Inter Parfums (IPAR) Tops Q4 EPS by 1c, Revenues Beat

Inter Parfums (NASDAQ: IPAR) reported Q4 EPS of $0.26, $0.01 better than the analyst estimate of $0.25. Revenue for the quarter came in at $177.8 million versus the consensus estimate of $176.8 million.

Fourth Quarter 2019 Compared to Fourth Quarter 2018:

• Net sales were $177.8 million, up 0.3% from $177.2 million; at comparable foreign currency exchange rates, net sales increased 1.5%;
• Net sales by European based operations decreased 4.2% to $129.1 million from $134.8 million;
• Net sales by U.S. based operations were $48.7 million, up 14.7% compared to $42.4 million;
• Gross margin was 64.5% compared to 66.1%;
• S,G&A expenses as a percentage of net sales were 57.6% compared to 60.1%;
• Operating income rose 16.5% to $12.3 million as compared to $10.6 million;
• Operating margin was 6.9% compared to 6.0%;
• Net income attributable to Inter Parfums, Inc. increased 1.8% to $8.2 million compared to $8.0 million; and,
• Net income attributable to Inter Parfums, Inc. per diluted share was $0.26 for both periods.

Jean Madar, Chairman & CEO of Inter Parfums stated, “In nearly every region in which we operate, we achieved top line growth in 2019, with sales in North America, our largest market, up 11.4%. Our second largest market, Western Europe, achieved sales growth of 2.6%, while in Eastern Europe, net sales rose 4.7%. The biggest percentage gainer was the Middle East where sales surged 22.4% over the previous year. Sales in Asia, our third largest market, were down nominally in actual dollars, but ahead in constant dollars, which we consider quite respectable in light of trade tariffs on goods coming in and out of China from the United States. Our smallest market, Central and South America, underperformed in 2019, not surprisingly in light of the region’s political, economic and social turmoil.”

He continued, “Regarding our largest brands, Montblanc remains our largest brand, with annual sales up nearly 23%. As we previously reported, the strength of the dollar produced slightly lower sales in actual dollars by Jimmy Choo and Coach, but in constant dollars, sales by these two brands were in fact ahead of 2018. GUESS, whose first full year of fragrance sales under our leadership was 2019, has quickly become the fourth largest brand in our portfolio.”

Russell Greenberg, Executive Vice President and CFO stated, “Our consolidated gross margin was 62.5% and 63.3% in 2019 and 2018, respectively. Gross margin for European operations was 65.7% compared to 66.3% in 2018. As we reported throughout last year, the benefit of a strong dollar on the gross margin was offset by the higher than typical cost of sales for the Montblanc Explorer product line, which launched in the first quarter of 2019. For U.S. operations, gross margin rose to 52.5% from 51.4% in 2018 with the 110 basis point improvement primarily due to the continued growth of higher margin prestige products under licenses.”

He continued, “Selling, general and administrative expenses rose 2.5% compared to 2018, and as a percentage of net sales, were 47.8% and 49.3% for 2019 and 2018, respectively. Once again, promotion and advertising, included selling, general and administrative expenses peaked in the fourth quarter, which brought the total for the full year to 20.3% of net sales, down slightly from 20.7% in 2018. While we budgeted 21% of 2019 net sales for promotion and advertising expenditure, minor fluctuations in certain launch schedules altered our planned spending.”

Mr. Greenberg also noted, “In 2019, there was a $1.1 million loss on foreign currency while in 2018, the loss was $0.3 million, and our effective income tax rate was 27.7% in 2019 and 27.3% in 2018. Cash provided by operating activities aggregated $76.5 million in 2019, and we closed the year with working capital of $389 million, including approximately $253 million in cash, cash equivalents and short-term investments, a working capital ratio of over 3 to 1 and only $10.7 million of long-term debt.”

2020 Guidance

Mr. Greenberg concluded, “The fundamentals of our business remain strong. However, like most companies doing business around the globe, ours is being impacted by the coronavirus. There are many unknowns as to the duration and severity of the situation which we are closely monitoring. As a result of the trends we have seen recently, such as the significant decline in air travel and consumer traffic in key shopping and tourist areas, we delayed certain launches to later in the year, and therefore, our 2020 guidance needs to be revised. The business challenges change daily, as the track of the virus is unknown, making it very difficult to precisely estimate the impact. If the impact is limited to the first few months of this year, we expect 2020 net sales and net income attributable to Inter Parfums, Inc. to be in line with 2019 results. We are assessing developments constantly and will update these measures as needed and will address the issue on tomorrow’s conference call.”

For earnings history and earnings-related data on Inter Parfums (IPAR) click here.

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