Byline: Katherine Weisman / Jennifer Weil

PARIS — The stock price of Clarins tumbled 16.96 percent here Friday after the company said first-half profits had plummeted by 54.1 percent, primarily due to extraordinary items.
Clarins stock closed Friday on the French stock exchange at $92 (550 francs) a share.
The cosmetics company, a market leader in Europe, said first-half profits fell to $11.1 million (66.3 million francs) at current exchange rates, compared with the first half last year, when earnings totaled $24.25 million (144.6 million francs). Profits would have fallen 76.3 percent at constant exchange rates.
Much of the difficulty stemmed from costs such as the firm’s controlling investment in Thierry Mugler’s fashion business.
“We had an enormous amount of extraordinary items,” said a Clarins spokesman. “These included costs incurred in changing over Mugler Triumvirat [Mugler’s couture company] to a U.S. accounting system from a French system; a convertible bonds issue, and higher French taxes.”
The latter two elements created a loss of $3.8 million (22.9 million francs).
Clarins also reported that Mugler Triumvirat depreciated the lease-hold right of its Paris boutique and revised downward the value of some corporate assets.
Consequently, Mugler Triumvirat’s net loss was $5.8 million (34.6 million francs).
Without exceptional elements and excluding Mugler Triumvirat, Clarins’s net profits would have been $20.77 million (123.8 million francs), down 16 percent. This drop is mainly due to a recent increase in French corporate taxes. Operating profits fell by only 2.4 percent to $39.56 million (235.8 million francs).
For the second half, the company is integrating its increased stake in Mugler Triumvirat, which totals 83.5 percent.
This move could push operating profits down by about 15 percent, according to Clarins. Prior to July 1, Clarins owned 39.4 percent of Mugler Triumvirat.
For the second half, sales should continue at the same pace, according to the company. Yet Clarins’s goal of having profit growth stay abreast of sales growth will not be met due to extraordinary costs, higher taxes and promotional expenses, according to the company.
For the year ended June 30, Clarins reported a volume of $282 million (1.682 billion francs), an increase of 13.2 percent over the previous year.

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