Elizabeth Arden Spas were featured in a front-page story in The Wall Street Journal titled The Wax and Wane: In Spa Industry's Makeover, Some Tough New Regimens. Staff reporter Sally Beatty explores the past and future of Elizabeth Arden, from their first opening in New York City nearly a century ago, to the chain's expansion plans. The article chronicles North Castle Partners' acquisition of Elizabeth Arden Spas and the challenges of standardizing the spa industry.
Cosmetic visionary Elizabeth Arden opened her first Beauty Salon on Manhattan's Fifth Avenue in 1910, following with the Maine Chance Beauty Resort in 1934. After her death in 1966, the chain floundered as it passed through a series of corporate owners. Arden spas later split off from the product division, and Elizabeth Arden Inc., which owns the cosmetics and fragrance business, licenses the Elizabeth Arden and Red Door names to Arden Salon. The salons also buy certain products from the cosmetics company at a preferred price.
In 2000, North Castle Partners purchased the Elizabeth Arden Spas and Mario Tricoci chains for a combined cost of more than $60 million. The private-equity firm focuses on health-oriented companies, including Equinox gyms and DDF Skincare (Doctor's Dermatolgic Formula). North Castle struggled with management issues and underperforming operations. "There was a lack of focus and too many chiefs," Sharilyn Abbajay told the WSJ. A former Arden senior vice president, Abbajay left after her job was eliminated in some post-merger restructuring. "Arden became a big pool of ugly politics which we never had before," she says.
There were also employee issues as a result of strict employee policies, such as a rule that prevented therapists and stylists from communicating directly with customers to make appointments. One former employee stated, 'They didn't want us to develop a personal relationship with the client." "The frustrations felt by some early investors illustrate the difficulty of creating cookie-cutter operations from a fragmented industry built on personal, and sometimes idiosyncratic service," says Beatty. She cites French luxury-goods giant LVMH's recent sale of Bliss spas to Starwood Hotels & Resorts, and Steiner Leisure's closure of all but two Greenhouse spas as evidence of the difficulty.
Elizabeth Arden's chief executive, John Richards, told WSJ that "the company's strategy is starting to pay off, because of the efficiency of operating chains and the trust connoted by the Arden name." In 2003, Arden's revenue increased almost 4% to $173 million, while the company's measure of earnings rose almost 15% to $14.9 million, as a result of cost controls and operating efficiencies. Arden expects to post 2004 revenue of $185 million and earnings of between $15 million and $16 million. Revenue and earnings are expected to increase more than 12.5% in 2003. Mr. Richards says he plans to open six to eight new spas each year over the next five years, at a cost of nearly $2 million for an 8,000-square-foot facility.
Cosmetic visionary Elizabeth Arden opened her first Beauty Salon on Manhattan's Fifth Avenue in 1910, following with the Maine Chance Beauty Resort in 1934. After her death in 1966, the chain floundered as it passed through a series of corporate owners. Arden spas later split off from the product division, and Elizabeth Arden Inc., which owns the cosmetics and fragrance business, licenses the Elizabeth Arden and Red Door names to Arden Salon. The salons also buy certain products from the cosmetics company at a preferred price.
In 2000, North Castle Partners purchased the Elizabeth Arden Spas and Mario Tricoci chains for a combined cost of more than $60 million. The private-equity firm focuses on health-oriented companies, including Equinox gyms and DDF Skincare (Doctor's Dermatolgic Formula). North Castle struggled with management issues and underperforming operations. "There was a lack of focus and too many chiefs," Sharilyn Abbajay told the WSJ. A former Arden senior vice president, Abbajay left after her job was eliminated in some post-merger restructuring. "Arden became a big pool of ugly politics which we never had before," she says.
There were also employee issues as a result of strict employee policies, such as a rule that prevented therapists and stylists from communicating directly with customers to make appointments. One former employee stated, 'They didn't want us to develop a personal relationship with the client." "The frustrations felt by some early investors illustrate the difficulty of creating cookie-cutter operations from a fragmented industry built on personal, and sometimes idiosyncratic service," says Beatty. She cites French luxury-goods giant LVMH's recent sale of Bliss spas to Starwood Hotels & Resorts, and Steiner Leisure's closure of all but two Greenhouse spas as evidence of the difficulty.
Elizabeth Arden's chief executive, John Richards, told WSJ that "the company's strategy is starting to pay off, because of the efficiency of operating chains and the trust connoted by the Arden name." In 2003, Arden's revenue increased almost 4% to $173 million, while the company's measure of earnings rose almost 15% to $14.9 million, as a result of cost controls and operating efficiencies. Arden expects to post 2004 revenue of $185 million and earnings of between $15 million and $16 million. Revenue and earnings are expected to increase more than 12.5% in 2003. Mr. Richards says he plans to open six to eight new spas each year over the next five years, at a cost of nearly $2 million for an 8,000-square-foot facility.