Elizabeth Arden posts gloomy guidance for fiscal year

By Guy Montague-Jones

- Last updated on GMT

Related tags Elizabeth arden Britney spears Mariah carey

Elizabeth Arden has posted gloomy guidance for the financial year after weakness in travel retail and unfavorable exchange rate fluctuations hit third quarter results.

The maker of celebrity perfumes like Britney Spears and Mariah Carey said sales fell by 3.4 percent to $203.5m in the third quarter ending March 31.

Nevertheless, the figure slightly above market expectations, according to analysts poled by Thomson Reuters, who had expected sales of $201.8m.

Looking forward to the end of the fiscal year, Elizabeth Arden does not expect any great improvement in turnover.

Forecast for the fiscal year

Guidance for the year ending June 30 is for net sales to fall by 6 to 6.5 percent or 2 to 2.5 percent excluding foreign currency translation.

The company said the figures are based on the expectation of continued weakness in international markets, particularly higher margin travel retail, distributor markets and its European business.

Variations within business

In the latest quarter Elizabeth Arden said that performance varied within its business.

CEO E. Scott Beattie said: “We are seeing modest improvement in retail sales performance and are continuing to build market share.

“This, however, is being offset by weak conditions in our travel retail and distributor markets, reflecting declining passenger traffic, retailer destocking and the impact of credit constraints and currency volatility on our distributors, which is expected to continue.”

Wedbush Morgan Securities analyst Rommel T. Dionisio predicated last week that Elizabeth Arden would be badly affected by the recession in the latest quarter, pointing to its reliance on the weak travel retail sector.

He said that existing travel retail woes could also be exacerbated by the emergence of swine flu, which is likely to keep potential customers grounded.

Smaller net loss for quarter

Despite the declining sales, Elizabeth Arden posted a slightly smaller net loss for the quarter than it did in the same period last year. Net loss was at $3.7m as opposed to $3.81m last year.

Elizabeth Arden, which announced job cuts earlier in the year, is working on reducing inventories and speeding up cost savings to return the company to profit next year.

It also hopes to benefit from the recent launch of its Pretty fragrance, the sales of which have so far exceeded the company’s expectations.

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