Greater than anticipated declines in celebrity fragrances has hurt Elizabeth Arden, Inc., which today announced that net sales for the fiscal year ended June 30, 2014 fell 13.4% $1.164 billion.
The global beauty giant also announced that Rhône Capital has taken an equity stake in its company.
While the company had expected weaker sales comparisons due to the lower level of fragrance launch activity in fiscal 2014 versus fiscal 2013, the decline in sales of celebrity fragrances, particularly the Justin Bieber and Taylor Swift fragrances, was steeper than anticipated.
The inventory destocking at a number of non-prestige customers that impacted the company’s 2014 third fiscal quarter results continued through the fourth quarter of fiscal 2014 and led the company’s shipments to be below the rate of retail sales, noted Arden. The company also proactively tightened distribution globally across its key Elizabeth Arden branded products and certain other pillar fragrance brands during fiscal 2014 to improve pricing and gross margins, which negatively impacted sales and profits, but is beginning to result in improved pricing.
By segment, for the 2014 fiscal year, net sales of the company’s North America and International segments declined by 14% and 8% (at constant currency rates), respectively. Retail sales at the company's Elizabeth Arden flagship counters have increased 9% in North America since conversion, and retail sales at the Company’s international flagship doors have increased 8% since conversion, or 16% excluding underperforming travel retail doors in Korea.
“Our primary focus as an organization is to improve performance and restore profitability and return on invested capital to levels consistent with historical results,” noted E. Scott Beattie, chairman, president and CEO.
Beattie says the company remains committed to its improvement plan, announced in June of this year. The plan is expected to result in annualized savings of $27 million to $35 million.
"We remain committed to achieving a total of $40 million to $50 million of annualized savings upon full implementation of all of our cost-reduction efforts, and remain confident that we can get back to consistent improvement in quarter over quarter performance. Most of the changes to our organizational structure were implemented in the third and fourth quarters of fiscal 2014, which should position the company for improved performance in fiscal 2015," he said.
Upon releasing the results, Arden announced that Rhône Capital L.L.C. has agreed to purchase $50 million of redeemable preferred stock of the company and also will receive warrants to purchase 2.5 million shares, representing approximately 7.6% of the company’s outstanding common stock.
“Having assessed the opportunity, and focused on the market positioning of Elizabeth Arden, the quality and potential of Elizabeth Arden’s brand portfolio, and the quality of the company’s management team, we firmly believe that this represents a unique investment opportunity to partner with a proven entrepreneurial organization and help them achieve their ambition to be a leader in the global beauty industry,” noted M. Steven Langman, co-founder of Rhône Capital.
Beattie added, “I am very excited to have Rhône Capital as an equity partner, to support the turnaround of our business in the short-term and the continued global growth and development of our brands and organization in the future. I am confident that we have a compelling business plan to improve the company's performance. Rhône Capital’s investment and commitment to Elizabeth Arden in light of its significant experience in our industry is evidence that Rhône Capital shares our optimism and belief in the outlook for the company."
Rhône Capital also has advised Arden that subject to market conditions and applicable legal or regulatory approvals, it intends to increase its ownership of the company’s common stock over time.