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Sephora to Abandon

NEW YORK — One of the most daring — and expensive — experiments in beauty retailing will end with the click of a lock on Aug. 31 when Sephora closes its 21,000-square-foot Rockefeller Center flagship.<br><br>The French beauty...

NEW YORK — One of the most daring — and expensive — experiments in beauty retailing will end with the click of a lock on Aug. 31 when Sephora closes its 21,000-square-foot Rockefeller Center flagship.

The French beauty retailer will announce today that it has assigned the lease of the huge store to French fashion retailer Façonnable, which is owned by Nordstrom.

Sephora, a division of LVMH Moët Hennessy Louis Vuitton, did not disclose the terms. But executives described the move Monday as part of Sephora’s new strategy of focusing on smaller, more productive formats, while continuing to develop its remaining 71 American stores. David Suliteanu, president and chief executive officer of the U.S. wing of Sephora, stated that “Sephora continues to achieve outstanding sales growth across the U.S. We remain on track to achieve our near-term objective of positive operating profit and cash flow in 2003.”

The comment exuded the same optimism that Suliteanu had voiced in a May 24 interview, during which he said that plans were in the works to scale back the Rockefeller Center unit from three floors to two. Sephora, which has been racked by reports of huge losses and rumors of a possible sale of both the U.S. and European divisions, has struggled for some time with Rockefeller Center. Touted as “a world-class flagship” when it opened Oct. 14, 1999, the Rockefeller Center flagship was estimated by industry sources to cost $30 million to build, with expectations of doing well in excess of $20 million in annual retail sales. The store was launched in 1999 with lavish fanfare and an appearance by LVMH chairman Bernard Arnault, who declared that “Sephora has a revolutionary concept that’s going to capture more and more market share in the U.S.”

The new unit dwarfed every other store in the chain, including the 14,000-square-foot Champs-Elysées superstore in Paris. But the complex three-level layout proved unwieldy from the start, and the highly artistic visual design was criticized as being confusing. The store has been redesigned twice and its presentation has been made more straightforward. However, the sales productivity has come nowhere near the original heady expectations. Sources estimate the store’s volume is trending at $15 million this year, a double-digit gain over last year. Sephora executives point out that even after the Rockefeller Center Sephora is shut, the chain will still have six stores in New York.

While representatives for Tishman-Speyer Properties, owner of Rockefeller Center, refused to give information on the terms of Sephora’s lease, industry sources estimated that the original lease was for 12 to 15 years. “I can’t imagine that they spent as much as they did building out that space and renting it for anything shorter than that,” said one source. “And their rent isn’t exactly a bargain. Most likely, they were looking at an uphill battle to make that space pay itself back.”

Jean-Paul Agon, president and chief executive officer of L’Oréal USA, said, “It’s probably the right business decision.”

William Lauder, group president, The Estée Lauder Cos., said, “I’m very surprised by the decision to close the store. However, real estate in that area is extremely expensive and it may be that they have decided to spend that money in other areas of the city.”

Lauder noted that the multi-level format at Rockefeller Center may have been a drawback. “It seems that the most successful Sephora locations, both here and abroad, are one-level stores,” he said. “The format of the Rockefeller Center store forces the consumer to go to one level for fragrance, another for color and another for skin care, rather than access them all on one level.”

Still, Lauder doesn’t believe that the shuttering of the Rockefeller Center store spells doom for the troubled retailer. “Their same-store performance overall is said to be good,” he said. “If they are taking this opportunity to close stores that don’t work for them, that will be good for everyone in the long run. If they have huge stores that are a drain on their expenses, it’s better to close them.”

Carol Shaw, founder of Lorac and a partner in that business with brother Barry Alan, does a significant percentage of her business in Sephora —?and said she is optimistic. “We’re very positive about our business with Sephora,” she said. “I think they’re evaluating their operations, like every other company in America, including us. I don’t think this is a statement on the chain in general; I think that this is an occupancy-cost issue related to a single location. They have so many other great locations in the city that continue to do well.”

Façonnable confirmed to WWD on Monday that it will move out of its current site at 689 Fifth Avenue, between 54th and 55th Streets, and take over the entire 21,000-square-foot Sephora site in Rockefeller Center, providing Façonnable with twice as much selling space.

Façonnable’s current quarters are tight, with 3,000 square feet of selling space, although with all the back office space the store measures 10,000 square feet. Façonnable is one of the more successful labels sold by Nordstrom. It’s classically styled sells at bridge prices. Nordstrom started selling the brand exclusively in the U.S. in 1989 and bought the Nice, France-based brand in fall of 2000.

Aside from selling inside Nordstrom stores and at the Fifth Avenue store, Façonnable is also sold in the U.S. at three other free-standing boutiques, in Beverly Hills and Costa Mesa, Calif., [in South Coast Plaza] and Dallas. A fourth is scheduled to open at the Village of Merrick Park lifestyle center in Coral Gables, Fla. on Sept. 27.

Façonnable also operates 23 international boutiques, primarily in Europe.

“This prime location will allow us to present the most complete and compelling selection of Façonnable,” Mark Brashear, president of Façonnable, stated.

The existing Fifth Avenue Façonnable offers a full assortment of men’s wear, but only a small selection of women’s. The upcoming Rockefeller Center store will house an expanded men’s offering and the complete women’s and accessories collections. Façonnable has been on Fifth Avenue for nine years, and was the first free-standing U.S. Façonnable location.