

The company will launch a line of bath and body care products on Nov. 15 called City Beauty, which was developed with Inter Parfums Inc., the same company that produces personal care products for Gap Inc. and is the fragrance licensee for Quiksilver. When those initiatives are added to the fragrance and bath line recently unveiled by Ann Taylor, it is clear a growing number of retail specialty chains are eager to tap into the market dominated by department stores and chains such as Sephora and Bath & Body Works.

Ironically, these apparel stores are adding beauty to their offerings even as one of the legendary apparel retailers — Leslie Wexner's Limited Brands Inc. — is exiting fashion to focus on personal care and beauty via its BBW and Victoria's Secret Beauty operations.

"Our customer is spending money on these types of products somewhere else and we would like to get some of that business," said Richard P. Crystal, chairman and chief executive officer of New York & Co. "We feel this could be a major business."

He added, "We have to treat it like it is positioned to be a big business if we want it to be successful."

Crystal said the company did extensive research into the beauty market, even utilizing focus groups, and studied the preferences of its customers. "We thought it was a natural extension for us. We thought bath and body would be a better direction. We wanted to build a repeat business with a repeat customer."

None of the executives would comment on sales projections, but industry sources estimate the new line could generate $10 million to $15 million in retail sales for the first year. New York & Co. in total does about $1.2 billion annually.

Asked if the initial launch might lead to further forays into the market, such as venturing into color cosmetics, Crystal replied, "We might do lip gloss."

"We're just testing the waters," added Leslie Goldmann-Franco, the company's executive vice president and general merchandise manager."Our customer likes color," said Crystal. According to Celia Rao Visconti, executive vice president of marketing, "Our target customers are fashion-conscious, value-sensitive women between the ages of 25 and 45."

From the name of the bath and body collection to the packaging, City Beauty was cast in the image of the New York-based chain in order to echo its urban persona. Goldmann-Franco pointed out that even the shapes of the bottles and jars were meant to mimic the New York skyline. "We capitalized on the architectural heritage of New York City," she said.

The collection consists of six different scents, each of them expressed in five products. There is a body mist, body lotion, body scrub, hand and body cream and shower gel for each flavor, all of which were developed by International Flavors & Fragrances Inc.

The names and types of scent were meant as somewhat sly monikers for different neighborhoods. Downtown Darling has the scent of passion fruit, Fabulous on Fifth contains wild orchid, Chelsea Chic has pomegranate, Broadway Beauty has gardenia, Uptown Angel contains vanilla and Miss Manhattan is marked by an apple note.

The chain not only studied the market but also its likely competition — notably Victoria's Secret Beauty and BBW — and it shows up in the pricing. Each item will be priced at $8, but two units will be sold for $14 and three items for $18. "We are a value-oriented brand," Crystal said.

The line will be rolled out to all of the chain's 569 stores across 44 states. In the top 100 doors, the collection will be merchandised with 14-foot-wide wall units, featuring two columns of shelves divided by a large photo mural of the products. The other doors will have freestanding display units near the cash registers. Product portraits will be featured in windows and photos will be displayed on easels near the entrance.

As for promotion, Crystal said a product-oriented gift-with-purchase will be used to drive sales and during the launch in the second week of this month, sales associates will wear City Beauty T-shirts. Special shopping bags also have been designed. Rao Visconti said the chain's more than six-million-customer database for direct mail will be used to send out brochures and e-mails will be sent over the store's digital network of 3.8 million electronic addresses.News of the launch plans seemed welcome on Wall Street. Mark Montagna, retail analyst at CL King & Assoc., said that if the line generates $10 million to $15 million in first-year retail sales, it would account for about 1 percent of the firm's total sales, and add a penny of earnings per share. Unlike apparel, the bath and body line might be less of a target for markdowns, which could boost margins. "It will give them some incremental sales — and everyone else, including Gap and Ann Taylor, has bath and body. Every little thing you can do to nudge sales helps," said Montagna.

Eric Beder, retail analyst at Brean Murray Carret & Co., said bath and body products offer a nice add-on purchase and will inject excitement into New York & Co.'s accessories business, which, like its women's apparel sales, has been lagging. "Its customer looks to New York & Co. to set the trends," said Beder, noting the average customer is a woman 25 to 35 years old with children. "I don't think it will drive significant traffic, but that customer wants convenience. [Beauty] is an impulse- and convenience-driven purchase."

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