Parlux Fragrances Drops on 3Q Results

2007-04-16 | 02:28

Parlux Fragrance shares fall on third quarter results.

Shares of Parlux Fragrances Inc. fell on Monday, after the perfume and beauty products maker said it posted a loss from continuing operations in the third quarter and an analyst said revenue growth was overshadowed by soaring operating costs.

On Friday, the company said net income climbed to $17.9 million, or 98 cents per share, from $6 million, or 28 cents per share, in the prior year quarter. However, excluding a gain from the sale of its Perry Ellis fragrance brand, the company fell to a loss of $5.5 million, or 30 cents per share, from a profit of $1.5 million, or 7 cents per share, a year earlier.

Revenue grew 15 percent to $43.4 million, from $37.8 million in the year-ago quarter, but analysts polled by Thomson Financial were looking for higher sales of $49.7 million.

On Monday, Wedbush Morgan Securities analyst Rommel T. Dionisio said following the sale of Perry Ellis, which accounted for about 40 percent of total company revenue, "significant restructuring and downsizing," is likely needed to return the company to profitability.

In the third quarter, advertising, promotional, selling and distribution and administrative expenses were all up, Dionisio said.

"Following the sale of Perry Ellis, recent management changes, and increased expenses in recent quarters, we believe a review of existing costs is warranted to return the company to profitability," Mr. Dionisio wrote.

He lowered his 2007 earnings expectations to a loss of 16 cents, from a profit of 40 cents per share, on increased operating expenses and reduced gross margins.

"There remains a considerable degree of risk and uncertainty in the near term for Parlux due to such factors as class action shareholder lawsuits and decelerating earnings performance in recent quarters," Mr. Dionisio wrote. "However, the company still has a solid core business with proven successes such as Paris Hilton and Guess, as well as reduced leverage given the recent sale of the Perry Ellis business."