Inter Parfums Q3 results reflects slowing sales growth
tailing off as third quarter sales growth slows to 12 per cent,
against a nine month sales increase of 21 per cent, as the company
is hit by increased royalty and advertising expenses.
Third quarter net sales, ending September 30, came in at $75.4 million, compared to $67.1 million for the corresponding quarter in 2004. Net sales for the nine month period were €207.9 million, compared to $172.2 million in 2004.
The rise in expenses also saw hit net profits, which fell from $4 million for the third quarter in 2004, to $3.8 million this year. The nine month period saw net profits fall from $12.2 million in 2004 to $11.4 million for this year.
Inter Parfums CEO Jean Madar pointed to the fact that prestige product sales rose by 16 per cent, while mass market product sales fell by 11 per cent. Likewise, although Burberry fragrance sales increased by 14 per cent, an increase in the royalties paid to the Burberry company ate into margins.
Madar also pointed out that the quarter's results also reflected a period during which there had been no major launches. However he did point out that the recent launch of the Aperge Pour Homme line in time for the 2005 holiday season should start to make an impact in the fourth quarter.
Royalty expenses increased 19 per cent during the third quarter to reach $8.8 million, mainly on account of the increased dividends paid to Burberry. Promotions and advertising increased to $44.8 million for the current quarter, up from $22.9 million for the corresponding quarter in 2004.
However, despite the added expense of the Burberry licensing agreement, the company is still pinning a lot of hopes on the brand's potential for the coming financial year, as current sales continue to boom.
"We have a very ambitious new product schedule for 2006, which includes a major Burberry fragrance family in spring 2006, in conjunction with Burberry's 150th anniversary," Madar said.
Inter Parfums also drew attention to the added potential from the agreement it has made with Gap to develop personal care and home fragrance products.
"We expect to meet our goals of launching at Banana Republic retail stores in the fall of 2006 and at Gap in early 2007," said Madar.
Executive vice president Russell Greenberg said that, assuming the dollar remains at current levels, the company is reaffirming its 2005 sales guidance of $274 million, a 17 per cent increase on the 2004 figure. Likewise net profits are expected to increase to $14.6 million, down from $15.7 million in 2004.