Tough Q3 for Elizabeth Arden

For the third fiscal quarter ended March 31, 2014, Elizabeth Arden Inc.’s  Net sales were $210.8 million, down 20.3%, or 19.4% excluding the impact of foreign currency rates. Net loss per diluted share was $0.89.

On an adjusted basis, excluding non-recurring items, net loss per diluted share was $0.84. The non-recurring items include Elizabeth Arden repositioning and restructuring costs. A reconciliation between GAAP and adjusted results can be found in the tables and footnotes at the end of this press release.

Net sales of the company’s North America segment fell 23% to $121.9 million from $158.7 million in the prior year. The decline in net sales was primarily due to fewer fragrance launches in the fiscal 2014 period as compared to the prior year and lower replenishment orders at a number of non-prestige retail accounts.

Net sales of the company’s international segment dropped 16% to $89 million from $106 million in the prior year. At constant currency rates, net sales decreased 14%. The sales decline in the international segment reflects the Company’s efforts to maintain product pricing across both Elizabeth Arden branded products and its key fragrance brands.

Net sales of Elizabeth Arden branded skin care, color and fragrance products declined by 19% for the third fiscal quarter and by 3% fiscal year-to-date, in each case at constant currency rates.

Retail sales at the company's Elizabeth Arden flagship counters have increased 11% in North America year-over-year since conversion, and retail sales at the company’s international flagship doors have increased 11% since conversion, or 19% excluding underperforming travel retail doors in Korea.

Arden says it remains encouraged by the results, particularly given that all of the flagship doors are now reaching the anniversary of their reset dates.

Net sales for the nine months ended March 31, 2014, were $972.6 million, a decrease of 9.7%, or 9.0%, excluding the impact of foreign currency rates.

“Clearly these results are not indicative of the strength and potential of our brand portfolio,” noted E. Scott Beattie, chairman, president and CEO. “We have been hampered this year by weak performance in our North American mass fragrance business and a global environment that has been highly promotional. We also did not have the same level of significant fragrance innovation as we did last year. This coincided with an unprecedented number of weather-related store closures in our North America business during the quarter, which is our seasonally weakest quarter, exacerbating the impact of these other factors and contributing to the weak overall results.”
 
Beattie continued, “These results are clearly disappointing, particularly after several years of consistent improvement in gross margins and earnings. The status quo is not acceptable. While we are encouraged by recent retail sales performance in our North American mass fragrance business, we must position the company for success in an economic environment that remains challenging. We are taking corrective action to improve the performance of the business, focusing on tightening distribution, improving gross margins and restoring profitability and return on invested capital to levels consistent with historical results.”

As part of this process, the company is proactively implementing a broad restructuring and cost savings program across multiple dimensions focused on reducing its overhead structure and improving gross margins.