Rising costs hit Parlux bottom line

By Simon Pitman

- Last updated on GMT

Rising costs hit fragrance maker Parlux hard, after the company
belatedly filed its third quarter results showing a rise in
both sales turnover and net profits, but a big downturn in
continuing operations due to rising operating costs.

The company unveiled the results last Friday, showing that net income had almost tripled to $17.9m for the quarter, compared to $5.99m in the corresponding quarter for 2005. However, those figures took into account a gain from the sale of its Perry Ellis fragrance brand. Excluding that gain the figures were not so positive, with sales from continuing operations registering a loss for the quarter of $5.5m, compared to a $1.5m for the corresponding quarter a year earlier. This came despite the fact that sales revenue climbed by 15 per cent, up from $37.8m to reach $43.4m, although financial analysts had expected a more significant rise, in line with the company's more dramatic performance experienced in the first half of 2006. The company should have filed the third quarter results in the middle of March, but claimed that the late filing was the result of an administrative backlog caused by the company's rapid expansion back in 2005. Analysts polled by Thomson Financial said they were expecting sales of $49.7m, suggesting that the company has been unable to replicate its earlier success. Either way the financial world has reacted negatively to the results, with share prices on the NYSE falling from $5.76 on Friday, to reach $5.01 at the close of business yesterday. As well as problems trying to keep apace with previous growth, inner turmoil has also beset the company, with a boardroom power struggle recently resulting in the firing of CEO Ilea Leckach. However, the company has come a long way in a short time, making up for significant delays in its administrative and accounting processes, as well as reforming its executive board, which is currently headed up by Neil Katz. Likewise, the recent sale of its most profitable brand, Perry Ellis, to the Falic Fashion Group, is expected to help put the company in better shape for the future, helping to consolidate and restructure its position in the hope of creating a stronger and healthier operation. In 2005 strong growth in sales of the company's Paris Hilton fragrances and branded designer goods helped sales turnover more than double, from $47.44m in 2004 to $111.77m. However 2006 was a different tale, with sales growth slowing markedly in the last half of the year, something the company blamed on slowing retail activity in the US market. Parlux, is the license holder to big fragrance names such as XOXO, Ocean Pacific and tennis star Andy Roddick, and really hit the big-time by licensing deal to produce fragrances and accessories using the name and image of media figure and heiress Paris Hilton.

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