S&P Places Elizabeth Arden (RDEN) on CreditWatch Negative; FY14 Operating Results Seen as 'Weak'

Standard & Poor's Ratings Services today placed all of its ratings on New York City-based Elizabeth Arden Inc. (Nasdaq: RDEN), including the 'BB-' corporate credit rating, on CreditWatch with negative implications.

The CreditWatch placement follows weak operating results for the fiscal year ended June 30, 2014. Sales decreased about 13% to $1.16 billion for fiscal 2014 compared with the prior fiscal year, stemming from weaker than expected declines from its celebrity fragrances segment and replenishment from the mass channel. Profitability also decreased, mainly due to a highly competitive and promotional environment, and sales mix shift towards lower-margin products. We estimate credit metrics have deteriorated, including leverage above 5x. This is weaker than our expectation that leverage would remain below 4x.

We could affirm or lower the rating once we meet with the company and assess the company's financial policy and ability to strengthen its credit metrics over the next year. We could lower our ratings if we believe the company's credit metrics will remain near its current weakened levels. Alternatively, we could affirm our ratings if we believe the company can improve its operating performance and strengthen credit metrics, including leverage decreasing towards historical levels of near 4x.

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