An ambivalent shopping surge that developed too late coupled with a recession-hardened reluctance to spend money resulted in a painful holiday for major department store groups, many of which missed their December plan and suffered sales declines ranging from 1.5 percent to the high-single digits for the men’s and women’s fragrance businesses, according to sources.
Some stores also reportedly sustained a single-digit decline in their total cosmetics and fragrance business for the four weeks of December, with color cosmetics flat and treatment ahead of last year. There were some reports of fashion niche fragrances performing strongly, but a number of major brands sustained declines.
For more than a decade, the Christmas business has developed later and later each December. This year, the trend reached a crescendo. “The last five days meant more than ever before,” said one retail executive, who described the final three days as a “killer.” Moreover, consumers seemed to respond to beefed-up merchandising programs staged the week after Christmas to tempt cash-heavy postholiday shoppers. But it was not enough to make up for the frailty of early December.
The season is critical for the fragrance business particularly. Major department store retailers estimate that 60 percent of their November-December fragrance business is done in the 10 days before Christmas. Of that, the final two days represent 60 percent of those 10 days of selling, telescoping the season down to 48 hours.
At Belk’s in Charlotte, N.C., a hoped-for rush the week before Christmas did not materialize, leaving the chain short of plan with a decline in the low-single digits for the entire cosmetics division in December and a more significant drop towards double digits for the fragrance category. A surge on Christmas Eve and the week after the holiday was not strong enough to compensate for the preholiday weakness, said Jonathan Pollock, senior vice president and general merchandise manager. He attributed the disappointing holiday to a number of reasons, led by an absence of traffic and a lack of excitement in new product offerings. Pollock noted that new introductions usually draw attention to the fragrance bar and this year, “there was no rallying point” for the season.
Also, the economic fallout from the terrorist attacks of Sept. 11 not only cemented the gathering recession in general, but put a damper on the fall launch season. Furthermore, fragrance was caught in what Pollock calls “the luxury backlash.” Consumers don’t view scent as a necessity like makeup or skin care. The latter category was very strong, he added. In addition, the “collateral pressure” of price competition from other departments in the store, like the deeply discounted apparel, further cut into the beauty business. And in order to protect their bottom lines, some vendors pulled back on advertising. “It’s a showbiz business,” he pointed out.
Looking ahead, Pollock does not see much relief in the first half, with a lot of spring launches postponed and a lack of newness. “I see the business being difficult for the next six months,” Pollock said.
But there were bright spots at Belk’s. Clinique’s Happy performed strongly, both on the men’s and women’s sides of the master brand. “Chanel finished strongly,” Pollock said, adding that Ralph Lauren’s new Glamourous, Lancome’s Miracle and Estee Lauder’s Intuition were all good on the women’s bar, and Donna Karan’s Cashmere Mist was “fabulous.” In men’s, Giorgio Armani’s Acqua di Gio for Men was also “fabulous,” Calvin Klein’s Eternity was good and Liz Claiborne’s Mambo for Men was “decent.”
Nancy Feldman, vice president and divisional merchandise manager for Bloomingdale’s, called this year’s holiday season “a mixed bag.”
“After Sept.11, we looked at what we could realistically expect of the business,” she said. “We are on plan for those numbers, and we feel good about that. We didn’t pull back on advertising or in-store support this fall or for holiday, and that made a big difference.” Still, she said, Christmas’s traditional bestseller — fragrance — proved to be the expected challenge. “We are a little off as compared to last Christmas, which was marked by very strong fragrance sales driven by a lot of newness and continued growth in key brands. This year, the new fragrance launches weren’t as strong post-9/11 as they were at the same time a year ago, which was a continuing, contributing factor. And there were challenges in anniversarying sales on some fragrances that were new last year.”
Still, there were bright spots in scent for Bloomingdale’s. “While overall, the fragrances were a mixed bag, some of our very strong brands continued, to show strength,” said Feldman. “In the women’s fragrance category, Thierry Mugler’s Angel, the entire Cartier fragrance assortment, Hanae Mori, Chanel’s whole assortment, Donna Karan’s Cashmere Mist and Marc Jacobs did very well. In fact, of all the new launches, Marc Jacobs did the best for us. “For men, L’Eau de Cie, Bulgari Blu for Men and Michael Men from Michael Kors sold well, as did Zirh’s men’s treatment line, she said.
In terms of buying patterns, fragrance value sets sold better than single bottles for Bloomingdale’s this holiday season, said Feldman. “In fact, value sets had a better sell-through than a year ago,” she said. “The dollars were better for value sets than they were last year. However, the basic business was off. The way people were buying fragrances was different this year.”
