Wall Street apparently likes the look and scent of the Liz Claiborne-enhanced Elizabeth Arden Inc.
Shares of Arden beefed up $1.75, or 10.3 percent, to close at $18.80 in Nasdaq trading Thursday after the company matched estimates with a charge-heavy net loss in the fourth quarter but provided upbeat guidance for the year ahead, a good deal of it based on the ability of the Liz Claiborne roster to reenergize a North American business that sputtered in the just-concluded year.
For the final quarter of 2008, ended June 30, the New York-based beauty concern registered a net loss of $10.4 million, or 38 cents a diluted share, versus net income of $9.6 million, or 33 cents, in the year-ago quarter.
Stripping out charges to reflect the addition of the Liz Claiborne brand portfolio, related product discontinuation costs and restructuring expenses, adjusted earnings came in at $6.3 million, or 22 cents a share, matching analysts’ consensus estimates, versus $9.9 million, or 34 cents, in the 2007 quarter. Adjusted gross profit receded 1.4 percent, to $105.1 million, and increased, to 43.9 percent from 43.5 percent, as a percentage of sales.
Elizabeth Arden acquired the global licensing rights to Liz Claiborne’s fragrance brand portfolio, which includes Juicy Couture, Lucky Brand and other scents, in May, moving beyond its previous relationship as a distributor for Liz Claiborne fragrances in the U.S. mass channel.
E. Scott Beattie, chairman, president and chief executive officer of Elizabeth Arden, said, “As we look to fiscal 2009, we expect the Liz Claiborne transaction to provide us with significant incremental sales and earnings growth, particularly in our North America fragrance business.” Calling the transition “on track,” he pointed out that the sales organization had been strengthened “with minimal incremental head count additions to our sales force, and all of the key marketing personnel associated with the Liz Claiborne fragrances already have joined us in our New York City offices.”
Falling slightly below the consensus estimate of $237.6 million, sales declined 2.6 percent to $236.3 million from their year-ago level of $242.7 million. Revenues were down slightly more, 3.8 percent, when the favorable effects of foreign currency translation were excluded.
Of greater concern was the performance of the company’s fragrance business in North America, responsible for 60 percent of company revenues. While international business for the year grew 9.2 percent — 4.2 percent without currency fluctuation — the North American component declined 1.5 percent and, Beattie told a Thursday morning conference call, business in U.S. department stores declined “about 14 percent.”
The ceo said that department store business had improved somewhat in the fourth quarter but that the company had seen “continued weakness in the North American consumer,” a softness expected to extend at least into the first half of fiscal 2009.
The company introduced 2009 earnings guidance of $1.65 to $1.85 a diluted share based on expectations of a 12.5 to 14 percent increase in sales. Apart from the addition of the Liz Claiborne brands, “modest growth” is expected in the U.S. and Europe.
“We do expect to see continued growth in our international business with the exception of certain of the European markets where we see weakness, but our growth is going to be modest across our existing brand portfolio and obviously significant double-digit growth as a result of the integration of the Liz Claiborne brand portfolio,” Beattie said on the call.
He noted upcoming fall launches of the Viva la Juicy fragrance from Juicy Couture, the company’s first fragrance under a license from Rocawear, and new scents from Mariah Carey and Usher. A new Elizabeth Arden fragrance is set for a spring launch.
The company also expects to benefit from improvements in its supply chain and logistics, realizing savings of between $10 million and $12 million in the new year and up to $15 million in fiscal 2010.
For the year, net income declined 46.7 percent to $19.9 million, or 68 cents a diluted share, from $37.3 million, or $1.30, in 2007. Excluding charges, EPS matched estimates of $1.31 a share versus the year-ago mark of $1.36. Sales grew 1.2 percent to $1.14 billion from $1.13 billion with China and Eastern Europe making significant contributions.
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