Arden Sees Setbacks in Holiday, Mass and Mid-Tier Retail

Elizabeth Arden, Inc. said net sales fell 10.6% to $418 million, due to declines in North America during the second quarter of fiscal 2014.

Net sales of the company’s North America segment decreased by 13%, due to weaker than anticipated holiday retail sales and replenishment orders at a number of North American mass and mid-tier retail accounts, in part due to decreased consumer traffic at those retailers, and a higher volume of fragrance launch activity in the prior year. Performance at prestige retailers was solid and in-line with expectations. However, retail sales of Elizabeth Arden branded products in North American prestige retailers were strong, increasing by approximately 4%, which was better than the performance of the overall category.

Net sales of the company’s international segment decreased 5%. The company’s Greater China region posted strong sales growth during the quarter, but weak performance in the European markets, where sales of fragrances were impacted by an increased level of highly promotional and discounted activity, drove the net sales decline for the quarter.

Net sales for the six months ended Dec. 31, 2013 fell 6.2% to $762 million. However, for the first six months, net sales of Elizabeth Arden branded skin care and color products rose 6% in the aggregate and sales of fragrances were flat. Retail sales at the company’s Elizabeth Arden flagship counters have increased 16% in North America year over year since conversion, and retail sales at the company’s international flagship doors have increased 13% since conversion, or 21% excluding underperforming travel retail doors in Korea.

“Our results in the second quarter are highly sensitive to the performance of North American mass retailers, which was weak during the holiday season” said E. Scott Beattie, chairman, president and chief executive officer. “We are confident that this is not an issue with the commercial execution of that business, the fragrance category or our brands, and that our recent results are not reflective of the underlying strength of our fragrance brand portfolio.”

Beattie continued, “Right now, the priorities for the company are to return to more consistent profitability and improved return on invested capital. With the new senior leadership team, we are fully engaged in preparing and implementing plans targeted toward reaccelerating gross margin improvement and earnings growth. This is a comprehensive process that will be focused on improving the commercial execution of our international business, strengthening our travel retail and distribution relationships, better leveraging our overhead structure and re-deploying capital to priority markets and brands.”