By  on November 6, 2006

NEW YORK — Due to restructuring costs related to its two recent acquisitions and increased promotional spending, Elizabeth Arden Inc. posted a net loss of $1.3 million in the first quarter.

Chairman and chief executive officer E. Scott Beattie said the integration of the two companies, namely Sovereign Sales and Riviera Concepts, is on track and that the beauty firm has an appetite to bring additional beauty brands into the fold.

"We look for brands that are strong, particularly fragrance brands that have strong global demand and are established businesses that we can leverage across all of our distribution channels," Beattie told analysts during a conference call Friday. "Those are our key target acquisitions."

The company completed the acquisition of prestige fragrance distributor Sovereign Sales in August, and the purchase of Riviera Concepts Inc.'s brand licenses, including Badgley Mischka and Alfred Sung, a month earlier.

A bevy of new fragrance launches, including With Love Hilary Duff and Danielle by Danielle Steel, and its ultra-luxury skin care brand, Prevage, bolstered the company's net sales 12.1 percent to $254.8 million for the quarter ended Sept. 30, up from $227.4 million. The $1.3 million, or 5 cents per diluted share, loss in the quarter compares with a gain of $895,000, or 3 cents, in the prior year.

Regarding sales by channel, the company said its mass market business increased 12 percent, and its department store business gained 25 percent, despite the disruption of Federated Department Stores' string of store closures. Sales of the Elizabeth Arden brand soared 37 percent, helped by relocation of Prevage to its department store beauty counter. Beattie noted that international sales were up 11.5 percent, aided by a 53 percent sales surge in the Asia-Pacific region. He added that travel retail sales increased 6 percent, slowed somewhat by the liquid ban in U.S. and European airports in August and conflicts in the Middle East.

Beattie acknowledged that the Hilary Duff scent had a slower than anticipated start due to delays in producing creative materials and the TV commercial, which is slated to air in the next few weeks. As a result, the company will shift much of its promotional spending for the singer's scent to the second quarter, closer to Thanksgiving.

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