By and and  on July 11, 2008

After two years of falling sales, the U.S. fragrance business may eke out at least a small gain for the second half — fueled by a staggering number of new global product launches with equally staggering advertising budgets, particularly on the men’s side.

“[The second half] has the potential to be positive,” said Karen Grant, global industry analyst and vice president of beauty at The NPD Group. “There’s so much activity and so much attention — all the big guns are coming out. It might be a positive fall for the first time in two years.”

For 2006 and 2007, the prestige fragrance business finished each year at 1 percent down, with the total men’s and women’s business totalling $2.94 billion for last year. In the two previous years — 2004 and 2005 — volume was ahead by 1 percent for each year.

“We’re cautiously optimistic [for fall],” said Debbie Murtha, senior vice president of cosmetics at the Macy’s Merchandising Group. “There’s definitely more launches than last year and they have an opportunity to build on last year’s success.”

The trend this year has been strengthening, despite a disastrous first quarter in which U.S. department store sales were down 9 percent. Since then, the arrow has been pointing in the right direction. April was up 4 percent, compared to a 1 percent gain last year, and May was ahead by 3 percent, compared to a drop of 6 percent last year, according to NPD. Grant added that Mother’s Day sales were also positive — by a margin of 3 or 4 percent- — despite fewerspring launches. There were less than 90 spring launches this year versus more than 100 last year, Grant noted. She added that some men’s launches from last year — Diesel’s Fuel for Life, Usher He and Dolce & Gabbana’s Light Blue Pour Homme — continued to show strength this year. In addition, the launches of Boss Pure and Ed Hardy broke into the top 20. On the women’s side, the classics carried the season both in France and the U.S., Grant said.


But below the surface, the long-term prospects seem disquieting. Through NPD’s consumer preference Fragrance Track survey, NPD has detected a worrying drop in usage. From 2006 to 2007, the number of women aged 18-24 saying they use fragrance dropped from 88 percent to 85 percent. Teen girls aged 13 to 17 showed a 6 percent drop from 81 percent to 75 percent in the same time period. In what Grant refers to as the “Axe effect,” the number of teen boys using fragrance dropped from 81 percent in 2005 to 63 percent in 2006 and has since dropped to 60 percent.
 

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