Inter Parfums, Inc. Reports 2018 Third Quarter Results

Inter Parfums, Inc. (NASDAQ GS:IPAR) today reported results for the third quarter ended September 30, 2018.

Third Quarter 2018 Compared to Third Quarter 2017:

  • Net sales were $177.2 million, up 4.5% from $169.5 million; at comparable foreign currency exchange rates, net sales increased 5.4%;
  • Net sales by European based operations rose 2.4% to $137.8 million from $134.6 million;
  • Net sales by U.S. based operations were $39.4 million, up 12.9% from $34.9 million;
  • Gross margin was 61.6% compared to 61.0%;
  • S,G&A expenses as a percentage of net sales were 41.9% compared to 41.5%;
  • Operating income increased 5.5% to $35.0 million from $33.2 million;
  • Operating margin rose to 19.7% from 19.6%;
  • The effective income tax rate was 28.6% compared to 32.9%;
  • Net income attributable to Inter Parfums, Inc. increased 10.9% to $18.9 million compared to $17.1 million; and,
  • Net income attributable to Inter Parfums, Inc. per diluted share rose 9.1% to $0.60 from $0.55.

Discussing European based operations, Jean Madar, Chairman & CEO of Inter Parfums stated, Jimmy Choo and Coach, two of our largest brands, achieved 19.7% and 40.9% third quarter sales growth, respectively, all the more impressive in the absence of major new product launches. In fact, the nearly 12% year-to-date increase in net sales by European based operations was primarily due to brand extensions for the best sellers among our largest brands, energizing product selections within our other brands and expanding distribution, all the while supporting these efforts with well-planned and executed advertising and promotional programs with a far greater emphasis on digital media.

On the subject of U.S. based operations, Mr. Madar continued, The inclusion of legacy GUESS fragrances, which began in the second quarter of 2018, factored into the increase in net sales. Also factoring into the third quarter sales growth was the successful launch of brand extensions for the Abercrombie & Fitch First Instinct fragrance family and Hollisters Festival Vibes duo. Additionally, with the popularity of Anna Sui fragrances throughout Asia, we continue to enjoy dramatic increases in brand sales in that region.

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Mr. Madar noted, Nearly all of the regions in which we do business have shown year-to-date sales growth. Our three largest markets, North America, Western Europe and Asia, achieved sales growth of 18%, 9% and 22%, respectively, compared to the first nine months of 2017. The Middle East and Eastern Europe, have grown sales by 11% and 12%, respectively, while Central and South America sales were essentially flat compared to the same period last year.

Discussing new product launches for 2019 he continued, On both sides of the Atlantic, we have ambitious plans for the coming year. With regard to European operations, our largest brands, Montblanc and Jimmy Choo, both have new mens scents debuting and there will be new womens fragrances for Coach and Lanvin. For U.S. operations, 2019 launches are for the most part brand extensions including one for Anna Suis Fantasia, an addition to the GUESS 1981 fragrance family, a sister scent for Oscar de la Rentas Bella Blanca, and a flanker for the Dunhill Century fragrance line. among others.

On the subject of newer brands under the U.S. based operations, Mr. Madar noted, We are developing a four-scent super luxury collection for Graff, along with an amenities line, geared for five-star hotels. As we recently announced, we have initiated a direct-to-the consumer e-commerce enterprise in partnership with IMG Models, and our first multi-scent fragrance collaboration with super model Lily Aldridge, is planned for next year.

Discussing profitability factors, Mr. Greenberg stated, For European operations, gross profit margin was 65% in both the current and prior years third quarter and once again, the dollar/euro ratio had little impact on our gross margin. For U.S. operations, gross profit margin rose to 50% as compared to 47% in the third quarter of 2017, with the improvement attributable to increased sales of higher margin prestige products under licenses. For European operations, selling, general and administrative expenses increased 2% and represented 44% of net sales in both the current third quarter and the corresponding period of the prior year. At the same time, selling, general and administrative expenses of our U.S. operations increased 25% and represented 35% of net sales compared to 32% in the corresponding period of the prior year with the increase directly associated with the increase in net sales of licensed products.

He continued, With regard to non-operating items, the loss on foreign currency increased to $1.1 million in the current third quarter, as compared to $0.3 million in last years third quarter, which was more than offset by a decrease in our effective tax rate to 29% in the current third quarter from 33% in last years third quarter.

Mr. Greenberg also pointed out, We closed the quarter with working capital of $383 million, including approximately $211 million in cash, cash equivalents and short-term investments, a working capital ratio of nearly 3.4 to 1 and $52.0 million of long-term debt, including current maturities, incurred in connection with the 2015 Rochas brand acquisition.

Guidance

Mr. Greenberg concluded, We continue to anticipate approximately $665 million in net sales for full year resulting in net income per diluted share attributable to Inter Parfums, Inc. of $1.61. Guidance assumes the dollar remains at current levels. As we reported last month, we have scheduled November 12, 2018, after the close of the market, for the release of our initial 2019 guidance.

Dividend Increase

The Board of Directors of Inter Parfums, Inc. authorized a 31% increase in the annual dividend to $1.10 per share. The next quarterly cash dividend of $0.275 per share is payable on January 15, 2019 to shareholders of record on December 31, 2018.

Conference Call

Management will conduct a conference call to discuss financial results and business developments at 11:00 am ET, on Tuesday, November 6, 2018. Interested parties may participate in the call by dialing (201) 493-6749; please call in 10 minutes before the conference call is scheduled to begin and ask for the Inter Parfums call. The conference call will also be broadcast live over the Internet. To listen to the live call, please go to www.interparfumsinc.com and click on the Investor Relations section.

