US cosmetics giant Estee Lauder Companies Inc. (EL) has inked a multi-year licensing agreement with Milan-based fashion house Marni, announcing that it will partner the European fashion giant to launch a fragrance by the fall of 2012.
The Aramis and Designer Fragrances, a division of Estee Lauder, will take over the exclusive worldwide license to produce fragrances for Marni. This is Marni’s first venture into perfume business and comes after years of the beauty industry’s anticipation for a fragrance from the eclectic fashion house.
Marni was founded by Consuelo and Gianni Castiglioni in 1994. Marni sells clothing in over 16 countries and its boutiques’ locations include London, New York City, Los Angeles, Beijing, Shanghai, Sydney, Moscow, Kuwait, and Tokyo.
Marni represents the iconic luxury, eclectic women’s clothing and accessories collection. In addition to the women’s collection, Marni’s men’s collection was launched in Spring Summer 2002 and was followed by Eyewear for Fall Winter 2005–06 and Marni Edition collections in 2009. Marni’s distribution strategy targets a selective, niche clientele. Retailing at over 320 points of sale worldwide, Marni began a roll out of freestanding Marni boutiques and shop-in-shop in 2000.
The forthcoming perfume is expected to capture the exotic charm that has forged a niche for the label, which is known for its unexpected interplay of unusual textures and playful prints. The perfume is aimed at women in their 20s, 30s and 40s. The aroma is expected to carry “woody fragrances, with a touch of incense, but never too penetrating”, which is the personal liking of designer Consuelo Castiglioni.
However, this to-be-launched perfume is expected to face stiff competition from the perfume that is rumored to be launched by Madonna. The Material Girl is reportedly in talks to launch a signature scent with Coty, a rival of Lauder. A Madonna license would give Coty the star power, along with Lady Gaga and Beyonce who are among the stars for whom Coty had previously designed perfumes. It is also rumored that designer Tory Burch could be the next brand to join the Lauder’s fragrance portfolio, while she is also said to be in talks with Coty.
For Estee Lauder, the deal is a part of the company’s strategy to increase the division’s (Aramis and Designer Fragrances division) market share in Europe. The division has already bagged several licenses like Michael Kors and Donna Karan in America. While the company acquired Zegna in July 2011, which gave it a broader reach in Europe and Asia’s men’s fashion world, Marni will provide it a fantastic opportunity to heat up the women’s business in Europe and in the luxury market.
Estee Lauder posted robust results for the fiscal year 2011. The full-year 2011 earnings per share were $3.69, in line with the Zacks Consensus Estimate, surpassing the fiscal 2010 earnings of $2.75 per share. The earnings also exceeded management’s guidance of $3.55 to $3.65 per share.
Operating expense margin declined 40 bps to 65.1% and operating income margin jumped 180 bps to 13.0%. Fragrance segments’ operating income increased over 200%, primarily reflecting higher net sales from Estee Lauder and designer fragrances, driven by recent product launches, cost reductions and a more strategically focused approach to support spending on successful launches and classics, and in markets and channels with the greatest potential.
Estee Lauder which competes with Procter & Gamble Co. (PG) holds a Zacks #3 Rank, which translates into a short-term Hold rating.
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