NEW YORK — Shares of Elizabeth Arden Inc. plunged more than 28 percent Thursday after the beauty product maker said that it would be in violation of loan covenants, incur a fourth-quarter loss and cut one-tenth of its U.S. workforce.
The Miami-based company said that, following a weak holiday season, it will not be in compliance with certain of the covenants in its credit facility but that it will seek, and expects to get, a waiver for the fourth quarter and an amendment of certain covenant levels for fiscal 2003.
Arden said Thursday that it now expects a fourth-quarter loss of $1 million to $4 million on an EBITDA basis, excluding $2 million in restructuring costs.
The Miami-based maker of skin care products and perfumes, formerly known as FFI Fragrances, also said it will cut 100 jobs from its U.S. staff, or 10 percent of its domestic head count.
Shares dropped $3.94, or 28.1 percent, to $10.06 in Nasdaq trading Thursday, coming within 28 cents of the stock’s 52-week low of $9.50 at one point in intraday trading. Credit-rating agency Standard & Poor’s placed the firm on CreditWatch with negative implications and lowered its debt ratings, including dropping its corporate rating to “B” from “B+” based on its “below-average business and financial profiles, integration risk result from the acquisition of Unilever’s Elizabeth Arden business, highly seasonal sales and industry concerns about the very competitive cosmetics business.”
As reported, the company, then known as FFI Fragrances, acquired the Elizabeth Arden and Elizabeth Taylor brands from Unilever PLC last year for $240 million in cash and stock. It converted to its current corporate name last January.
Arden said it also sees fourth-quarter sales of about $160 million to $170 million. The scent maker of such products as Red Door, White Diamonds and 5th Avenue said sales to department store customers have been weak, reflecting both the difficult economic climate and the absence of any major new product introduction. The firm said the sell-through of Christmas gift sets was lower than anticipated and that department store retailers have taken a very conservative approach to post-holiday inventories.
Last month, the company began its U.S. restructuring plans, beginning with the elimination of 100 positions. Excluding restructuring costs, the headcount reduction should result in savings of roughly $7 million, excluding restructuring costs.
“Our performance in fiscal 2002 was disappointing and is not indicative of the potential of this business,” E. Scott Beattie, chairman, president and chief executive, said in a statement.
For 2003, The company has developed a number of plans to expand sales and margins while reducing costs, including several new product rollouts and increased spending for advertising and marketing. In particular, Arden said it plans to introduce a new Elizabeth Arden fragrance and expand the Ceramides skin-care line globally as well as to introduce a new fragrance in its Elizabeth Taylor line.
Arden said it expects the current difficult economic environment to continue for the first half of the year with a “modest recovery” in the travel retail market in the second half. It projected fiscal 2003 EBITDA of $95 million to $105 million, with net sales of $800 million to $840 million.