Interparfums earnings almost halved by coronavirus
May 12, 2020
International fragrance maker Inter Parfums, Inc. (Interparfums) announced a 46.8% decline in Q1 net income on Monday, principally due to hefty sales declines in the Middle East and Asia early in the quarter, followed by decreases in other markets as the coronavirus pandemic evolved.
For the first quarter ended March 31, 2020, net income attributable to Inteparfums totaled $10.1 million, or $0.32 per diluted share, down from $18.9 million, or $0.60 per diluted share, in the prior-year period.
As reported at the end of last month, the company’s quarterly net sales were $144.8 million, decreasing 18.7% from $178.2 million in the same period in the previous year. In comparable currencies, the decline was 17.8%.
Sales by the company’s European-based operations fell 20.6% from $143.7 million to $114.1 million, while revenues from U.S.-based operations declined 10.9% from $34.5 million to $30.7 million.
Interparfums’ U.S.-based business was propped up during the quarter by a strong performance from the Coach brand, which the launch of the new “Coach Dreams” fragrance early in the year helped achieve a 35.9% increase in revenues.
Guess brand sales also rose 28.9% in Q1 thanks, in part, to brand extensions launched last year. All other major brands saw year-over-year sales declines in the quarter.
The impact of the Covid-19 pandemic was felt most intensely in Middle Eastern and Asian markets, where quarterly revenues fell 44% and 37%, respectively, although some improvement was seen towards the end of the period, with a strong pick-up in Anna Sui sales in China offering a glimmer of hope for the future in March.
In North America and Western Europe, where shelter-in-place and store closings were implemented later in the quarter due to the spread of the coronavirus, net sales fell 1% and 11%, respectively. However, the worst of the effects of the health crisis on these markets is anticipated to be reflected in Q2.
“While we expect a precipitous decline in second quarter sales, compared to both the current first quarter and last year’s second quarter, we look for measured improvement in the second half,” said Interparfums chairman and CEO Jean Madar in a release, optimistically highlighting the easing of stay-at-home and store closure measures in a number of regions.
“In a recessionary environment, fragrance is generally a lower priority than essential purchases,” he added, having also pointed out the potentially disastrous effect of a prolonged drop-off in air travel on the company’s travel retail business. “We will continue to monitor the impact of Covid-19 and adjust our plans and activities accordingly as the situation evolves.”
In light of the coronavirus pandemic, Interparfums has postponed the launch of a number of major programs and campaigns until 2021, including projects for Kate Spade New York, Jimmy Choo, Anna Sui and Guess.
Thus far, the company has avoided terminations and furloughs, but has implemented a hiring freeze and significantly reduced bonuses for 2020. The group has also drastically cut its non-essential businesses expenses and suspended its cash dividend.
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