INTER PARFUMS, INC. REPORTS 2016 SECOND QUARTER RESULTS
Inter Parfums, Inc. has reported results for the second quarter ended June 30, 2016.
Second Quarter 2016 Compared to Second Quarter 2015:
- Net sales were $117.2 million, up 14.8% from $102.0 million; at comparable foreign currency exchange rates, net sales increased 14.2%;
- Net sales by European based operations rose 14.8% to $88.6 million compared to $77.1 million and net sales by U.S. based operations increased 14.8% to $28.6 million compared to $24.9 million;
- Gross margin was 63.5% of net sales compared to 59.1%;
- S,G&A expenses as a percentage of net sales was 53.7% compared to 51.1%;
- Operating income increased 39.0% to $11.5 million from $8.2 million;
- Operating margin rose to 9.8% compared to 8.1%; and,
- Net income attributable to Inter Parfums, Inc. increased 34.0% to $5.8 million or $0.19 per diluted share compared to $4.4 million or $0.14 per diluted share.
Discussing the Company’s European based operations, Jean Madar, Chairman & CEO of Inter Parfums, Inc., stated, “Once again, Montblanc, our largest brand, drove our top line growth with brand sales of $26.3 million, up 32% from last year’s second quarter. This growth was primarily due to strong sales of the newly launched Legend Spirit line and the ongoing success of the original Legend line. Our second largest brand, Jimmy Choo, also had a strong second quarter with brand sales up 43% to $22 million, reflecting wider distribution of Illicit, which debuted last year, and the steady performance of Jimmy Choo Man, which launched in 2014. Rochas fragrances contributed $8.9 million to second quarter sales resulting from sales of legacy scents in the brand’s core markets of Spain and France. Lanvin fragrance sales declined 19% to $12.4 million due primarily to the economic slowdown in two of its primary markets, Russia and China. We hope to counter this trend with a new Lanvin women's line Modern Princess, launching in selected markets this fall and internationally in 2017.
“Our U.S. based operations delivered solid growth in the second quarter,” continued Mr. Madar. “The launches of our first new Abercrombie & Fitch men’s scent, First Instinct, and the Hollister duo, Wave, began in late spring and were major contributors to our second quarter sales growth. In addition, Dunhill fragrances continue to be consistent top performers, achieving an increase of 23% in brand sales for the period.”
Regarding sales drivers in the second half of the year, Mr. Madar pointed to the debut of the first Coach scent for women, a signature scent aptly named Coach, and the continued rollout of the new Abercrombie & Fitch and Hollister scents, plus the launch of Icon Elite by Dunhill.
Mr. Madar went on to say, “Thus far this year, our two largest markets were also our two fastest growing markets with sales in Western Europe and North America up 44.6% and 10.5%, respectively. Despite negative market conditions in China, our overall sales in Asia, our third largest market, are slightly ahead of the first half of last year.”
Discussing factors affecting second quarter profitability, Russell Greenberg, Executive Vice President and CFO of Inter Parfums, Inc., stated, “The improvement in our blended gross profit margin was attributable to both our European and U.S. operations. For European operations, gross profit margin was 67% as compared to 63% in last year’s second quarter with the increase primarily the result of increased product sales through our own distribution subsidiaries directly to retailers. In addition to increased Montblanc and Jimmy Choo brand sales to retailers through our United States distribution subsidiary, a significant portion of Rochas brand sales were to retailers through our own distribution in France and Spain. For U.S. operations, gross profit margin was 53% as compared to 47% in last year’s second quarter, due primarily to the shift in product mix favoring higher margin prestige product sales. For both European and U.S. operations, the increase in selling, general and administrative expense, both in dollars and as a percent of sales, was primarily due to higher promotional and advertising expenses, which reflects our commitment to supporting new product launches, and sustaining the sales momentum of our best sellers.”
He continued, “Below the operating line, the main noteworthy second quarter comparison would be the $661,000 foreign currency gain in the current period versus the $80,000 foreign currency loss in the same period one year earlier. Our effective income tax rate was 36% as compared to 34%, however, we expect our effective rate, excluding the previously reported pending settlement with the French Tax Authorities, to be approximately 35% for the full year ending December 31, 2016.”
Mr. Greenberg also pointed out, “Our balance sheet remains very strong. We closed the quarter with working capital of $338 million including $232 million in cash, cash equivalents and short-term investments. Our long-term debt, a five-year term loan aggregated $89.9 million at mid-year.”
Mr. Greenberg concluded by saying, “We continue to expect 2016 net sales to be in the range of $500 million to $510 million. Excluding the impact of the previously reported tax settlement, we are on track to meet our net income attributable to Inter Parfums, Inc. goal of between $1.05 and $1.10 per diluted share; inclusive of the tax settlement, we expect net income attributable to Inter Parfums, Inc. to come in between $1.01 and $1.06 per diluted share.” Guidance assumes the dollar remains at current levels.
Founded more than 30 years ago, Inter Parfums, Inc. is a premier fragrance company with a diverse portfolio of prestige brands that includes Abercrombie & Fitch, Agent Provocateur, Anna Sui, Balmain, Banana Republic, bebe, Boucheron, Coach, Dunhill, Hollister, Jimmy Choo, Karl Lagerfeld, Lanvin, Montblanc, Oscar de la Renta, Paul Smith, Repetto, Rochas, Shanghai Tang, S.T. Dupont and Van Cleef & Arpels. The fragrance products developed, produced and distributed by Inter Parfums are sold in more than 100 countries throughout the world.
