Elizabeth Arden Inc. is breaking out the smelling salts in a bold move intended to awaken a “sleeping giant” with the overhaul of its flagship Elizabeth Arden brand.
“This is transformational,” chairman, president and chief executive officer E. Scott Beattie told analysts during the company’s second-quarter earnings call on Thursday, emphasizing that the effort has the potential to double the size of the Elizabeth Arden brand. It, in turn, could also double the total company’s revenue, which for 2011 was $1.18 billion.
“If successful, this will more than double the size of [the brand’s] business to $1.6 billion in retail sales,” said Beattie. “This repositioning touches every element of the brand,” he added, from the packaging of every item to in-store displays. The company also has jettisoned unproductive items from the line.
“The single biggest opportunity we have in our portfolio to grow the revenue and the profitability of our business is to grow the Elizabeth Arden brand.…It’s going to put us on a different level of our performance as a company,” said Beattie.
Nevertheless, on Thursday morning shares declined more than 10 percent, reaching a low of $31.57 on the Nasdaq, since the company’s third-quarter guidance of sales growth of 3 to 5 percent was lower than some analysts had anticipated. By the afternoon, shares had rebounded to close at $38.36.
Several analysts zeroed in on the $6 million in costs associated with the brand revamp, to which Beattie replied, “The best investment we can make is to drive the Elizabeth Arden brand.” Calling the stock-market reaction “shortsighted,” he said, “It’s the single most profitable part of our business. It’s the most global brand we have and it’s the biggest brand.”
The ultimate goal, said Beattie, is to land Elizabeth Arden a spot among the top 10 beauty brands, up from its current rank of 15.
Its positioning aims to edge higher as well, as the company intends to catapult the brand into the luxury, spa-inspired tier. A tighter distribution strategy will likely tie into that plan, as Beattie said the brand may exit certain doors or retail formats that do not fit its luxury positioning. Beattie noted that many retailers have long referred to Elizabeth Arden — considered one of the four founding brands of the American cosmetics industry — as “the sleeping giant.”
In late August, the revamped Elizabeth Arden brand is slated to enter 50 key retail doors globally, and then begin to roll out to a broader swath of retailers over the first half of next year. The company also plans to relaunch the brand’s Web site in the fourth quarter with a design and content that “intends to educate and inspire.”
Ahead of the introduction, the brand is already showing momentum. The total Elizabeth Arden business — which includes skin care, color and fragrance — gained 11 percent in the quarter compared to last year, said Beattie.
The company reported Thursday that for the three months ended Dec. 31, Arden’s net income gained 24.7 percent to $42.4 million, or $1.42 a diluted share, up from $34 million, or $1.19, in the year-ago quarter. Net sales in the quarter gained 6 percent to $429.9 million, from $405.6 million in the year-earlier period. Excluding the impact of foreign currency translation, net sales gained 5.8 percent.
For the first half, net income gained 33 percent to $51.6 million, or $1.73 a diluted share, from $38.8 million, or $1.37 a share, from the same period a year ago. Sales for the six months gained 6.2 percent to $733.5 million, or 4.7 percent, excluding the impact of foreign currency translation. Revenue in North America gained 3.2 percent to $480 million, outpaced by international sales, which gained 12.4 percent to $253 million.
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