European Sales Up 78% for Inter Parfums, Helping Make 2011 Its "Best Year"

Inter Parfums, Inc. reported results for the fourth quarter and year ended Dec. 31, 2011. For the fourth quarter, net sales rose to $189.1 million, a 68% increase from fourth quarter 2010’s $112.5 million; at comparable foreign currency exchange rates, net sales rose 61% for the period. European-based operations generated net sales of $169.6 million, up 78% from $95.5 million in the same period in 2010, and net sales by U.S.-based operations were up nearly 15% to $19.5 million from $17 million in fourth quarter 2010.

Thus, net sales for the year ended Dec. 31, 2011, increased 34% to a record $615.2 million from the prior year’s $460.4 million; in constant dollars 2011 net sales rose 28%. Net income attributable to Inter Parfums, Inc. rose 21% to a record $32.3 million, or $1.05 per diluted share, from $26.6 million, or $0.87 per diluted share in 2010.

Jean Madar, Inter Parfums chairman and CEO, noted, “2011 was far and away the best year in our history. Not only did we achieve record sales and profits, but we gained further control over product distribution, executed the largest new product launch in our history, enjoyed major success introducing fresh products for our newest brands, and added three valuable names to our brand portfolio: Balmain, Repetto and Anna Sui.”

Madar continued, “Several of our prestige portfolio brands showed stellar sales gains. Notably Burberry sales rose 20% for the year in local currency due to the launch of Burberry Body and the staying power of the brand’s historic lines. With the debut of Montblanc Legend, sales were more than three times greater than in 2010, when legacy brand sales were limited to the second half only. In 2011, we recorded first time sales for the Jimmy Choo signature fragrance, which far exceeded expectations, and in the latter part of the year, sales of Boucheron products began. New product launches, including Too Too for Betsey Johnson, and the continued distribution of specialty retail products overseas, were among the reasons for the increase in sales by U.S.-based operations.”

On the subject of Burberry, Madar added, “Discussions that began in December between Interparfums SA and Burberry on the creation of a new operational structure for the fragrance and beauty business are continuing.”

Russell Greenberg, Inter Parfums executive vice president and CFO, noted, “The January 2011 commencement of European-based product distribution in the U.S. by Interparfums Luxury Brands, Inc., a subsidiary of Interparfums SA, had a significant influence on our reported results. As we had been reporting throughout 2011, this change in our U.S. distribution model factored into the increases in net sales, gross margin and S,G&A as a percent of sales for the each of the four quarters and for the year as a whole."

Greenberg also pointed out, “While my focus is on the year as a whole, the dramatic increase in fourth quarter sales and concurrent decline in fourth quarter profits and margins requires explanation. Promotion and advertising expenses included in S,G&A expenses for the three months ended Dec. 31, 2011, increased to $49.8 million and represented 26.3% of net sales as compared to $10.9 million or 9.7% of net sales in same period of 2010. Much of that increase is because we are now responsible for 100% of the cost of advertising support for our European-based fragrance brands distributed in the U.S.; in previous years, those costs were shared with our former U.S. distributor. In addition, the global launch of Burberry Body was supported with a strong visual campaign on a scale far greater than ever before. Further, our advertising spend for certain other strong sellers like Jimmy Choo and Montblanc also pushed our advertising and promotion budget to new heights. For the year as a whole, promotion and advertising included in S,G&A expenses aggregated $127.8 million or 20.8% of net sales compared to $69.2 million or 15.0% of net sales in 2010.”

Discussing plans for European-based operations, Madar stated, “Following 2011’s very ambitious product launch schedule, in 2012 we will primarily grow our business through ongoing advertising and promotion of our strongest brands and fragrances in our prestige portfolio. We are however bringing several new fragrances to market, including our first new woman’s scent for Montblanc, and a new take on established Boucheron and Balmain scents.”

On the subject of U.S.-based operations, Madar commented, “We have quite a few new products debuting this year. Love Fury by Nine West was launched at 650 Macy’s and 282 Nine West stores in the U.S. and internationally. Banana Republic’s Wildbloom Vert, an offshoot of 2011’s Wildbloom, is now in U.S. namesake stores with a men’s version in the works. Gap Established 1969, a new fragrance for Gap with versions for men and women, is currently hitting store shelves, and also scheduled for a 2012 introduction are Fairy Dance, our first new fragrance for Anna Sui and Wishes & Dreams for bebe.”

Greenberg concluded, “While we are regularly reviewing our expectations for 2012, at this point in time, we are reaffirming our current guidance which calls for sales of approximately $625 million, with resulting net income attributable to Inter Parfums, Inc. of approximately $35.7 million. The three major launches of 2011 versus a more modest launch schedule in 2012 set a very high bar for year-over-year comparisons of our financial results. Guidance assumes the dollar remains at current levels.”


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