Costs hit Elizabeth Arden, but prospects look strong

By Simon Pitman

- Last updated on GMT

Related tags: Elizabeth arden, Revenue

Cosmetic and fragrance giant Elizabeth Arden posted a quarterly
loss on Friday, as it was hit by restructuring costs, but with
marketing spend lower than expected and sales still strong, the
underlying results appear to be solid.

Analysts said that a quarterly loss of $0.4m, with additional restructuring charges of $0.9m, was less than expected, but the company has decided to remain cautious, stating that it is sticking to earlier forecasts that also take into account the crucial holiday trading period because of the continued integration of the newly acquired Riviera Concepts business.

However, chief executive Scott Beattie, conceded that the company's stand was probably a little conservative and said that the forecasts would probably be reviewed again in the second half of the company's financial year, which follows the holiday season.

Net sales increased a very respectable 12.1 per cent, to reach $245.8m in the three months to September 30, up from $227.4m. The company said that the sales growth was driven by the addition of a number of new brands, including the fragrances Love… Hillary Duff and Danielle, by author Danielle Steele.

The acquisition of Riviera Concepts also helped to drive results. The acquisition was announced in July of this year and included a number of high-fashion fragrance brands, including Badgely Mischka, Alfred Sung and the Hummer brand.

"We are going through the first season with a number of new brands due to the acquisitions, while continuing the integration of the acquired business into our company,"​ said Beattie. "As a result, despite the stronger than planned sales and earnings performance of the first quarter, we are maintaining our first half sales and earnings targets."

Beattie also highlighted the fact that the Riviera Concept manufacturing operations were going to be incorporated into its own manufacturing operations, which in turn should help to drive efficiencies through increased synergies.

The chief executive also stressed that the company is planning to soon exit the manufacturing facilities of Soveriegn Sales, the cosmetic distributor it bought out in August this year, which should also lead to further synergies.

The company also highlighted strong sales of its anti-aging treatment Prevage, increased shipments to mass retailers in North America and a strong retail environment in both China and Taiwan.

Under current guidelines the company is expecting that sales for 2007 will grow by 15% to 18% to reach approximately $1.10bn - $1.1bn, with first half next sales expected to reach $660m to $675m.

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