Russell Greenberg, Executive Vice President and Chief Financial Officer of Inter Parfums, Inc., 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.”
Mr. Greenberg 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 December 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.”
He went on to say, “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.”
Mr. Greenberg also pointed out that net income attributable to Inter Parfums:
- Was reduced by an impairment loss of $0.8 million in 2011 relating to the goodwill of the Nickel business;
- Benefited from $1.5 million of foreign currency gains compared to $2.1 million of foreign currency losses in 2010; and,
- Reflects a 36.3% effective tax rate compared to 33.7% in 2010.