CHALLENGING FIRST HALF REPORTED BY CLARINS

Byline: Jennifer Weil

PARIS — Could the once-booming prestige beauty business be grinding to a screeching halt here? For the first half of 2000, the selective perfumery sell-through business in France grew a mere .05 percent versus the first half of 1999, according to tracking firm Secodip.
It’s a figure Groupe Clarins quoted last week to analysts as part of the reason why the going is tougher than usual. As reported, Clarins’s net income rose 18.5 percent during the first half to $25 million.
Revenues in the six months increased 17.2 percent to $354.3 million. Although operating profits were up 10.5 percent to $46.5 million, operating profits declined to 13.1 percent from 13.9 percent in the 1999 half. The company attributed the decrease to ongoing investments in long-term business growth, especially in its beauty division, including the startup of its U.S. distribution of Hugo Boss and Giorgio perfumes, which generated first-half losses.
Then there was the couture division that also weighed on operating margins. The Clarins-owned Thierry Mugler Couture business lost $3.46 million in the first half of the year. However for 2000, its annual losses are expected to be cut by 20 percent in 2000, said Christian Courtin, president of Clarins.
But the consensus is that Clarins — and other beauty companies Europe-wide — is facing numerous hefty hurdles ahead. Among the toughest is dealing with retailer consolidation throughout Europe, and particularly in France.
“Nowadays, about 50 percent of selective distribution in France is being done through Marionnaud and Sephora,” said an analyst, adding that a firm like Clarins doesn’t have the critical mass of LVMH Moet Hennessy Louis Vuitton and L’Oreal.
Clarins also said its product shipments were impeded earlier this half due to strikes.
Although the financial community was disappointed, since the group’s figures are generally stellar, Courtin is confident that the company will pass the $666.6 million mark, or 5 billion French francs, by yearend as planned.

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