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Physicians Formula Profits Leap

Third-quarter profits at Physicians Formula Holdings Inc. grew to $1.7 million, or 12 cents a diluted share, from $102,000.

AZUSA, Calif. — Third-quarter profits at Physicians Formula Holdings Inc. grew to $1.7 million, or 12 cents a diluted share, from $102,000, or a penny a share, in the same period a year ago because of tax benefits and a shift in timing of inventory returns.

The cosmetics firm, a leader in the bronzer market that produces mineral makeup and a brand called Organic Wear, registered sales of $20.3 million during the quarter ended Sept. 30, a 2.3 percent rise from $19.8 million in the year-ago period that was driven in part by a 30 percent increase in eye makeup sales.

Citing ACNielsen retail sales data, Physicians Formula said it held an 8 percent market share of the masstige market for the year ended Oct. 4, a category the firm defines as premium-priced products sold in the mass market. For the same period ended a year ago, the firm noted, its share of masstige was 7.7 percent.

“We have reached a new growth phase,” Ingrid Jackel, the firm’s chairman and chief executive officer said during a conference call with Wall Street analysts Monday, discussing a plan to revamp the firm’s marketing approach. Rather than marketing the brand item by item, the strategy will be to undertake “broader marketing initiatives,” according to Jackel.

For instance, in early 2009, the brand plans to unveil advertising with a new logo and imagery. Each advertising page is to have a claim and a response, she noted, and the tag line, “Your beauty, our passion, we promise.”

The firm’s gross margin improved 21.6 percent to $11.8 million, while operating income more than doubled.

Year to date, net income was up 21.7 percent to $4.7 million, or 32 cents a share, from $3.9 million, or 27 cents, in the first nine months of 2007. Sales grew 10.5 percent to $85.8 million, compared with $77.6 million last year.

“In light of the consumer environment,” said Jackel, “we’re pleased with results to date.”

The firm forecast that net sales for the full year would be between $120 million and $123 million, an 8 to 10 percent increase from 2007. Earnings per share are projected to be in the 52-cent to 57-cent range.