WWD.com

LOS ANGELES The smell of something new is in the air at Gap Inc., which today is set to announce that it has signed an exclusive agreement with Inter Parfums Inc. to design and manufacture fragrance and personal care products under the Gap and Banana Republic brand names.

It is an unusual move for the company, which has handled its fragrance needs in-house. But the initiative is in line with the goals of Paul Pressler, Gap Inc.'s president and chief executive officer, to improve the product offering and reinvigorate the 35-year-old, $16 billion company.

Gap same-store sales in June rose 3 percent, while Old Navy was flat and Banana Republic dropped 6 percent. The company in April revealed a refurbished look for its Gap stores and announced its new Forth & Towne brand, scheduled to debut this fall.

"Personal care products are a natural extension of our brands and represent an organic growth opportunity for our company," Pressler said in a statement. "Inter Parfums is an exceptionally creative company and has extensive expertise in building high-quality personal care products. Their ability to transform personal care concepts into products complements our core strengths in branding and marketing."

Inter Parfums is the producer and marketer of the red-hot Burberry fragrances, particularly the Burberry Brit brand.

"For us, it's going to add a whole new dimension, as it's a whole new entry into the specialty retail business," Jean Madar, chairman and ceo of Inter Parfums, said in an interview. "For us to have a brand like Gap and Banana Republic, we feel like a Russian violinist who has been given a Stradivarius."

The challenge will be to translate the essence of such an iconic brand into a line of product that fits the company's core consumer, he said.

"But we are good at translating clothing spirit into fragrance and personal care," Madar said.

Inter Parfums will be responsible for product development, formula creation, packaging and manufacturing, while Gap Inc. will be responsible for marketing and selling the products in its stores.

Although the line has not been set, potential products include fragrance, makeup, bath and body care and home fragrance products. Gap Inc., which first launched personal fragrances in 1994 at its Gap stores and in 1995 at Banana Republic, is to debut the lines at Banana Republic in the fall of 2006 and at the Gap in 2007.

Terms of the deal and sales projections were not disclosed.

"We are not just launching a perfume," Madar said. "It's a very ambitious product launch. It's a matter of first looking at what kind of lifestyle [the customer has]. Then we are launching a total regimen of product, so all of these products will have a good reason to exist."

Madar said that talks with the Gap began about six months ago and that this project is the largest one in which his company has been involved.

In a separate deal, Old Navy and skin care maker Kiss My Face have signed an agreement under which Kiss My Face will create an exclusive body care collection for Old Navy that is scheduled to bow in October.

Inter Parfums, a publicly traded company, develops, manufactures and distributes perfumes and cosmetics as the worldwide licensee for S.T. Dupont, Paul Smith, Christian Lacroix, Celine, Diane von Furstenberg and Lanvin in addition to Burberry. The company also has a controlling interest in Nickel SA, a men's skin care company.

"It makes a lot of sense to grow into the beauty category," said Laure De Metz, senior director of personal care for Banana Republic. "They are all very natural extensions of apparel brands, and if you look in the marketplace, there are a lot of apparel brands who have expanded into beauty."

"We didn't want the traditional licensing deal you would find in the marketplace," De Metz said, referring to the majority of licensing deals where the licensee not only creates the product but markets and sells it as well. "We needed to invent something different. To a certain extent you give away your brand [with traditional licensing deals], but with this we take over and are in charge of our brand and the concept and selling."

De Metz said that for the Gap, which is used to working in-house, the challenge will be for the two companies to work together as one team. She said she is not concerned that it will pose a problem.

"[Inter Parfums] has proven that they have been able to capture the essence of a brand and unlock that in the beauty arena," De Metz said. "Their team is very engaged and dynamic, and the excitement is that there is huge untapped potential. It feels like a white canvas."