Physicians Formula Holdings, Inc. announced its financial results for the three and six months ended June 30, 2012. Net sales were $26.1 million for the second quarter of 2012, a 25.2% increase over $20.9 million for the same period in 2011. The net sales growth was driven by an increase in gross sales of color cosmetics, expanded distribution of the brand’s skin care line and an improvement in returns expense. These improvements were slightly offset by increased spending in various retail marketing programs and higher cooperative advertising, including the impact of program movement from the first quarter.
Gross margin for the second quarter of 2012 was 52.9% of net sales versus 48.4% in the prior year period. The improvement was primarily driven by favorable product mix, reductions in manufacturing costs, lower air freight and increased product recoveries. Net income for the second quarter of 2012 was $2million, or $0.13 per diluted common share. This compares to a net loss of $(0.3) million, or $(0.02) per common share for the second quarter of 2011. Net income increased due to improved operating performance, as well as lower interest expense and a lower provision rate for income taxes.
The company also noted that, in the food, drug and mass channel, as reported by AC Nielsen, its products achieved 8% point-of-sale dollar growth over the last 52 weeks versus the prior year period, whereas the overall masstige color cosmetics category only grew 6%. This made Physicians Formula among the fastest-growing masstige color cosmetics brand in dollar sales among major masstige brands in food, drug and mass during this period.
Ingrid Jackel, chairwoman and CEO of Physicians Formula, stated, "We are very pleased with our second quarter results, which were ahead of management's expectations. In order to continue to experience long-term benefits of our investment strategy, we will follow through with our planned programs including some deferred first-half spending in the back half of 2012."
Net sales for the first six months of 2012 were $52.3 million, a 24.6% increase over $42 million in the prior year. This increase was driven by the same factors that led to the second quarter increase. Net income for the first six months of 2012 was $4.4 million, or $0.29 per diluted common share. This compares to net income of $0.1 million, or $0.01 per diluted common share, for the first six months of 2011. The driver of the increased earnings was the strong performance of color cosmetics combined with the expanded distribution of the skin care line and an improved gross margin from 48.5% to 52% versus last year.
Jackel commented, "Due to our strong first half performance and the strength of our 2012 new color cosmetics product launch, we are increasing our expectations for net sales growth to be between 10% and 13% for the full year 2012 from the 8% to 11% range we previously projected. We now expect diluted earnings per common share to be between $0.17 and $0.23 for the full year 2012 versus $0.10 to $0.18 in our earlier projections. This takes into account not only our strong operating performance but also the shift in timing of our marketing programs for the full year."