Elizabeth Arden profits hit by reduction in fragrance distribution

By Simon Pitman contact

- Last updated on GMT

Elizabeth Arden profits hit by reduction in fragrance distribution

Related tags: Middle east

Elizabeth Arden’s drive to tighten its global distribution has resulted in a significant fall in both global sales and profits for the first quarter of its financial year.

The company said that net sales for the period up to September 30th were $270.38m, compared to $343.61m for the corresponding period last year, representing a fall of almost 24%.

The company recorded a net loss of $25.35m, compared to a net profit of $1.7m in the corresponding period last year, a figure that reflected both the falling sales and charges relating to the restructuring activities as part of the performance improvement plan announced in June of this year.

However, the restructuring is expected to bring in annualized savings of approximately $40m - $50m.

North America hardest hit

Net sales in its North America and International segments declined by 23% and 17% respectively, reflecting the company’s tightening on distribution of Elizabeth Arden branded products in particular.

Executives say they now want to move away from the old model, which depended on the company's own branded products and celebrity fragrances, in an effort to premiumize other parts of the portfolio and increase pricing, particularly in its mainstay North American business.

 “Our first quarter results were in-line with our expectations, with sales and earnings declines that we expected and forecasted,”​ said E. Scott Beattie, chairman, president and Chief Executive Officer.

“As we previously stated, fiscal 2015 is a rebuilding year, and during the quarter we continued to advance the key elements of our turnaround plans.”

Focusing on expanding the Middle East and Southeast Asia

The company now also wants to concentrate on expanding its business in international markets and recently established a joint venture with the Chalhoub Group to accelerate distribution in the Middle Eastern market.

Beattie also stated that the company is currently looking for a similar deal, to that established with Chalhoub business, for the Southeast Asian region, which is expected to be implemented during the course of 2015.

Looking ahead to the rest of the financial year, Elizabeth Arden expects net sales to continue to be affected by the tightening of distribution during the next quarter, while the second half of the year should see an improvement as new launches moderate and increased pricing shows dividends.

Related topics: Business & Financial

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