Arden stock falls -16% on guidance cut for H2

By Kevin Rozario |

US beauty house Elizabeth Arden yesterday revealed lower-than-expected sales in its fiscal second quarter and said it was reducing its second half revenue and earnings guidance, sparking a share sell-off.

 

In the company’s fiscal first half to 31 December, net sales of $812.5m were up +10.8% year-on-year (+12% taking out the impact of unfavourable foreign currency translation) though in Q2, sales growth slowed slightly to +8.8% year-on-year to $467.9m, below guidance.

 

Arden – whose portfolio includes Elizabeth Arden skincare, colour and fragrance products, plus celebrity scents from Britney Spears, Elizabeth Taylor, Justin Bieber, Mariah Carey, Nicki Minaj, Taylor Swift (below the Wonderstruck launch at Changi airport), and Usher – cut its H2 guidance, the reason the company says, is “based on the retail trends year-to-date and the seasonally slower fragrance market in the second fiscal half”.

 

For Q3, the company’s guidance for net sales is between $255m and $270m, while net income per diluted share is expected to be no more than four cents (in Q2 it was $1.47). As a result, in yesterday’s trading its share price opened at $36.09 (having closed the night before at $45.87) and finished the day at $38.41, a -16.3% fall.

 

Yesterday, Arden also presented forecasts for the full fiscal year ending 30 June – a net sales rise of +9% to +11%, and EPS (adjusted) of $2.30 to $2.50, both below previous forecasts, plus a gross margin rise for the year of 75 to 100 basis points.

 

QUARTER TO DECEMBER

In the final three months of 2012, Arden’s biggest market of North America, saw net sales rise by +8.4%. The company’s fragrance portfolio continued to add market share, with both prestige and mass retailers gaining 2.15% and 2.1%, respectively.

 

North American growth was driven by recently acquired brands and new launches, including Justin Bieber’s Girlfriend, Pink Friday Nicki Minaj and Taylor Swift Wonderstruck Enchanted. In prestige, the largest retail sales increases were posted by the Juicy Couture, John Varvatos and Curve fragrances. Net sales of products from the Elizabeth Arden brand – which has been undergoing a repositioning – decreased -6% for the quarter.

 

Internationally, net sales grew +11% (constant rates) for fiscal Q2, with Elizabeth Arden branded products growing +10% (constant rates) in the period.

 

Commenting on the Q2 results, E. Scott Beattie (left), Chairman, President and CEO of Elizabeth Arden, says: “Second quarter sales and earnings were up solidly from the prior year, with strong retail sales performance within our North America and international businesses. Nonetheless, our net sales results were below original guidance due to lower-than-forecasted sales in department stores as well as softer than anticipated holiday sales at one of our major mass retail accounts.

 

TRAVEL RETAIL INVENTORIES HIT

Beattie continues: “Despite strong sales growth among many of our global affiliates, international net sales were impacted by lower-than-expected inventory replenishment in our travel retail business and weakness in Greater China.”

 

“Over the course of the past few months, we successfully completed the conversion of our Elizabeth Arden flagship doors and are very excited with the momentum of sales increases. US flagship doors delivered +24% year-over-year retail sales growth from conversion through the end of December, well in excess of the US prestige category which grew +5% for the second quarter.

 

“The timing of the conversion of international flagship doors was staggered across the quarter due to retailer constraints. International flagship doors delivered +9% retails sales growth from conversion… and are gaining momentum by the week. The most recent weeks have achieved retail sales growth of +23%.

 

“Given our early success, we plan to extend key elements of the flagship model to the next tier of approximately 200 doors globally during the remainder of fiscal 2013 and drive sales growth behind the roll out of new products for our international markets during the second half of the fiscal year.”

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