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Squibb Sells Charles of the Ritz Cosmetics to Yves Saint Laurent

November 19, 1986|DENISE GELLENE | Times Staff Writer

Yves Saint Laurent S.A., the French fashion design house, on Tuesday purchased the Charles of the Ritz cosmetics and fragrance firm for $630 million in a move that signals continuing consolidation in the beauty business.

The purchase unites the fashion designer with Charles of the Ritz, which has been marketing fragrances with the Yves Saint Laurent name since 1963. Charles of the Ritz was sold by Squibb Corp., which previously announced its intention to sell the business to concentrate on its pharmaceutical operations.

The sale comes only four days after Revlon purchased rival Max Factor, Almay and Halston cosmetics and fragrance lines for $345 million, creating a company with about $1.7 billion in sales. Industry analysts said that further acquisitions in the beauty business were likely.

"The industry is not growing very rapidly and there is financing available," said Deepak Raj, a cosmetics industry analyst with the Merrill Lynch investment firm in New York. "This leads to consolidation. . . . The firms are buying market share. I think there will be fewer firms in the business five years from now."

Industry sources said bidding was intense for Charles of the Ritz, which markets cosmetics under the Charles of the Ritz label and such leading fragrances as Opium and Paris. The company had operating profits of $50.6 million on sales of $432.2 million in 1985 and has a strong overseas business, analysts said.

Yves Saint Laurent cosmetics and fragrances provided about two-thirds of its profits last year.

"It's a rare event when a company this well-positioned in the United States and overseas becomes available," said Neil Sweig, an analyst with the Prudential-Bache Securities investment firm in New York.

Other Charles of the Ritz brands include Bain de Soleil sun tanning products, Jean Nate fragrances and cosmetics, the Forever Krystle and Carrington fragrances--whose names are taken from the "Dynasty" soap opera--and Alexandra de Markoff, a prestige line of cosmetics and fragrances.

Although beauty industry sales have been stagnant, Charles of the Ritz has had annual sales growth averaging 8% during the last 10 years. Sweig said that much of the recent growth can be attributed to the decline in the value of the dollar, which has helped boost overseas sales that now provide about half of Charles of the Ritz revenue. Additionally, Sweig said that Charles of the Ritz has been very successful with the more profitable prestige fragrances. Opium, introduced in 1978, is one of the top three fragrances in worldwide sales.

John Ledes, editor and publisher of Cosmetic World newsletter, said the purchase "promises everything (at Charles of the Ritz) will continue, except it may be a little more adventuresome and exciting." He said he expects Yves Saint Laurent to license the names of its cosmetics, similar to how Saint Laurent licensed its name to RJR Nabisco for a designer cigarette.

Squibb said that the sale would make it easier for Charles of the Ritz to diversify its business beyond its traditional offerings of cosmetics and fragrances. The company has already introduced such new products as its Aroma Disc Players, or scented records, and its Fila Fitness brands of mail-order fragrances and exercise equipment.

Squibb, which acquired Charles of the Ritz in 1971, said the sale would result in a one-time gain. However, the company said that it is currently reviewing its other businesses and that the gain might be offset by a charge against earnings. Squibb, which reported earnings of $354.8 million on sales of $2.04 billion last year, said that the sale is expected to close by the end of the year and that it might use the money to repurchase its shares or make other investments in health care. Charles of the Ritz

Who was Charles of the Ritz?

In 1919, a Frenchman named Charles Jundt took over the beauty salon at the Ritz Carlton hotel in New York, modeled it after one he had operated successfully in Paris. In 1926, he marketed a line of cosmetics to department and specialty stores.

By 1936, he sold his interest to Benjamin Levy and Levy's nephew Richard Salomon, who ran the company until it was sold to Squibb in 1971. Salomon said Jundt invested his profits in Florida real estate but fared poorly. Jundt died about 1940.

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