The Montblanc and Rochas brands boosted first-quarter top-line growth at Inter Parfums Inc., but wasn’t enough to offset the impact of a previously disclosed and pending tax assessment and settlement with the French Tax Authorities — which cost the company $1.9 million during the quarter.
As a result, the company is on track with its sales goals for the year, but the bottom line will continue to see the effect of the tax charges.
For the quarter ended March 31, sale gained 2.1 percent to $111.5 million from $109.2 million in the same period last year as net income dropped to $7.3 million, or 24 cents per share, from $10 million, or 32 cents. The company said the results include “the effects of a pending settlement of a tax assessment with the French Tax Authorities in the amount of $1.9 million.”
The company noted that excluding the effect of the pending settlement, net income came in at $8.7 million or 28 cents per diluted share.
Subsequently, Russell Greenberg, executive vice president and chief financial officer, said he expects 2016 net sales “to be in the range of $500 million to $510 million. Excluding the impact of the nonrecurring tax settlement, we would be on track to meet our net income attributable to Inter Parfums Inc. goal of between $1.05 and $1.10 per diluted share; inclusive of the tax settlement, we expect net income attributable to Inter Parfums Inc. to come in between $1.01 and $1.06 per diluted share.”
Jean Madar, chairman and chief executive officer, said in regard to its European business, the “top-line growth in the first quarter was largely due to the extraordinary success of the Montblanc brand and the $6.4 million in incremental sales from the Rochas brand.”
Madar described the launch of Legend Spirit was an “important growth catalyst for the Montblanc brand, which achieved sales of $35 million, up 29 percent in dollars and 32 percent in local currency, compared to last year’s first quarter.”
The ceo noted that sales of the Jimmy Choo brand of $21.4 million were “on par with last year’s first quarter as both periods benefited from recent product launches and rollouts, namely 2016’s Jimmy Choo Illicit and 2015’s Jimmy Choo Man and Jimmy ChooBlossom.”
Madar explained that the economic downturns in China and Russia, which are “two key markets for the Lanvin brand, depressed comparable quarter fragrance sales by 25 percent to $12.2 million.” The ceo was quick to note that the company hopes to “counter this trend with new flankers and seasonal scents debuting this year, as well as a new Lanvin women’s line planned for early next year.”
In the U.S., the ceo said rollouts with the Abercrombie & Fitch and Hollister brands, “as well as the new scents for the Oscar de la Renta and Agent Provocateur brands, we expect year-over-year quarter sales comparisons to improve.”
Greenberg said while various expenses “did little to move the profitability needle, the pending nonrecurring $1.9 million tax settlement recorded in the current first quarter, resulted in a 45 percent tax rate for the period. Excluding the settlement, our effective income tax rate would have been 34 percent for both the three months ended March 31, 2016 and 2015.”
As previously reported, Greenberg said the French Tax Authorities had examined the 2012 tax return of Interparfums SA, “our 73 percent owned subsidiary, and in August 2015 issued a $6.9 million tax adjustment. The main issues challenged by the French Tax Authorities related to the commission rate and Lanvin royalty rate paid to Interparfums Singapore Pte. and Interparfums SARL, respectively, both wholly owned subsidiaries of Interparfums SA.”
The cfo said that this past April, Interparfums SA reached an agreement “in principle to settle the entire matter with the French Tax Authorities. The settlement requires Interparfums SA to pay a tax assessment of $1.9 million covering the issues for not only the 2012 tax year, but also covering the issues for the tax years ended 2013 through 2015.”