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A strong stable of fall launches has beauty retailers hopeful for holiday — even as most would view flat sales as a victory.
With some sources forecasting holiday sales could decline by 4 to 12 percent — which would come on top of the 10 percent drop last December — retailers said the key to Christmas this time around will be heavy promotion of gift-with-purchase sets, exclusives and the strength of recent launches, including Lola from Marc Jacobs and Couture Couture from Juicy Couture.
“I think we should look for flat or better,” said Howard Kreitzman, vice president of cosmetics and fragrances at Bloomingdale’s, who put on a brave face. On the one hand, Kreitzman said he can’t believe business could be worse than last year, but the executive also acknowledged he knows how difficult it is to reverse a downward trend. “It does look and feel a bit better than it did a few months back,” Kreitzman observed, adding that he is hoping for the best while preparing for a difficult season.
“We’re hoping it will be better this year,” said Bettina O’Neill, vice president and divisional merchandise manager of cosmetics and fragrances at Barneys New York.
According to the consumer tracking firm NPD, prestige fragrances, men’s and women’s combined, suffered a 10 percent drop for the first half of this year in dollar volume. Unit sales fell 13 percent and the entire beauty business — fragrance, skin care and color cosmetics — was down 7 percent in dollar sales for the period.
Some executives are bracing for a fourth-quarter slide of anywhere from minus 4 to minus 12 percent.
Karen Grant, vice president and global industry analyst for NPD, stopped short of making a prediction, saying, “We are hopeful, but it is still too early to tell. There is some good launch activity,” she added. “But will it be enough to offset the declines in the category? It’s a toss up.”
The predictions of a number of manufacturers, speaking not for attribution, are that a flat fourth quarter looks like a longshot at this point. “I’d be pleasantly surprised if it was flat,” remarked one observer. “Even 2 percent [down] would be a win.”
Another executive noted, “It’s not all that positive, but it’s not dire, either.” While observing that the better business has shrunk by 25 to 30 percent over the last year, he cited a catalogue of factors, ranging from continued destocking by retailers and diminished expectations of consumers — a downsizing of everything — to a slight perking up of demand recently with retail results ranging from minus 5 to plus 5 percent. The situation is highly complex and come December, “there could be a pleasant surprise,” he added.
“The results of our women’s fragrance launches have been pretty good,” said Kreitzman at Bloomingdale’s.
The fragrance category struggled all through 2008 and into the first half of this year, he noted, “but the arrival of the new launches turned the business around.”
With fewer blockbuster launches than last fall, the men’s fragrance category has been lagging women’s. Comparing the sales in the last seven weeks with the entire year to date, the sales trend in the women’s category has improved by two-thirds, although the overall business remains “slightly down,” Kreitzman noted.
Among the launches driving the turn are Lola by Marc Jacobs, Juicy Couture’s Couture Couture and Very Hollywood by Michael Kors. “There have been nine meaningful new [women’s] fragrance launches this fall,” Kreitzman noted, compared with “no more than two or three last fall.”
Lola exceeded “reasonably high” expectations, since it eclipsed Jacobs’ earlier hit Daisy. Juicy Couture is one of the store’s biggest franchises and the brand’s newest fragrance “did very well.” He added, “That one was quite powerful.” The Kors fragrance is still in its initial launch period and it is doing well, said Kreitzman.
Dolce & Gabbana’s new set of five Tarot card-inspired fragrances has “gotten off to a good start,” he said, and CH Carolina Herrera, which is due to bow at Bloomingdale’s later this month, “looks good.” Kreitzman also sounded hopeful about Narciso Rodriguez’s Essence and Issey Miyake’s new women’s fragrance, A Scent.
Bloomingdale’s, like some other stores, is getting comfort from some of their stalwarts. Sisley launched its new Supremya cream, priced at $750, and shattered the forecast, with 35 to 40 jars sold the first month.
Chanel continues to perform strongly at the store, as does the Viktor & Rolf franchise, with its original Flowerbomb fragrance and the new Eau Mega.
However, one of the brightest spots is in the existing, promotional business driven by very strong gift-with-purchase events staged by the big three brands, Clinique, Estée Lauder and Lancôme. The gwp business tends to be maddeningly inconsistent from year to year, but 2009 is clearly a gift year. “Customers are looking for free,” Kreitzman noted. That news figures largely in his fall strategy.
Fragrance gift sets fared poorly last Christmas, Kreitzman theorized, because the value aspect was not trumpeted. “We never made much of it,” he said.
But this year will be different, with some vendors prominently displaying not only the price on the packaging, but also the amount of savings. “We are going to get very aggressive,” Kreitzman said, noting the tactic will be aimed not only at the market competition, but also as a defense against the deep discounts from ready-to-wear departments inside his own store. He noted that last year a $75 fragrance gift set had to compete with a deeply discounted cashmere sweater.
