NEW YORK — Robust sales growth helped Elizabeth Arden Inc. reduce its losses in the fourth quarter and eradicate them entirely for the year.
This story first appeared in the March 20, 2003 issue of WWD. Subscribe Today.
The company also announced that Paul West has been promoted to president from executive vice president, a title formerly held by chairman and chief executive officer E. Scott Beattie. West continues as chief operating officer.
For the three months ended Jan. 31, the Miami Lakes, Fla.-based fragrance and beauty manufacturer reported a net loss of $440,000, or 2 cents a diluted share. That compares with last year’s much greater loss of $20.1 million, or $1.14. Earnings per share beat the Wall Street estimate by 3 cents. Excluding $913,000 paid in dividends on preferred stock, the firm would have earned $473,000.
Net sales for the period rose 17.7 percent to $169.8 million from $144.2 million a year ago.
Looking ahead, Arden estimated for the year ending next January diluted EPS growth of 20 to 25 percent on net sales growth of 5 to 7 percent, assuming there is no impact from changes in exchange rates.
The improved results and rosy outlook, along with an upgrade in its Standard & Poor’s outlook to stable from negative, launched Arden shares $1, or 9.8, to close at $11.24 in Nasdaq trading Wednesday.
“We are building market share in our fragrance portfolio and our skin care and hair care portfolios,” said Beattie on a conference call with analysts. “Our mass retail market in the U.S. was up over 20 percent, and our international business was up over 20 percent. The U.S. department store business continues to be a generally difficult environment for all beauty-related companies. From a brand portfolio, all our key brands were up on a global basis. In terms of the Elizabeth Arden brand, our skin care business was up 5 percent on a global basis, our color business was up 5 percent and our fragrance portfolio was up 16 percent.”
Beattie said the growth of the fragrance business was primarily a function of the launch of Arden beauty, which did particularly well in the international retail marketplace.
Beattie also credited restructuring initiatives begun early in the year for the improved results. Among the changes, Arden consolidated three distribution facilities into two, moved various services previously provided by Unilever into either in-house operations or to lower-cost providers and restructured its U.S. department store business.
These contributed to a 250-basis-point decline in selling, general and administrative expenses as a percentage of sales for the year to 28.8 percent, or $216.5 million, versus 31.3 percent, or $208.9 million, a year ago. The lower relative costs were achieved despite a 25 percent increase in advertising spending.
Overall, for the full fiscal year, the company reported profits of $14.5 million, or 78 cents a diluted share. By comparison, last year Arden lost $33.3 million, or $1.92. Excluding payments for dividends on preferred stock in both years, earnings would have been $18.2 million versus a loss of $29.8 million a year ago.
Sales for the year increased 12.6 percent to $752 million from $668.1 million in the prior year. On a constant currency basis, net sales gained 11 percent.
Also on the call, the firm broke out full-year sales to the firm’s biggest customers.
“Our mall-based department store channel declined,” said West. “For example, May Co. was down 12 percent and Federated was down 13 percent. Dillard’s, however, was up 1 percent and J.C. Penney was up 1 percent. Wal-Mart increased 49 percent and Target increased 52 percent. Rite Aid grew 13 percent, Walgreens was up 3 percent and CVS declined 16 percent. Our travel retail business increased 14 percent.”