Elizabeth Arden (RDEN) Falls on Much Weaker Than Expected Results

Shares of Miramar, Florida, based Elizabeth Arden, Inc. (RDEN) fell sharply on Tuesday in response to the announcement of the company's earnings for the third fiscal quarter ended March 31. Elizabeth Arden fell 22.82%, down $8.13, to close at $27.50 on volume of 4,008,958 shares. The company reported a net loss for the quarter that was larger than expected, and total revenues came in at significantly less than analysts had been expecting.

Founded in 1910, Elizabeth Arden operates as a global beauty products company, which sells fragrances, skin care and cosmetic products to retailers, beauty salons and direct to retail customers. For fiscal 2013 the company had a net profit of $40.71 million on total revenue of $1.34 billion. The company has nearly 3,000 employees, and its stock trades on the NASDAQ. On Tuesday the company announced an unexpected adjusted loss of 84 cents per share for its fiscal third quarter that ended on March 31, against a Wall Street consensus that the company would break even for the quarter. Meanwhile, revenue for the third quarter fell to $210.84 million, a decline of 20.3% from the same period in 2013. This included a 23% decline in the company's North American sales. Analysts surveyed by Thomson Reuters had forecast revenue of $256.86 million. The report is one of Elizabeth Arden's worst performances in a decade. It has led to the hiring of Goldman Sachs to "explore strategic alternatives". The company has been negatively affected by a global market that it describes as "highly promotional". It also cited severe winter weather in North America that led to store closings. The company has also experienced declines in its licensed celebrity fragrances, especially those carrying the Justin Bieber and Taylor Swift labels. In an industry-wide problem, the celebrity market has been hit by the younger demographic. Though they still closely associate with celebrity brands, they lack the buying power for discretionary purchases as their incomes remain impaired since the financial meltdown. Celebrity fragrances have fallen from 12% of the US market in 2012 to 11% in 2013. The company's fragrance portfolio represents 64% of total sales, but fell 13% to $624 million for the nine months ending March 31. E. Scott Beattie, Chairman, President and Chief Executive Officer at Elizabeth Arden reported "These results are clearly disappointing...While we are encouraged by recent retail sales performance in our North American mass fragrance business...We are taking corrective action to improve the performance of the business, focusing on tightening distribution, improving gross margins and restoring profitability and return on invested capital to levels consistent with historical results." In addition to engaging Goldman Sachs (GS) to assist in exploring potential strategic alternatives to enhance shareholder value and to accelerate the growth and maximize the value of its brand portfolio, the company also plans to introduce a full line of new fragrances this fall, as well as new products under its existing brands, including Britney Spears, Justin Bieber and Nicki Minaj. Other News About Elizabeth Arden South Korean Company Considering Bid for Elizabeth Arden LG Household & Healthcare has identified the company as a possible takeover target. Elizabeth Arden Brings Rx Skincare Cream The skincare cream will be available exclusively at physician's offices. Other Stocks in the News Hollande: GE bid for Alstom power unit falls short GE's proposed $17 billion purchase of Alstom SA's power division isn't satisfactory. American Express raises dividend to 26 cents from 23 cents The new dividend will be payable on Aug. 8 to shareholders of record on July 11.

Published on May 14, 2014
By Kevin Mercadante

Copyrighted 2020. Content published with author's permission.

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