By  on February 10, 2010

NEW YORK — Oscar de la Renta may be cooking up a new beauty deal.

According to sources close to the company, de la Renta is in discussions with a private equity investor who might take a minority stake in a newly established company, Oscar de la Renta Beauty. Sources speculate a deal could be reached within the next few weeks.

In December, de la Renta got back his beauty license from L’Oréal as a result of arbitration stemming from an 18-month legal dispute that involved the license holder, YSL Beauté, which was acquired by L’Oréal in 2008, and the distributor Elizabeth Arden Inc.

Alex Bolen, chief executive officer of Oscar de la Renta, declined comment on negotiations for a new beauty deal.

Sources told WWD a private equity investor was introduced to de la Renta’s firm through a financial intermediary. The potential investor already has holdings in the beauty industry and would focus on de la Renta’s fragrance business, as well as expand the brand into cosmetics and skin care. Eventually, the investor could conceivably get involved in the apparel and retail side of de la Renta’s business, which has seen much better results in recent years than the beauty business. De la Renta’s wholesale business does about $100 million in volume.

De la Renta’s classic original fragrance, called Oscar, was developed in partnership with Milton Stern and launched in 1977. Over the decades, the fragrance license has changed ownership several times, being acquired in succession by Avon Products Inc., El-Sanofi SA, YSL Beauté and finally L’Oréal. At its peak in the late Eighties-early Nineties, Oscar and its subsequent fragrance siblings generated a combined wholesale volume of $110 million. It currently does an estimated $30 million in wholesale volume, according to industry sources.

According to The NPD Group, the original Oscar fragrance is still in the top 100 of women’s scents in the U.S. In addition, the entire Oscar franchise, which includes 15 fragrances, variations and spin-offs, is selling among the top 50 women’s brands.

The return of the beauty license stemmed from a trademark infringement suit filed by Oscar de la Renta Ltd. in June 2008 against Elizabeth Arden Inc., alleging Arden sold 4-ml. fragrance samples to Wal-Mart Stores Inc. and other mass retailers without authorization. In August 2008, Arden filed a counterclaim against de la Renta, alleging that under terms of the designer’s cosmetics and fragrance licensing agreement, YSL was the actual owner of the brand’s trademark rights and was the only party that could sue for infringement. The issue went to arbitration and a deal was worked out in late December.

De la Renta has been actively expanding on the international and domestic fronts in recent years, and developing a beauty business in-house would take some serious financial investment.

At a WWD luxury forum in September, Bolen said through the recession and beyond, “nothing is off the table as far as moving the business forward.” Bolen was up front about the recession’s impact on the luxury sector during his talk and said the firm needs to develop a wide range of products and prices. “We have opportunities at the high [end]. We have opportunities at the low. We need to pursue both of them,” said Bolen.

In recent seasons, de la Renta has entered the fashion jewelry category, now a growing multimillion-dollar business. At the other end of the spectrum, the designer has been doing a strong business in furs and bridal gowns priced at more than $20,000, Bolen said.

Overseas retail expansion is one area where the company has been on the move. In September, de la Renta opened its first store in the Middle East, in Dubai, as well as a directly owned store in Madrid and a franchised one in Athens. The company also opened a 400-square-foot boutique in Harrods in London in September. The company has nine freestanding stores globally and an online site.

Building international sales through its wholesale business has been another key priority. The designer’s collections are available at Boutique 1 in Dubai; Saks Fifth Avenue in Riyadh and Jeddah, Saudi Arabia, and Harvey Nichols in Riyadh. Last year, the company inked a deal to operate freestanding Oscar de la Renta boutiques in Qatar, Saudi Arabia and the United Arab Emirates, with plans to unveil five stores in Dubai, Abu Dhabi, Doha, Riyadh and Jeddah in the next three years.

Where de la Renta has stumbled in recent years is in developing a better-price line, which could go head-to-head with Lauren by Ralph Lauren, Tommy Hilfiger and Calvin Klein. The exclusive and high-profile O Oscar line at Macy’s folded in 2008.

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