PARIS — France’s Groupe Clarins’ stock lost one-sixth of its value on the Paris Bourse since the firm warned Monday that first-half operating profits could drop 40 percent from year-ago levels.
Clarins said in a statement that its "preliminary, nonaudited, first-half 2002 operating profit shows a drop of around 40 percent versus the 2001 first-half level." It cited "the low overall level of activity, the significant underperformance of the perfume distribution and couture divisions, and an increase in the group’s overhead expenses" for the expected reduction.
The firm added that due to economic uncertainties in the second half, its full-year operating margin may not match the 9.2 percent level attained in 2001.
The warning sent Clarin’s stock down 16.7 percent Tuesday, when it closed at $36.91. It was unchanged on Wednesday. Dollar figures have been converted from the euro at current exchange rates.
In reaction, UBS Warburg, changed its investment rating on Clarins’ stock to "reduce" from "hold." Goldman Sachs cut its earnings-per-share forecast for the full year by 19 percent, to $1.95, and by 18 percent for 2003, to $2.47.
Also on Monday, Clarins reported consolidated net sales for the first half of 2002 of $435 million, up 2.8 percent compared with sales of $423 million in the comparable 2001 period.
On a like-for-like basis, with constant exchange rates and comparable corporate structure, consolidated net sales would have risen 2.7 percent.
After "a strong sales increase" in the first quarter of 2002 — at the end of April, net sales in Clarins’ cosmetics division were up 12.1 percent and the consolidated group’s net volume rose 10.3 percent — "weakening market conditions badly affected the group during the last weeks of [the half-yearly] period," the company said.
Flat or decreasing levels of consumer spending in most countries and the reduction of inventories at distributor and retailer levels contributed to Clarins’ slow growth rate, the company explained.
By division in the period, the Clarins brand posted consolidated net sales of $272 million, almost flat from $271 million in 2001; Thierry Mugler rang up volume of $79.8 million, up 16.3 percent from $68.6 million; Azzaro’s volume reached $46.5 million, up 8.8 percent from $42.7 million, while the group’s fragrance distribution business’ sales were $36.6 million, down 9.8 percent from $40.5 million.The company added that its cosmetics division performed "in line" with the group’s target of growing at twice the market’s pace.
Clarins’ fashion sales, mainly the former Mugler business, were down 12.1 percent, "following a market in recession," said the firm.
By geographical zone, first-half group consolidated sales were up 6.1 percent in Europe to $275.3 million, up 1.3 percent in North America to $102.5 million, down 3.9 percent in Asia to $34.6 million, while activity in "other regions" fell 14.6 percent to $22.5 million.
Clarins said sales growth is expected to be on the uptick in the second half, due to favorable comparisons and a stronger marketing plan, particularly in its fragrance distribution branch.
The firm’s management board therefore "remains confident" that it will be able to double market growth saleswise for the full fiscal year.
In second-quarter news, Clarins reported sales of $210.5 million, down 2.9 percent from $216.7 million in the second quarter of 2001. On a comparable basis, sales would have been down 1.2 percent.
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