By  on April 17, 2008

Speculation began circulating in the market this week that Liz Claiborne Inc. is seeking a buyer for its fragrance business, Liz Claiborne Cosmetics, which includes scents under the Juicy Couture, Usher, Lucky and Claiborne banners.

Industry sources said Claiborne is informally shopping around the division to a host of potential buyers without a banker in tow. They named Coty Inc. and Elizabeth Arden Inc. as two firms that might have an interest in the Claiborne fragrance portfolio, but suggested that there are a number of interested parties.

A Claiborne spokeswoman said the company does not comment on rumors. Arden could not be reached for comment. Michael Fishoff, Coty's chief financial officer, stated, "Coty is always looking for expansion opportunities, but at this time we have nothing to report on future plans." Art Spiro, president of Liz Claiborne Cosmetics, had a terse "no comment" when asked about the report, while attending the Pratt Institute/Luxe Pack Art of Packaging Award dinner Tuesday in Manhattan.

L'Oréal Shares Slide After Sales Report

PARIS — L'Oréal's shares closed down 7.36 percent to 73.75 euros, or $116.68 at current exchange, on the Paris stock exchange Wednesday, due to what analysts consider to be the company's lower-than-expected first-quarter sales, notably in North America.

As reported, on the back of a difficult trading environment in North America and a strong euro, L'Oréal announced Tuesday first-quarter sales of 4.36 billion euros, or $6.53 billion at average exchange, up 2.1 percent over the same period last year.

On a like-for-like basis, revenues gained 5.1 percent. In North America, the company's revenues fell 7.2 percent to 893 million euros, or $1.34 billion. On a like-for-like basis, that represented a drop of 3.9 percent.

"A quarter may not be a year, but the start has certainly been disappointing," UBS analyst Eva Quiroga wrote in a research report Wednesday. UBS, which downgraded L'Oréal's stock to neutral, had expected L'Oréal's North America sales to decline no more than 1 percent on a like-for-like basis.

"The first quarter was disappointing with regard to sales in North America," agreed Heinz Mueller, equity analyst at DZ Bank. "It was a big disappointment because the company only recorded negative sales growth there, despite having acquired some companies in North America." He was referring to the acquisitions of PureOlogy, Beauty Alliance, Maly's West and Columbia Beauty Supply."This negative growth trend has not been seen for a while at L'Oréal," added Benoit de Broissia, a financial analyst at Richelieu Finance. "Excluding the negative currency effect, L'Oréal was still growing in North America [until now], and the figures that have been released show negative growth even on a constant currency basis. It is a setback compared to what the market had expected."

L'Oréal chief executive officer Jean-Paul Agon stated Tuesday that while the company had been expecting a lackluster first quarter, the period had, in fact, been more difficult because of lower footfall in department stores and larger-than-expected inventory reductions by distributors.

While the rest-of-the-world region, including Asia, Latin America and Eastern Europe, showed strong like-for-like growth of 16.7 percent for L'Oréal, "it has not been enough to save the day" wrote Quiroga. A slowdown in North America, the continent that generated almost a quarter of L'Oréal's total sales in 2007, cannot be compensated by high growth in emerging markets, added Mueller.

Looking ahead, the UBS report said the bank continues to believe in the strength of L'Oréal's long-term business model.

Mueller, meanwhile, predicted continued tough trading conditions in the U.S., thanks to reduced consumer spending because of the subprime crisis.

De Broissia, for his part, believes the major L'Oréal product launches planned for the rest of the year, after a quiet first quarter for new products, should improve the company's performance in the U.S.

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