Beauty Earnings: Guess’ Fragrance Plan, Frutarom’s Merger and E.l.f.’s Project Unicorn
Beauty companies reported higher sales in quarterly reports on Wednesday, with Inter Parfums Inc., International Flavors and Fragrances and E.l.f. Cosmetics posting gains.
On earnings calls, Inter Parfums detailed its expansion of the recently acquired Guess license; IFF talked the $7.1 billion Frutarom merger, and E.l.f. plans to get more newness onto store shelves with an initiative it's calling Project Unicorn.
Inter Parfums Details Guess Fragrance Plan
Inter Parfums Inc. is working to reestablish the Guess fragrance business.
The company, which took over the license from Coty Inc. earlier this year, said it is in the process of procuring and starting to sell finished goods. Inter Parfums’ efforts center around Guess’ 1981 and 1981 Indigo fragrances, which each come in men’s and women’s, and include a significant push for the holiday season.
Inter Parfums has scheduled “major” shipments for September and October, executives said on the company’s earnings call Wednesday, and is gearing up for advertising and promotion efforts around the 1981 fragrances.
“Our worldwide distributor network is quite enthusiastic about Guess because they view it as a great American brand with huge brand recognition outside of the U.S.,” said Jean Madar, Inter Parfums chief executive officer and chairman. The business expects the fragrance to do well in Eastern and Western Europe, as well as in Asia. Russia is expected to be a particularly important market for Guess, as the brand is opening stores there, executives noted. For the fragrance, the goal is to be in the top 10 in the Russian market in two years.
In the second quarter, Guess posted a 51 percent increase in sales.
Broadly, Inter Parfums Inc.’s sales rose in both its U.S. and European segments for the second quarter. Net sales were up 15.7 percent to $149.4 million, while net income increased 61.6 percent to $10.9 million. Earnings per diluted share were up 59.1 percent, to 35 cents. Sales for European operations rose 8.3 percent to $115.6 million, and sales for the U.S. segment were up 50.8 percent to $33.8 million.
Inter Parfums’ largest brands — Jimmy Choo, Coach and Lanvin — made up most of the growth, gaining 8.2 percent, 98.5 percent and 7.1 percent, respectively. Coach’s growth was driven in part by the launch of Coach Floral, which propelled Coach into the top three brands in the business, according to Madar. The company also launched Jimmy Choo Man Blue. Montblanc had a 9.8 percent dip in sales for the quarter, offset by a 33 percent gain in the first quarter. Karl Lagerfeld, which recently changed its pricing strategy, posted a comparable sales upturn, the company said, because of Les Parfums Matières, a fragrance duo. Anna Sui fragrance sales did well in the quarter, due to solid performance in Asia.
In the coming months, Inter Parfums will launch Jimmy Choo Fever in the U.S. market in September, as well as Coach Platinum and Rochas Moustache, which are both men’s scents. Flight of Fancy Spirit from Anna Sui and Century, a new Dunhill pillar, will also launch. Abercrombie & Fitch is rolling out First Instinct Blue for women, and Hollister is launching a festival duo called Festival Vibes.
Inter Parfums is projecting 2018 net sales of $665 million with $1.59 in net income per diluted share.
IFF Expects to Close Frutarom Deal in Q4
International Flavors & Fragrances Inc. is on track to close the Frutarom merger this year — earlier than expected.
IFF, a supplier to the beauty and food industries, went through the details of the $7.1 billion Frutarom merger on its second-quarter earnings call Wednesday. The business plans to receive $3.1 billion in debt financing for the deal, executives said.
IFF’s chairman and chief executive officer Andreas Fibig stressed the companies’ complimentary capabilities on the call with Wall Street. IFF is planning to sell some of Frutarom’s offerings to its existing customers, for example, and Frutarom gives the business more access to small and midsized customers, which are growing faster than large ones, he noted.
“The categories we have now as a portfolio, as a combined company — or that we will have after closing — us the ability to move categories that have good and high growth rates, like natural colors, for example,” Fibig said.
IFF’s merger with Frutarom is expected to be completed in the fourth quarter.
For the second quarter, IFF posted a net sales gain of 5 percent, to $920 million in sales for the second quarter, with $99.1 million in net income, a 10 percent drop. The fragrance business brought in $469.5 million in sales, up 5 percent in the quarter. Growth was driven by Latin America and North America. Consumer fragrances were up 5 percent, driven by double-digit growth in hair care, as well as increases in toiletries, home care and fabric care. The ingredient side of the business was up 10 percent.
IFF’s net income for the quarter was $129.4, and earnings per share were $1.63. Earnings numbers were down slightly, affected by currency, the company said.
To Combat Slowing Sales Growth, E.l.f. Launches Project Unicorn
E.l.f. Cosmetics has put a plan in place to get new products on store shelves faster.
Called "Project Unicorn," the plan aims to switch up certain packaging elements for its products to maximize its shelf space in retailers and make sure that products it launches have room to fit on shelves. "This year, we didn't have an appropriate mix between new and items," Amin said on the company's earnings call Wednesday.
E.l.f. has seen a more dramatic deceleration in sales in the last eight to 10 weeks, according to Amin, which has prompted the company to take new actions, including Project Unicorn, but also to lower its fiscal guidance for the year. And while sales are down, E.l.f. remains the "most productive" beauty brand at Target and Walmart on a square-foot basis, Amin repeatedly said Wednesday.
In addition to Project Unicorn, E.l.f. plans to start spending on influencers for the first time. It had long had an influencer marketing program that included trips like Beautyscape, but hadn't historically paid influencers. The goal is to make sure the brand is "making enough of a voice" in a market with brands that are paying mega influencers for a bigger reach, executives said Wednesday.
E.l.f. posted a 6 percent gain in net sales for the quarter, to $59.1 million, driven by expansion in national retailers. Net income was down to $6.5 million. E.l.f. has expanded its space at Ulta Beauty with products that sit in Ulta's more general skin-care assortment, as well as through end caps at Rite Aid, executives said.
The business lowered its projections for 2018, and is forecasting net sales growth in the low-single digits, as well as net income between $28 million and $31 million.
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