IPAR - Earnings call transcript Q4 2019

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Operator

Greetings and welcome to the Inter Parfums’ fourth quarter and year end 2019 conference call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Russell Greenberg, Executive Vice President and Chief Financial Officer. may you sir, you begin. Thank

Russell Greenberg

Good Thank XXXX welcome our and quarter you, and operator. fourth year-end to morning conference call.

We After questions. I Then, we our our update you standard performance, business open future of with will Madar, plans. our overview CEO, Chairman will Jean and the and an our will on review proceed financial provide format. floor to

uncertainties, may known want from further, remind include, listeners be risks, call I and to conference limited involve which just to to are other but may contain proceeding projected that headings time do not Statements, Before and and this Forward-Looking reports and duty Risk results factors Statements factors cause and unknown that We the and the our not results. actual with These different Exchange the file Commission. and Form to risks to the discussed. Factors time from the update XX-K discussed information we uncertainties Securities to Forward-Looking no undertake Annual under intend in Report on materially

we primarily United prestige primarily talking operations, domestic through SA. about we operations, subsidiary When sales our are to refer fragrance prestige States-based through of conducted our are we our wholly Interparfums we of products conducted discuss fragrance European-based referring sales to products subsidiaries. When owned XX% French our owned

costs our operations are has all while on I of our negative effect impact sales and final in mindful sales, are of over profit full-year euro. incurred dollar a those XX% in quarter denominated dollars, strong is review because positive U.S. a net the that on Before results, margin. European operations please almost a of be but This our gross

XXX.X increased million, to over and was the comparable exchange for fourth quarter as compared quarter million. and XXX.X XXXX, up X.XX is the quarter for dollar/euro final were At year XXXX net XXXX. of With X.X% the exchange the of regard X% were dollar/euro foreign rates X.XX X.XX XXXX, to X.X%. rate average the difference The sales net in average exchange for as XXXX sales The from X.XX full respectively. fourth XXXX currency to the rates, compared

Net based a sales in X.X% million, to sales decreased came percentage million at and net U.S. up XX.X%. operations margin as by compared XX.X% to by XXXX. to to XX.X from XXX.X of operations net XX.X% was XX.X million Gross sales European-based SG&A XX.X% compared million. XX.X% were expenses in compared XXX.X

to to to to as in attributable to Operating income Net income margin attributable XX.X And finally, million X%. Operating for million. rose XX.X% Inter periods. XX.X both X.X as X.XX as X.X% Inc. compared Parfums, per diluted increased income to share compared was came net compared at X.X% to Parfums million. million Inter X.X

resulting totaled on million in This a For net Parfums, December income the XX.X Parfums XXXX, X.XX income to X.X% XX, ended sales sales, XXX.X and Inter diluted in full net to Inter net XX% diluted attributable increase of share. is a EPS. in increase or XX.X% attributable gain million year per

respectively. XXXX margin and and XX.X% gross in consolidated Our XX.X% XXXX was

higher-than-typical reason, dollar XX from of year, gross declined out rolled and sales benefit Explorer, for XXXX that basis in strong the our the XX.X%. benefited launched for XX.X% for offset quarter gross operations the points first by While which margin, essentially throughout the Montblanc European XXXX’s margin that costs was of the to

The products under represented In rate XXXX. XX% over increased XXXX. U.S. primarily gross margin XX.X% our versus licenses. XX.X% XX% operations to the that than sales grew XXXX, also consolidated at XXX operations, is in sales in in of point higher decline European That our faster margin from reflects U.S. operations. of XXXX, just operations fact U.S. in a consolidated gross improvement prestige to margin slight increased For due basis

of and the us, XXXX X.X% operating XXXX and and SG&A and XX.X% increase respectively. a story In net in at administrative on for percentage XX.X% came X.X% big sales, sales our a as selling, leverage. expenses XXXX, is net rose general expenses For in

again, peaked in expenses, the full in which sales, promotion included general advertising, that the brought in from is and to for and XX.X% selling, Once year quarter slightly the down administrative of XXXX. fourth net total the XX.X%

XXXX, X.X on in that for XXXX loss we currency, this of budgeted was in our while foreign a there schedules in our change versus XX.X% at million spending. income came in XX% fluctuations a tax in rate While In in net XX.X% minor effective warranted million sales loss expenditure launch certain XXXX, XXXX, X.X and in was XXXX.

