Physicians Formula predicts lower sales

By Simon Pitman

- Last updated on GMT

Masstige skin care provider Physicians Formula says that soft
market conditions within the segment have led it to lower its
forecast for the forthcoming quarter and full year, prompting fears
for other big name prestige player.

The company said that in reaction to softer spending in the segment in the US, in the past month drug stores have lowered the number of product re-orders, which is in turn affecting sales.

The company said that second quarter sales came in at $22.1m, above the company's own expectations, but down by more than 4 percent compared to the same period last year.

This is in contrast to a strong first quarter, which meant that sales for the first six months were up 13.8 per cent to reach $57.8m.

The company said it was expecting full year sales of $110m to $115m, but has reduced that outlook to $107m to $111m, and also said that it expected share dividends to be lower as a result.

Third quarter sales are now predicted at between $18.5 million and $20.5 million, a result that it likely to lead to a small dividend loss for shareholder and one that was below analyst expectations of $22m.

Mulling the lower orders from drug stores, Ingrid Jackel, company chief executive officer, pointed to the fact that data from market research provider Nielsen points to the fact that during the four weeks up to July 14 drug stores sales grew by 15 per cent, suggesting that as a whole, the segment was reasonably buoyant.

In turn, Jackel stated her belief that the change in the re-stocking procedures for drug retailers has been a significant cause of the lower sales, suggesting that this might be contributing to the problem for prestige personal care makers as a whole.

However, Jackel did concede that the Nielsen data shows the masstige market "is softening slightly, with sales for the premium segment as a whole down 2 percent for the four week period up to July 14, according to the Nielsen figures".

Created in 1937, the Physicians Formula name represent a number of brand names that concentrate on the treatment of skin imperfections, with the products being sold in leading retailers all over the US, including CVS, Target and Wal-Mart.

As well as Physicians Formula, the masstige skin care market also includes names such as Almay, L'Oreal, Max Factor, Revlon and Neutrogena - companies that will all be closely analyzing their rivals results.

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