By  on July 2, 2010

The Sephora perfumery chain is about to enter Brazil, the world’s third-largest cosmetics market, and take its first step into South America following its parent LVMH Moët Hennessy Louis Vuitton’s purchase of 70 percent of the Rio de Janeiro-based online retailer Sack's.

The Brazilian retailer offers more than 270 brands and boasts a customer portfolio ofmore than 830,000 clients, with four million unique visitors a month. Financial details were not disclosed and none of the executives would discuss dollars. However, industry sources estimate Sack's has annual retail sales of more than $50 million. The purchase price for the 70 percent stake was estimated at more than $100 million. LVMH declined to comment on the figures.

“They are a market leader and have a tremendous position,” said David Suliteanu, president and chief executive officer of Sephora Americas, based in San Francisco. He indicated that Sack's, founded 10 years ago, is the leading prestige fragrance and beauty leader in Brazil. Suliteanu added that the acquisition will serve as a stepping stone for Sephora to enter the market with brick-and-mortar stores, although he said that, at this point, the American retailer doesn’t have a definitive timetable. However, Suliteanurecalled that before Sephora entered Canada in the fourth quarter of 2005, the chain had been doing business there — and building consumer awareness — via the Internet.

Suliteanu ticked off the pluses in the deal. The Brazilian operation provides an infrastructure and an expertise in regulatory matters in a country where rules are plentiful and complex. The strength of Sack's was described by Suliteanu as an advantage in a market of huge potential that is underpenetrated by premium brands.

Sack's does 60 percent of its sales in fragrance, according to Carlos André Montenegro, co-founder and ceo of the company. Both executives see an opportunity for Sephora to add color cosmetics and makeup to the mix.

Montenegro said he evolved into the Internet business a decade ago as he was pursuing his first love and profession as a disc jockey. It was difficult to keep up with music trends from Brazil, but then he discovered Amazon.com. That paved the way for his Internet business, which has been growing at a double-digit rate and achieving profitability. He sees the power of Sephora and the LVMH group as a way to access brands not available in Brazil.

He also predicted the relationship will move Sack's to a new level, helping the company to grow by five- or sixfold.

The deal is expected to close at the end of July. Montenegro said he will stay in place “for the next coming years.” He and his partners, Albatroz Participações and Marcelo Franco, will continue to own 30 percent of Sack's.

 

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