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Sales Up for 2008 at Physicians Formula

March 31, 2009

Masstige brand sees a rise in annual report

Physicians Formula Holdings, Inc. posted financial results for the three months and year ended Dec. 31, 2008.

Net sales for the fourth quarter of 2008 dropped 2% to $28.2 million. According to the company, as previously announced, since early November 2008, the consumer environment has weakened at a faster pace than anticipated and tight inventory control by retailers reduced the expected pipeline orders for new products during the latter half of the fourth quarter. As a result, shipments to retailers lagged retail sales, as reported by ACNielsen, and were lower than originally anticipated for the fourth quarter of 2008.

Howeve, net sales for the full year 2008 rose 2.2% to $114 million.

“We are pleased to have achieved net sales growth in 2008 considering the very challenging consumer environment and the dramatic increase in tight inventory control by retailers during the latter half of the fourth quarter. Based on retail sales data provided by ACNielsen, during 2008 we continued to increase our share of the masstige market with an 8.1% share ... we believe our growth in 2008 is a testament to the solid fundamentals of our business, including strong cash flows, loyal customer base and continued product innovation,” said Ingrid Jackel, chairwoman and chief executive officer of Physicians Formula.

“Our 2009 strategic initiatives, including our new product offerings, our new communication, promotional and merchandising platforms, were designed to raise the profile of our brand, to continue to push the boundaries of innovation and to improve the shopping experience,” continued Ms. Jackel. “However, during the first quarter of the year, retailers continue to operate under unprecedented tight inventory control programs and in addition, we are experiencing smaller pipeline orders compared to last year’s larger pipelines from space gains.

"We expect 2009 will continue to be a very challenging retail environment for our industry. To weather the current economic turmoil, our low-cost business model coupled with prudent cash management has provided the financial ability to sustain some of our core 2009 initiatives while developing, presenting and executing on our 2010 plans. We remain focused on raising the bar of innovation for 2010 and beyond, by developing products that provide a high return on investment to our retail partners, and that provide solutions, backed by a commitment to quality, to our consumers.”
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