PARLUX AIMS FOR RICHES, NOT RANKINGS
Byline: Pete Born
NEW YORK — In a business obsessed with market share, Parlux Fragrances Inc. would rather have a fat bottom line than a number-one ranking.
“We are not going after market share, we’re going after profits,” said Jeffrey Dame, senior vice president of sales and marketing.
The Parlux formula is simple: Rank just high enough in the standings to turn a profit while keeping expenses down.
“We want to have a lot of good fragrances — five or six brands ranked in the top 10 or 12,” Dame said. “We don’t want to be second or third. It’s too competitive. You’ve got to pull back your ego. Everybody spends a lot of money to be in the top five slot. But that’s not where you make money; you’ve got to be in the top 20.”
Parlux, which is based in Pompano Beach, Fla., has been on the move for the last six months, beginning with the licensing of the Fred Hayman fragrances in June. This month, the company signed a deal with Sanofi SA of Paris to buy the worldwide manufacturing rights to the Perry Ellis fragrances, including Perry Ellis 360í, last year’s women’s entry, and Perry Ellis for Men. It now is working on a men’s version of 360í, tentatively scheduled for introduction next September.
Also under way is the development of Todd Oldham’s first fragrance, a women’s scent that will be launched in April.
The Parlux stable also includes Vicky Tiel’s new fragrance, Sirene, launched last March in Neiman Marcus, Dallas, and Bergdorf Goodman, New York. By April, Sirene will have been rolled out to 500 U.S. doors plus stores in 20 other countries.
The projection for the Oldham scent, the firm’s major launch next year, illustrates the thinking of the Parlux chairman and chief executive officer, Ilia Lekach. With a tight U.S. distribution of 97 department store doors and 14 or 15 countries in the fall, the first sales forecast is for only $5 million, a seemingly paltry figure, considering that another company might shoot for $20 million.
“If it hits $5 million and takes off we can fund it,” said Dame.
“We will not go for broke with any one brand,” Lekach said. “We are not going to gamble on a big brand.”
However, he has lofty ambitions. Lekach predicted that if Parlux can continue its present pace of acquisitions, volume will hit $250 million in five years.
“We are going to be the most important fragrance house in the U.S.,” he predicted.
For its last fiscal year, which ended March 31, Parlux sales totaled $25.36 million. Lekach predicted that volume will hit $40 million by the end of this fiscal year and $60 million at the end of March 1996.
The latest figures show the impact of the acquisition of the Hayman fragrances and the effect of cutting nearly $500,000 in costs. For the second quarter, ended Sept. 30, net income soared to $739,929, or 17 cents per share, compared with $171,096, or 6 cents, a year ago.
Sales in the quarter jumped 66 percent to $7.6 million, from $4.58 million.
For the six months ended Sept. 30, net earnings climbed to $1.36 million, or 34 cents, on sales of $14.1 million, nearly a third higher than the previous year. For the same period in 1993, Parlux had net income of $257,598, or 9 cents, and sales of $10.8 million.
Parlux distributes its fragrances throughout the department store network in the U.S. and in 65 other countries. Latin America, which Lekach estimated does 25 to 30 percent of Parlux’s global volume, is the company’s top region outside the U.S.
That market includes Mexico, Colombia, Argentina, Venezuela, Chile, Peru, Ecuador, Bolivia and Paraguay.
In the Mideast, which Lekach describes as a close third to the U.S. and Latin America in global importance, Parlux has been experimenting with TV. Last fall, the budget was $850,000 for air time on MBC, a Mideastern satellite network that reaches 16.5 million viewers.
Parlux distributes in 16 Mideast countries; its main market is Saudi Arabia, followed by the United Arab Emirates, Kuwait and Qatar. In Europe, Parlux distributes in Germany, Switzerland, France and Italy.
But Lekach has no interest in emphasizing Western Europe because the competition is just too brutal.
“Those markets are too nationalistic,” he charges. “The Germans buy German brands and the French buy French brands — and the distribution is dominated by companies like Christian Dior and Chanel.”
To illustrate his point he said, “If you put a dollar into the U.S., if you are lucky, you’ll get a dollar back. If you invest a dollar in Latin America and the Mideast, you’ll get a dollar and a half back. If you put a dollar into Europe, you get 50 cents.”
The on-again, off-again launch of the Havana men’s fragrance in the U.S. is on again. David Nap, vice president of marketing in the Aramis division of Estée Lauder, said countertop testers are being slipped into stores. The fragrance will be distributed exclusively in 30 doors of Saks Fifth Avenue and throughout the Neiman Marcus chain.
The introduction will occur in January, primed by 700,000 scent strips in the February issue of Allure plus co-op advertising and billboards.
Aramis executives declined to make projections, but industry sources estimate the fragrance could do $2 million at retail the first year.
In September, Aramis postponed the U.S. launch, due to the “sensitivities” related to the Cuban immigration crisis.
The flood of refugees has now subsided and Aramis has been launching the fragrance overseas to its 26 affiliate companies. In September, Havana began rolling out through Europe and into Asia with stronger-than-expected results.
Now, Aramis executives worry that they might miss out on the momentum.
“We realized that if we didn’t launch in the U.S. soon,” Nap said, “there wouldn’t be a chance to launch it.”