Founded more than 30 years ago, Inter Parfums, Inc. is a premier fragrance company with a diverse portfolio of prestige brands that includes Abercrombie & Fitch, Agent Provocateur, Anna Sui, Boucheron, Coach, Dunhill, Graff, GUESS, Hollister, Jimmy Choo, Karl Lagerfeld, Lanvin, Montblanc, Oscar de la Renta, Paul Smith, Repetto, Rochas, S.T. Dupont and Van Cleef & Arpels. The fragrance products developed, produced and distributed by Inter Parfums are sold in more than 100 countries throughout the world.

Statements in this release which are not historical in nature are forward-looking statements. Although we believe that our plans, intentions and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved. In some cases, you can identify forward-looking statements by forward-looking words such as “anticipate,” “believe,” “could,” “estimate,” “expect,” “intend,” “may,” “should,” “will,” and “would,” or similar words. You should not rely on forward-looking statements, because actual events or results may differ materially from those indicated by these forward-looking statements as a result of a number of important factors. These factors include, but are not limited to, the risks and uncertainties discussed under the headings Forward Looking Statements and “Risk Factors” in Inter Parfums’ annual report on Form 10-K for the fiscal year ended December 31, 2017 and the reports Inter Parfums files from time to time with the Securities and Exchange Commission. Inter Parfums does not intend to and undertakes no duty to update the information contained in this press release.

See Accompanying Tables

       

CONSOLIDATED STATEMENTS OF INCOME

(In thousands except per share data)

(Unaudited)

 
Three Months Ended September 30, Nine Months Ended September 30,
2018   2017 2018   2017
 
Net sales $ 177,213 $ 169,531 $ 498,347 $ 441,725
 
Cost of sales   68,066     66,059     187,917     164,240  
 
Gross margin 109,147 103,472 310,430 277,485
 
Selling, general and administrative expenses   74,169     70,309     226,286     203,676  
 
Income from operations   34,978     33,163     84,144     73,809  
 
Other expenses (income):
Interest expense 523 495 1,553 1,494
(Gain) loss on foreign currency 1,109 335 (185 ) 1,308
Interest income   (847 )   (615 )   (3,321 )   (2,788 )
 
  785     215     (1,953 )   14  
 
Income before income taxes 34,193 32,948 86,097 73,795
 
Income taxes   9,767     10,845     25,550     24,314  
 
Net income 24,426 22,103 60,547 49,481
 
Less: Net income attributable to the noncontrolling interest  

5,488

   

5,026

   

14,801

   

12,287

 
 
Net income attributable to

Inter Parfums, Inc.

$

18,938

 

$

17,077

 

$

45,746

 

$

37,194

 
 
 
Earnings per share:
 
Net income attributable to Inter Parfums, Inc. common shareholders:
Basic $ 0.60 $ 0.55 $ 1.46 $ 1.19
Diluted $ 0.60   $ 0.55   $ 1.45   $ 1.19  
 
Weighted average number of shares outstanding:
Basic 31,326 31,175 31,297 31,163
Diluted   31,587     31,307     31,502     31,281  
 
 
Dividends declared per share $ 0.21   $ 0.17   $ 0.63   $ 0.51  
 
 

CONSOLIDATED BALANCE SHEETS

(In thousands except share and per share data)

(Unaudited)

 
ASSETS
      September 30,

2018

  December 31, 2017
Current assets:
Cash and cash equivalents $ 133,553 $ 208,343
Short-term investments 77,173 69,899
Accounts receivable, net 164,574 120,749
Inventories 161,459 137,058
Receivables, other 2,146 2,405
Other current assets 5,678 7,356
Income taxes receivable   1,107     3,468  
 
Total current assets 545,690 549,278
 
Equipment and leasehold improvements, net 9,854 10,330
Trademarks, licenses and other intangible assets, net 207,828 200,495
Deferred tax assets 10,941 9,658
Other assets   8,840     8,011  
 
Total assets $ 783,153   $ 777,772  
 
LIABILITIES AND EQUITY
 
Current liabilities:
Current portion of long-term debt $ 23,418 $ 24,372
Accounts payable “ trade 47,452 52,609
Accrued expenses 73,263 81,843
Income taxes payable 11,660 1,722
Dividends payable   6,580     6,561  
 
Total current liabilities   162,373     167,107  
 
Long“term debt, less current portion   28,626     36,207  
 
Deferred tax liability   3,552     3,821  
 
Equity:
Inter Parfums, Inc. shareholders equity:
Preferred stock, $.001 par; authorized 1,000,000 shares; none issued

Common stock, $.001 par; authorized 100,000,000 shares; outstanding 31,333,842 and 31,241,548 shares at

September 30, 2018 and December 31, 2017, respectively

 

31

 

31

Additional paid-in capital 68,665 66,004
Retained earnings 449,085 422,570
Accumulated other comprehensive loss (30,423 ) (17,832 )
Treasury stock, at cost, 9,864,805 shares at September 30, 2018 and December 31, 2017  

(37,475

)

 

(37,475

)

 
Total Inter Parfums, Inc. shareholders equity 449,883 433,298
 
Noncontrolling interest   138,719     137,339  
 
Total equity   588,602     570,637  
 
Total liabilities and equity $ 783,153   $ 777,772  

Inter Parfums, Inc.
Russell Greenberg, Exec. VP & CFO, (212)
983-2640
[email protected]
www.interparfumsinc.com
or
Investor
Relations Counsel
The Equity Group Inc.
Fred Buonocore, (212)
836-9607
[email protected]
or
Linda
Latman, (212) 836-9609
[email protected]
www.theequitygroup.com

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