Bare Escentuals reports strong results but doubts loom

By Simon Pitman

- Last updated on GMT

Related tags: Company, Bare escentuals, Revenue

Innovative natural cosmetics player Bare Escentuals has announced a
strong set of quarterly results, but doubts have arisen as the
company warns that future sales may be hit by the failure of one of
its latest infomercial campaigns.

The company, which specializes in natural-based color cosmetics, said that net sales for the second quarter came in at $124.1m, an increase of 29.1 percent from the $96.2m recorded in the corresponding quarter for last year. Likewise net income almost doubled from $10.5m last year to reach $20.2m this year and operating income increased 15.9 percent, from $34.0m to $39.4m. The quarterly figures meant that in the six months up to July 1, net sales rose to 28.8 percent, from $186.1m to $239.8m, while net income increased 62.5 percent, from $25.0m to $40.6m. CEO and company founder Leslie Blodgett said that the company's performance demonstrated the strength and breadth of its business structure, adding her belief that the company was well positioned to enjoy further growth. On the face of it the figures appear rosy, but the future might not be looking quite so bright for the company, which has chosen to shun conventional outlets such as department and drug stores, in favor of the QVC home shopping network. But relying on infomercials as a main source of its revenue might prove to be too much of a risk, particularly in view of the two warnings that the company issued - the first in June, the second last week - stating that it was expecting lower sales from the company's latest infomercial campaign. However, on the whole, the company said that its infomercial ventures were still proving to be a success and it has continued to back full year forecasts for sales growth of 27 - 30 percent. But investors seem to think differently as shares in the company have continued to fall, and are currently valued at $23.70, down from a year high of $43.22. Bare Escentuals is now hoping that its move into the European market will help to cushion the blow of potentially weaker results on the US market. Until now the company's efforts have been concentrated on the North American market, but that is about to change due to the acquisition of a UK distributor that should give the company a good foothold to access the European market. The deal saw Bare Escentuals buy up UK-based Cosmeceuticals Limited, a company that distributes its mineral-based cosmetic and personal care products throughout Europe.

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