The Cosmetic Center Inc., hoping to stem losses in its struggling business by cutting operating costs, is closing nearly half its cosmetics retail and outlet stores and laying off 875 employees.
The Columbia-based cosmetics retailer said it will pull out of the Chicago and North Carolina markets and close all but one store in Philadelphia to concentrate on a core group of stores in the mid-Atlantic.
Spokeswoman Wendi Kopsick said yesterday that the moves "follow a comprehensive analysis of the business and are intended to reduce operating costs and position the company to be successful in the future."
The retailer operates 57 Cosmetic Center retail stores and 183 outlet stores in 41 states under the names Prestige Fragrances & Cosmetics, and Colours and Scents.
By summer, the company will close 26 Cosmetic Centers and 90 outlet stores that didn't meet expectations. About 31 Cosmetic Centers, primarily in Maryland and Virginia, and 93 other outlets in 27 states, will remain open.
Three of Cosmetic Center's 19 stores in Maryland will close, though Kopsick said she did not know which ones.
The company said it will eliminate 875 positions, including 44 jobs at its Columbia headquarters.
"They are shrinking the company down to a core level," said Mark Millman, president of Millman Search Group, a national retail consulting firm based in Lutherville.
"It's a major attempt they're making."
"It's probably a last-ditch effort to keep the company alive."
The company's financial troubles stemmed from a 1997 merger with Revlon Inc., Millman said. Revlon, the biggest U.S. maker of mass-market cosmetics, acquired an 85 percent interest in the Cosmetic Center in return for the Prestige Fragrance & Cosmetics Inc. chain, a wholly owned subsidiary.
"The merger was not successful in integrating both companies," Millman said. "It caused problems that spilled to the retail stores and the flow of goods, and drained the profits of the company." The Cosmetic Center lost $4.85 million on sales of $159 million for 1997 and reported a third-quarter 1998 operating loss of $3.4 million, or 33 cents a share. The company has not yet reported year-end results.
In June, the company hired noted turnaround specialist Betsy Burton in an effort to make it attractive to suitors after Revlon said it would sell its majority stake.
In December, Revlon sold its stake in Cosmetic Center to Prestige Holdings I, which is controlled by York Management Services Inc., a New Jersey-based investment and management company. Revlon took a loss of $32.7 million, or 64 cents per share, on the sale.
Cosmetic Center has not filed for bankruptcy protection from creditors. "The company is continuing to analyze ongoing business operations and is looking at a range of options to best position" itself, Kopsick said.
Pub Date: 3/31/99