U.S. Prestige Beauty Sales Decline 3.3%

A report released by marketing research firm, NPD Group, Inc. shows that U.S. sales of prestige beauty products dropped 3.3% in 2008.

Among the global markets that were tracked by NPD, the U.S. prestige market -- which are products sold mainly in U.S. department stores -- showed the largest decline. France and Italy showed decreases of 0.3% and 0.5% respectively, while China boasted an increase of 17.2%.

U.S. makeup sales also showed a decline, but there was a bright spot in the skincare category. Overall growth in the category remained flat, however NPD says that there is opportunity for growth due to increase interest in anti-aging skincare products.

Karen Grant, NPD's senior global industry analyst and vice president of beauty, said that U.S. fragrance category showed the biggest decline in sales of all the categories that were tracked. “The most pressing concerns for the fragrance category are not only the loss of users, but decreasing frequency of usage," said Ms. Grant. "It is important that the industry find new ways to engage consumers, especially as they become more independent about their product selection".

J.Crew Stumbles On The Obama Effect

Fist bumps must have been going around the J.Crew offices when word surfaced that the First Family wore outfits and accessories from the retailer on Inauguration Day, and at various Inauguration weekend celebrations. First Daughters, Malia and Sasha Obama wore specially made outfits from the Crewcuts for Kids collection to the Inauguration ceremony, while First Lady Michelle Obama wore leather olive green gloves. President Barack Obama sported a white satin bow tie with his tux for the Inaugural Balls.

The NY Daily News reports that J.Crew's website, www.jcrew.com, shut down for an half hour as people flocked to the site to buy up the outfits. This isn't the first time the Obamas had a positive effect on J.Crew. When First Lady Michelle Obama appeared on "The Tonight Show with Jay Leno" wearing a three-piece yellow J. Crew ensemble, searches for the outfit caused their online traffic to increase 64% according to New York magazine.

So, it's puzzling that J.Crew didn't anticipate this type of response, and configure their site to a) be able to handle the traffic and b) offer a user friendly way to access merchandise that is similar to the pieces the Obamas wore, being that outfits and pieces the First Family wore were specially made and currently unavailable for purchase.

On the front page of the J.Crew website, the visitor is greeted with sketches of the outfits, as well as swatch samples. The visitor can "roll over" the images to get more info on the designs, as well as quotes from the designers:

(Photo: J.Crew/jcrew.com)

What was missing, however, were links to similar pieces that are being offered on the website. Performing a search for "Obama", "Michelle", "Barack", "Malia" or "Sasha" on the website only takes you back to the front page. It would have been prudent to have those searches lead to actual merchandise. It's great that J.Crew has received so much needed attention, but what's the point if they're not using in a way to generate profit?

However, this has been a good week for J.Crew. Since the Inauguration, the stock price has gone up from a Jan. 20th opening of $9.61 per share to a Jan. 22nd closing of $10.26 per share. Today, shares rose 55 cents to $10.81 during midday trading on analyst upgrade to "Equal Weight". It closed at $10.56 per share, down from an opening price of $10.96.

Move Over, Maybelline....Here Comes Latisse!

Allergan, Inc. has done it again.

At the end of this month, Allergan, the pharma company that created Botox, plans to introduce Latisse, the first FDA approved prescription drug for growing long lashes.

The New York Times reports:

The product has the same formula as Allergan’s eye drops for glaucoma, called Lumigan. It is one of several drugs in a category known as prostaglandin analogs, which are meant to reduce dangerous pressure in the eyeball. But as a side effect, the treatment tends to make the eyelashes of many patients longer and fuller.

Ah, but don't get too excited. There are side effects such as red, itchy eyes, darkening of the eyelid as well as the iris, and hair growth on areas of skin that the product comes into contact with. That's not good news considering women spend hundreds of dollars on eye creams and hair removal products/services to combat the darkened skin around the eyes and unwanted hair.

Another drawback: Latisse would be considered "discretionary healthcare", which is not covered by health insurance. At $120 per monthly dose, in today's economy, will consumers be willing to shell out that much cash for long lashes when they can go to Tarjay and purchase mascara for a fraction of the price without the inconvenience of having to get a prescription?

The American Society for Dermatologic Surgery thinks so. According to a survey conducted by them last fall, despite the economic downturn, people were willing to pay the cost to look good:

Twenty-eight percent of the survey physicians said that their current use of fillers increased up to 30 percent, compared to six months ago and more than 40 percent of survey respondents stated that the number of Botox procedures also increased compared to six months ago.

However, if we're going to use Botox sales as a barometer for how Latisse will do, Allergan's financials tell a slightly different story. Newsweek reports:

Last January, Allergan projected that Botox revenues would rise about 14 percent to about $1.4 billion in 2008. Allergan's third-quarter report wrinkled a few brows when it revealed that Botox sales would rise only 4 percent or 5 percent.