operating aggregated only with cash, over million, investments. had million in XXXX XXX by working million including working capital provided closed cash activities and year and XX.X capital of short-term XXX We and of approximately equivalents one three we in debt. of a XX.X ratio long-term to Cash the million

Now, to the for outlook XXXX.

like being the strong, is business companies ours of around by most fundamentals Virus. the the impacted While doing globe, business remain Corona our

it time, certainty challenging. at of months only While our will is nearly calculate the this the Virus Company impossible the full that is impact on be Corona potential to several the next

are cropping China, there new now up cases around Beyond world. the

consumer year. of in areas, we until a launches result several the As this decline later significant corresponding in and key situation air and postponed and traffic this travel shopping

this be fluidity our Virus revised. and Corona needs XXXX net the to expect XXXX to impact limited to If few be these are situation. earnings is on sales results. the our Obviously, and to related this For of months guidance with we in-line XXXX with subject year, the reasons, expectations our of the first change

continue. please Jean,

Jean Madar

And Russ. all. you, good Thank you to morning

these I’m we Virus years our message talk moving review I and plans to Corona building questions But by about before here performance on to will upon that during convey have is of region future growth. our wish our plans, you that We crises. are sales I successive later. sure the will

in XX% the heels year. ahead For of upon XXXX. Eastern in XXXX were rose sales market, X.X% the which our XX% X% gain sales largest example gains Western in in on layering North X% growth in Also XXXX, sales ahead Similarly, comes were preceding nearly America, in net of the X%, XXXX. sales Europe of Europe, XXXX of

The in biggest the which XXXX market, Asia, goods dollars United China gainer where in XX% in the of are largest nominally out which XXXX, light were we of Also increased in consider actual XXXX, our in but percentage ahead third trade down in East ahead on respectable in in we Middle over XX% and XXXX. from constant States. was sales quite tariffs dollars, of coming

a mind, ended. just the for sales in in climbed high our keep XX% bar XXXX, year setting in Also Asia

continued market, Our smallest to America, Central and has decline. South

brand to news. on Moving

our two in fragrance we new the June with build Kate forward moving year Spade brand, with plans last enterprise are which of to respectively. We signed agreements

legacy scents, end new Colorfully Air reported, we summer, of women’s distribution On commence As and in Walk will several beginning two retaining unveil we have scent fall. should an for we Live and popular the in of entirely which are weeks the next the

MCM signed technology, XXXX, goods redefining We German are November. cutting-edge innovation, also very has this Fashion and enthusiastic a pushing Since agreement been fashion House about that scale through our superior level exceptional quality. luxury creativity licensing global we and new on in with worldwide boundaries

first and work on developing fragrance men begun quarter the has an targeted of women team for our with for XXXX. MCM initial launch So extraordinary

Europe. January department focus with stores, on be and a will our prestige think high-end of strategy geographic in stores, we XXXX beauty America Asia, and ready MCM retailers We distribution includes

Montblanc our brand year, is number With the followed and regard three. number one, of to by launch Choo still Coach Explorer with number ranking, especially, Jimmy this two

the fourth in and two next However, taken three has GUESS number could in become the over less than place two brand in years, GUESS years, Company.

overstated. The cannot importance of ranking be this

company. call today’s annual long one sales. of for have that accounted a aggregate been than the Today, on you have much time and Burberry more than for that our progress will four ago brands our a us making filled more long of Some space, not following remember half that in brand stronger

we on several to last already the unveiled our top which is Dreams for and launch Moving at we doing five numbers year, great including week in Macy’s, Coach were products just the Macy’s. pipeline some at launched new have

roll-out. It both also signature new is scheduled be recently We began first a to will Montblanc have and Rochas for L’Homme still business the for women’s by half. Rochas, called The launched scent Montblanc keep women expected success to scent for mind, perform The smell-centric Montblanc not is Explorer, comparably. was Montblanc Signature, brand. in for a out the rolled huge but XXXX which the in

Also, it a Choo though we a even program small is L’Eau with limited ahead product, Jimmy are moving with still distribution.

