Perfume Shop suffers in competitive market, but digital soars

By

Sandra Halliday

Published
Oct 8, 2019

The Perfume Shop continued to struggle in its latest year as the UK market proved hugely competitive, even though the category grew. Its revenue for FY2018 rose only 0.8% to £201.6 million, which didn’t even match the 1.7% growth of the UK fragrance sector overall with the market being “promotion-led”, the firm said.

Operating profit at the AS Watson-owned firm fell to £11.2 million from £16.3 million with net profit down to £7.8 million from £11.8 million as rigid cost controls failed to offset the impact of inflation and investment to drive future growth.

However, at least like-for-like sales rose 1.2%, which is always good news, although its online performance boosted this and it continued to be challenged in its physical shops.

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E-sales for the company were up as much as 21% but that clearly means its stores had a tougher time. Those online sales were helped by the company’s app, by international delivery, and by other improvements that drove site traffic higher and boosted conversation rates.

The company said the heavy competition last year in the UK health & beauty market was added to by the continued expansion of general merchandise and fashion retailers into the beauty sector, as well as the proliferation of pureplay beauty e-tailers. But given that the business was operating at the exact time that Debenhams and House of Fraser were struggling to attract customers, some believe The Perfume Shop should have been able to capitalise on their misfortunes.

Pippa Stevens, retail analyst at GlobalData, called the firm’s figures “uninspiring, with further modernisation and differentiation required in order to drive relevance amid a fiercely competitive market.”

She said that while the retailer completed its store refit programme in 2018, “further investment must be made to make its 259 stores more appealing and offer visitors a premium experience, with opportunity to emulate the department stores, as well as other high-end fragrance specialists like Jo Malone in order to drive repeat visits.”

The company is heading in this direction already and opened a new concept store in Sheffield last month, which provides a more experiential store environment focused on enhancing the scent discovery process. The concept is to be rolled out to more regional flagships and Stevens added that this rollout “must be swift”.

Meanwhile, The Perfume Shop said it sees market innovation and new products as key to its future and that sales of new launches and exclusives are growing. So it’s continuing to “engage with suppliers” to make sure the fast stream of the right type of new product carries on.