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Bare Escentuals sees massive leap in sales, but costs hit profits

By Simon Pitman , 13-Nov-2006

Having gone public in September, Bare Escentuals, a producer of natural cosmetics announced that its sales jumped 45 per cent on the back of continued brand awareness and the rise in the naturals market.

The company said that sales came in at $97.9m, compared to $67.2m for the corresponding third quarter in 2005. Net sales for the first nine months was up 58 per cent to reach $284.0m.

But net income for the third quarter fell 5 per cent, down from $9.4 in the corresponding quarter last year, to reach $8.9m, reflecting a significant increase in selling and general expenses, mostly associated with its flotation.

"Our strong performance reflects Bare Escentuals' continued growing brand awareness and the increasing consumer demand for our mineral-based products," said Leslie Blodgett, CEO.

The company went public as a means of repaying debts it had incurred trying to grow its line of mineral- and natural-based cosmetic and make-up products. The IPO raised $373.9m in net proceeds from the sale of 18.4m shares.

The funds went towards partial payment of debts, as well as a $1.8m fee to terminate its management agreements with Berkshire Partners and JH Partners.

Looking ahead to the fourth quarter, the company is forecasting that sales will grow in the range of 28 - 33 per cent, compared to the same period last year, whereas sales for the full year are expected to growth 18 - 22 per cent to reach.

However, with analysts expecting big things from cosmetic players in the natural and organic field on the back of significant projected growth, Bare Escentuals might find itself struggling to live up to forecasts from the financial world.

Indeed analysts' forecasts have come up significantly higher than those of the company, putting pressure on it at a time when it is still trying to ease itself into the public domain, while fighting hard to remain competitive in this ultra competitive category.

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