NEW YORK — As the fragrance industry prepares for another rite of celebration and self-congratulation at tonight’s FiFi Awards, hopes are emerging for the improvement of the stubbornly lackluster business, particularly as it heads into the crucial fall season.

That emerging hope is based partly on the fact that the department store fragrance business has improved from the first quarter, when sales were depressed by as much as 5 percent, to being essentially flat for Mother’s Day. As Andrea Robinson, president of Ralph Lauren Fragrances Worldwide at L’Oréal USA, said, there has been “a teeny, tiny upturn. I’m more optimistic than I have been.”

“The industry is not out of the rough waters yet,” said Patrick Bousquet-Chavanne, chairman of the Fragrance Foundation, which bestows the FiFi’s, and a group president of Estée Lauder Cos. “The waters have calmed down a bit but it’s still rough.” However, he asserted, “I think we will have a modest recovery in the fragrance category for the second half.”

One of the key drivers is foot traffic in the stores —“we’re dealing with a high impulse purchase category” — and traffic has returned to pre-Iraq war levels — but not pre-9/11 levels. “And we’re far from that,” Bousquet-Chavanne pointed out, adding that achieving plus business in the fall will depend on generating a sustained increase in traffic and that task remains a “fragile” proposition. However, thanks to the passing of the war in Iraq, Bousquet-Chavanne senses a betterment in consumer confidence, which is key to discretionary spending. He also thinks that the industry will get a break this Christmas, if the stores refrain from last year’s markdown mania in the fashion departments, giving beauty a price competition it couldn’t match. “Value sets on the fragrance bar didn’t quite crack it,” Bousquet-Chavanne said.

Similarly, the industry has to stop living on new fragrance launches alone. Bousquet-Chavanne’s reading of the current business reveals that while newness is providing the power, it comes at an unsustainable price. The existing business, cannibalized by the advent of the new products, is down by a double-digit rate. That yawning gap is large enough to swallow the gains made by the newcomers, hence an overall flat picture. For the category to produce a 1 or 2 percent gain in the second half, the erosion of the existing business has to be held to single digits. “The classics have to rebound,” he said.But the new entries should pull their weight, according to Bousquet-Chavanne, who sees “more horsepower” in this fall’s crop of launches. Desirability to the consumer is a burning issue that Bousquet-Chavanne raised a month ago when he called the Fragrance Foundation board together for a skull session to fix the business. Bousquet-Chavanne says money needs to be invested in ways to explain the value of buying the product, not just another value set. “We have got to put before the consumer the primary reason why they should buy fragrance.Retailers have to focus on the business. There is not room for error in the fall season.”

Camille McDonald, president and chief executive officer of the U.S. divisions of Parfums Givenchy and Guerlain, agreed “the quality of the launches are better” and last week’s buoyancy in the stock market bodes well for consumer confidence. Donald J. Loftus, president and chief executive officer of Cosmopolitan Cosmetics USA Inc., asserted “new launches are positive” for the business. “[Fragrances] launched in November are still new,” he said. What’s more, “we’ve seen stabilization of existing brands — last year’s fall launches through this year.”

The retail community, however, appears more wary, with at least one department store buyer predicting a flat season. One of the weakest spots is the men’s business, where there are few launches. One retailer suggested that lack provides an opportunity for building existing business.

Eric Thoreux, president, Coty Beauty Americas, said Coty has a three-pronged approach to restarting growth in the mass fragrance category. For one, it wants to strengthen sales of its core mass brands — Stetson, The Healing Garden and Jovan. Two, an attempt will be made to make merchandising entertaining, such as pairing the Celine Dion scent with her music CDs. Thirdly, Coty is aiming to make sure price points reflect thepositioning of individual brands.

Rochelle Bloom, the new president of the Fragrance Foundation, said not only are manufacturers being more daring in their new offerings, but consumers are ready for “richer, fuller fragrances” following a long, tough winter.

Editor’s Note: This column marks the start of regular daily coverage of the beauty industry in WWD under the Beauty Beat banner. Fridays will continue to include comprehensive coverage of the category.

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