NEW YORK – Prestige beauty retailers weren’t exactly breaking out the celebratory champagne this week, but most said the beauty business performed “decently” in December, translating into low single-digit gains.
And sales came later than ever, chiefly Dec. 21-24, with the week between Christmas and New Year’s also accounting for significant gains for some.
“Friday [Dec. 23] was absolutely huge,” said one leading department store beauty executive, who requested anonymity. “But the way the calendar fell wasn’t inspiring. We’d hoped for a stronger post-Christmas week, but the calendar and market conditions made that difficult.”
Indeed, beauty sales – and overall retail sales – were tempered by a number of challenges during the holiday period. Among them: a three-day transit strike affecting New York City; higher heating costs in the Midwest, Northeast and South; strong storms on the West Coast, and the arrivals late in the week of both Christmas, on a Sunday this year, and Hanukkah, which began Dec. 25 (in 2004, it arrived on Dec. 8). As well, Federated Department Stores Inc. continues to digest its buy of May Department Stores Co., with at least 75 doors – said to represent $2.1 billion in total store sales – set to be shuttered this year.
As a result, most beauty retailers had said prior to the holidays that they weren’t expecting enormous gains – but the general feeling this week seemed to be that, all in all, it could have been worse.
Claudia Lucas, senior vice president and general merchandise manager of beauty at Henri Bendel, said, “The week between Christmas and New Year’s was phenomenal. I have never seen anything like it. It’s amazing to have a post-Christmas week as strong as the one leading up [to the holiday], especially because beauty is traditionally not markdown-driven. We were doing a full-priced business both the week after Christmas and the week before.
“During the transit strike, we had soft numbers for the first two days, but by the third day people had adjusted and we had a phenomenal day,” said Lucas.
“It was a nail-biting month, with the transit strike certainly having a negative impact on the fragrance business in key city doors,” said Micheline Jordaan, vice president and divisional merchandise manager of fragrances for Macy’s East. “The compression of volume into the week leading up to Christmas was enormous. Close to 50 percent of the month’s volume was generated in that week.”
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The following week also yielded positive results at Macy’s East. “Our fragrance business for the last week of December was strong as well,” added Jordaan. “The in-store focus was on young and celebrity brands with visual animation, creating a fresh shopping environment for post-Christmas traffic.”
Overall, “we had a very good week five of December, which sets the stage for the spring season,” said Elizabeth Morello, senior vice president and gmm of cosmetics and fragrances for Macy’s West. “We’re feeling optimistic.”
In fragrance, “there was a lot of newness in the marketplace. It was a good year for launches, [which] were up against huge launches last year. We launched more [fragrances] this year in women’s and met the numbers. Sales met expectations, which were planned aggressively.”
“We had a very good Christmas last year,” added Morello. “I think the industry has had two strong years.”
“It was late but it came,” said Jon Pollack, executive vice president and gmm for cosmetics and fragrances at Belk, of holiday business. “The day after Christmas was our biggest ever. Week five of December continues to be an opportunity.”
“As we expected, strong momentum in both online and store sales continued through the end of the year,” said Betsy Olum, senior vice president of marketing for Sephora. “In particular, in-store business really heated up during the 10 days before Christmas and our Beauty Passport initiative, which launched on Dec. 26 along with several new exclusives, helped to close out the month very well.” The Beauty Passport program was designed to encourage clients to return to Sephora after their holiday shopping to purchase items for themselves.
“Shopping was very compressed, in part due to unseasonably warm California weather in early December,” said Robin Coe-Hutshing, owner of the Studio at Fred Segal. “It gave a false sense of exactly how close the holidays really were. Also, with Christmas and Hanukkah so close together, it was difficult to get a sense of potential demand for certain items, which sold out in one big rush without allowing time for replenishment. We achieved our goals – however, I would have liked to have one more full weekend since our business hours were abbreviated on Christmas Eve.”
Ed Burstell, senior vice president and gmm of cosmetics, accessories and footwear at Bergdorf Goodman, said the holiday period “exceeded expectations.”
“We were very encouraged with the business [and] there’s no reason spring won’t keep up the pace,” said Burstell, who cited anticipation for at least four new scents: Cartier, Ferré, Missoni and Serge Lutens.
Before the holidays, the fragrances cited as fall standouts for more mainstream retailers included celebrity entries from Sarah Jessica Parker, Britney Spears and Jennifer Lopez, as well as the designer fragrances like Calvin Klein’s Euphoria, Youth Dew Amber Nude (created by Tom Ford for the Estée Lauder brand), Miss Dior Cherie and Viktor & Rolf’s Flowerbomb. Newsmakers on the men’s side this fall included Ralph Lauren’s Polo Black, Armani Code by Giorgio Armani and Canali.
Post-Christmas, it looked like a number of those products performed well, with the big winners including Lovely Sarah Jessica Parker, Fantasy Britney Spears and Calvin Klein’s Euphoria on the women’s side and Ralph Lauren’s Polo Black, Armani Code and Acqua di Gio on the men’s side.
