BBW NAVIGATES ROUGH WATER
Byline: Laura Klepacki
NEW YORK — Bath & Body Works has sprung a leak.
After more than 10 years of smooth sailing, the 1,600-store chain watched its comp-store sales dive 11 percent last year. The slump continued in February and March, with sales down 8 percent and 3 percent, respectively. Annual sales for BBW slipped to $1.74 billion in 2001 from $1.78 billion in fiscal 2000.
Its parent, The Limited Inc., forecast in March that “Bath & Body Works will continue to be challenged” this year.
The consensus among industry observers is that the fruit and floral scented soap and lotion business has reached maturity. Beth Pritchard, longtime chief executive officer, who has guided the chain through its remarkable ascent, already has set an action plan intended to bail out the company. She is hitching the heartland-based personal care chain to a lifeboat of pricier aromatherapy and salon and spa treatments. A prototype store opened in the Easton Town Center in Columbus, Ohio, last September could portend the future look of Bath & Body Works. It replaces the charming basket and wood merchandisers with white walls, pale green cabinets and polished hardwood floors. The focus of the future is on health and wellness. Some new gift sets contain jump ropes and booklets with aspiration messages.
Sources said the company was planning to add staff to develop and oversee a spa and salon business. BBW had no comment. But it behooves The Limited to reinvest in the business, which has been a cash cow to the group’s Intimate Brands division, contributing 49 percent of the operating profits in 2000. [Intimate Brands was reintegrated into The Limited, Inc. in March.]
The rise of Bath & Body Works has been nothing less than a beauty industry phenomenon. It elevated the chore of bathing into a self-indulgent act and turned baskets of soap into romantic gifts. It also spurred the development of bath departments among a host of retailers and led to numerous knockoffs by manufacturers in the U.S. and internationally.
Thomas Filandro, retail analyst with J.P. Morgan Chase recalled being in a Bath & Body Works store in November several years ago and watched in disbelief as shoppers bought that store’s own decorations. “I thought, ‘Oh my God they are buying everything,”‘ said Filandro. “That buzz and that power sort of lost its way.”
BBW’s revolutionary format resulted in many imitators at retail and wholesale, but some players rode the crest and exited. William McMenemy, executive vice president at Del Labs, which marketed the Naturistics bath line, has transitioned the brand into a teen cosmetics collection. “What we found is that there was really no brand loyalty on the part of the consumer. We were constantly introducing new products just to keep consumers involved with the brand, but they would try something new and switch to that.”
Kathy Steirly, vice president, beauty merchandising at Eckerd, said the chain was discontinuing its two-year-old Comfy private label line, saying that the specialty stores do it better. A constant turnover of products has long been the trademark of Bath & Body Works, with news coming at least every three months to keep shoppers interested. Filandro is enthused about Pritchard’s new approach, although he initially had reservations about the price of the new aromatherapy collection, which entered stores last fall. The tags range from $12 to $20 per item, up from the core collection, which is typically $8 or $9 per item. But the chain is noted for its multiple pricing; a current offer for core items is buy three get one free.
“We thought customers would balk at the price,” said Filandro. But in unscientific research, shoppers have said they felt the quality of the aromatherapy products was superior and that “price was a secondary” issue, he said. For long-term success, “they [BBW] need to reestablish a transaction anchor. Customers have to want to come back for the item.” For one, he believes Bio, a hair care collection, could be more aggressively promoted to keep customers returning.
In an interview last October, Pritchard said BBW was poised to become the market leader in aromatherapy. Her goal is to grow that segment of the chain’s business to $500 million from $100 million. Currently BBW’s aromatherapy lineup includes three branches — Relax, Sleep and Awake. Relax items contain three essential oils said to be naturally calming — eucalyptus spearmint, cedarwood sage and blue lavender palmarosa. Sleep products feature an assortment of fragrant blends, including lavendar vanilla, chamomile neroli and sweet bay evening primrose. Awake features grapefruit peppermint, orange ginger and bergamot coriander.
The True Blue Spa collection, also new last fall, has items such as eye gel, bubble bath, foot lotion and hand lotion and body cleansers, at prices ranging from $10 to $28. There are also accessories like linen bath mitts, spa slippers and body brushes. The highest ticket item is a spa robe for $90.
While the new product collections are already chain-wide, by this summer about 20 stores will carry elements of the prototype store in Easton.
Donald Trott, retail analyst with Jeffries & Co., believes the slowdown at BBW has been fueled by two things. For one, he thinks the chain is over-stored and would operate best with about 1,100 units, some 500 less than it currently has. He also contends that giving bath items as gifts has lost its momentum. “Beth Pritchard is a brilliant marketer, but this gift giving thing has matured and run its course.”
Filandro commented that the chain has made gift-giving more difficult for men, because there has been an increased focus on the build-your-own-basket concept. “A guy who walks into that store doesn’t want to create their own gift sets,” said Filandro. He thinks building a more seasonal business, such as offering baskets for Easter, “could really reinvigorate that [gift] business.”
Going forward, Filandro said he is watching for an increase in transaction trends at BBW. And he is not overly concerned about the parent’s prediction of a soft year ahead for BBW. “What you want is for them to underpromise and overdeliver.”