The Cosmetic Center Inc., a Columbia retailer that sells discounted cosmetics and fragrances, said yesterday that it plans to give up its fight to survive and liquidate its 124 stores by the end of the year.
After four years of hemorrhaging money, the chain filed for Chapter 11 bankruptcy protection in the spring. At the time, a spokeswoman said, executives hoped to emerge from bankruptcy with "new leadership and a fresh approach" to selling beauty products.
But a recent analysis of Cosmetic Center showed that the industry was too competitive and the company's financial troubles were too deep, company spokeswoman Wendi Kopsick said.
"The company has undertaken a number of steps, including closing unprofitable stores, reducing operating costs and introducing new marketing initiatives," Kopsick said. "Under current circumstances, these steps just weren't enough." Going-out-of-business sales will start later this month at the company's 31 Cosmetic Center stores, primarily in Maryland and Virginia, and 93 Prestige Fragrances & Cosmetics outlets nationwide. Those sales are expected to continue until this fall, when all stores should be shuttered.
About 1,200 employees, including 800 in the Baltimore-Washington market, will lose their jobs following the liquidation.
Few people in the industry were surprised by Cosmetic Center's decision. Like Hechinger Co. and Woodward & Lothrop -- two other regional chains based in the Washington area -- Cosmetic Center lost touch with its customers and failed to distinguish itself from its rivals, industry observers said.
Founded in 1957 by Louis R. Weinstein and his wife, Anita, of Bethesda, Cosmetic Center went public in 1986. The company had 72 stores by the end of that year.
After Weinstein's death in 1995, however, the firm started to unravel. Rapid expansion, merchandising problems and several senior management changes contributed to Cosmetic Center's woes.
Howard Diener, chief executive of Cosmetic Center from 1997 to 1998, said the company had trouble bringing popular brands to its shelves.
"Hot lines like MAC and Bobbi Brown were very hard to get," Diener said.
Diener said he hoped to save the company but left after turnaround specialist York Management Services Inc. purchased Cosmetic Center last year from Revlon Inc. York replaced Diener with Betsy Burton, who left earlier this year. Her replacement was retail consultant Kevin Regan.
"We had a game plan, but we'll never know whether or not it would have worked," Diener said. "No one in senior management was there long enough."
Unable to draw upscale beauty names such as Clinique and Estee Lauder, Cosmetic Center began carrying mass-market lines such as Revlon and L'Oreal.
However, in the lower-priced niche the company faced cutthroat competition from drugstores and grocery stores. Rite Aid, for instance, has expanded its beauty sections, offering a popular new policy among shoppers: If you don't like the shade or quality of the lipstick, simply return it.
If Cosmetic Center had opted to continue, it would have faced even more competition from new entrants such as French perfume giant Sephora, which opened a store in Montgomery Mall in Bethesda last week and plans to open another this fall in Georgetown.
Some industry analysts are concerned that the beauty market isn't growing fast enough to accommodate the increasing number of companies trying to sell perfume, rouge and eyeliner.
"Many ladies today choose to shine au natural," said Kurt Barnard, president of Barnard's Retail Trend Report. "What is it? It's a lifestyle, the need to show themselves as they are. They feel less of a need to make themselves look like something that they aren't."
In Profile: Cosmetic Center
Business: Sells brand-name cosmetic, fragrance, skin-care, hair- and personal-care products
Founded: 1957 by Louis R. Weinstein and his wife, Anita
Stores: 124 (31 Cosmetic Center stores, 93 Prestige Fragrances & Cosmetics outlets), all of which will be liquidating
Losing their jobs: About 1,200 workers (800 in the Baltimore-D.C. market)
1997 revenue*: $159 million
1997 loss*: $4.8 million
*Latest year available; fiscal year is 12 months ended September
SOURCE: Hoover's, Bloomberg News