Soft fragrance sales widened the quarterly loss for Elizabeth Arden Inc. as the company also experienced the negative impact of a strong U.S. dollar amid efforts to reposition the brand and restructure the firm.
The third-quarter loss came in at $35.1 million, or $1.18 a share, which compares to a loss of $26.4 million, or 89 cents a share, in the same period last year. Sales fell 9.2 percent to $191.7 million. Carving out the costs associated with the company’s “Performance Improvement Plan” and other restructuring, the quarterly loss per share was 86 cents.
Sales were strained by weak results in the company’s non-Elizabeth Arden branded products, which plunged 18 percent in the quarter – led by a 12 percent decline in North America. The company was also saddled with $2.9 million worth of “currency transaction” losses.
Arden said declines in sales of “non-Elizabeth Arden branded fragrances reflect lower sales of celebrity fragrances, which primarily impacted the company’s North American business, and a lower level of new fragrance innovation.”
Meanwhile, Elizabeth Arden branded products gained a sales increase in the quarter of 3 percent with both North America and the international segment performing well. “Sales of the international segment and the Elizabeth Arden brand reflect increased skin care sales, particularly in Asia as a result of a new distribution strategy and the impact of prior period proactive tightening of distribution globally,” the company stated.
E. Scott Beattie, chairman, president and chief executive officer, said he was “pleased with the recent growth of the Elizabeth Arden brand that we are seeing across both our international and North American businesses, giving us confidence as we head into the re-launch of the Elizabeth Arden brand marketing campaign this fall.”
Beattie noted that the company continues to see balance sheet improvement as it navigates a restructuring. “Our balance sheet and cash flow metrics also continue to improve and remain ahead of plan, resulting in $41 million in operating cash flow through the first nine months of this fiscal year,” he said.
Regarding an outlook for the fourth quarter and full-year results, the company said it expects net sales to increase in the international segment, but with “continued declines in celebrity fragrances impacting the North America segment.” Management also expects stronger gross margins “due to better sales mix, lower discounts and realization of reduced supply chain and product costs.”
In a conference call to investors, Rod Little, chief financial officer and executive vice president, described the current year as a period of transition, “where we are working to stabilize the business and establish the foundation for healthy and sustainable future growth.”
“We remain disappointed with our absolute performance, but we are making good progress on many fronts,” he added. “While still below a year ago, our sales performance has improved as we begin to lap more like-for-like comp periods in terms of distribution and innovation pipelines.”
The cfo said the Elizabeth Arden brand will key this year. “This is our top corporate priority, and our focus is on the skin care category,” he said.