Elizabeth Arden Inc. is seeing the payoff of a larger fragrance portfolio and the repositioning of its flagship brand, with second-quarter sales gaining 8.8 percent.

This story first appeared in the February 1, 2013 issue of WWD. Subscribe Today.

But the news wasn’t all roses: Arden’s chairman, president and chief executive officer E. Scott Beattie said consumers, particularly the mass-market shopper, is feeling the pinch of the U.S. payroll tax increase and has curtailed spending as a result.

“Generally, our retail plans for the second quarter were too optimistic,” said Beattie.

Nevertheless, the company reported solid second-quarter results. Net income for the three months ended Dec. 31 rose 13.4 percent to $48.1 million, or $1.58 a diluted share, from $42.4 million, or $1.42 a share, a year earlier.

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Net sales in the quarter gained 8.8 percent to $467.9 million, compared to the year-ago period. Excluding the unfavorable impact of foreign currency translation, net sales increased by 9.1 percent. In North America, net sales increased 8.4 percent for the quarter and 13 percent for the fiscal year-to-date, driven by new launches from Taylor Swift, Justin Bieber and Nicki Minaj. Arden acquired the latter two celebrity fragrance businesses from Give Back Brands in 2012. Separately, that same year, the company also acquired the fragrance licenses of Ed Hardy, True Religion and BCBG Max Azria from New Wave Fragrances.

In the U.S., Bieber’s Girlfriend fragrance ranked number three among new launches for calendar year 2012, and Minaj’s Pink Friday ranked number six, according to Arden.

Internationally, net sales grew 11 percent in constant currency for the quarter, and 10 percent for fiscal year-to-date.

The increase, however, fell short of the company’s forecasts due to lower-than-expected sales in department stores and a weaker-than-anticipated holiday season at a major mass-market retailer.

“We saw a weak Christmas season through most of our markets and most of our channels of distribution,” Beattie told analysts during the company’s earnings call Thursday, noting that sales began decelerating after Thanksgiving.

Based on a softening in consumer spending and the seasonality of the fragrance market, Arden reduced its guidance for the second half of 2013. For the full fiscal year ending June 30, Arden expects net sales to increase by 9 to 11 percent, and for earnings per diluted share to be in the range of $2.30 to $2.50.

The company said the initial roll out of its revamped Elizabeth Arden brand to its roughly 40 flagships over the past several months is beginning to yield solid returns. “Flagship counters in the North American markets were converted earlier this fall, with all door conversions complete by the end of October. U.S. flagship doors delivered 24 percent year-over-year retail sales growth from conversion through the end of December, well in excess of the U.S. prestige category, which grew 5 percent for the second quarter,” said Beattie. He said the roll out across key international doors was more staggered, but resulted in a 9 percent lift. Arden plans to install the revamped brand to 200 more doors globally during the remainder of fiscal 2013. Beattie said the Elizabeth Arden brand is close to a $1 billion business, and reiterated that a successful restaging could double brand sales over five years.

For the first half, Arden’s net income rose to $61.5 million, or $2.02 a diluted share, compared to $51.6 million, or $1.73 a share, in the year-earlier period. Net sales for the six months, gained 10.8 percent to $812.5 million, up from $733.5 million.

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