DRUGSTORE CHAINS: YULE AS BLEAK AS EXPECTED
NEW YORK — It may have been a white Christmas for many drugstore chains, but for most of them, it was also a blue one. The timing of the holiday, a skittish economy and heavy snowstorms in the Northeast left retailers with a less-than-merry business.
The good news is that they had planned it that way.
“What happened to us is exactly what we thought would happen,” said James LeBlanc, vice chairman, president and chief executive officer of K&B Services in New Orleans. “We’re where we thought we’d be, because we looked at the numbers for 1989 when Christmas Eve was also on a Sunday. That can be devastating to retail because it takes store traffic away.”
Even though a Monday Christmas provides an extra weekend of shopping, retailers said they didn’t benefit. “When Christmas falls on a Monday, it is bad for stores like ours in the city because people aren’t around,” said Ely Tawil, president of New York’s McKay Drug. “Then there was the snowstorm, too,” he said referring to the snow and big freeze that hit the East Coast the week before Christmas. But as reported, most chain drugstore merchants were not surprised. They had noted sluggish fragrance sales throughout the year had been just a sign of bleaker things to come.
Their predictions proved accurate. Chain executives said they expect to see gains of only 5 to 6 percent on a storewide basis, versus last Christmas, once the numbers are fully tallied. The picture is even more dismal for the beauty category. Sales are expected to be up only 1 to 2 percent. This compares with relatively healthy gains last year, when sales jumped 5 to 8 percent for the same period. Ironically, the season had a promising start for mass marketers, with earlier than usual sales of fragrances. “One chain I talked to had its biggest day in history after Thanksgiving and it was great,” said Jim Curley, senior category manager for the Chain Drug Marketing Association Inc., an industry trade group based in Deerfield, Ill. “It was all downhill from there.” “It wasn’t a cosmetics year,” agreed LeBlanc, who added that his stores have a surplus of leftover holiday gift sets.
McKay’s Tawil noted that for the most part, consumers seemed to have shifted their dollars away from fragrances into high-ticket items, like computers. But he added that this came as no surprise to the chain.
“We had purchased merchandise based on this type of year, so we are getting a good sell-through,” he said, referring to the chain’s tightened inventory controls.
Strict attention to point-of-sale reports throughout the year also helped chains such as Arbor Drugs Inc. of Troy, Mich., to plan accurately for the Christmas selling season. “We’re not just in the fragrance business for Christmas like some other retailers, so we could forecast what would sell,” said Eugene Applebaum, Arbor’s chairman, president and ceo.
Despite their anticipation of a less-than-stellar Christmas, executives admitted mass market fragrance sales were even more disappointing than expected.
One of the main reasons was that the traditional last-minute dash for gifts didn’t materialize in the fragrance category, as it had in seasons past, retailers said. Drugstore chains had hoped to capitalize on the 11th-hour factor to ring up last-minute sales. Many stores kept their doors open late Christmas Eve and throughout Christmas Day. Revco D.S. of Twinsburg, Ohio, even advertised an 800 number to help shoppers locate open Revco units. CVS’s 24-hour stores remained open on Christmas Day, and most Walgreen’s and K&B stores kept their doors open for late shoppers.
K&B’s LeBlanc noted that keeping stores open usually gives drugstore chains a leg up on discount and department stores, as well as supermarkets. But this year, fragrance sales did not benefit from the extended hours.
Inspections of a CVS, a Walgreen’s and a Revco in central New Jersey on Tuesday revealed a multitude of holiday gift sets that were being marked down by as much as 50 percent. Buyers are not happy that they have been left with so much inventory, because this year so many heavily advertised mass fragrances were launched. These included Ici and Ghost Myst from Coty, Lasting and Charlie White from Revlon and Renaissance’s White Chantilly.
“We have a lot of Ghost Myst and Ici left,” said a Walgreen’s beauty adviser about Coty’s major two launches. The store’s most successful fragrance item, she said, was an Elizabeth Taylor White Diamonds gift set from Elizabeth Arden. The set consisted of a 0.12-oz. perfume, a 1.7 oz.-eau de toilette and a 6.8-oz. body lotion for $39.99. She added that the unit almost sold out of an Elizabeth Arden Sunflowers set that contained a 1.7-oz. eau de toilette and a 3.3-oz. lotion for $26.
To attract customers who wanted the Sunflowers scent at a bargain price, Walgreens cross-merchandised Fragrance Impressions’ knock-off version of Sunflowers, which is $11.39 for a 2.5-oz. spray. A few retailers, such as McKay, said they had managed to obtain a few pieces of Calvin Klein’s CK One, which sold out. CK One’s success had a halo effect on the mass market’s many mimics, retailers noted. “The CK One knockoffs were one of the bright spots,” confirmed McKay’s Tawil. In addition to White Diamonds, Sunflowers and CK One, many drugstore chains stocked their shelves with proven prestige brands, like Lancaster’s Joop for Men, Ralph Lauren’s Polo, Yves St. Laurent’s Opium and Davidoff’s Cool Water.
In the past, chains took a wide variety of prestige names and were often saddled with inventory on obscure brands.
Walgreen’s touted its upscale scents with store banners that asked shoppers, “Why Pay Department Store Prices?”
Among Walgreen’s values was a White Diamonds 1-oz. eau de toilette for $24.99 versus $30 manufacturer suggested retail. The store also offered a 1-oz. eau de toilette of Opium for $29.99 versus its usual $40 price tag, and a 2.5-oz. eau de toilette of Cool Water for $35.99 instead of the prestige price of $42.50.
The chain sold miniatures of Drakkar Noir by Guy Laroche, White Shoulders and Sun Moon Stars that were priced from $5.99 to $9.99. Other chains, such as Revco and Snyder Drug of Minnetonka, Minn., did not promote prestige scents and placed their marketing muscle behind mass market items that deliver higher margins. Although Walgreen’s had residual inventory on Ghost Myst, several buyers still dubbed it one of the year’s best new fragrances. The other scent singled out was Revlon’s Lasting. “Revlon appears to have found a formula for success with ColorStay and Lasting,” said a buyer for a drugstore chain based in the Midwest. “The Lasting commercial was on TV at all the right times.” Several buyers noticed continued strong sales of Revlon’s ColorStay lipstick.
“[ColorStay] brought shoppers into stores,” said Judy Wray, Revco’s senior beauty buyer.
A pleasant surprise, executives said, was the bath category, which produced a clean sell-through. Store visits verified that bath sets were strong sellers. The category appeared unusually strong in light of its loss of momentum two years ago.
“Bath has become a big gift item,” said Mark Kaplan, president of Sarah Michaels, a division of Laloren Inc. in Stoughton, Mass. McKay’s Tawil said perhaps it is time for retailers to reassess their mix to better serve shoppers’ needs while de-emphasizing seasonal sales and boosting day-to-day volume.
He noted, “We’re going to be making some changes in our cosmetics mix in 1996 based on what customers are telling us they want.”