P&G advised to trim down further, Bluemercury to challenge Sephora, Prestige Brands buys DenTek for US$225 Million, and Aussie online retailer Surfstitch doubles market value.
P&G advised to trim down further
It's been a year of substantial shedding for P&G as the multinational sold off 43 brands to Coty. But increased competition from aggressive rivals and niche brands and sliding demand may demand more radical action warns Barron's, America's premier financial magazine. According to writer Leslie P. Norton: "Smaller, more focused concerns tend to be more agile competitors than a lumbering giant like Procter & Gamble".
Cutting back to 100 core brands may not be enough of a trimming-the-fat strategy says Norton. What's the solution? Splitting into three separate companies - Beauty, anchored by P&G's power brands Pantene Pro-V and Olay; Healthcare, centred by shaving behemoth and Crest dental care; and Home and Family Care based around Tide detergent and Pampers baby care.
According to Barron's, such a break-up could drive shares as high as US$97, in contrast to P&G's estimates of US$4.25 per share for 2017. John Moeller, P&G CFO, says that the household name conglomerate is not averse to looking at any option that creates value for shareholders.
Bluemercury to challenge Sephora
Ulta, the US beauty chain, recently announced that it would challenge Sephora on its home turf. Bluemercury, bought by Macy's in February, is also shaping up to entice business away from the world's largest beauty store network. Sephora isn't taking the homegrown threats lightly. In mid-November, Calvin McDonald, the chief executive of Sephora Americas, unveiled a new concept store in San Francisco. The layout features increased store space, work stations for classes, a larger number of beauty studio seats for makeup applications and much more and the remodelled fit-out will start rolling out across the US next year.
Sephora currently operates 300 stores in the US and over 500 concept stores within JCPenney department stores. Bluemercury, backed by Macy's who remain the number one retailer of beauty products in the US, has 76 freestanding stores. But expansion under the new ownership has been rapid. According to founder Marla Malcolm Beck, who still runs the company, 18 new Bluemercury stores opened this year and 24 more are planned for 2016. This month, four Bluemercury stores opened in Macy's department stores - three in California and one in Texas.
It won't be a case of same old, same old for consumers because there's only a 20 per cent product overlap between Bluemercury and Macy's. Apart from selliing different brands, Bluemercury will also offer spa services - a first for Macy's. Sephora is dominant in colour cosmetics in the US prestige market but Bluemercury's X Factor is skincare. To leverage its skincare cred, the chain has an own brand range called M-61 and performs 150,000 spa treatments a year in its current freestanding locations.
Prestige Brands buys DenTek for US$225 Million
With its range of dental floss picks and guards, the DenTek brand has carved out a strong niche in Coles and pharmacies nationwide. The speciality oral care category is enjoying surging growth in Australia, the US and Europe and the DenTek brand boasts the number one dental floss pick in the US. In a cash transaction worth US$225 million, Prestige Brands Holdings has acquired the fast-growing brand to create its fifth US$100 million platform.
Prestige Brands markets and distributes name brand healthcare and cleaning products, primarily in the US, Canada and Australia. Core brands include Nix lice treatment, Clear Eyes eye care products, Efferdent denture care products, Gaviscon antacid and Dramamine motion sickness treatments. With annual revenues of US$602 million, Prestige Brands has followed an aggressive M&A policy - seven buy-outs in six years. In 2013 and 2014, the US-based company also acquired , the leading oral rehydration product in Australia and New Zealand, and Australian-owned Care Pharmaceuticals.
Aussie online retailer Surfstitch doubles market value
In less than a year, online retailer Surfstitch has increased its market value from $214 million to $511 million. Over the past six months, the surf lifestyle brand has beefed up with three major acquisitions. Last week's buy-out of Surf Hardware International for $23.7 million, the early November purchase of Garage Entertainment for $15 million and the acquisition of Stab, the digital surf magazine, and Magicseaweed, the surf forecasting network, for $21 million in May.
By the end of the year, analysts predict that Surfstitch will be valued at $550 million, about $40 million more than former parent company, Billabong. With total revenues up 30 per cent to $199 million in 2014/2015, Europe is the top-selling market at $87.3 million, followed by Asia/Pacific at $82.9 million. Sales in North America climbed to $29 million and Surfstitch is on track to becoming a market leader in surf lifestyle - at home and abroad.
Snippets from the wires
- Myer and David Jones started setting up their Christmas retail space on the first day of Spring - September 1st. No wonder. Australian shoppers are predicted to spend $47 billion over the holiday shopping season.
- Japan's beauty and personal care market has surged strongly in the past year, fuelled by innovative launches from some of the nation's biggest beauty names. The Japanese spent a total of US$32.1 billion on looking good in fiscal 2015 reports Euromonitor International.
- Known as the Net-A-Porter of beauty, Feelunique.com is Europe's largest online beauty retailer. Based in the UK's Channel Islands, the company has bought Parfumeries Rive Droite, a boutique chain of four upmarket stores in Paris, to extend its reach in France. The company will also launch a pop-up store this week in the French capital to introduce key British brands such as Tangle Teezer, Aromatherapy Associates and TIGI.
- As we reported recently, Avon's Q3 results dipped by 22 per cent. But Citigroup sent the direct-selling giant's stocks soaring up to 28 per cent last week - the biggest gain in four decades - when it raised Avon's outlook from "neutral" to "buy".
- According to the NPD Group, fragrance sales will be the top beauty category for prestige holiday sales in the US. Gift sets have become less prominent, says the researcher, as new fragrance launches invigorate the market.
- The Chinese accounted for 46 per cent of global luxury purchases this year says the 2015 China Luxury Report. The US ranked second with a spend of 19 per cent. More than 78 per cent of Chinese purchases of luxury goods occurred overseas, reaching a total of US$91 billion.
- Prestige and men's grooming are the twin focuses of growth for Unilever says Personal Care President, Alan Jope. Not only has the multinational scooped up the prestige Dermalogica, REN and Murad skincare brands this year, Unilever plans to "premiumise"mass brands, including and Pond's. E-commerce has also become a tremendous source of growth, says Jope, and will only get bigger.
