Physicians Formula posts big losses and ceases forecasts

By Simon Pitman

- Last updated on GMT

Related tags: Ingrid jackel

Masstige player Physicians Formula recorded a significant loss in 2008, and as the economic downturn kicks in, the company says it is withdrawing all financial forecasts.

The company posted a net loss of $19.77m loss in 2008, compared to a profit of $8.75m for the full year 2007.

The results were largely down to a poor performance from the business in the fourth quarter, where lagging sales were responsible for the company posting a $24.50m loss, compared to a profit of $4.86m in the corresponding quarter for 2007.

The fourth quarter results were also hit by a goodwill and intangible asset impairment charge of $32.7m, which the company said was a direct result of the decline in sales during the quarter.

Fourth quarter sales plummet

Net sales for the full year were up 2.2 percent to reach $114m, but the economic crisis was clearly being felt by the end of the year, with fourth quarter sales falling by 16.8 percent, from $33.9m in the fourth quarter of 2007, to $28.2m.

The company stated that the deterioration in the consumer market since November 2008 has accelerated at a faster pace than expected, reducing orders by retailers, particularly in the run up to the all-important holiday season.

The poor results and a general lack of visibility during the current economic conditions, forced the company to change its guidance policy, stating it would no longer provide specific net sales and EPS forecasts.

Company still increased market share

CEO Ingrid Jackel pointed out that the company has continued to increase its share of the masstige skin care market during 2008, with figures from ACNielsen suggesting that it now commands an 8 percent share in the 12 months ending February 21, 2009.

However, she also stressed that the company had already entered a difficult period due to lower consumer spending power, which is hitting the mastige and premium end of the market particularly hard.

This has been evinced by poor performances from other key players in these markets, including L'Oreal, Estee Lauder and Revlon, who all posted lower fourth quarter results recently.

Retailer orders continue to drop

“During the first quarter of the years, retailers continue to operate under unprecedented tight inventory control programs and in addition, we are experiencing smaller pipeline orders compared to last year’s larger pipelines from space gains,”​ said Jackel.

She added that 2009 would invariably be a ‘very challenging’ year for the industry, but stressed that the low-cost business model of the company, together with careful cash management, were likely to help it weather the economic turmoil.

There are further plans to develop the Physicians Formula brand and product distribution during the course of 2009, but the company stressed this would be conducted with a tight control over spending.

Related topics: Business & Financial

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