PARIS — Cautious optimism best describes European beauty executives’ outlook.

"The impact of Sept. 11 is still very big," explained Patrick Choël, president of the perfumes and cosmetics division at LVMH Moët Hennessy Louis Vuitton, speaking of the industry in general and summing up the belief of many executives here.

"Business has been harder hit than we thought," said another European manufacturer. "We all expected a tough time in travel retail, but that hasn’t been so difficult. Instead, it’s been the domestic markets that haven’t been that easy."

Sell-in for France’s selective domestic beauty sellers has been erratic. For instance, year-on-year, it was down 10.7 percent in May, but up 18.3 percent in April, according to the French Federation des Industries de la Parfumerie.

"The first-half turned out worse than anyone thought it would be," confirmed Gabriele Pungerscheg, president of European Designer Perfumes, a division of Unilever Cosmetics International. "Can business improve? I think so. Economies are on the upturn and political situations are more secure, with most countries having voted in their new parliaments.

"It was a cold first half, but will be a hot second half because of backloading," she continued.

That is to say, all of the major European players are gearing up for blockbuster fall launches. LVMH, for its part, will introduce Addict from Parfums Christian Dior and Kenneth Cole’s first scent duo from Parfums Givenchy. UCI will unveil a new Valentino scent, Cerruti Amber 1881 and Lagerfeld Man. Also slated are Parfums Giorgio Armani’s Sensi, Parfums Chanel’s Chance and Parfums Balmain’s Balmya — to name just a few.

"For the next six months, we’re all relying on the last quarter of the year, which should be significantly better," continued Choël, who predicts LVMH’s beauty division’s sales will be up 6 to 8 percent for yearend.

His business’s volume in the first six months of 2002 was up 2 percent — a good turnout, he said, particularly considering: "Last year, we had an extremely strong first half, which was up 15 percent.""All growth will be driven by launches now," said Manuel Puig, president of prestige beauty brands at Puig Beauty and Fashion Group, whose beauty division posted about 8 percent growth in the last quarter of 2001, registered a 10 percent drop in the first three months of this year and an increase of 12 percent in the second-quarter 2002. For the June-to-December period, he expects his business to spike 10 percent and by the end of the year to be up by "close to double digits."

"Our forecast for the year is more or less flat," said Philippe Benacin, president of Inter Parfums. "Everything has been so slow since the beginning of the year."

"If you take out the launches, the market is quite stagnant worldwide," continued Puig.

Executives say the sluggish U.S. business is the biggest force dragging down selective beauty sales, which will have trouble meeting the industry’s forecast growth of 3 percent to 3.5 percent worldwide by yearend.

Yet that’s not to say growth drivers don’t remain. In skin care, traditional products are making the sale, according to executives. "We’re still doing very well with basics, classics — toners, and day and night creams," said Christian Courtin, chief executive officer of Groupe Clarins. However, he said "everything with a little plus," such as a second or third lipstick or a slimming item, is not moving off shelves these days.

In prestige fragrance, besides new products, classics are showing their colors. "In periods of crisis, brands representing core traditional values resist well," said Andreas d’Avack, managing director of Chanel’s fragrances and beauty products division.

"I see the classics resisting quite well," agreed Puig. "The idea is to maintain business with classics and pick up growth with new products."

There’s also a silver lining when it comes to emerging markets. China "is definitely growing strong," particularly in the long term, said Courtin. "The Indian market is also starting to percolate." Others say Russia is promising, as well.

Expressing the overriding sentiment of his European colleagues, Courtin added: "I am feeling optimistic about the future, but I don’t know when I will feel comfortable."

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