By and  on February 5, 2007

PARIS — Groupe Clarins reported Thursday that its fourth-quarter 2006 net sales fell 7.2 percent, to 277.9 million euros, or $358.4 million at average quarterly exchange rates. On a like-for-like basis, revenues rose 3.9 percent. For the full year ended Dec. 31, the French beauty company posted net sales of 967.2 million euros, or $1.22 billion at average yearly exchange rates, down 3.1 percent year-on-year. At similar group structure and constant exchange, they rose 5.5 percent. Clarins' revenues last year came in 0.3 percent under its announced target. Pierre Milet, the firm's financial chief, during a conference call Friday said the group's 2006 sales turnout was "very satisfactory," given market conditions, and that its distribution license with Procter & Gamble in the U.S. ended Jan. 1, 2006. Olivier Courtin, vice president of research and development at the firm, added disappointing performances by some of its fragrances, destocking policies undertaken by key retailers including Marionnaud in France, a dip in makeup sales in preparation for a new-look line currently being introduced, and the change of its agent in Brazil, hampered sales in the 12-month period. Net sales at Clarins' beauty division grew 8.9 percent, to 643 million euros, or $807.7 million, in 2006, versus 2005 on both a reported and a constant basis. The company attributed the gains to strong sales of both new and existing products. Clarins' fragrance division's net sales dropped 20.5 percent, to 324.2 million euros, or $407.3 million, in 2006 against the prior-year period. On a comparable basis, they fell 0.8 percent, due to a lack of major launches versus four fragrance introductions in 2005, said the firm in a statement. Clarins lauded performances by its Thierry Mugler and Azzaro fragrance brands. However, it said its Stella Cadente Miss Me and the Clarins Par Amour scents, which generated sales of 1.3 million euros, or $1.6 million, and 9.5 million euros, or $11.9 million, respectively, in the period, didn't meet expectations. Clarins' distribution business rang up sales of 55.3 million euros, or $69.5 million, in 2006, down 56.3 percent year-on-year following the cessation of its P&G distribution deal. Stripping out P&G, sales were up 30.8 percent on a comparable basis. Revenues from its fragrance distribution business in the U.S., which had been forecast to generate 16 million euros, or $20.1 million, came in at 12.8 million euros, or $16.1 million. "We haven't reached critical mass in fragrance in the U.S. after the loss of P&G," said Milet. "There are only two solutions — either acquire brands, or acquire new distribution or manufacturing licenses." He noted the company has taken the licensing route, inking beauty deals with Porsche and David Yurman last year. He added Clarins was also open to acquisitions. Looking ahead, fragrance launches planned for this year include Ice Men and Eau de Star under the Thierry Mugler brand, plus Now, a masterbrand by Azzaro. Novelties in treatment will include My Blend, a made-to-measure line, which will bow in 12 points of sale in the U.S. in the second half of this year. The collection will later be rolled out to Europe and Asia. Clarins's color cosmetics line, which rang up sales of 86 million euros, or $108 million, in 2006, is currently being revamped. The line's makeover and new display units are expected to drive sales to 100 million euros, or $125.6 million, in 2007. The company's 2006 profits are to be announced on March 15.

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