Inter Parfums Posts Second Quarter Results

Thu. August 20, 2009; Posted: 01:11 AM

In a release on August 10, the Company noted second quarter 2009 compared to second quarter 2008:

- Net sales declined to $88.6 million or 10.6 percent from $99.1 million; at comparable foreign currency exchange rates, net sales were down 3 percent for the period;

- Sales by European-based operations were $79.4 million, down 5 percent from $83.9 million;

- Sales by U.S.-based operations declined 39 percent to $9.2 million from $15.2 million;

- Gross margin for both periods was 57 percent;

- S, G & A expense as a percentage of sales was 49 percent compared to 50 percent;

- Operating margins were 7.7 percent of sales compared to 6.9 percent;

- Net income attributable to Inter Parfums, Inc. rose 12 percent to $4.2 million from $3.8 million; and,

- Diluted earnings per share attributable to Inter Parfums, Inc. common shareholders were $0.14 compared to $0.12.

Through the first half of 2009, net sales were $179.0 million, or 19.4 percent below the $222.2 million reported in the first half of 2008. At comparable foreign currency exchange rates, net sales were down 13 percent. Net income attributable to Inter Parfums, Inc. decreased 23 percent to $9.7 million or $0.32 per diluted share from $12.5 million or $0.40 per diluted share in the first half of 2008.

Jean Madar, Chairman and CEO of Inter Parfums, noted, "As we previously reported, about 6.5 percent of the second quarter sales decline was due to the continued strength of the U.S. dollar relative to the euro. Also, in the prior year period, both our European-based and U.S. based operations experienced exceptional sales growth of 19 percent and 23 percent, respectively versus the same period one year earlier. Finally, recessionary factors and their impact on discretionary spending, along with reduced inventory levels by distributors and retailers, put pressure on sales."

He continued, "Our new product pipeline for the second half of the year is vibrant on both sides of the Atlantic. The launch of the bebe signature fragrance at more than 212 bebe stores is set for this month. Next month, the scent debuts at 300 plus Dillard's stores. The launch is being supported with a print advertising program in the November issues of Cosmopolitan, Elle, and In Style. There will also be outdoor advertising on billboards and bus kiosks. Dillard's has also made a strong commitment to the bebe launch as a featured fragrance in its multi-page advertising insert in several Conde Nast publications plus inclusion in its holiday catalog. We anticipate that international distribution will begin in the fourth quarter and our plans call for distribution in 40 countries by year-end 2010."

He continued, "Brooks Brothers Black Fleece is debuting this fall. Also, two new fragrances under the Banana Republic brand, Republic of Women and Republic of Men, are coming to market in the third quarter. Finally, a new fragrance for New York & Company will be in stores later this year. Following the North American launch of Close, a new Gap fragrance in April, we are moving forward with international distribution during the second half of this year. With these new product launches domestically and internationally, together with existing distribution, we expect to curb the sales decline for our US-based operations."

With regard to European-based operations, Madar noted, "During the second quarter of 2009 we introduced an ST Dupont fragrance for women for select distribution. Van Cleef & Arpels Collection Extraordinaire is coming to market in September as is a new men's scent, Paul Smith Man. Looking further ahead, our initial plans for 2010 include a sports fragrance for men and women and cosmetics under the Burberry brand. For Lanvin, Van Cleef & Arpels and Paul Smith, also in 2010, we are creating new women's scents for each."

Discussing factors impacting profitability, Russell Greenberg, Executive Vice President & CFO, pointed out, "As was the case in the first quarter, second quarter sales mix variations offset an increase in the gross margin percentage that typically accompanies a rising dollar since approximately 35 percent of European-based product sales are denominated in dollars while costs are incurred in euro. In response to the dramatic strengthening of the U.S. dollar during the fourth quarter of 2008, we entered into foreign currency forward exchange contracts to hedge approximately 80 percent of our 2009 sales scheduled to be invoiced in U.S. dollars. As a result, for the three and six months ended June 30, we recorded foreign currency gains of $2.5 million and $3.9 million, respectively, which contributed $1.2 million and $1.9 million, respectively, to net income attributable to Inter Parfums, Inc. common shareholders."

Greenberg concluded, "Based upon our new.TEXT product launch schedule, as well as the seasonality of our business, we expect a stronger second half and remain confident that we will meet our 2009 guidance which calls for net sales of $390 million, and net income attributable to Inter Parfums, Inc. common shareholders' of approximately $21.0 million or $0.70 per diluted share, assuming the dollar remains at current levels."

Cash Dividend

The Company's next regular quarterly cash dividend of $.033 per share will be payable on October 15, to shareholders of record on September 30.

Inter Parfums, Inc. develops, manufactures and distributes prestige perfumes and cosmetics as the exclusive worldwide licensee for Burberry, Van Cleef & Arpels, Paul Smith, S.T. Dupont, and Quiksilver/Roxy. The Company also owns Lanvin Perfumes and Nickel, a men's skin care company. It also produces personal care products for specialty retailers under exclusive agreements for Gap, Banana Republic, New York & Company, Brooks Brothers and bebe brands. In addition, Inter Parfums produces and supplies mass market fragrances and fragrance related products.

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