When Napoleon Perdis appointed administrators, the brand owed more than $22 million to creditors including the ANZ bank, the Australian Taxation Office, Australian Pharmaceutical Industries and Myer - with $16 million in “accumulated losses” sitting in the US branch of the company. While Mr Lee wasn’t with the business at the time, he suspects the brand made a “typical mistake” common among retailers that enter the US market - over-investing in infrastructure such as warehouses and stores too quickly before sales actually start pouring in. Premium Beauty News had the chance to meet with Mr Lee.
Premium Beauty News - When did you buy Napoleon Perdis and why?
Henry Lee - We acquired the business in mid-April 2019 after conducting 6 months of due diligence.
The irony is the top-line numbers were there and it was very well received but the numbers did not justify the infrastructure ahead of sales. It’s a typical mistake a lot of Australian retailers make, thinking they should go in big and build 10 stores because the US is such a big market, but it just doesn’t work like that. The losses were propped up by the Australian arm through a combination of debt and working capital which put enormous pressure on the business and resulted in poor decisions which coincided with Australia’s tough retail climate. The Australian business was still profitable but couldn’t sustain the levels of debt, a heavy corporate structure that included dual offices in Europe and Australia and wage and rent expenses for its 80 stores. This had a resulting impact on cashflow, which affected stock levels and ultimately led to a further decline in sales. This is a death spiral that has been played out by so many retail businesses of late. The founder and namesake was a pioneer, a leading authority in the beauty industry and his craft in makeup artistry meant that he was an insider for new trends and innovation.
He invented new categories and released products before consumers even knew they needed them. Case in point, our best-selling product is our iconic primer, first introduced more than 15 years ago. To this day we continue to sell one primer every 90 seconds. He was still surprised by the “panic buying” that took place once news of the administration broke when the chain’s future was still unclear, with some customers snapping up enough primers and foundations to last “several years”.
Napoleon Perdis is ranked the number one Australian brand in the Prestige Cosmetic segment. It’s also an iconic brand with a cult-like following from professional makeup artists and end-consumers, both in Australia and internationally. The opportunity to acquire such an established and well-loved brand does not come up often, nor does the opportunity to reset a business and re-build it on a solid foundation. This was a challenge we were excited to tackle.
Premium Beauty News - As the forefront of runway trends and innovation, Napoleon Perdis Cosmetics will be the official makeup partner for MBFWA in 2020.
Henry Lee - We are proud to announce our official makeup partnership with Mercedes-Benz Fashion Week Australia 2020. As MBFWA celebrates its 25th anniversary, we are excited to bring the artistry that has defined Napoleon Perdis to the event. We look forward to sharing our creative expertise and continued passion for the fashion and beauty industry as Australia’s leading professional makeup brand.
Premium Beauty News - What is your international strategy?
Henry Lee - The broader market beyond Australia is extremely important to us, and we expect that international sales will exceed domestic sales by the end of 2020. Clearly, we have our sights set on two of the largest consumers of cosmetics – the North American market and China.
The brand has previously had good traction in the U.S. market, having been stocked in Bergdoff Goodman, Neiman Marcus and Ulta. To capitalise on this, we are currently in discussions with several U.S. based department stores and hope to re-enter the North American market in the next 12 to 18 months. In July 2019, we partnered with Access Corporate Group, and launched into the China market via a cross-border e-commerce platform. This has been a phenomenal success having generated $30m in retail sales in as little as 6 months, and this will grow exponentially in the coming year. And over the next three years, Kuba Investments has budgeted to invest more than $21 million in brand development and marketing alone to reconnect with “loyalists” and engage with new customers.