At Macy’s, Muriel Gonzalez, executive vice president and general merchandise manager of cosmetics, fragrances and shoes, declared, “we’ve gotten good traction from a lot of fragrance launches.” Strong performances were turned in by the men’s fragrance Play from Givenchy, which is being promoted with a TV commercial featuring Justin Timberlake, followed by Queen Latifah, who is appearing in the Macy’s TV commercial.
“Lola has been a standout,” Gonzalez said. “It has been a very strong fragrance launch since the beginning of August.” Macy’s also has high hopes for the new Mariah Carey fragrance, Forever, which has been selling well since hitting the counter two weeks ago. The focus will be on Tuesday, when the star makes an appearance in Herald Square. Usher’s new fragrance, VIP, is also expected to perform well.
Gonzalez agreed that the big three firms are enjoying a good gwp year. “The brands worked hard in putting value into the gift,” she said. Also on the color and treatment side of the aisle, Estée Lauder’s Doublewear Lipstick and Doublewear Lip Pencil were a hit, as was Chanel’s Rouge Allure lipstick. There also has been strength in skin care’s serum category. Lancôme scored with Genifique and so did Estée Lauder, with its updated Advanced Night Repair. The antiaging category in general has been strong. She added she is also looking forward to the launch of Lancôme’s new Oscillation Powerfoundation.
At Saks Fifth Avenue, Deborah Walters, senior vice president and general merchandise manager, said Saks is focusing on novelty giftables, impulse items priced at $50 and below. “Our assortment will be focused on exclusive, impulse items that are so appropriate for gift-giving or self-indulgence,” she said. “Pricing will be compelling at $50 and below.”
Walters said Saks has been “thrilled” about the reception of Natori from Josie Natori, which was launched exclusively in August. “We’ve been equally pleased with Dolce & Gabbana’s Rose The One and Narciso Rodriguez’s introductions — Narciso, Essence and Musc,” Walters continued.
“Our younger customer loves Marc Jacobs’ Lola. It is fun and playful. In addition to newness, our customer loves the unexpected. We are seeing great results with unique fragrances. By Kilian, which we introduced in our stores over a year ago, continues to do well.”
Walters indicated that expectations are high for the October launch of the latest Bond fragrance, Success is a Job in New York. Moreover, the store will be supporting its classics with a “first-of-its-kind marketing campaign planned in partnership with Chanel to promote Chanel No.5.” Expectations are also high for the introduction of Guerlain’s new scent, Idylle.
At Neiman Marcus, fragrance launches “have been going well,” particularly the exclusives, said Karen Katz, president and chief executive officer of Neiman Marcus Stores. The hot introductions include scents by Creed, Halston, Balmain, Van Cleef & Arpels, Chanel and Prada. The beauty business “is doing pretty well,” she added.
Debbi Hartley-Triesch, national beauty director for Nordstrom, said, “CH Carolina Herrera and the D&G [Fragrance Anthology] have both been strong launches for us.” She added, “Both fragrances remain among top-selling scents at Nordstrom today.”
Marc Jacobs’ Lola and Juicy Couture’s Couture Couture scents have also been standouts. “We have a strong business in their core fragrances,” said Hartley-Triesch.
For fall, niche fragrances are going to be an area of focus, according to Hartley-Triesch, who noted the retailer is bringing in Bond No. 9 this season.
“Our niche fragrance business is doing very well, so we’re going to continue to expand distribution with Creed, Bond No. 9 and Jo Malone,” she said, explaining that the scents will be rolled out to additional Nordstrom doors. “Our customers enjoy finding signature scents that are more limited in distribution, fragrances that not everybody is wearing.”
At Barneys, O’Neill said, “Overall, the fragrance business has been trending best out of beauty.” The retailer’s launches include Daphne Guinness’ fragrance, called Daphne, which was produced in collaboration with Comme des Garçons. Also, Barneys is launching a scent named Baudelaire (after the French poet Charles Baudelaire) by Swedish fragrance marketer Byredo Parfums. “It’s a brand that’s exclusive to us,” she said of Byredo Parfums, whose Gypsy Water fragrance is a standout. Other strong performers include Le Labo, Serge Lutens and Frederic Malle.
Though the market has suffered greatly and some consumer polls indicate that there has been more slippage in the rate of fragrance usage, NPD has found a silver lining. The richest part of the market, fragrance products priced over $75, is gaining ground and growing larger. Eaux de toilette and eaux de parfum showed growth for the first half, according to Grant. Products priced $75 and above gained 4 percent in dollars and 1 percent in units. For juices $100 and above, dollar sales grew by 9 percent and by 6 percent in units.
In addition, this segment is claiming a larger share of the market. For the first half, total fragrance sales amounted to $607 million in the U.S. The portion priced $75 and above claimed $176 million of that total, or 29 percent of the market. That compares with 17 percent of the market in 2006.