Feldman said that post-Christmas sales were very strong, noting that the week between Christmas and New Year’s Day increases in importance every year. “Given the market challenges, we paid special attention to that week this year,” she said. “Last year, we had a beauty event called the post-Christmas Beauty Bash to drive beauty sales, and we anniversaried that this year. We made it bigger and better, which really drove treatment and color sales. There was a lot of traffic post-Christmas in our stores.”
While pre-Christmas foot traffic in tourist-driven areas was “clearly off,” Feldman noted that it had increased in suburban stores, particularly in the New York metropolitan area. “The challenge, however, was getting customers to buy cosmetics and fragrances, rather than other things in the store,” she said.
Color and treatment delivered good sales for Bloomingdale’s, said Feldman. “YSL’s color, Laura Mercier’s new fragrance and body products, MAC’s new color stories and Lancome’s colors and its Absolue treatment line did very well for holiday,” she said. “Chanel’s total business — its new colors and its fragrances and skin care — also did very well for us at holiday. That whole business has been strong. We also saw great results from a lot of the spa-related lines, particularly gift sets.”
Gail Gordon, vice president and divisional merchandise manager of cosmetics at Macy’s East, said, with a hint of pride: “The cosmetics and fragrance business at Macy’s East not only survived but exceeded its post 9/11 reprojections. We were very, very pleased.”
In a dollar comparison with last year, she added: “We were very close to flat” for November and December. While noting that the fragrance business was more depressed, Gordon added that “the classics maintained their top-10 positionings in men’s and women’s.”
She said that it was no surprise that “what drove the business was exceptional value and newness.” And Gordon doesn’t expect that to change for the first half. “I don’t think we will see an immediate change,” Gordon added, “It will be a continuation of the customer wanting value, value, value and newness.”
“Christmas was better than expected — in fact, we were ahead of plan last week by single digits,” said Bettina O’Neill, cosmetics and fragrance buyer for Barneys New York. “The last 10 days have been excellent, but there have been a few challenges. Fragrance was definitely tough, but it did start picking up around Christmas. In the women’s department, the L’Artisan Parfumeur and Antonia’s Flowers assortments did especially well, as did Chanel’s Coco Mademoiselle and Marc Jacobs’s Perfume. We also saw good sales from The Different Company’s fragrances, which have unique bottles and are an unusual size.” They are leather-wrapped glass containers that contain 250 milliliters of fragrance, she noted.
Home generated strong holiday sales at Barneys, particularly candles from Tocca, Diptyque and Red Flower, said O’Neill. “That category has been building and will continue to be strong,” she predicted. Treatment was another bright spot, driven by products by Remede, Aesop and Cle de Peau.
In the men’s department, products from Art of Shaving — especially their ancillaries — did very well, said O’Neill, as did products from Anthony Logistics, Zirh and Gendarme. “Bulgari’s new men’s scent, Blu for Men, was another very strong seller.”
While she wouldn’t get specific about holiday sales figures, Amy Jones, spokesperson for Nordstrom, noted that there were several bright spots at the retail chain’s beauty counters during the Christmas season. “We had a great selection of cosmetic gift items in a wide range of categories and price points,” she said. “Color cosmetics kits, like those from MAC, Laura Mercier and Trish McEvoy, proved very popular, as did shimmer products ranging from dusting powders to lip gloss. Fragrances from Herve Leger and JC de Castelbajac were also popular with our clients. And comfort products like bath items — such as Laura Mercier’s Creme Brulee Honey Bath — and candles continue to be very strong sellers for us.” To boost sales at Christmastime, Nordstrom hosted informal beauty seminars in several doors, given by national beauty director Debbi Hartley-Triesch. The seminars, Jones noted, instructed how to create different holiday makeup looks, and showcased gift-giving ideas.
“Christmas was not an exceptionally strong Christmas, but it was better than we had anticipated, given the fall climate,” said Steve Dye, spokesperson for Dillards’ Phoenix division. “We’re still feeling the effects of the general recession and other factors from this year.”
According to Dye, treatment — “particularly products from Clinique and Lancome” — were very strong sellers, while color cosmetics delivered consistent, if not blockbuster, sales. On the other hand, he noted, fragrance — normally one of the strongest Christmas beauty sellers — proved to be quite a challenge this year. “Fragrance sales were on the weaker side,” he said, although he declined to provide sales figures. “That hasn’t just been for the holiday season, however. Weak fragrance sales are consistent with the fragrance trend in the market. It’s been a challenging climate at the fragrance counters all year.”
