Growth takes a dive for Elizabeth Arden in fourth quarter

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Related tags: Elizabeth arden brand, Generally accepted accounting principles, Fiscal year

Growth takes a dive for Elizabeth Arden in fourth quarter
Following strong sales growth and increased profitability in the first half of the financial year, Elizabeth Arden has ended it on a sour note, as fourth quarter sales and profits come in well below expectations.

Sales in the quarter were up by 0.8 percent to $267.8m compared to the corresponding period last year, which at constant rates indicated an increase of 1.2 percent, when factoring in currency translations.Net income also took a dive, with a profit of $3.6m last year, turning into a loss of $5.0m for the current quarter.

The company said that the results during the period were largely impacted by lower than expected replenishment order from a key mass retailer in the US, coupled with weak performance in Europe, and in particular the UK market were the primary reason why the results were down.

However, the company did point out that the rest of its business operations did perform according to forecasts.

Full year results buoyed by a stronger first half

For the full financial year the results were buoyed by a much stronger start to the financial year, which meant that net sales increased by 8.6 percent to $1.4bn, a figure that represented a rise of 9.6 percent at constant rates.

Net profits for the full year were down from $57.4m to $40.7m. a performance that reflected weaker performances in the last two quarters of the financial year.

CEO Scott Beattie made reference to the problems with replenishments of orders in the US market, but also pointed to full year projections: “… growth projections for the Elizabeth Arden brand proved to be overly optimistic given the complexity and scope of transition underway for the brand repositioning.”

Looking ahead to the next financial year, Beattie made reference to the fact that the final phase of the company’s current restructuring plan should help to strengthen its position.

Forecasts for 2014 look more conservative

“We expect to incur the final phase of repositioning expenses, including eliminating pre-repositioned product inventory and exiting unprofitable doors, in fiscal 2014,”​ he said.

“While resulting in near term charges, this is expected to drive improved performance of the Elizabeth Arden brand going forward. Separately, we are taking steps to improve efficiencies in our sales organizations and in the overall indirect overhead structure.”

In view of the latest quarterly results, the company said that its projections for the 2014 financial year are more modest, due to uncertain economic conditions and the quarterly variability of the company’s growth initiatives.

For the full fiscal year 2014 the company is now projecting net sales growth to increase by between 3.0 and 5.0 percent, with an unfavorable impact of foreign currency exchange expected to impact the result by approximately 1 percent.

Related topics: Business & Financial

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