By  on August 11, 2005

Inter Parfums Net Falls 6%
NEW YORK — Despite strong sales, Inter Parfums Inc. reported a dip in earnings for the second quarter ended June 30 as the company faced higher royalty rates.

Net earnings were down 6 percent to $3.2 million, or 16 cents per diluted share, from $3.4 million, or 17 cents, a year prior, while sales increased 28 percent, excluding the benefits of currency exchange, to $61.3 million from $46.7 million.

Net earnings for the first half were also down, to $7.6 million, or 37 cents per share, from $8.2 million, or 40 cents. Net sales for the first half were up 26 percent to $132.4 million from $105.1 million.

The drop in profitability for the second quarter "is due to the impact of the higher Burberry royalty rate ... and marketing expenses that began in January of this year," said Russell Greenberg, executive vice president and chief financial officer, on a conference call.

The royalties for Burberry more than doubled in the second quarter, to $7.1 million, while advertising was up $2.7 million from last year. The fragrance line is still one of Inter Parfums' most successful brands, and while its costs dragged down the company's earnings, it still accounted for most of the big increase in net sales.

Overall, prestige product sales grew 44 percent in the second quarter, while mass sales declined 19 percent.

Executives on the conference call shied away from providing too many details on the company's newest venture with Gap and Banana Republic, but did say it budgeted between $1.5 million and $2.5 million in start-up expenses for the second half of the year.

Inter Parfums revised its 2005 sales and earning guidance to account for these costs and for currency translation. The 2005 year-end sales were adjusted down to $274 million from $280 million, and earnings are expected to come in at $14.6 million, or 71 cents per share.

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