USA. Elizabeth Arden has turned in a solid sales performance for the fourth quarter and fiscal year ended 30 June 2005.
FOURTH QUARTER RESULTS
Net sales advanced +21% to US$187.1 million for the three months ended 30 June 2005, from US$154.6 million in the comparable three month period of the prior year, and ahead of previously announced expectations.
This sales growth was driven by sales of the Britney Spears’ Curious fragrance to additional retailers in the USA; Curious’ continued success internationally; and increased sales of Elizabeth Arden skin care and colour products.
Excluding the favourable impact of foreign currency translation, net sales increased +19.6%.
Gross margin expanded 340 basis points to 45.1% from 41.7% in the comparable period last year, primarily reflecting greater margin contribution from the company’s owned and licensed brands this quarter versus the same period last year.
While selling, general and administrative expenses increased +18%, primarily due to increased advertising expenditures to support brand growth, selling, general and administrative expenses as a percentage of net sales decreased by 130 basis points reflecting operational efficiencies and leverage from increased sales volumes.
Net loss per share improved by US$0.24 to a loss of US$0.11 per share for the fourth quarter compared to a loss of US$0.35 per share in the prior year period.
Earnings results for the current period exclude an impairment charge of US$2.2 million related to the sale of the company’s Miami Lakes facility and disposition of related assets, net of related tax benefits.
Results for the comparable period of the prior year exclude debt extinguishment and restructuring charges as well as the accelerated accretion on converted preferred stock. On a reported basis, the Company had a loss of US$0.16 per share for the fourth quarter of fiscal 2005 compared to a loss of US$1.12 per share for same period of the prior year.
The sale of the Miami Lakes facility closed on 1 August 2005. The company used the approximately US$9.9 million in net proceeds from the sale of the facility and related equipment to repay borrowings under its credit facility.
Elizabeth Arden Chairman and Chief Executive E. Scott Beattie commented: “This was another successful year for our company, particularly from a product development and brand building standpoint. Not only did we experience significant growth for the Elizabeth Arden brand, led by the successful launch of the Elizabeth Arden Provocative Woman fragrance and the Color Intrigue cosmetics line, but we built the Britney Spears Curious brand into the number one woman’s fragrance launch.
“The Curious fragrance continues to perform extremely well with all of our retail customers globally and we expect to continue to advertise aggressively behind this brand.”
He continued: “We have a robust pipeline of product innovation and strategic initiatives planned for fiscals 2006 and 2007. The second fragrance under the Britney Spears license, Fantasy Britney Spears, is scheduled to ship into USA department stores this fall and internationally early next year. The recently announced alliance with Allergan, Inc, a leader in pharmaceutical dermatology and the maker of Botox(R) Cosmetic, will allow us to exclusively produce and market PREVAGE(TM), the breakthrough anti-aging treatment to prestige retailers worldwide.
“PREVAGE(TM), which has received an extremely enthusiastic reception from retailers, is expected to be on counters at USA department stores by the 2005 holiday season and is scheduled to launch in international markets beginning next year.
“There also is an exciting line-up of new products within the Elizabeth Arden franchise, including a new fragrance, 5th avenue after five. In addition, we have entered into an exclusive licensing agreement with International Speedway Corp, the owners of the Daytona Speedway which hosts the most famous NASCAR event, and plan on introducing a number of related products, and we have a number of other licensed properties currently in development that are expected to contribute to our revenue and earnings growth over the next several years.”
Beattie concluded: “I am also pleased to say that we just recently completed the acquisition of our Chinese distributor’s business and the establishment of our Chinese affiliate based in Shanghai. Our business in that region has grown by nearly +50% over the last two and a half years, and, as we expect this level of growth to continue, that region is obviously a priority for our business.”
FISCAL 2005 RESULTS
Net sales increased +10.6% to US$920.5 million for the fiscal year ended 30 June 2005, from US$832.0 million for the twelve months ended 30 June 2004, exceeding the company’s previous estimate for net sales between US$900 million to US$910 million.
Excluding the favourable impact of foreign currency translation, net sales increased +8.5%.
Net income was US$39.1 million, or US$1.30 per diluted share, versus US$27.9 million, or US$1.01 per share, for the prior twelve-month period and at the high end of the company’s previous estimate for earnings per diluted share of US$1.26 to US$1.30.
On a reported basis, earnings were US$1.25 per diluted share for fiscal 2005, compared to a loss of US$1.66 per share for the twelve months ended 30 June 2004.
OUTLOOK
With respect to fiscal 2006, Arden currently anticipates annual net sales will increase approximately +8.5%-+10.5% to reach between US$1.0 billion to US$1.015 billion, assuming no impact from foreign currency translation.
The Company expects to continue to increase its investment in new product development and advertising to support brand growth. Earnings per diluted share in fiscal 2006 are expected to increase to US$1.50 to US$1.55, which represents a +15% to +19% increase over the prior fiscal year, excluding charges.
On a reported basis, earnings per diluted share are expected to range between US$1.37 and US$1.42. Additionally, free cash flow is expected to range between US$65 million and US$75 million for the full fiscal year.
Looking at the first half of fiscal 2006, net sales are expected to increase +8% to +12%, and earnings per diluted share are expected to increase +8% to +10% over the first half of fiscal 2005.
The Company’s expectations for the first and second fiscal quarters reflect the timing of brand development and marketing expenditures relating to PREVAGE(TM) and the Britney Spears Fantasy fragrance; the advertising support for Curious in multiple retail channels in the first fiscal quarter; the leverage from increased sales volumes realised in the second fiscal quarter; and current holiday shipping schedules.
Considering these factors, for the first fiscal quarter ending 30 September 2005, the company anticipates net sales of US$220 million to US$230 million and earnings per diluted share of US$0.05 to US$0.06.
For the second fiscal quarter ending 31 December 2005, the company anticipates net sales of US$360 million to US$370 million and earnings per diluted share of US$1.25 to US$1.28.
Beattie concluded: “We have achieved significant operational and financial improvements over the last several years. We intend to continue to intensify the reinvestment of these savings into our brand-building efforts, both in established and emerging markets, such as greater China, Latin America and Eastern Europe, and thereby drive our top line and increase brand value.”
MORE STORIES ON ELIZABETH ARDEN
Elizabeth Arden gears up for fragrant second half – 11/05/05
Elizabeth Arden teams up with Allergan to market new dermatology PREVAGE anti-ageing line – 05/05/05
Elizabeth Arden gets set for summer with new cosmetics launches – 02/03/05
Britney’s fragrant hit boosts Elizabeth Arden results – 03/02/05
