Avon sells North American business for US$605 million, Australians to spend $2.3 billion on Boxing Day, Elemis sales to double in 2016, and Gillette takes legal action against The Dollar Shave Club.
Avon sells North American business for US$605 Million
Depending on who's talking, have taken a key step on the road to recovery or the multinational's board has sold off a prime asset for a discount price. Private equity firm Cerberus Capital Management has bought an 80.1 per cent majority stake in Avon North America for US$170 million and purchased US$435 million in Avon's preferred stock to acquire 16.6 per cent of the total business.
The world's biggest direct seller of cosmetics has announced it will focus its attentions on international operations and allow Avon North America to develop new strategies as a privately-held company - free of the pressure of a public company reporting cycle. A new CEO for the spun-off business will be appointed in January and Cerberus has already made plans to improve representative incentives and simplify order fulfilment and payment processes to "enhance the customer experience".
Sheri McCoy, Avon's CEO, has hailed the deal as a pivotal moment for the company. But some Wall Street analysts believe the agreement is more of a "back to the wall" gambit. Activist investors, including Barington Capital who own 3 per cent of Avon, are the main critics of the agreement and believe that Avon has sold the farm in a fire sale. "While we are pleased that six existing board members have agreed to step down," says James A. Mitarotonda, Chairman and CEO of Barington Capital, "we are astonished that Sheri McCoy remains as CEO".
McCoy was appointed three years ago to revive Avon's fortunes. The success of the new deal hinges on Cerberus being able to perform the much-needed turnaround in a faster timeframe. Avon's major task is to rejuvenate its international business and rebuild its brand heritage. Both major jobs with attendant risks.
Australians to spend $2.3 billion on Boxing Day
You can almost feel the shivers of nervous anticipation from the major beauty brands. December is the most critical month of the year for their corporate bottom lines. According to the Australian Retailers Association (ARA), Australians will spend $16.8 billion in a post-Christmas shopping binge from December 26th to January 15th.
The three week period will start with a bang on Boxing Day predicts the ARA, traditionally one of the biggest retail therapy days of the year, with a national outlay of $2.3 billion. "Pre-Christmas 2015 has seen record sales," says Russell Zimmermann, Executive Director of the ARA. Victoria will lead the charge following the festivities with an estimated Boxing Day spend of $750 million, followed by NSW at $721 million. But NSW will pip its southern neighbour at the post for the 21 day period to mid-January with a shopping tally of $5.3 billion, in contrast to Victoria's spend of $4.2 billion.
On the down side, the ARA expects retail theft, a.k.a shrinkage or shoplifting, to reach $1.4 billion in the six weeks to Christmas. The most "popular" items for the light-fingered include cosmetics, toys, smartphones, wearable technology and cameras says the ARA.
Elemis sales to double in 2016
Private equity firm Catterton Partners, the owners of StriVectin, completed its US$933 million buyout of Steiner Leisure, the global provider of spa services to key markets and some of the world's biggest cruise lines, in early December. Steiner is the parent company of Mandara and Bliss Spas and and the deal was part-funded by the Elemis management team. The finalisation of the purchase fast-tracks Elemis' ambitions to go global says President Sean Harrington. "You're going to see sales double really quickly," he says. "We're going to see sales climb by about US$50 million next year".
Elemis has mainly been targeting its home market in the UK and British sales have spiked 17 per cent this year. But the expansion focus is very much on the US says Harrington, who moved to Florida earlier this year. Elemis will launch on the QVC shopping channel in the US in January and three House of Elemis locations, similar to the UK flagship store in London's Mayfair, will open in mid-April in Miami, New York and LA. Harrington has also reduced the number of retail outlets in the US and Elemis will be available in 30 to 40 department store doors. There will be more emphasis on e-commerce, he says, and the aim is for elemis.com to "emulate the Net-a-Porter experience".
Gillette take legal action against The Dollar Shave Club
Procter & Gamble is ferocious about protecting , one of its most profitable assets. The "magic" power brand is so far out in front as the dominant giant of the global shaving market that Schick is a distant second. There's been plenty of legal stoushes over alleged copyright infringements and industrial espionage by former employees in the past. One engineer was jailed for three years for disclosing details of Gillette's R&D developments to another company.
The Dollar Shave Club has been one of the most successful start-ups in personal care. Founded three years ago, the online subscription razor service has a market value of US$650 million and boasts sales of US$140 million a year in the US alone. The company launched in Australia in late 2012, the first international market outside North America. In March this year, it took another major step in the booming men's grooming market with the launch of a tightly-edited range of hair styling products.
Gillette accounts for just over 60 percent of the US shaving market with annual sales of US$3 billion. But the fast-growing Dollar Shave Club has stymied Gillette's online sales by offering cheaper razors and blades. P&G has filed a lawsuit accusing the Dollar Shave Club of the unauthorised use of its patented technology and is seeking damages and an injunction to prevent future sales of any products that infringe Gillette's patented technologies. P&G spends billions on developing innovations like the Gillette BODY razor and the Fusion ProGlide. According to Deborah P. Majoras, Chief Legal Officer at P&G - "We take action to protect these important assets".
Snippets from the wires
- Seafood is nearly as popular as turkey and ham over the Christmas period. Australia's passion for shellfish and farmed salmon and trout in particular is expected to intensify says IBISWorld. Over the next five years, per capita consumption of seafood will rise to 19.7 kilos a year predicts the researcher.
- Cosme Tech and Cosme Tokyo 2016, Japan's largest cosmetics exhibition, is scheduled to open its doors from January 20th to 22nd. Over 700 exhibitors from 50 countries - an increase of 30 per cent on 2014 - will showcase their wares. As Japanese and South Korean beauty trends continue to trend strongly in Western markets, many smaller local brands are hoping to attract the attention of international visitors.
- Launched in 2007, the Gilt Groupe quickly morphed into a multi-million dollar business with its pioneering concept - online flash sales of designer and luxury goods. Hudson's Bay Company (HBC), the owner of Saks Fifth Avenue, is in talks to acquire the company for US$250 million in the new year. Earlier this year, the Canadian department store conglomerate bought Kaufhof, Germany's biggest department store chain.
- Shoes are big business. Private equity firm Sycamore Partners sold the covetable Stuart Weitzman brand to Coach earlier this year for US$574 million. The company has just sold British shoe retailer, Kurt Geiger, to Cinven, the Europe-based private equity firm for US$372 million.
