By  on November 4, 2005

NEW YORK — Citing a higher number of returns as well as weaker sales in key markets, Elizabeth Arden Inc. reported a decline in earnings on more robust total sales — thanks to Britney's Fantasy — for the first quarter.

Net income for the quarter ended Sept. 30 dropped to $1.9 million, or 6 cents a diluted share, from $4.8 million, or 16 cents a diluted share, a year ago. Net income results for the first quarter exclude the impact of a new program that expenses stock-based compensation.

Net sales at the company rose 7.2 percent to $227.4 million from $212.2 million in the prior year. The company said the launch of its new Fantasy Britney Spears fragrance in U.S. department stores and the Elizabeth Arden After Five fragrance in the international markets drove the sales growth.

"Despite a volatile economic environment and decreasing consumer confidence, we are pleased with the sales growth and product launches during the first quarter. The Fantasy Britney Spears fragrance, which was launched into U.S. department stores in September, is off to a strong start and currently ranks as the number-one or number-two fragrance launch with most retailers," said E. Scott Beattie, chairman and chief executive officer, in a statement.

The company's gross margin rate fell to 39.2 percent in the quarter from 42.2 percent in the prior year. The drop was partly attributable to a weak sales performance and higher returns provisions in Western Europe, according to a company statement.

Poor performance in a gift-with-purchase program for the Elizabeth Arden brand was also a factor. Additionally, the company said, the launch of the new Britney Spears fragrance increased advertising and marketing costs at the company.

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