By and  on December 21, 2004

Marionnaud's Much-Awaited Results

PARIS — After months of delays, Marionnaud Parfumeries published its first-half net results, which came in at steep losses of $96.9 million at current exchange rates, or 79 million euros, against net profits of $7.8 million, or 6.4 million euros, in the prior-year period.

The perfumery chain’s results for the January-through-June half were negatively impacted by $114.1 million, or 93 million euros, incurred from changes in accounting methods concerning loyalty points and the correction of errors dating back to 2002 and 2003. These included inaccurate estimations of provision calculations such as for end-of-year rebates and advertising displays paid for by suppliers.

In November, the firm had projected the impact on its profits would be around 20 million euros.

The posted losses come on sales of $632.4 million, or 515.3 million euros, up 8.5 percent on a constant basis.

“I personally assume the written errors made,” said Marcel Frydman, company president, during an analyst conference call Monday. He added that he is involved in taking steps such as instituting new internal controls with a “major international audit firm,” the appointment of a new financial director and the closing of some stores — including up to 20 in France — “so that this never happens again.”

Marionnaud said the published readjustments do not generate any cash outflow for the company.

Its net debt rose to $671.3 million, or 547 million euros, in the half.

The market had been waiting for the publication of Marionnaud’s profits since Oct. 26, the first of three dates when the company put off reporting.

Generally, analysts were pessimistic about the results.

“We reiterate our ‘Reduce’ recommendation,” wrote Alexandra Nizard, an Ixis Midcaps analyst who has been historically negative on the stock, in a research note. “We are lowering our EPS estimates by more than 45 percent. For the first time since being floated, Marionnaud has generated a historic loss. However, we wonder about the external auditors’ responsibility, notably in respect of the accounting methods applied to suppliers’ discounts since the group’s flotation. A number of capital operations (five capital increases, an issue of ABSA — shares with warrants attached — and the February 2002 issue of OCEANE, bonds convertible into new shares or exchangeable for existing shares) were thus made based on an incorrect estimate of the group’s profitability.”

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