Gary Borofsky, vice president and divisional merchandise manager for Rich’s in Atlanta, was more upbeat. “We will make our plan,” he said, adding that holiday sales at Rich’s are up about 4 percent, which is consistent with Rich’s growth level throughout 2001, he said. “The last-minute shopping was unbelievable. That Sunday and Monday [before Christmas] far exceeded our expectations.” According to Borofsky, the “usual suspects” — including Estee Lauder’s Beautiful and Pleasures, Clinique Happy, Ralph Lauren Romance, and Tommy Hilfiger’s Tommy Girl — did very well, as did newer scents such as Ralph Lauren Glamourous, Chanel’s Coco Mademoiselle and Liz Claiborne’s Mambo. As Borofsky had expected, the coffret business continued strong, as did container and value sets. “Container sets were still a big piece of the pie,” he noted, “but value sets did a higher percentage of sales. Newness got great play in treatment,” he added, pointing to Clinique’s Moisture Surge and Estee Lauder’s Advanced Night Repair as hot sellers. Cosmetics sales, he said, have been flat.
Surprisingly, Borofsky found customers weren’t as price resistant as originally thought. For Rich’s, the recent addition of fragrance counter managers seems to be positively affecting sales, Borofsky added — 12 out of the 13 stores that the managers were added to exceeded plan.
As to whether these holiday sales are an indication as to how the rest of the year will be, Borofsky is not sure. “We are going to continue to be challenged,” he said. One category that promises to be especially challenging is fragrance. “There is a limited amount of initiative in the first half, ” he said adding that several launches have been put off until the second half. “Our customer continues to look for newness and value.”
Shashi Batra, Sephora’s senior vice president of merchandising, also had a positive report. “It was unbelievable,” said Batra of the season. “Some of our numbers are still coming through, but our comp store increase is over 20 percent. In the two weeks before Christmas, there was not a day that we did not have comp increases.” Explaining the growth is easy, at least for Batra. “The bigger pie may be getting smaller but we are still being discovered. One out of every two people in the store is a new shopper and that is driving comp store increases.”
According to Batra, Manhattan locations didn’t comp high at all, but Midwest, Mid-Atlantic and Southern California stores did extremely well. Stores in tourist-driven areas, such as Las Vegas and the Southeast, have yet to come out of the slump. “They did fine,” he said, “but not great. In regards to inventory, we shifted dollars from one store to another but we didn’t let up.”
Bath was the big seller in Sephora, said Batra. “In our top 10 brands for the month of December, in sales volume, three brands were driven by the bath aspects of their business — Bliss, Fresh and Philosophy. Our own private label was huge — in bath it was number one.”
“Fragrance came on strong the last three days before the holiday, as we expected it to,” he added, pointing to Marc Jacobs, Issey Miyake, Acqua di Gio pour Homme, Dolce & Gabbana Light Blue and Michael Kors as top sellers. Gift sets and value sets also did well.
Color cosmetics, spiked by sales of Urban Decay Honey, did well, said Batra. “There was a week that we did over $100,000 for that one product alone,” he said. But, he allowed, “at Christmas, we don’t get the same kind of increases in color as we do with more giftable items.”
Like many retailers, Fred Segal Essentials in Santa Monica, Calif., had a rough fall. But at the end of November, owner Robin Coe-Hutshing and her staff planned a spate of in-store events, ranging from clinics to social get-togethers, to make shopping more inviting, and business turned around Dec. 5. Segal managed to eke out a razor-thin gain for December, while the year is headed for a slight loss.
Coe-Hutshing said she had fewer customers, but average unit sale was up by 15 to 20 percent. And the gift-buying was pragmatic, consisting of bath, body and skin care items, like a jar of Creme de la Mer.
J.C. Penney Co. in Plano, Tex., made plan, according to a spokeswoman, and the top-selling women’s fragrances included Elizabeth Taylor’s White Diamonds and Passion, Chanel No. 5, Elizabeth Arden’s Red Door, White Shoulders, Wings, Tommy Girl, Ralph Lauren Romance, Design and Davidoff Cool Water Woman. On the men’s side, the hot fragrances were Liz Claiborne’s Curve for Men, Wings for Men, Davidoff Cool Water, Calvin Klein’s Eternity, Tommy Hilfiger’s Tommy, Paul Sebastian, Hugo, Drakkar Noir, Nautica and Michael Jordan. The most popular item was a $35 set of five miniature purse sprays from Elizabeth Arden. – Pete Born, Julie Naughton with contributions by Cassandra Chiacchio.