Inter Parfums, Inc. reports 2015 second quarter results
Inter Parfums, Inc. reports 2015 second quarter results
Inter Parfums, Inc.reported results for the second quarter ended June 30, 2015. Jean Madar, Chairman & CEO of Inter Parfums, Inc. noted, "As was the case in the first quarter, second quarter sales for European-based operations were lower than those of the 2014 second quarter due to three primary factors: currency fluctuations, difficult comparisons and weakness in certain markets. The greatest headwind came from the 19% depreciation of the euro versus the dollar, which served to mask sales growth for some brands, and exacerbate declines for others. Additionally, some brands had challenging comparisons against very strong new product launches in the second quarter of 2014. For example, our largest brand, Montblanc, experienced a 23% decline in local currency and a 38% reduction in dollars due largely to the high bar set by the launch of Emblem in the second quarter of last year. Lastly, the economic environments in some of our markets, particularly Eastern Europe and China, have weakened in 2015. For instance, brand sales for Lanvin, another one of our largest names, were down 9% and 27% in local currency and dollars, respectively, largely due to weak demand in Eastern Europe, where the brand is especially popular. Partially offsetting these declines, Jimmy Choo once again delivered very positive results. Continued excitement over the Jimmy Choo Man line, particularly in the U.S., along with the women’s fragrance, Jimmy Choo Blossom, which launched earlier this year, combined to generate sales growth of 62% in local currency and 30% in dollars for the brand.
"Our U.S.-based operations delivered solid growth in the second quarter," continued Mr. Madar. "The 6% increase in sales during the period reflects the successful launches of Extraordinary by Oscar de la Renta and Icon by Dunhill earlier this year. Mitigating some of these gains was the decline in Anna Sui brand sales, due to continued negative market conditions in China. Anna Sui product sales were down 24% in the second quarter of 2015 as compared to the prior year second quarter.
"Looking ahead through this year and next, we remain optimistic about our prospects. One reason for our optimism relates to the launch of several new fragrances, including this month’s debut of Jimmy Choo Illicit. For Montblanc, our plans call for the unveiling of Lady Emblem during the second half of 2015, which should boost brand sales as the year progresses and into 2016. Lanvin sales should also benefit from new launch activity in the coming months, with the introduction of a new scent for women, Éclat de Fleurs. For our U.S. brands, this October we will be launching Romantica, a new women’s scent from Anna Sui. In addition, we are continuing the global roll out of new products introduced under the Oscar de la Renta and Dunhill labels earlier this year.
Mr. Madar concluded, "With respect to growth drivers for 2016, in early June of this year, we closed on our acquisition of the Rochas brand, and have begun work on developing new fragrances and marketing programs to capitalize on the potential of this brand. We are doing the same with Abercrombie & Fitch, Hollister and Coach, and expect them to spur growth for Inter Parfums in the coming year and beyond."
Discussing factors impacting profitability, Russell Greenberg, Executive Vice President and CFO of Inter Parfums, Inc. stated, "Gross profit margin for our European operations was 62.9%, up 320 basis points from the second quarter of 2014 as a result of the strength of the U.S. dollar against the euro. A strong dollar has a positive impact on the profitability of our European operations as nearly 50% of our European operation’s sales are denominated in dollars, while most of our costs are incurred in euro. During the second quarter of 2015, the average dollar/euro exchange rate was 1.11, a 19% strengthening of the dollar as compared to 1.37 in the second quarter of 2014. Gross margin for our U.S. operations, although down 210 basis points in the second quarter of 2015 compared to the prior year, improved 280 basis points for the six months ended June 30, 2015, compared to the prior year period, driven by a favorable mix shift towards newer fragrances from our prestige brands such as Oscar de la Renta and Dunhill. The increase in selling, general and administrative expenses as a percentage of net sales reflects reduced absorption of fixed costs in our European operations due to the lower sales level during the quarter. In our U.S. operations, selling, general and administrative expenses as a percentage of sales was flat with the prior year quarter, as royalty and advertising expenses rose proportionately to the sales increase, primarily related to more recently signed prestige product licenses, Oscar de la Renta and Dunhill."
Mr. Greenberg pointed out, "We closed the quarter with working capital of $342 million, including approximately $229 million in cash, cash equivalents and short-term investments, and $89.7 million of long-term debt, relating to the term loan we entered into to finance the Rochas acquisition."
Mr. Greenberg concluded by saying, "We currently expect 2015 net sales to come in at a range of $460 to $470 million, resulting in net income per share attributable to Inter Parfums in the range of $0.95 to $1.00 per diluted share. Our current guidance takes into account continued negative market conditions prevailing in China and Eastern Europe. Our guidance also assumes the dollar remains at current levels."
Russell Greenberg, Exec. VP & CFO