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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 Reuters Estimates.

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 compensation.

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.