Still, David E.I. Pyott, CEO of Allergan is optimistic, projecting sales of Latisse in excess of $500 million. Mr. Pyott compares the cost of the drug to that of a daily cup of coffee:

“If you think about it in terms of luxury, it’s four dollars a day,” he said. “We think this is fairly acceptable to a large segment of people even in these times.”

ELuxury.com Shuts Down To Reinvent Itself

The retail industry was blind-sided last Friday when LVMH announced that it would be closing it's high-end retail commerce website, eLuxury.com in the next six months.

Unlike other retail closings, this one has nothing to do with financial performance. In fact, eLuxury.com has had double-digit sales growth from 2007 to 2008. A spokeswoman for LVMH told WWD.com that the decision to shut down eLuxury was because "many of the brands it sells have developed their own online presences".

However, eLuxury.com will still exisit, just in a different form. WWD.com reports:

“Starting in mid 2009, eLuxury’s new mission will be to create an ‘e-window’ into the world of luxury, by serving as an information reference for luxury in fashion, art de vivre, leather goods, wines and spirits, watches and jewelry, gastronomy, cars, yachts and services,” the spokeswoman said. “To that end, eLuxury intends to develop collaborations with the most prestigious names in the world of luxury media, as well as the main contributors of the luxury world.”

Can an e-magazine that's backed by one of the world's largest luxury congolmerates truly serve as a "reference for luxury in fashion"? In its current state, as a retail site, while eLuxury.com offers non-LVMH brands in its lineup, it's the LVMH brands that get the best product placement on their site, and in their email promotions. Will that carry over into the new venture, or will the new eLuxury give its readers bipartisan coverage of the luxury industry allowing PPR and Richemont, LVMH's biggest competitors, to receive positive exposure?

Peter Som Parts with Creative Design Studios, Cancels Fashion Show

Another retail marriage has dissolved.

Women's Wear Daily reports that Peter Som and Creative Design Studios, a subsidiary of Lord & Taylor LLC, have decided to part ways, undoubtedly due to the economic crisis that has delivered a major blow to the fashion retail industry. As a result, Mr. Som has cancelled his Fall '09 show for NY Fashion Week.

“We have realized that our strategic interests are no longer aligned and feel that this is the best direction for our company at this time,” said Som. “While these are challenging times for luxury brands both small and large, it’s an opportunity for us to reshuffle our deck of cards. I remain creatively inspired and am looking forward to exploring opportunities where we can grow with the right partner, or on our own.” (Source WWD.com)

NRDC Equity Partners, the parent company of Lord & Taylor, created CDS in 2007 with the purpose of working with American designers. They made an initial investment of $10 million in Mr. Som for a two-thirds stake in his company.

“Peter’s talent is enormous but the realities of today’s marketplace have forced us to reevaluate all of our strategic partnerships,” said Susan Davidson, ceo of CDS. “We need to focus all of our resources on our core businesses — Lord & Taylor and The Bay department stores.” (Source: WWD.com)

The last few months have been trying for Som. In Oct. '08, he left Bill Blass, due to lack of finances on the part of NexCen Brands, Inc., the parent of the Blass label. However, Elana Posner, co-owner of Peter Som Inc. remains optimistic, exploring options for the fall.

Here's a thought: Now that Peacock International Group is the new owner of the Bill Blass label, could Som give the Blass brand another shot?

Macy's To Close 11 Stores

Amid dismal same-store sales results for December 2008, Macy's Inc. announced it will close 11 underperforming stores in nine states. These closings will affect approximately 960 employees.

"These closings are part of our normal-course process to prune underperforming locations each year in order to maintain a healthy portfolio of stores," said Terry J. Lundgren, chairman, president and chief executive officer of Macy's, Inc. "While new store growth has slowed in the current economy, our long-term strategy is to continue to selectively add new stores while closing those that are underperforming."

Stores to be closed are located in:

• Ernst & Young Plaza (Citicorp Plaza), Los Angeles, CA
• The Citadel, Colorado Springs, CO
• Westminster Mall, Westminster, CO
  
• Palm Beach Mall, West Palm Beach, FL
• Mauna Lani Bay Hotel, Island of Hawaii, HI
• Lafayette Square, Indianapolis, IN
• Brookdale Center, Brooklyn Center, MN
  
• Crestwood Mall, St. Louis, MO
• Natrona Heights Plaza, Natrona Heights, PA
  
• Century III Furniture and Clearance, West Mifflin, PA
  
• Bellevue Center, Nashville, TN

December Same-Stores Sales Results Bring The Pain To The Retail Industry

Well, the December same-store sales results of the nation's retailers are in and it ain't pretty.

