Parlux sales results hit by loss of Guess contract

By Simon Pitman

- Last updated on GMT

Related tags Corresponding quarter Generally accepted accounting principles

Parlux third quarter results show a significant drop in sales, due mainly to the loss of a contract to supply retailer Guess with fragrance and personal care products.

The company said that sales during the quarter slipped from $50.3m during the corresponding quarter last year to $31.4m, a fall of nearly 38 percent.

The turnover for the corresponding quarter in 2009 included sales of just over $15m for the Guess brand, indicating that the underlining trend is also down for the company’s remaining licenses, which include fragrances for names such Jessica Simpsonr and Paris Hilton, as well as the recently announced Rihanna fragrance launch.

Nine month underlying comparison looks better

For the nine month period up to December last year sales fell from $130.4m to $94.1m, a fall of 28 percent that again was mainly attributable to the loss of the Guess contract.

The company stated that for the nine month period the underlying trend was positive, as prior comparable sales for the nine month period in 2009 were approximately $87.0m, suggesting an increase of 8 percent.

Net loss for the third quarter was $273 thousand, compared to a net loss of $5.4m in the corresponding quarter, while net profit for the nine month period was $1.1m, compared to a net loss of $4.9m in the previous year.

Operating income shows progress

“For the nine-month period we were profitable compared to a significant loss in the comparable prior year period. Operating income improved by approximately $10 million,”​ said CEO Frederick Purches.

“These results have been achieved by revising our selling strategy and significantly reducing operating expenses,”​ Purches added.

Last October the company pointed out that by eliminating the Guess license from its comparisons, it is likely to see an increase of 15 percent in its sales during 2011 fiscal year, with a predicted yearly total of £125m.

Rival Coty takes over Guess license

At the end of 2009 it was announced that fragrance company Coty would take over the Guess licensing agreement from Parlux, beginning January 2010, and since then a sharp decline in the company’s earnings has been observed.

To help tie the business over Parlux executives signed a $20m credit facility with GE Capital Corporate Finance last year, aimed at helping it focus on growth and profitability, with the additional funds being used for initiatives such as new licences as well as ensuring the company can meet the fluctuating stock requirements posed by seasonal demands.

"Regarding the immediate future, based upon our expectations for the new Rihanna launch and a new Paris Hilton entry, Passport, net sales for the fourth quarter ending March 31, 2011, are expected to be higher than the comparable prior year quarter,”​ Purches said.

Purches added that although sales visibility was limited for the fourth quarter, the company believes that initiatives to cut sales expenses should result in a profit for the period.

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