CHICAGO - Procter & Gamble Co appears ready to expand The Art of Shaving -- the high-end shaving chain it purchased in June to provide a retail presence along with its Gillette brand.

The Art of Shaving opened its first New York shop in 1996 and is taking a strategic look at its nearly 40 stores, where customers can buy pure badger shaving brushes or luxuriate in an expert shave and purifying face mask at its barber spas.

A review set to be completed in the coming weeks should illustrate the sales growth potential if it were to expand into certain locations.

The push comes as luxury retailers struggle and shoppers in general cut back. The Art of Shaving stands to take advantage of a weakened U.S. real estate market to secure new locations, especially now that it has P&G's financial backing.

Analytics company Buxton is working on the review, which began a few months after P&G bought the chain.

They're very cautiously optimistic, not only about the business model that they have right now, but they are extremely excited about the growth potential, said Charles Wetzel, Buxton's president and chief operating officer.

The chain has started to make changes in existing stores to make them more customer friendly and more inviting, he said.

The Art of Shaving, which declined requests for interviews, is making the barber area more private in some locations. It is also utilizing richer, darker colors and improving the displays where razors, lotions and oils are sold.

Many of the chain's stores are located in big cities, with some suburban mall locations. It also has shops inside upscale stores, such as Bloomingdale's and Nordstrom.

Buxton's Wetzel predicted the chain could have 100 to 140 U.S. stores, with 20 to 40 opening each year. International expansion has not been disclosed, but he expects P&G will bring the brand first into Canada, possibly as soon as 2010.

TIES TO OTHER RETAILERS SAFE

P&G has made a concerted effort to expand in areas such as beauty and grooming, which over the past decade, has risen from 18 percent of its total sales to 33 percent, spurred largely by P&G's 2005 purchase of Gillette.

The Art of Shaving gives P&G -- already the world's largest seller of razors with Gillette -- a new way to drive profits and, unlike selling at other chains, reap the full benefits.

If (P&G knows) who the customer is, it's the same business that they are in right now, albeit they don't necessarily control the sale of the product. This way they're actually protecting their brand even more, Wetzel said.

Besides The Art of Shaving, P&G also bought men's skincare brand Zirh in June.

The Art of Shaving worked with P&G for a few years before the acquisition, with the chain selling pricey handles that could be fitted with Gillette blades.

Prices can be steep, with razor handles costing as much as $500, though many are less than $100. At stores such as Wal-Mart Stores Inc, complete razor sets sell for less than $10.

The acquisition of The Art of Shaving by P&G is a great strategic move for them to expand their business, but that doesn't really create conflict with their traditional retail business for the most part, said Marc Dietz, vice president of marketing at DemandTec.

Dietz, whose software company helps retailers and consumer products makers with analysis, said P&G's push should not significantly damage their business with other retailers who sell Gillette razor blades.

A higher-end razor handle purchased at The Art of Shaving could still be replenished with blades purchased at a mass retailer on an ongoing basis, Dietz said.

While luxury retailers are under pressure in the downturn, there is a segment of consumers that are purchasing from The Art of Shaving and, despite the recession, continue to, Dietz said. Coming out of the recession you could expect further growth there.

For now, the focus appears to be on the United States, where landlords with space to fill could be enticed by a chain that attracts upscale clientele who drop in for a shave, skin treatment or to buy products to use at home.

They draw a demographic that isn't known to necessarily go to malls that often, Wetzel said.

(Reporting by Jessica Wohl, editing by Maureen Bavdek)

Canada Retail