Following its biggest ever quarterly loss, Elizabeth Arden says a slide in sales of celebrity perfumes, especially the Justin Bieber and Taylor Swift brands, is to blame. Ciara Lee asks if the market for celebrity endorsements has reached saturation point?
The sweet smell of success - celebrities have long been cashing in on perfume endorsements. But for Elizabeth Arden they're beginning to lose their scent. The U.S. beauty company reported its biggest ever quarterly loss due to a steep fall in sales of celebrity perfumes, particularly the Justin Bieber and Taylor Swift brands. While teens and young adults still like celebrity-branded perfumes, the market for them could have reached saturation point, says Andy Milligan, brand business expert at Caffeine. (SOUNDBITE) (English) ANDY MILLIGAN, BRAND BUSINESS EXPERT, CAFFEINE, SAYING: "As soon as someone becomes famous the first thing they think about doing is putting their name on fashion and fragrance lines. It's the easiest and simplest thing to do because fashion and fragrance is image-led, and celebrity is also image-led. That causes a problem when there are just so many celebrities around because you then have a glut of celebrity fragrances. There are around 50 or so celebrity fragrances around and not all of them can survive." Elizabeth Arden's disappointing results sent shares plunging as much as 25 percent. Investment firm Rhone Capital has agreed to step in and invest nearly $100 million in the cosmetics company through preferred stock and warrants. The firm expects further weakness company for the next 6 months. Perfumes account for around 75% of Elizabeth Arden sales, whereas rivals such as Estee Lauder and L'Oreal rely more on cosmetics. It had five of the top 10 celebrity perfumes in the United States last year. And one of its classic fragrances has helped it strike gold. (SOUNDBITE) (English) ANDY MILLIGAN, BRAND BUSINESS EXPERT, CAFFEINE, SAYING: "The great one of course is Elizabeth Taylor's White Diamonds. That was launched in 1991 and it's still going strong. It's still the number one celebrity-endorsed fragrance. That's where it goes right, she's got the right image, so it confers a lot of credibility on that produce." As price-conscious shoppers rein in their spending on beauty products, Elizabeth Arden has come under pressure. It's largely focussed on the mass market fragrance industry, which is viewed as less attractive than skin care.