Elizabeth Arden Reports Q4 Loss

The company said earnings were hit by weak sales trends, slower than expected sales of its flagship brand and a hotly competitive U.K. business.

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Elizabeth Arden Inc. is dealing with the weight of overhauling its flagship brand.

This story first appeared in the August 9, 2013 issue of WWD.  Subscribe Today.

The company — which began introducing a leaner, revamped Elizabeth Arden brand to key retail doors in October — said sales were slower than expected, ticking up less than 1 percent in fiscal 2013, as opposed the company’s forecasted gain of 4 percent.

During Arden’s earnings call Thursday, chairman, president and chief executive officer E. Scott Beattie said weak sales trends at a major, unnamed mass retailer in the U.S. and a hotly competitive and promotional market in the U.K. further hampered performance in the fourth quarter.

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Arden reported a fourth-quarter net loss of $5 million, or 17 cents a diluted share, compared with net income of $3.6 million, or 12 cents a share, in the year-earlier period. The results prompted the company to reduce its guidance for 2014: It now expects net sales to increase by 3 to 5 percent for the year, and to be flat to down 1 percent in the first quarter.

The news sent Arden shares down by more than 20 percent on Thursday morning. Shares closed at $33.56, or down 16.7 percent, on the Nasdaq.

Beattie assumed all responsibility for the loss, going so far as to issue an apology.

“[I would like to begin] by apologizing to our shareholders and analysts and certainly my colleagues at Elizabeth Arden for the poor execution and performance this year,” he said. “I take full responsibility as the ceo of Elizabeth Arden to address the deficiencies in our execution, particularly the predictability and consistency of our business execution.” He continued, “We are focusing in a very intense way against our largest markets and our largest brands…to make our biggest brands bigger in the largest, fastest-growing markets.”

On the Elizabeth Arden front, the company said that in the flagship doors where it’s reintroduced the brand, sales have grown 20 percent in North America and 17 percent in international doors — despite trimming the brand’s total stockkeeping units by more than 30 percent.

Arden’s net sales for the three months ended June 30 gained 0.8 percent to $267.6 million, compared with $265.5 million in the year-ago quarter. At constant exchange, net sales gained 1.2 percent.

In North America, net sales in the quarter gained 1.9 percent to $156.2 million, while international sales ticked down 0.8 percent to $111.4 million.

For the full year, net income declined 29.1 percent to $40.7 million, or $1.33 a diluted share, compared with $57.4 million, or $1.91 a share, in the prior year. Net sales for the year gained 8.1 percent to $1.34 billion, compared with $1.24 billion. At constant currency, net sales gained 9.6 percent.

In North America, net sales for the year gained 10.2 percent to $857.5 million, and international sales gained 5.9 percent to $487 million.

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