Inter Parfums sales slide on strong dollar and weak consumer demand
Total net sales for the fourth quarter 2008 fell 16 per cent to reach $100.4m (€78.5m), compared to $119.4m for the same period in 2007.
Sales for the company’s European division, which make up the vast majority of the turnover, fell by 14 percent to $83.2m, while US operations fell 24 per cent to $17.2m.
US sales slow, while dollar impacts European market
The performance in the US market highlights the severity of the consumer and retail market downturn there, while the European results reflected both a slower economy and unfavourable currency exchange.
Inter Parfums was also affected by the poor performance of its Nickel skin care product, for which the company incurred an impairment charge of about $0.9m for the second year running.
CEO Jean Madar pointed out that the three largest brands all showed strong growth, highlighting the fact that sales for its Burberry fragrance – its biggest brand - increased by 10 per cent.
Madar also noted that in the year ahead a new Burberry fragrance, The Beat for men, is due to be launched, while in the US a new Gap fragrance, Close, is also being lined up for a nationwide launch.
Gap launch holds results back
“The year-over-year sales increase was modest because our 2007 US based product sales included the initial rollout of personal care products to Gap’s North American stores as well as the initial launch of personal care products for all New York and Company stores,” Madar said.
The weak fourth quarter results meant that net income for 2008 as a whole was down from $8.6m last year, to $5.1m, representing a fall of nearly 41 per cent.
For the full year net sales rose 15 percent to $446.1m, with European sales representing $386.4m, while net income came in at $23.8m, which was just below the company’s initial forecast of $24.1m.
Dollar strength will continue to impact results
Looking ahead to 2009, the company revised its net sales forecast to $390m and net income to $21m on the expectation that the dollar will remain strong against the euro and in light of the global economic crisis.
“The financial crisis is global in scale and has negatively affected consumer demand, which is having an adverse impact on our distributors and on retailers,” said Russell Greenberg, CFO.
Greenberg went on to explain that, in response to the situation, the company would be reviewing all of its budgets, particularly with respect to advertising, to adjust to anticipated spending, as well as initiatives to ‘right size our staff’.
