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Monday, May 27, 2024

Urban Decay’s Metro Moves

Wende Zommir worked her way up from an Elizabeth Arden makeup counter in Texas to cofounding Urban Decay Cosmetics LLC, L’Oréal SA luxury division’s No. 2 brand—second in sales growth only to Lancôme.

“I still remember sitting in Sandy’s yard with her, and telling her, ‘Wouldn’t it be cool if we put nail polish in a medicine bottle?’ ” Zomnir said.

She was referring to Cisco Systems Inc. cofounder Sandra Lerner, whom she met through a mutual friend and partnered with in 1996 to launch the Newport Beach-based company with an edgy and colorful line of 10 lipsticks and 12 nail enamels bearing names such as Roach, Smog, Rust, Oil Slick and Acid Rain.

“I can’t believe we are at where we are today,” Zomnir said.

She’s far from done.

Urban Decay, which sells about 75% of its volume through cosmetics chains such as Sephora USA Inc. and ULTA Salon, Cosmetics & Fragrance Inc., is opening its first brand stores in November at Fashion Island in Newport Beach and in London.

Zomnir said the move doesn’t signal a change in direction; just a higher profile for the brand.

“We are not out there to compete with our own retailers. It’s really just great marketing for the brand,” she said. “I think it’s good for everyone as long as you don’t create an environment where there is cannibalization of the business.”

The international expansion, which also includes entering markets in Russia and Germany through its retail partners there, is part of a growth strategy supported by Urban Decay’s direct parent, L’Oreal USA.

The cosmetics giant, whose global headquarters are in Paris, acquired the brand in 2012 from private equity firm Castanea Partners in a deal estimated at $350 million.

“The business just got to a size where we had to make some decisions where we are going to go, and the next logical step was to look at expanding to other countries,” Zomnir said. “It’s a lot of work, because it requires setting up an organization in that country, and we don’t really believe in distributors. So we knew that we needed a partner that could help us expand internationally.”

Zomnir said she met with Carol Hamilton, president of L’Oréal USA’s luxury division, who “saw how perfectly this brand would fit into the L’Oréal portfolio.”

“I felt a comfort level that she understood our brand and that she wouldn’t try to turn it into a mass commodity, that they wanted us to be who we are,” Zomnir said.

L’Oréal SA, a company that had about $30 billion in sales last year, didn’t change Urban Decay’s leadership and kept Zomnir as chief creative officer.

She must have been doing something right—the brand posted 42.5% growth in sales last year, which adds up to an estimated $221 million.

“I really love makeup, I love trying beauty products, and I think that that love for what I do and love for the product comes through,” she said. “In some cases, product development may not happen from the most personal place, but I think with our brand it really does. There is nothing out there in our product assortment that I haven’t loved, road tested and played with, and personally got my hands on creating.

“A lot of things in this world feel manufactured—like your health insurance, it feels corporate and big business-y. When you feel you found a product that has a personal connection behind it, I think that’s important to people.”

Zomnir’s role remained the same as Urban Decay changed hands multiple times before falling into L’Oréal’s roster of brands.

She and Lerner first sold it in 2000 to French luxury goods company LVMH Moet Hennessy Louis Vuitton SA for $22 million.

“You are always concerned (about the position), but it was my baby, and I really didn’t want to let go of my vision for it, and they wanted me to stay,” she said. “It worked out, but it was a tough go. I think it was hard for everyone to sort of figure out how you integrate a small brand into one of these big, big companies.”

LVMH sold Urban Decay two years later to Falic Group, a duty-free stores operator in Miami.

“They were more entrepreneurial, and that was a great fit for us,” Zomnir said. “We really thrived with them. At that point, I met Tim Warner and begged him to join us, and he agreed.”

Warner, Urban Decay’s chief executive, focused on the “operational side of things and sales,” while she devoted her time to product development.

“And that’s the role he and I still have right now—we tag team it,” Zomnir said.

The period also marked change in the company’s strategy, which shifted to “reduced distribution, doing few things really well and being important to the No. 1 retailer in the U.S., and that’s Sephora,” Warner said.

Newton, Mass.-based private equity firm Castanea Partners took over Urban Decay in 2009.

“We both learned from each other,” Zomnir said. “I don’t know that they knew as much about beauty and personal care, and I think that they definitely brought some expertise to the table in terms of different ways of looking at the business.”

Urban Decay employs about 350 people around the world, of which about 100 work in Newport Beach. It launches products four times a year and does the marketing for them in-house.

Could Zomnir, back in the early days when she started out with Lerner, imagine this level of success?

“No,” she said, laughing. “I think our idea was we do this a couple of years, and something else would come up.”

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