A Sneak Peak At Parlux’s 3Q

Parlux Fragrances, Inc. announced its unaudited results for the third quarter and nine months ended Dec. 31, 2011.

Net sales for the three-month period rose 2% to $31.9 million. Net sales for the nine-month period increased 7% to $100.9 million.

Fred Purches, chairman and CEO, commented, “At the time of our last conference call, we expected to exceed prior year third quarter sales by 10% based upon initial customer reaction, with one caveat, US department store sales, as it was still difficult to predict given the mood of the consumer in the current worldwide environment. Unfortunately, this has proven to be prophetic. To counter what was expected to be a strong competitive environment, we entered the US holiday period with strong promotional gift set inventories at the retailer level. After Thanksgiving, department stores struggled to reach sales goals and countered by discounting virtually all products, with the exception of fragrances and cosmetics, by 40-60% and more, in some cases. As a result, our sell-through did not meet expectations and we have made provisions in the third quarter to accept approximately $3.0 million in additional returns than originally estimated.”

Purches added, “The higher proportion of promotional gift sets also resulted in an increased cost of goods further adding to the pretax loss by approximately $2.0 million at the gross margin line for both periods. Despite the effort to limit our operating costs, the one-time costs and higher than expected returns coupled with the margin loss, resulted in a net loss of $3.4 million in the third quarter.”

Purches concluded, “In view of the continuing volatility of the U.S. retail situation, we have reduced our net sales estimate for the fiscal year ending March 31, 2012 to $135-$140 million which would still mean double-digit growth vs. prior year. On a positive note, our balance sheet remains strong financially, with $23.0 million in cash and no borrowing at Dec. 31, 2011. Our year-end objective is to absorb our current loss position, and reach pre-tax profits of approximately $2 million prior to one-time costs. This result would be slightly better than prior year on an operating basis, and after one-time costs related to the potential merger, would result in an approximate breakeven profit position.”