Elizabeth Arden net profit down 88 pct, sales fall
Cosmetics maker Elizabeth Arden Inc. on Thursday posted a quarterly
profit that beat Wall Street estimates despite falling 88 percent on a
one-time charge and lower-than-expected sales due to the merger between
Federated Department Stores and May Department Stores.
The company, whose shares rose nearly 4 percent in after-hours
trade, also lowered its fiscal 2006 outlook and warned of continued
weakness in the U.S. market.
Net profit in the fiscal third quarter was $702,000, or 2 cents per
share, compared with $5.6 million, or 19 cents per share, a year
earlier. The current results included a $1.5 pretax charge for stock
compensation, which was not recorded in the prior period.
Analyst Gary Giblen of Brean Murray Carret & Co., who lowered
his target price on the company on Tuesday, said Elizabeth Arden "lived
up to my expectations and worse," noting that results were boosted by a
lower tax rate in the quarter.
Excluding a pretax charge for debt extinguishment of $800,000, or 2
cents per share, Elizabeth Arden said that earnings per share were 4
cents. Analysts, on average, had expected a profit of 2 cents per
share, excluding items, on revenue of $199.4 million, according to
Quarterly sales fell 3.5 percent to $191.3 million, missing the
company's previous estimate for sales of $195 million to $200 million.
Elizabeth Arden has been pressured as Federated Department Stores
Inc. (FD.N: Quote, Profile, Research) -- operator of Macy's and
Bloomingdale's -- closes stores following its acquisition of May
Department Stores, a move that cuts the number of outlets where the
company's cosmetics and fragrances are sold.
Sales fell as U.S. retailers tightened inventories, which resulted
in higher-than-expected returns and more promotions, said the company.
Looking ahead, Elizabeth Arden said it expects "continued weakness in the U.S. market."
"I'd be astounded if the stock doesn't see $20 tomorrow," he said,
attributing the after-hours share rise to unsophisticated traders.
After an initial drop in after-hours trading, the stock rose
82 cents on Inet to $22.98. It closed at $22.16 on Nasdaq earlier.
For fiscal 2006, the company lowered its outlook for earnings per
share to a range of $1.15 to $1.20, including share-based compensation,
but excluding other one-time charges. Sales are expected to range from
$950 million to $970 million, down from a February estimate of $980
million to $995 million.
Wall Street has been expecting earnings per share of $1.25, excluding items, on sales of $989.3 million.
In February, the company stood by its full-year forecast for
earnings of $1.20 to $1.26 per share, including stock-based
Chief Executive E. Scott Beattie said that organizational
improvements in Europe and Asia, particularly China, would contribute
to revenues and earnings next year.
The fragrance Fantasy Britney Spears "contributed solidly" to sales
as it rolled out to the rest of Elizabeth Arden's international
markets, Beattie said. The Prevage anti-aging treatment, made in
collaboration with Botox-maker Allergan Inc. (AGN.N: Quote, Profile,
Research), "continues to be introduced in markets around the world to
an enthusiastic reception," he added.