Clarins fights back after US sales crisis

By Guy Montague-Jones

- Last updated on GMT

Related tags North america

Luxury French cosmetics group Clarins has bounced back from a sales
crisis in the US to post strong third quarter sales figures.

While European sales remained solid for the first nine months of 2007, North American sales took a tumble in the first quarter of 2007 as struggling US retailers reduced orders. Improved sales figures in the US drove total group sales up eight per cent for the third quarter compared to the same period last year, 10.8 per cent at constant exchange rates, to €231.8m. The perfume division led the recovery growing 20 per cent at constant exchange rates for the quarter to €67.2m. The strong performance of classics such as Azzoro Pour Homme and Crome contributed to growth along with successful launches including Eau de Star and Ice Men, which were released in the first quarter. The beauty division grew seven per cent at constant exchange rates to €153.1m with make-up ranges performing particularly well, growing by 27.6 per cent. The high growth in make-up sales was attributed to new designs and the success of new ranges rolled out at the beginning of the year. By geographic zone, at constant exchange rates, sales remained solid in Europe growing 7.4 per cent over the quarter while sales in Asia steamed ahead, rising 11.6 per cent. Despite tough competition Japan continues to be a strong performer for the company, especially after the recent opening of a Clarins boutique in Tokyo. In North America sales recovered after falling 8.8 per cent over the first quarter. For the first nine months of the year sales have slipped only 0.6 per cent in an increasingly challenging retail environment for luxury manufacturers. Clarins confirmed its forecast of a six per cent increase in sales at constant exchange rates for 2007 although the company expects margins to fall. For the first six months of the year the company reported a fall in operating profit of 23.5 per cent over the first half of 2007, dragging the total figure down to €40m. The stagnant American market and the resulting restructuring efforts of the US business are expected to drag margins down for the financial year. The development of the company's internet site, which made its first online sales this quarter, and the cost of new launches including most recently the release of the skin care brand, My Blend by Dr Olivier Courtin, are also expected to affect profitability.

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