Deep holiday discounts were not enough to save the apparel sector. Macy's, Inc. reported same-store sales down 4% for December, less than the 5.3% decline analysts projected.

"The holiday shopping season ended with strong sales in the fourth and fifth weeks of December after a slow start to the month and unfavorable weather conditions in the Northeast, Midwest and Pacific Northwest," said Terry J. Lundgren, Macy's, Inc. chairman, president and chief executive officer. "We went into the fourth quarter with an objective of reducing inventory levels to position us for 2009. We are pleased to have accomplished that objective with approximately 7.5 percent lower inventory on a comparable store basis at the end of December compared with last year."

Ironically, meeting that objective, via markdowns and sales, has caused the company to cut its earnings per share expectations for the fourth quarter ($0.90 to $1.00 per share vs. $1.10 to $1.30 per share) and fiscal '08 ($1.10 to $1.20 vs. $1.30 to $1.50). There are also plans to close 11 underperforming stores.

Luxury stores were hit the hardest, undoubtedly a reflection of the Wall St. layoffs and affluent consumers experiencing major losses in their investment portfolios.

Neiman Marcus, Inc. led the pack with a 27.5% drop in December same-store sales, experiencing losses across all merchandise categories.

December same-store sales for Saks, Inc. decreased 19.8%, almost twice as much as analysts predicted, with weakness in the women's apparel, outerwear, men's clothing and advanced sportswear, women's shoes, and handbags categories.

Coach, Inc., one of the few retailers that did not discount their merchandise, in an attempt to protect their "brand proposition", reported same-store sales for the quarter declined 13%. As a result, earnings expectations for the second fiscal quarter were lowered 3% to $0.67 per share.

Nordstrom, Inc. cited industry wide competitive markdowns as the reason for it not meeting earnings expectations of $0.35 to $0.45 per share.

The biggest surprise was Wal-Mart. The world's biggest retailer reported same-store sales increased 1.7%, but it didn't meet the 2.7% estimate, thus it was forced to cut earnings estimates to $0.94 per share, down from projected $1.07 per share.

Things will probably get worse for retail. Thanks to some retailers not offering discounts, they have an abundance of inventory that needs to be cleared out before the spring shipments arrive. In order to get rid of inventory, they'll be forced to discount which cuts into their bottom line. Combine that with January and February historically being slow because consumers are waiting for Spring collections.

Bill Blass Couture Files For Bankruptcy

The economy is beginning to take it's toll on the high-end fashion industry. The first victim -- Bill Blass Ltd:

The company filed a Chapter 7 bankruptcy petition Wednesday with the U.S. Bankruptcy Court in Manhattan, listing assets of $192,000 and debts of $829,000, court papers show.

The company halted operations last week because it "did not have the financial wherewithal to continue," according to its bankruptcy attorney, Harold S. Berzow of Ruskin Moscou Faltischek P.C. ......

The bankruptcy petition shows the company has $11,250 in miscellaneous assets, including office equipment, $25,000 in inventory, about $90,000 in its bank account and $155,361 in accounts receivable..... (Source: WSJ.com)

This shouldn't come as a surprise. Just before Christmas, NexCen Brands Inc., the parent company, sold its Bill Blass licensing business to Peacock International Holdings LLC for $10 million to pay off debt, and laid off 60+ workers without severance pay.

The question is, Can Bill Blass recover? Here's some advice from former Blass head designer, Michael Vollbracht:

“You need the Blass DNA – it’s crucial,” says Mr. Vollbracht, who also was a personal friend of Mr. Blass’s. “You need to make good, classic clothes for women who don’t like fads. Bill Blass was not faddish.” (Source: WSJ)

I believe they had that with Peter Som, but NexCen couldn't afford him thanks to a $30 million debt they acquired to purchase Great American Cookie. Who knew a lil' ol' chocolate chip cookie would help bring down a fashion empire?

But there's hope. Peacock, with annual sales of $70 million, has plans on reviving the brand "within 9-12 months".

The new owners of the Blass trademark and its nearly 20 licenses plans to focus first on getting its licenses “on the same page – the brand identity is a little uneven,” Scott Patti says. “We’re very intrigued by the international business opportunities of the Bill Blass brand – we believe NexCen hasn’t even scratched the surface of that worldwide.” When asked about the potential for the brand, he notes that the Blass brand once did sales of $500 million annually. (Source: WSJ.com)

Stay tuned........

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Hello and Welcome!

Like any fashionista, I LOVE talking about fashion and beauty: the latest "It" bag, the hottest up and coming designers, the new must-have lip gloss.....etc.

However, I'm also interested in the business side of the industry, so I decided to create Haute Retail, a blog that waxes financial on the fashion and beauty world.

At Haute Retail, we'll discuss the business trends and financial aspects of the industry, as well as learn about the movers and shakers that help shape the beauty and fashion biz.

Enjoy!