“We expected the fragrance business to be strong and it was, but what surprised me was that men’s outperformed women’s,” said Pollack. At Belk, while the men’s category reached the double-digit mark, women’s achieved a high single-digit increase on the season. Pollack attributed success on the men’s side to “strong new introductions” and the performance of Polo Black, Armani Code, Tommy Bahama, the Calvin Klein business and Acqua di Gio.
“I’m hoping some of the strength of the new brands will carry into spring,” said Pollack. “I think the business will be a little tougher in the spring than it was in the fall. I’m being conservative in my expectation for spring. I think the general business climate out there is tough and we’re going to have to work very hard to continue [comparative] store growth.”
For Macy’s East’s Jordaan, “fragrances performed very well in December, with sales exceeding last year and plan for the month,” she said. “Existing brands dominated the top 10 ranking in both women’s and men’s fragrances. Chanel No.5, Cashmere Mist and Dolce & Gabbana Light Blue continued to deliver increases for two consecutive years. In men’s fragrances, Jean Paul Gaultier Le Male and Calvin Klein Obsession delivered significant increases above last year.
“Calvin Klein Euphoria, Lovely Sarah Jessica Parker and Fantasy Britney Spears delivered great results and ranked high. In men’s, Armani Code and Polo Black were the two new brands which delivered great results.”
The anonymous department store executive said the men’s fragrance category outpaced women’s, with Ralph Lauren’s Polo Black, Armani Code and the perennial bestseller Acqua di Gio as the big winners. On the women’s side, new entries Lovely Sarah Jessica Parker, Calvin Klein’s Euphoria, Fantasy Britney Spears and Youth Dew Amber Nude by Tom Ford for Estée Lauder were very strong, said the executive. Existing scents Chanel No.5 and Coco Mademoiselle; Estée Lauder’s Pleasures and Beautiful; Lancôme’s Tresor; Parfums Christian Dior’s J’adore; Dolce & Gabbana’s Light Blue; Donna Karan’s Cashmere Mist, and DKNY’s Be Delicious ranked very high in sales for the executive.
“Newness did well, but it’s encouraging to see how well the classics performed,” said the retailer. However, some of those classics were challenged by recent flankers. “Some of the gains [for major beauty companies] were voided out by some other nonperforming items, including flankers, in their portfolios,” said the retailer.
At Canada’s Holt Renfrew, the beauty division as a whole was up 13 percent, with women’s fragrances up 13 percent and men’s scents up 8 percent. Leading the charge, however, was color cosmetics, which jumped 20 percent.
“It’s a little better than what we were planning,” noted Shelley Rozenwald, the retailer’s senior vice president of cosmetics, skin care, fragrance and beauty services. “This is off a great year last year.”
The business was “building and consistent,” she added. “It was not last minute.” Sales were driven by a combination of “new brands, core classics and exclusive brands. It was a nice balance,” said Rozenwald.
Overall, Holt Renfrew’s gift card business increased by double digits, Rozenwald noted. “The week after Christmas we had very good sales, so we know customers are redeeming them.” For the year, the retailer is forecasting that women’s fragrances will end up with a 12 to 13 percent increase and men’s with a 6 to 7 percent increase, according to Rozenwald.
At Macy’s West, Estée Lauder Pleasures did well, according to Morello, partly because of the brand’s Gwyneth Paltrow ad campaign and the flankers that have been added to the Pleasures portfolio. She also saw strength from Donna Karan’s Be Delicious and Cashmere Mist scents, Calvin Klein’s Euphoria, “the whole Chanel house,” Parfums Christian Dior’s J’adore, Dolce & Gabbana’s Light Blue, Lauder’s Beautiful scent and Lancôme’s Tresor. “Fantasy Britney Spears, Baby Phat Goddess and [Sarah Jessica Parker’s] Lovely posted some nice numbers,” said Morello, adding, “the two launch brands that exceeded our expectations in women’s were Lovely and Euphoria.”
In the Macy’s West men’s category, “Acqua di Gio had another stellar year [and] Code was a wonderful addition to the franchise,” said Morello. “Polo Black was a great addition, [Azzaro] Chrome had a great year and [Jean Paul Gaultier’s] Le Male and the Issey Miyake franchise had great years and great months.”
At Macy’s West, there was also strength “in the men’s skin care [category] and leading the way was Aramis Lab Series. The category is having a really strong year; across the board, the business has been doing well,” said Morello, pointing to the Clarins Men, Biotherm Homme and Zirh brands.
Standouts on the women’s side at Belk included the Chanel franchise and Estée Lauder scents like Beautiful and Pleasures. “We also had some very strong new introductions that performed very well at holiday, including Sarah Jessica Parker Lovely, Euphoria from Calvin Klein and also the new Britney Spears brand, Fantasy,” said Pollack.
Outstanding brands for Holt Renfrew included Donna Karan’s Cashmere Mist, Thierry Mugler’s Angel, Sisley’s Eau de Soir, Jo Malone and Anthousa – not to mention Holt Renfrew-branded items, such as soaps and candles. For spring, Rozenwald is optimistic. “We have some exciting launches,” she said, pointing to Missoni, Cartier and Jo Malone, “and I think [strength] is going to continue.” Strength on the men’s side came from Canali, Aramis, Kiton, Armani Code, Acqua Di Parma, Burberry Brit and Pasha from Cartier.
