Cosmetic Center applies a makeover to sagging profits It will close 7 stores, open 8, renovate some

Personal grooming

July 30, 1998|By Kristine Henry | Kristine Henry,SUN STAFF

The Cosmetic Center Inc. said yesterday that in the wake of widening losses it will close seven poorly performing stores, open eight others and revamp some to give them a higher-end look.

The Columbia-based discount cosmetic retailer, which merged in April of last year with Revlon Inc.'s Prestige Fragrance & Cosmetics Inc., reported a net loss for the April-June quarter of $16.1 million, or $1.60 a share. That compared with a loss of $5.2 million, or 54 cents a share, in the same quarter last year.

Although sales in the recent quarter rose 8.2 percent to $39.5 million, the company attributed the increase to sales resulting from the merger with Revlon. Sales at stores open at least a year -- an important measure of a retailer's performance -- fell 7.5 percent to $38.1 million, from $41.2 million in the year-ago quarter.

"The financial results and the progress that has been made in integrating the company with Pres- tige have been disappointing," said the company's new president and chief executive, Betsy Burton.

She said the loss was expected and includes a $10.5 million one-time charge connected with her plan to remodel Cosmetic Center stores. There are no plans to update the Prestige stores.

"They will look, consistent with fashion, more updated and look more like a specialty store vs, a drugstore," Burton said. "And we're always looking for more prestigious lines, but for the most part we are remerchandising the stores and improving ambience and improving the shopping experience."

Burton declined to say which of the company's stores will close but said none of the eight new stores will be in Maryland.

The closings will be among Cosmetic Center's 60 shops and the 192 Prestige stores.

The company also said it is in talks with its lender to amend the terms of its credit agreement and has borrowed from an affiliate to improve cash flow. Burton declined to discuss any details.

Revlon, which owns 85 percent of the Cosmetic Center Inc., announced last month that it wants to get rid of its shares in the company. No formal divestment plans have been announced.

Despite the quarter's increased loss, Mark Millman, president of Lutherville-based retail consulting firm Millman Search Group, said Cosmetic Center's future looks promising.

"This is a very pivotal year for Cosmetic Center's future, and they need to make significant and dramatic changes fairly quickly so they can stop the bleeding," he said.

"They've gotten old-looking and they need some vitality, they need something pumped into them -- more creative advertising and strong merchandise marketing. Betsy Burton has already made some executive changes and is tackling other problems, and I'm expecting a turnaround sometime early next year based on some of the things she's put into place."

Along with updating stores, the company plans to add scanners at the cash registers, boost marketing, highlight its department TC store brands and focus on its frequent-shopper program.

Pub Date: 7/30/98

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