Inter Parfums (IPAR) Tops Q2 EPS by 48c; Reaffirms

Inter Parfums (NASDAQ: IPAR) reported Q2 EPS of $0.71, $0.48 better than the analyst estimate of $0.23. Revenue for the quarter came in at $207.6 million versus the consensus estimate of $149.01 million.

Jean Madar, Chairman & CEO of Inter Parfums, Inc. noted, “Once again, last year’s outbreak of the COVID-19 pandemic and the business conditions that ensued make comparisons with the very depressed second quarter of 2020 mostly irrelevant. Far more meaningful is a comparison with the second quarter of 2019 and the operating leverage resulting from the nearly 25% increase in net sales in 2021.”

He continued, “Through the first half of 2021, sales in our largest market, North America, rose 59% compared to the same period in 2019, while sales in Western Europe and Asia approximated those of the first half of 2019. Two of our smaller markets, Eastern Europe and Central and South America, experienced sales growth of 54% and 10%, respectively, over the first half of 2019. The only region where sales declined was the Middle East, by 23% to be precise. Similarly, there has been growth of our four largest brands. In the first six months of 2021, Montblanc, Jimmy Choo, Coach, and GUESS brand sales rose 3%, 39% 34% and 58%, respectively, compared to the first half of 2019. In the first half of 2019, the debut of Montblanc Explorer caused a surge in brand sales, which helps explain the modest increase in Montblanc brand sales in the current first half.”

Discussing recent events, Mr. Madar highlighted the signing of a transaction agreement for the exclusive worldwide license for the production and distribution of Ferragamo brand perfumes. Subject to certain conditions, the 10-year license is expected to start in October 2021 and has a 5-year optional term. “We will operate through a wholly-owned Italian company, based in Florence, with both legacy and newly created entrants produced in Italy. Once the business and existing inventory are transferred to us, we will be in a better position to estimate the contribution Ferragamo fragrances will make to 2021 sales. With our flexible business model, strong balance sheet, global distribution network, and committed staff, our pursuit of additional license agreements continues as we focus on established brands whose owners are seeking to reinvigorate their fragrance business. While there can be no assurance that any agreements will be finalized, adding select brands to our portfolio remains a high priority.”

Mr. Madar concluded, “The rollout of products unveiled over the course of the first half continues. These include Montblanc Explorer Ultra Blue, I Want Choo for Jimmy Choo, Coach Sunset Dreams, the Kate Spade signature scent, Rochas Girl, Alibi for Oscar de la Renta, Bella Vita for GUESS, Away by Abercrombie & Fitch, Canyon Escape for Hollister and Driven by Dunhill. Of special note, the MCM genderfluid fragrance that we introduced in first quarter continues to dazzle. With orders nearly triple our initial first year expectations, we have had to refill the pipeline several times to keep pace with sales. Brand extensions dominate our new product pipeline for the remainder of the year, including flankers for Jimmy Choo Urban Hero, the Oscar de la Renta Bella family, the Hollister Wave collection, and the Anna Sui Fantasia pillar. We recently debuted Effect, a full suite of men’s grooming and fragrance products under the GUESS label.”

Russell Greenberg, Executive Vice President and CFO noted, “The slight decline in second quarter gross margin compared to the same period in 2019 is primarily attributable to a weaker dollar and its effect on European operations. In the current second quarter, gross margin for European operations was 67% compared to 68% in the same period in 2019. Gross margin for U.S. operations was 53%, up from 52% in the second quarter of 2019. Once again, sales rose at a faster rate than we had expected, as was the case in the first quarter. As a result, 2021 second quarter promotion and advertising expenditures, included in S, G & A expense, of $33.2 million or 16% of net sales, were well below what we would typically spend in a quarter when sales exceeded $200 million. By way of comparison, in the second quarter of 2019, promotion and advertising expenditures were $36.4 million or 22% of net sales of $166.2 million. For the year as a whole, we continue to expect promotional and advertising expenses to approach historical levels of 21% of net sales.”

Mr. Greenberg also noted, “Our 2021 second quarter and year-to-date bottom lines were negatively impacted by two items. The first is interest expense incurred in connection with the borrowings related to the April 2021 acquisition of the future headquarters of our Paris-based 73% owned subsidiary, Interparfums SA. The second was an unusually high tax rate, which factors in a global tax settlement with the French Tax Authority covering the period January 1, 2010 through December 31, 2020 relating to a wholly-owned subsidiary of Interparfums SA.”

Mr. Greenberg continued, “We closed the second quarter with working capital of $461.7 million, including approximately $298 million in cash, cash equivalents and short-term investments, and a working capital ratio of 3.1 to 1. The $133.2 million of long-term debt relates to the previously mentioned headquarters acquisition, which was financed by a 10-year €120 million (approximately $143 million) bank loan. Approximately €80 million of the variable rate debt was swapped for fixed interest rate debt. Cash provided by operating activities aggregated $38.1 million for the six months ended June 30, 2021.”

GUIDANCE:

Reaffirms Increase in 2021 Guidance

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

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