“Business was good across all categories, with niche fragrances, home fragrance, bath and body and color products leading sales,” said Studio’s Coe-Hutshing. “In the bath and body category, Unnaco soaps – handmade organic soaps from Thailand – were a popular item. Abahna Bath products from the U.K. were very popular, also MOR from Australia. We had an excellent response to a test launch of Burn’s new Liquid Body products [Coe-Hutshing’s line] in 10 scents. In home fragrance, Anthousa, Burn, Apothia, Diptyque and Allora performed very well, as did the newly repackaged Agraria range.”
Other standouts for Coe-Hutshing include Serge Lutens, Santa Maria Novella, Molinard and L’Artisan Parfumeur.
Sephora’s top-selling brands during holiday included Bare Escentuals, Benefit, Fusion, Stila, Dior, T3 and Go Smile.
Brands’ strength at Bergdorf Goodman, said Burstell, was based on items that were “unusual, exclusive, limited-edition or hard to find.” These included Creed Love in White, L’Artisan Parfumeur’s Fleur d’Oranger and Youth Dew Amber Nude by Tom Ford for Estée Lauder. As well, Bergdorf’s launched a Joel Rosenthal boutique, which showcases his fragrance collection, and “that’s been phenomenal,” said Burstell. Also, Guerlain’s Plus Que Jamais has done well, as has Etro’s new scent and Jo Malone’s Pomegranate Noir. A personal appearance by Clive Christian drummed up excitement over that brand.
As is typical during the holidays, the fragrance category was a standout for retailers this season, although skin care continues to gain strength as a holiday gift. “Sisley, La Mer and La Prairie had the three highest increases in skin care,” said Rozenwald. “Men’s treatment continues to be very strong and it’s led by Aramis Lab Series. The Art of Shaving is doing very well for us.”
Bendel’s Lucas concurred. “We had an amazing skin care holiday,” she said, adding that Freeze 24/7 was “absolutely exceptional,” and that Pat Wexler’s eponymous skin care line and new items from Prevage were also standouts. “People really now have no qualms about buying skin care as a gift, and for us, it is driven by products at the top end and is a mix of gift and self-purchase sales. It used to be that most retailers had the majority, as much as 80 percent, of their holiday [beauty] business in fragrance. That’s changing to include skin care and color.”
Studio’s Coe-Hutshing is also seeing the boom effect in skin care for the holidays. “Treatment and skin care remained very strong throughout the [holiday] season, which sometimes is not the case,” she said, adding, “La Mer, Darphin, Rodan and Fields and [Pat] Wexler products made very strong showings.”
Additionally, “we saw a return to strength in color and treatment – particularly treatment. As an example, the moisturizer category was up big: double-digit increases,” said Pollack.
Skin care “had an amazing holiday for us,” said the department store executive, who added that across the board, nonpromotional brands, including Chanel, Shiseido, Bobbi Brown, MAC, Dior and Benefit, were strong. “The less promotional the brand, the better it did,” added the retailer.
“To be successful at Christmas, you can’t depend on one category,” continued the executive, who also pointed to success in the color cosmetics category. “You have to have all cylinders going.” Citing Clinique’s Butter Shine lip line as an example, the retailer said, “that product is blowing out the door, and it challenges the conventional wisdom that color doesn’t do well at holiday. That shows there is opportunity.”
While color was “soft” for Bendel’s at holiday, Lucas cited YSL’s holiday cosmetics charm bracelet as a standout, as well as the Nars, Chanel and Laura Mercier brands. Bendel’s fragrance business, driven for the most part by niche scents, was also boosted by L’Artisan Parfumeur, Annick Goutal, Carthusia and Caron, along with fragrances from Chanel and YSL.
But while many retailers trumpeted the season as a respectable one, Allan Mottus, a beauty industry analyst and management consultant, wasn’t so optimistic. Mottus forecasted that beauty sales across prestige and mass “will likely increase 4 percent in units sold and come in flat at best” in dollars. He further predicted that manufacturers will get hit with returns that will challenge the first half of the year.
As well, prices on gift sets were “out of line – much higher than in years past,” said Mottus, adding that stores like Macy’s and Lord & Taylor advertised gift sets for $50 to $70 – “well above the typical $30 to $40 price range. Department stores priced themselves out of consumers’ reach,” he said.
Mottus said he thought luxury department stores’ fragrance fortunes looked slightly brighter but predicted, “By Jan. 30, manufacturers will be strapped with large returns from retailers. Retailers loaded stores with product and drained luxury brands of their appeal as exclusive goods, and took on inventory earlier than usual to attract consumers before heating bills arrived in the mail.” However, he said, prestige retailers stopped taking merchandise in early October to prepare for Federated store closures, returning it to manufacturers, who he said in turn funneled products to the mass market.