PARIS — Groupe Clarins’ stock spiked 21.3 percent Wednesday on the Paris Bourse, to $48.44, on the back of news that the beauty firm has proposed to shut its money-losing Thierry Mugler fashion business. (Dollars figures are converted from the euro at current exchange rates.)
Financial analysts applauded the move. “It means that the company is taking steps in a noncore area of its business,” said one analyst.
Clarins has long been outspoken about its dissatisfaction with the Mugler fashion business. The firm’s president and chief executive officer Christian Courtin has called its losses “unacceptable.”
Pankaj Chandarana, Clarins’ chief financial officer, confirmed to WWD on Wednesday that a plan to cease fashion operations has been proposed by the advisory board of Mugler SA. He stressed that “no final decision has been made,” since the shutdown is a complicated matter in France and needs the approval of various labor groups and legal authorities. But he acknowledged that as many as 250 jobs hang in the balance, with the next meetings on the topic slated for early January. Until such time, it’s “business as usual,” he said.
Vera Strubi, head of Mugler’s fashion business since 1999, has resigned from the post and been succeeded by Perrine Houdoux, formerly Courtin’s right hand. Strubi continues at the helm of the profitable Mugler fragrance business.
She did not return phone calls and Thierry Mugler himself could not be reached for comment.
The specter of a Mugler shutdown comes only two years after Strubi trumpeted an ambitious expansion plan for a brand whose zenith came in the Eighties and early Nineties. Clarins took a controlling interest in Mugler in June 1997. Strubi’s wish list included a network of 50 boutiques and corners, a successful accessories and leather goods collection and brand extensions into lingerie, footwear, hosiery and homewear.
Instead, the company has been retrenching. Sales at the fashion house fell 13.1 percent last year to $36.6 million. The first nine months of the year saw another drop, of 19.6 percent to $25.6 million. Chandarana declined to pinpoint the losses for the fashion business, but characterized them as “heavy.”
In November 1999, Mugler announced it would suspend its couture operations and it recently ceased showing its women’s collection on the runway.
While she’s had a rough go in fashion, Strubi is considered one of the top fragrance marketers in the industry, having been among the first to put designer fragrance on the map. Mugler’s Angel women’s scent, celebrating its 10th anniversary this year, is still considered a groundbreaking achievement in the industry for its innovative “edible” accords, including a chocolate note, and the coherence of its advertising, packaging and merchandising with the designer’s image. Since 1998, it has (on and off) topped Chanel No. 5 in the prestige fragrance rankings in France.
For the first nine months ended in September, Parfums Thierry Mugler posted sales of $96.3 million, up 17.4 percent year-on-year. For 2001, the division registered a volume of $124.6 million, a rise of 17.6 percent against 2000.
In September, Clarins warned its full-year consolidated operating margin would be lower than in 2001, when it was at the 9.2 percent level, because of “the difficult economic situation marked by very poor visibility and with no signs of recovery.” For the half year, Clarins’ operating profit was down 41.1 percent, to $28.7 million.
Clarins is not the first beauty firm to run into troubles with its fashion holdings. L’Oréal, which bought Lanvin in 1994, ultimately sold the brand last year to a group of investors known as Harmonie SA, after attempting to engineer a makeover miracle. Puig Group is also struggling with the fashion business at Nina Ricci, amidst a revolving door of designers and managers.
But Clarins is clearly not anti-fashion. Last September, the company took a 33.3 percent stake in Stella Cadente, a trendy French fashion label by designer Stanislassia Klein. Clarins plans to spearhead the brand’s fragrance and makeup.
The possible shutdown of Mugler’s fashion business also raises the question of whether a top-selling designer fragrance can continue to flourish without a fashion house broadcasting its image. Traditionally, fragrances benefit from the publicity, advertising and brand imagery surrounding runway shows and fashion collections. Indeed, many of the significant fragrance launches this year have been closely linked with major fashion designers. In the run-up to the holiday season, scents such as Parfums Christian Dior’s Addict and Parfums Giorgio Armani’s Sensi are making waves across Europe.
But when it comes to Mugler, analysts are bullish about its future without ready-to-wear and accessories. One analyst said the Mugler name in fragrance boasts better equity than it ever could in fashion.
“I really doubt if people identify with Mugler because of his fashion shows,” said an analyst. But she allowed that they could, however, “add a little bit of spark.”