Inter Parfums, Inc. (NASDAQ GS: IPAR) today reported results for the third quarter ended September 30, 2011.
Third Quarter 2011 Compared to Third Quarter 2010:
- Net sales increased 42.1% to $171.7 million from $120.9 million; at comparable foreign currency exchange rates, net sales rose 36%;
- European-based operations generated sales of $154.7 million, up 41.7% from $109.2 million;
- Sales by U.S.-based operations were $17.0 million, up 45.9% from $11.7 million;
- Gross margin was 63% compared to 59%;
- S, G & A expense as a percentage of sales was 51% compared to 45%;
- Operating margins were 12.6% of net sales compared to 13.7% of net sales;
- Net income attributable to Inter Parfums, Inc. rose 24.5% to $10.4 million from $8.4 million; and,
- Basic and diluted earnings per share increased 21.4% to $0.34 from $0.28.
Through the first nine months of 2011, net sales were $426.1 million or 22.4% ahead of $348.0 million in the same period of 2010. At comparable foreign currency exchange rates, net sales rose approximately 18%. Net income attributable to Inter Parfums, Inc. increased 38.5% to $28.2 million or $0.92 per basic and diluted share from $20.4 million or $0.67 per basic and diluted share.
Jean Madar, Chairman & CEO of Inter Parfums, noted, “Spurred by the global launch of Burberry Body, Burberry fragrance sales were up 29% in local currency for the quarter. Our European-based operations also benefited from the continued strong momentum of the Jimmy Choo and Montblanc fragrance launches and the commencement in January 2011 of European-based product distribution in the U.S. by Interparfums Luxury Brands, a subsidiary of Inter Parfums, S.A. With respect to U.S.-based operations, the comparable quarter sales increase was driven by a strong performance in international distribution of our specialty retail products. Of special note, Banana Republic, Gap and bebe product lines are performing especially well in overseas markets. Also during the third quarter, we launched Too Too by Betsey Johnson and bebe Gold.”Discussing factors impacting third quarter profitability, Russell Greenberg, Executive Vice President & Chief Financial Officer pointed out, “The gross margin improvement was primarily due to booking wholesale rather than ex-factory sales by Interparfums Luxury Brands, which was offset slightly by a weaker dollar compared to last year. Product mix and promotional sales accounted for the remaining fluctuations in gross margin. The significant increase in S, G & A expense in both dollars and as a percentage of sales was, as we had forecast, due to increased advertising and promotional expenditures overall, but especially in connection with the global launch of Burberry Body. In addition, as was the case in the first half of the year, we are responsible for 100% of the cost of advertising support for prestige fragrance brands distributed in the U.S.; last year such expenses were shared with our former U.S. distributor. Our effective income tax rate was 40.5% in the current third quarter versus 32.5% for the corresponding period of 2010 reflecting an agreement in principle with the French Tax Authority on the consequences of a tax audit, which covered both income and non-income tax items. As a result, as of September 30, 2011, we increased income tax expense by $1.7 million and reduced a reserve for contingency related to non-income tax items recorded in 2010 by $1.3 million.” Mr. Greenberg noted, “The accounts receivable balance at September 30, 2011 is up 42% from the June 30, 2011 balance, which corresponds to the 42% sequential quarterly increase in net sales. We closed the third quarter with inventories of $182.3 million or about $6.0 million more than at the start of the quarter and $72.0 million more than at the start of the year, which reflects the needed inventory build to support anticipated sales growth and new licensing activities in both European operations and U.S. operations.”