4Q Sales and Profit Surge at Elizabeth Arden

Driven by successful new product launches, Elizabeth Arden, Inc. reported a surge in sales and profits for the fourth quarter. However, for the year ended Jan. 31, 2004, the company reported another loss.

Net sales for the fourth quarter of fiscal 2004 rose 26.0% to $213.9 million. Excluding the impact of foreign currency translation, net sales increased 20.5%. The increase in net sales was driven by the success of new product launches, including the skin care products Ceramide Plump Perfect, Overnight Success and the latest Elizabeth Arden fragrance Red Door Revealed, increased market share of prestige fragrances in U.S. mass retail and favorable foreign currency translation. In addition, the net sales increase reflects a shift in promotional and innovation activities between the company’s third and fourth fiscal quarters as compared to the prior year. Gross margin expanded to 44.2% from 40.0% reflecting improved leveraging of supply chain and distribution costs and promotional activities. Income from operations, excluding restructuring charges related to the consolidation of its U.S. distribution facilities, increased to $25.1 million from $8.8 million in the comparable period last year.

Fourth quarter net income increased to $11.3 million, compared with a net loss attributable to common shareholders of $0.4 million, or $0.02 per share, for the prior year period. The results for the fourth quarter of fiscal 2004 exclude debt extinguishment charges associated with refinancing activities as well as restructuring charges, net of related tax benefits.

Net sales for the fiscal year increased 8.3% to $814.4 million, exceeding the company’s previous estimate for net sales between $790 million to $805 million. Excluding the impact of foreign currency translation, net sales increased 4.3%. Cash flow from operations increased 60.1% to $45.8 million due to higher earnings, lower interest expense and strong working capital management.

Full year net income increased 34.6% to $24.5 million. The results for fiscal 2004 exclude the non-cash charge for the accelerated accretion associated with the conversion of the Series D Convertible Preferred Stock owned by Unilever, which was converted to common stock and sold in an equity offering in October 2003, and the debt extinguishment and restructuring charges discussed above. On a reported basis, net loss attributable to common shareholders for fiscal 2004 was $20.1 million or $1.02 per share.

E. Scott Beattie, Chairman and Chief Executive Officer of Elizabeth Arden, Inc., commented, “This was a tremendous year for the Company, despite a slow first half. Our new product innovation performed extremely well, with the Elizabeth Arden skin care and color lines posting double-digit growth and our Red Door fragrance brand exhibiting sales growth in excess of 25%. We also continued to increase the market share of prestige fragrances in the U.S. mass retail market, and our international business finished strongly. On the financial side, our working capital initiatives and the refinancing of our balance sheet enabled us to retire virtually all of our high cost debt, which should generate significant interest expense savings in fiscal 2005. This allows us to continue to reinvest in our brand portfolio and strongly positions us for additional growth opportunities.”

Mr. Beattie continued, “Operationally we have successfully closed and migrated our distribution facilities to one facility in Roanoke, Virginia and completed the conversion of all our IT systems to a single platform. We expect operational savings from the facility consolidation this fiscal year of approximately $2 million to $4 million and approximately $4 million to $6 million a year thereafter.”

The company currently anticipates net sales for fiscal 2005 to increase 8% to 10%, assuming current exchange rates, and earnings per fully diluted share to increase 22% to 24%. With respect to the first quarter of fiscal 2005, the company expects net sales growth in the high single digits and diluted earnings per share to improve by $0.35 to $0.40 on a per share basis over the first quarter of the prior year.

Mr. Beattie concluded, “As we start fiscal 2005, we are encouraged with the very positive retail sell-through trends in both the U.S. and internationally. We are confident that our initiatives will further grow the prestige fragrance category in mass retail and are also very excited about our new products for this year. The launch of our new fragrance, Elizabeth Arden Provocative Woman, supported by television advertising featuring Catherine Zeta Jones, is scheduled to occur in the U.S. next month and globally in the fall. We are well positioned and are looking forward to another strong year.”