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Elizabeth Arden, Inc. announced financial results for its fourth fiscal quarter and fiscal year ended June 30, 2013. For the fiscal year, the company reported net sales of $1.345 billion, an increase of 8.6% as compared to the prior fiscal year. At constant rates, net sales increased by 9.6%.
In North America, net sales increased 10.2% over the prior fiscal year, and net sales for the company’s international segment increased by 8.4% (at constant rates). Net sales of fragrances in the international segment increased 14% (at constant rates) for fiscal 2013 behind the company's Western European fragrance initiative and expansion into new markets.
The company also continued to see success with the Elizabeth Arden repositioning. Retail sales at the company's Elizabeth Arden flagship counters have increased 20% in North America year-over-year since conversion, and retail sales at the company’s international flagship doors have increased 17% in the aggregate since conversion. These increases are driven by the retail sales performance of skin care and color products.
E. Scott Beattie, Chairman, president and CEO of Elizabeth Arden, Inc., commented, “There were two primary factors that caused our sales and earnings results to be below our expectations in fiscal 2013. The first was due to weakness at one of our largest North American mass retail customers, both in terms of retail sales performance and replenishment rate. The second factor was that are growth projections for the Elizabeth Arden brand proved to be overly optimistic given the complexity and scope of transition underway for the brand repositioning. We remain confident in our repositioning efforts and, in fact, are accelerating the execution of the Elizabeth Arden brand repositioning. We expect to incur the final phase of repositioning expenses, including eliminating pre-repositioned product inventory and exiting unprofitable doors, in fiscal 2014. While resulting in near term charges, this is expected to drive improved performance of the Elizabeth Arden brand going forward. Separately, we are taking steps to improve efficiencies in our sales organizations and in the overall indirect overhead structure.”
Beattie continued, “While this was a transitional year for our company, we did make good progress driving both our Western European fragrance initiative and significantly enhancing the future prospects of the Elizabeth Arden brand through the brand repositioning. We also integrated the fragrance brands acquired late in fiscal 2012, grew our category-leading market share of fragrances at mass retail in North America, opened affiliates in new markets, including Brazil and Germany, and restructured our business in China.”
Beattie concluded, “Our priorities remain to accelerate the global growth of the Elizabeth Arden brand, expand sales of our fragrance portfolio, particularly internationally, and continue to drive operational efficiencies. Many of the initiatives we are undertaking to expand our business, while not accretive in fiscal 2014, are important to drive future growth. I am confident that with the acquisitions and restructuring activities, including those associated with the Elizabeth Arden brand repositioning, behind us and more conservative forward guidance, we will return to systematic improvement in gross margins, EBITDA margins and return on invested capital.”
For the fourth quarter ended June 30, 2013, Elizabeth Arden reported net sales of $267.6 million, or an increase of 0.8%, as compared to the prior year period. At constant rates, net sales increased by 1.2%. During the fourth quarter, the company experienced lower than expected replenishment orders from one of its key North American mass retail customers, effectively reducing their inventory on hand with orders significantly below their pace of their retail sales of thecCompany’s products. The replenishment rate at this account worsened significantly in the month of June. The impact from this customer, coupled with weak performance in Europe, particularly in the U.K., caused the fourth quarter and full year earnings results to be below the expectations communicated last May. The remainder of the company’s business largely performed as expected.
Elizabeth Arden's guidance for fiscal 2014 reflects more modest expectations regarding the overall Elizabeth Arden brand repositioning, uncertain economic conditions globally and the quarterly variability of all of the company’s initiatives to drive future revenue growth and market share, which span across the company’s businesses and geographies. In addition, based on current foreign currency rates, foreign currency translation is expected to negatively impact fiscal 2014 results.
For the full fiscal year ending June 30, 2014, the company expects net sales to increase by 3–5%, including an expected unfavorable impact from foreign currency of approximately 1%, as compared to the prior year period, and for earnings per diluted share to be in the range of $2.15–2.30. The earnings guidance includes a negative impact of $0.19 per share resulting from foreign currency translation as compared to rates in effect for fiscal 2013.