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LVMH Alters Course, Sells Kors Fragrances To Estée Lauder Cos.

Another step has been taken in the shedding of LVMH’s noncore beauty assets with the sale of the Michael Kors fragrance license to Estée Lauder.

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Despite assertions from Kors that it was its decision to leave, sources in the market suggest that the Sportswear Holdings initiative coincided with LVMH’s growing desire to sell.

LVMH launched American Designer Fragrances as a division of the New York-based Parfums Givenchy Inc. in the fall of 2000. It seemed like a high-octane idea to sign fragrance deals with Kors and Jacobs, top designers who were then both owned by LVMH and working for its other fashion houses. With the addition of Kenneth Cole, the business took off like a whirlwind, racking up about $55 million in combined retail sales in two years flat, with a possibility of breaking even this year. According to industry sources, Kors’ women’s fragrance, Michael, did $24.2 million at retail in 2002 and his men’s scent, Michael for Men, generated $8.8 million in the same year. Additionally, Kors Michael Kors was launched in February in only 300 doors and reportedly did $1.8 million at retail in its first two months on counter.

Despite market share successes of the newly established brands, that success story sailed into the increasingly choppy waters of a roiled fragrance market, where profitability has proved elusive at best.

Even as speculation swirls on the future of the Jacobs and Cole brands, McDonald, Parfums Givenchy’s president and architect of the American Designer Fragrances division, is pressing ahead with powerful plans for the two brands. Black, a men’s scent, will be launched in the fall in conjunction with the 20th anniversary of the Kenneth Cole fashion house, and the Cole fragrance advertising is being repositioned with more emphasis on being an urban lifestyle brand. There will be less social commentary and more fun, said McDonald, who added the new campaign represents the second stage in the Cole brand development. The objective is to bring out more of his personality or, as McDonald said, his wry humor. As an example, the tagline for the Black fragrance advertising will be, “It’s better in the dark.” Late next year, there will be another Kenneth Cole fragrance, called Reaction.

Meanwhile, a gardenia-influenced flanker fragrance for Marc Jacobs will be launched in the fall, paving the way for Marc by Marc Jacobs, hooked to his second fashion line, in early 2004. While Jacobs’ fragrances have been aimed at the upper market in specialty stores with a smaller distribution than the department store-oriented Kors, the Jacobs brand is still viewed as a potent success, despite the smaller dollar volume. The Jacobs women’s scent reportedly generated $17.6 million in retail sales last year, while the men’s pulled in $2.7 million. Meanwhile the Kenneth Cole New York brand, which was launched last fall, did $13.8 million on the men’s side and $7 million on the women’s for the year.
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