Perfumania Hopes That Web Sales
Will Arrest Skidding Performance
By KATE BERRY
Dow Jones Newswires
Perfumania Inc., a discount perfume retailer whose financial
performance is deteriorating, hopes to stage a comeback by --
what else? -- selling perfume over the Internet.
Perfumania's stock has surged in anticipation of the debut of its
Web site (www.perfumania.com) on Feb. 1, in time for
Valentine's Day. The company's stock has risen steadily since it
announced the formation of an Internet division last month. The
shares, which hit a 52-week low of 40.6 cents on Oct. 28, closed
Friday at $11.125 on the Nasdaq Stock Market.
"We are creating an enormous amount of excitement around the
Web store," said Perfumania's Chairman and Chief Executive Ilia
Lekach, who returned to the company in November after a leave
of absence. Mr. Lekach also is chairman and chief executive of
Parlux Fragrances Inc., a perfume licenser that supplies some
brands to Perfumania.
Mr. Lekach said that although Perfumania expects to post a loss
in the upcoming fourth quarter and year ending Jan. 30, he
expects the company will turn a profit in the upcoming year. The
company has consolidated stores, reined in expenses and
reported a 2% increase in same-store sales in December. He
expects positive comparable-store sales in January as well.
"We're going to have a huge loss for the year, and after that,
we're going to be profitable in the year ended in January 2000,"
he said.
Perfumania has posted seven straight quarters of losses. For the
year ended Jan. 31, 1998, the company posted a loss of $11.4
million, or $1.63 a share, on sales of $163.5 million.
The company's lagging performance has been attributed to
excess inventory and rapid growth, which strained the company's
cash flow.
As a result, Perfumania sees the Internet as a way to expand its
reach in the perfume trade without adding stores.
The company has increased advertising in newspapers, on
classical radio stations, and in Internet magazines to promote the
Web site. Its roughly 290 retail stores are strewn with giant
banners and fliers, part of a cross-marketing effort to promote its
Internet presence.
"What we are trying to do is create a global perfume network by
having international franchisees that will be Internet affiliates,"
said Mr. Lekach, a Russian immigrant who got his start selling
watches and electronics before buying a perfume factory outlet in
Freeport, Me., in 1986.
He declined to say how much the company is spending on
advertising and how much revenue it expects to generate from
the Web site.
Though he admits the perfume industry is "flat," Mr. Lekach said
a globalization strategy could bring perfume to a wider market via
the Internet.
"In many countries in the world, perfume is not that accessible,"
he said.
Perfumania's goal is to be a portal site for perfume, allowing
customers around the world to buy perfume or send it anywhere
for a low cost. Franchisees in other countries would do the
shipping and handling at local rates; Perfumania would get a
commission on all perfume sales.
"Right now, if you go to the Internet from a foreign country like
Argentina, perfume has to be shipped by freight and it can be
very expensive," said Mr. Lekach.
"We're establishing a franchisee in Argentina, so when you go to
our Internet site, you're going to push Argentina and get a
database in their currency, with their prices with local delivery,
and that is very, very powerful," he said.
Internet shoppers will be able to choose from more than 2,000
fragrances.
So far, the company has signed franchises in Canada and
Panama and expects to announce others, with a focus on
Australia, Mexico, Central and South America, Mr. Lekach said. |
