Avon stocks jump on private equity rumours, a steep decline in celebrity scent sales, Coty is back in black in Q4, and Europe's largest maker of luxury hotel amenities buys British rival.
Avon stocks jump on private equity rumours
is still hedging its bets about whether to sell a majority stake or look for a buyer. The shares of the direct-selling giant soared 13 per cent last week following a report in The Wall Street Journal that the company has been in talks with two major private equity firms - Cerberus Capital Management and Platinum Equity. Both multi-billion companies specialise in leveraged buy-outs but neither has invested in the cosmetics industry before.
Bids for the rumoured transaction - know as a PIPE, a private investment in public equity - are due on the table this week. The proposed deal would be a shot in the arm for Avon's finances. But the multinational also has the wiggle room to choose several other options that may suit its goals and corporate management better.
Steep decline in celebrity scent sales
Jennifer Lopez kickstarted the modern celebrity fragrance craze about 13 years ago and the Latina star's 18 fragrances racked up close to US$2 billion in global sales. Over the past 11 years, hundreds of millions of bottles of Britney Spears' major fragrance franchises have pulled in a similar fortune. But over the past three years, reports the NPD Group, US sales of celebrity fragrances have nosedived from US$150 million in 2011 to US$50.6 million last year - about 3 per cent of the US$3 billion prestige fragrance market .
We're still seeing a steady stream of launches from "name" hopefuls such as Arianna Grande. But the days of anyone with a claim to fame scoring a hit are gone. It's an ill wind that doesn't blow someone some good. According to NPD, the largest market for celebrity fragrances are young people looking for a cheaper scent with a low level of brand loyalty. Tastes have matured, it seems, and young people now want pretty much the same as older demographics - prestige names such as , , Chanel, Dior and so on.
Coty back in black in Q4
It's not all bad news. Celebrity fragrances are still a highly profitable business for Coty says Chairman Bart Becht. "The category is not very much in vogue either with the consumer or the trade. As a result, we are seeing a gradual erosion of this business. We still have a drag historically from our legacy celebrity fragrance business, which is a drag on the growth of the total company".
Coty plans to keep its major celebrity fragrance brands, including Beyoncé, Lady Gaga and David Beckham, but is looking forward to acquiring the higher-end scents from P&G - Gucci, Dolce & Gabbana and Hugo Boss. P&G's power makeup brands - COVERGIRL and Max Factor - are also poised to boost a successful makeup performance for Coty. The multinational's colour cosmetic sector recorded an 8 per cent uplift in Q4, following a crop of bumper hits including Rimmel London Lasting Finish 25 Hour Foundation and Sally Hansen Miracle Gel.
Power brands such as and were also strong drivers of growth. Body and skincare didn't perform as well but Coty managed to exceed analysts estimates with strong results for the quarter to end the year back in the black. The multinational finished the financial year with a profit of US$232.5 million, in contrast to a loss of US$97.4 million the year before.
Europe's largest maker of luxury hotel amenities buys British rival
Providing luxury personal care products to the global tourism industry isn't just a multi-million dollar business in itself. It's a major marketing strategy which allows brands to appeal directly to millions of well-heeled consumers who stay in four or five star hotels. That's why major beauty and cosmetics brands from Kiehl's to license their products to key players in the premium hotel cosmetics industry.
Pacific Direct, Britain's largest supplier of luxury hotel amenities to prestige hotel chains such as Ritz-Carlton and Crowne Plaza and cruising giant P&O, holds 12 upmarket licenses including Acqua di Parma, , Floris and Penhaligon's. The company posted sales of 35 million euros ( AUD$55.9 million) in 2014, with business distributed fairly evenly in Asia, the Middle East, the UK and the US.
The company, owned by private equity firm Primary Capital Partners, has been sold to ADA Cosmetics, the largest manufacturer of premium hotel amenities in Europe, for an undisclosed sum. The German-based multinational, owned by private equity firm Ardian, has acquired Pacific Direct to expand its reach in the Middle East and Asia. ADA specialises in naturally-based private label products for leading hotel brands and its license stable includes Bulgari, Chopard, Bronnley and Bogner. With 15,000 clients worldwide, ADA had revenues of 50.4 million euros ( AUD$80.6 million) in 2014.
Snippets from the wires
- Chanel enjoyed revenues of US$7.5 billion in 2014 , yielding a 38 per cent rise in annual profit. Extraordinary success in China continues to buoy the prestige brand, say analysts, as other luxury goods companies feel the pinch.
- The K-Beauty boom is only in its infancy says the Export-Import Bank of Korea. South Korean cosmetic exports reached US$1.4 billion for the first six months of the year and are expected to climb to US$10 billion annually over the next five to 10 years. AmorePacific, Korea's largest cosmetic company, is leading the charge. The conglomerate is entering the Dubai market next year and will launch its major skincare brands in Mexico and Brazil.
- Most Australians associate talc with babycare these days. But the global talc market is surging reveals a new report from Persistence Market Research. The Asia-Pacific region is the world's largest market, with huge sales in China, India, Japan and South Korea. The US is the world's largest single talc market and India enjoys the number three ranking. Europe is also enjoying increased market share and talc is popular continent-wide from Scandinavia, France, the UK, Italy and Scandinavia to eastern strongholds such as Romania and Bulgaria.
- The three biggest beauty markets in Asia - China, Japan and Korea - all rank in the top 10 global beauty markets reports Euromonitor and have a combined market value of US$59.5 billion.
- Macy's, the largest US department store chain, is working hard at building its e-commerce business and is under pressure to release more value from its real estate holdings. The company has announced it will close 40 stores across the US but declined to name the locations. Shares rose 1.3 per cent on the news because the under-performing stores represent only 1 per cent of the company's sales.
- Valentino, the Italian luxury fashion house, has enjoyed a strong rebound in its fashion and fragrance businesses over the past few years. Owned by Qatar's Mayhoola for Investments, the brand reported at 59 per cent increase in turnover in the first six months of the year to 479 million euros (AUD$765.6 million).
Newsletter image: Instagram.com/avoninsider/
