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Europeans Regroup

There's been a marked slowdown in the European marketplace.

There’s been a marked slowdown in the European marketplace. Yet, while this year looks to be difficult — with soft sales looming and more retail closures possible — beauty executives are focusing their sights on the best strategies to bolster their business.

“I think 2009 is going to be very challenging,” said Debbie Beaumont Howell, head buyer for beauty and accessories at the U.K.’s House of Fraser department store, adding that established brands with loyal consumer bases are likely to fare better than less well-known names in the tough economic climate. “It’s going to be about maintaining market share through service, theater and having a point of difference. We’re working with a 2009 calendar that’s event — rather than discount — driven.”

In Germany, Martin Ruppmann, managing director of the VKE, Germany’s association of cosmetics producers, said, “We’re focusing our expectations for 2009 on Valentine’s Day, Easter and Mother’s Day. In the long term, our segment has been lucky enough to be the last into the crisis, and one of the first to come out of it. We’re also hoping to get off lightly in the first half of 2009, and we anticipate a marked upswing in the second half of the year.”

“Cosmetics seemed to be one of the last things the consumer cuts back on,” agreed Michael Schummert, chief executive officer of Babor Cosmetics, who added that his company is expecting “good sales in 2009.”

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Also looking ahead, the U.K.’s Harvey Nichols department store is “expecting our beauty sales to be consistent,” said a spokeswoman.

“We think that the teenage market will see a strong level of growth,” said Keran Fordham, buying controller at U.K. perfumery chain The Perfume Shop. “The success of last year’s High School Musical and Hannah Montana perfumes clearly demonstrates that there is a strong consumer demand for this sector of the market. We also think that celebrity scents will lose ground in 2009, with celebrity-endorsed fragrances taking their place.”

Meanwhile, the credit crunch has had at least one beauty retail victim. On Jan. 5, the U.K.’s Passion for Perfume, a Manchester-based 45-door chain with stores across the country, went into administration, the U.K. equivalent of Chapter 11. “This follows challenging trading conditions and reduced consumer demand,” stated Deloitte, the business advisory firm handling the case. “Unfortunately, a buyer for the business as a whole was not found.”

Deloitte said it will continue seeking a buyer, but it does not intend to trade the business.

George Wallace, ceo of MHE Retail, said he expects the U.K. high street, which has seen a slew of retailers from different sectors go into administration in recent weeks, to see more businesses close up shop in the coming weeks.

“Beauty is more protected as it’d have to be a very, very severe situation for a woman to say ‘lipstick is not for me’ or ‘no thanks’ to a moisturizer,” he said.

As for the holiday period, numerous retailers said business was bustling. “Christmas sales were better than we expected,” said the VKE’s Ruppmann. “Most businesses kept the levels of the previous year — a few even saw increases.”

There was also good holiday news coming out of the U.K. House of Fraser’s Beaumont Howell added that trading was buoyed by the timing of the holidays, which offered an extra day for shopping, and stores reopening Dec. 26 with sale offers in other departments, which sent traffic through beauty floors. “Our beauty figures were double last year’s in the week before Christmas and smashed our plans.”

The Perfume Shop’s Fordham said Dec. 22 through 24 were “incredibly busy.” “Our online store did exceptionally well. For the first time [it became] one of our top 10 performing stores and [saw] a like-for-like growth of 150 percent,” she said.

“We experienced an increase in sales in the run-up to Christmas, with fragrance in particular leading the way,” said a Harrods spokeswoman.

The pre-Christmas period was strong beauty saleswise at Harvey Nichols as well, said its spokeswoman. She explained that shopping soirees were held at stores for cardholders and customers targeted through magazines. “Last month, we were actually up a good 10 percent in our beauty sales across the board as compared to [the previous] year.”

In Italy, La Rinascente department store’s December sales were boosted by promotional and exclusive efforts.

“We had a truly excellent December,” said Simone Destefanis, head beauty buyer for La Rinascente. That month, the retailer’s sales rose 10.4 percent against December 2007 and its revenues hit 7.2 million euros, or $9.87 million at current exchange. For the full-year 2008, sales came in at 48 million euros, or $65.82 million, representing a 7.7 percent gain on the prior year.

“We really upped our promotional efforts in the store, bringing in more staff during December, tuning up the visual look of the floor so it was more animated,” he said. “We highlighted brands other stores in Italy don’t have: Tom Ford and Jo Malone.”

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