Elizabeth Arden extinguishes debt

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US cosmetics and fragrance manufacturer Elizabeth Arden has
reported a loss of net income despite an increase in net sales for
fiscal 2004. Debt extinguishment and restructuring charges had a
negative impact on an otherwise profitable year.

Net sales rose in 2004 by 8.3 per cent from $752 million the previous year to $814.4 million. The fourth quarter net sales - ending 31 January - rose 26 per cent to $214 million.

The positive increase in sales, both in the fourth quarter and for the year, was attributed to a favourable currency exchange and to the successful launches of Overnight Success and Red Door Revealed, new skincare and fragrance lines intoduced by Elizabeth Arden in 2003.

"Elizabeth Arden skin care and colour lines posted double-digit growth and our Red Door fragrance brand exhibited sales growth in excess of 25 per cent,"​ said CEO of Elizabeth Arden Scott Beattie.

An increase in US mass retail sales of prestige fragrances - a struggling market - were also favourable for the company.

Net income for the year was down 88.7 per cent to $2 million in comparrison to $18.1 million a year earlier. However excluding debt extinguishment and restructuring charges net profit rose 35 per cent to $24.5 million.

During the fourth quarter of fiscal 2004 Elizabeth Arden and its banks amended the company's revolving credit facility resulting in lower borrowing costs. Debt extinguishing costs ammounted to $34 million.

Exceptional expenses of $18.5 million was associated with the conversion of Series D convertible peferred shares to common stock, owing to Unilever selling its Elizabeth Arden business to FFI Fragrances in an equity offering in October 2003.

"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,"​ said Beattie.

The Company currently anticipates net sales for fiscal 2005 to increase from 8 per cent to 10 per cent. With respect to the first quarter of fiscal 2005, the company expects net sales growth in the high single digits.

"As we start fiscal 2005, we are encouraged with the very positive retail sell-through trends in both the US 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,"​ said Beattie.

Elizabeth Arden​ is to launch its new fragrance, Elizabeth Arden Provocative Woman, in the US next month and globally in the third quarter of 2005.

Related topics: Business & Financial

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