Second Quarter Sales Rise at FFI Fragrances

FFI Fragrances today reported financial results for its second quarter ended July 31, 2000. Net sales for the quarter rose 12% to $66.9 million, compared to $59.7 million for the corresponding period last year. Net income, however, fell sharply from $2.0 million to $637,000.

During the second quarter, the company said it incurred a number of expenses in an effort to prepare for anticipated strong holiday season sales and to improve second-half operating efficiencies.

The company invested in the Edison, NJ facility to improve its promotional set fulfillment capabilities, including the ability to assemble gift sets internally, which should result in improved efficiencies and profitability going forward. In addition, because the company accelerated the production of holiday promotional sets as compared to last year in anticipation of strong retailer demand, certain set assembly and inventory carrying costs were incurred during the second quarter that historically have been incurred during the third quarter.

“We are pleased with our top-line performance for the quarter, which led to earnings results that exceeded expectations of a breakeven quarter,” stated E. Scott Beattie, chairman, president and chief executive officer. “The operating performance of our new Edison facility is meeting our budgeted objectives and we anticipate improved operating efficiencies and customer service during our peak selling periods. Our commitment to customer service has led to exceptional growth in sales to our Top 20 retail accounts, as evidenced by the 60% increase in sales to those accounts in the second quarter compared to the same period last year. This is especially encouraging given the fact that this period is typically a slower sales growth quarter for the Company.”

Mr. Beattie continued, “We are particularly excited about the initial results of several important sales initiatives we began testing with key retailers during the second quarter. During the second quarter, FFI conducted a pilot ‘open sell’ merchandising program with one of its major retail customers. The retail sell-through results were better than anticipated. As a result, FFI anticipates rolling out in phases its open sell program to that retailer’s other U.S. stores over the next several quarters and expects to begin to realize a meaningful financial contribution from this program as early as the fourth quarter. Also, one additional major retailer has committed to introducing our open sell program by the end of the fourth quarter.

Mr. Beattie added that FFI began testing “vendor managed inventory” program at 11 JCPenney locations and the initial results have been very favorable. “Due to these strong results, we will be offering this service to approximately 565 JCPenney stores beginning on September 1, 2000, and we also will be partnering with JCPenney to fulfill prestige fragrance orders from its top-ranked JCPenney.com web site.”