scents Our our the if space primary goal see we markets new fragrance to products in like and coming can is testing half. the selling in women Jimmy the expand Choo second for

of Moving launches, called on debuted product the Oscar Essence la the U.S.-based new domestically. recently family to member Bella Renta de

plan our perfume spring in and XXXX, we to that will in includes fragrance domestically Toilette, be in introduced Rosa fall. launching both GUESS, a and Eau Vita on de Bella Vita For be internationally the the blockbuster Bella

are fastest of the line working the happen It happen Middle fragrance also end East, and that XXXX. market be year be that a XXXX. will brand for on GUESS growing which noting women’s is for also is in grooming line We line, worth major a in men’s the grooming scheduled will in to our

have timing introducing on of planned will this to China course, year, wait. but have decision and the We GUESS will, its the brand in

in We GUESS going to are GUESS also Color stores. Cosmetics test some

this, moving, on strengthen are to goal Cosmetics the but is brand’s distribution. We Color of use conservatively the to course, fragrance

by the Anna launch were of of will Sui be the for onset brand a before Sky a confident new XXXX the So, sales we called Corona growth. catalyst fragrance that Virus,

be Graff Sui the we we Within decided will Harrods. to for back have fall to in launching two is and push for Asia market new a collection XXXX. biggest launch therefore Anna weeks, the

being distribution Abercrombie, a fall the Selective brand ready is number be a fragrance Escape for new Hollister, luxury Canyon we extensions for called will also of a have duo planned for got introduction. and mid-year planned

licensing option conference I the end Renta la the have our five-year last more Abercrombie And that. through extended our recently, XXXX for license extended have we call an additional Oscar of and after on brand have with arrangement we we Hollister. our extension that de reported and

in but our brands new not on portfolio. prepared two plate to are XXXX, our to that mean enterprise, doesn’t build a further portfolio added new Having we have lot enlarge we to our fragrance

compatible offer potential. we that solid human over, got said are entertain the backed the model, and talent many business by are to drive financial have that As our partner with strength, have growth transactions superior licensing the times and we

mention to meeting want questions, Before at Russ XX. I Davidson investor that Conference Growth on taking Consumer March will D.A. with the your be

Thank operator, for open let’s floor Now you. the questions.

Operator

Weiser Instructions] the Bolton line proceed Our comes question. first Please from of [Operator you. Thank Linda with D.A. Davidson. question your with

Linda Bolton Weiser

Hi, are how you. Yes.

Russell Greenberg

Good morning, Linda.

Linda Bolton Weiser

Hi.

of I is we seeing are So, impact, magnitude were as first we we what the what us just is I on of in you travel quarter Can for coronavirus in guess, the is your XX%. current earnings so the of revenue your reduced it you markets we did declines. what guess the the the and of retail down our that some just XX% revenue. give seeing sense model Maybe since are is impact. and thinking

your you color on along revenues seeing. XX% maybe you the XX% So, the a could quarter. us just little down thinking Am give Maybe right lines? I or first in what are

Jean Madar

Russ, you want to?

Russell Greenberg

sure. Yes,

actually You very are close. very,

Looking up numbers February, surprisingly the month anticipating are is well. It significant the that most holding and January surprisingly for at the March actually sales we the decline. are really

significant sales anticipating For saw by really approximately to quarter. at I we will flat, for a going that can that U.S. that. indicated press operations, operations have are but out operations, are that I our the was this down XX% you mentioned, those we think far, European they for not We we of sales seen release achieve who put be actually best the first as have just be we impact. so that think European

seen very, year. have the sales in have we that come with we very be what similar that from far of those should in the to orders to system, So able last

first X% So quarter lines. are or X.X%, those along maybe that, the combination, something with at looking down we somewhere

Jean Madar

plastic supply from this Yes, were add to If about coming from may more the components and very some I we Virus and bit worried color, the certain China. China of because special cartons agree. some you I little have some metal first beginning, a coming we Corona give when started at

the the year, with we had China already of tariff sourcing Virus. because of But before that in the started started to middle look Corona last alternative at

Actually, maybe components So or but going impact Maybe XX% ago. back up are a have we work factories only any of to not worried seen sources, not from on two we to supply about have we now we are XX%. China. of serious at rate to alternative the coming material weeks XX%

So we are from receiving China. parts

are especially the but course, The we problem the quarter which to and some you for the problem the is going like second Sui immediately the quarter, moved launches, all whole we not is and fourth moved February launches the what March. is buying and third region, that Asian only true and is going or retail, the will sales, in region, travel to is that said I it January quite do it really Chinese And are Europe the It China. this the to good, so the sales be mean, okay. pressure of that missing, Anna we in elsewhere. it tourist in is feeling is we started were start but but far

Linda Bolton Weiser

side, in the Thanks. bit cost quarter. quarter, face is something reduce of here as negative near you term the as are And your guess, per you to leverage little of Is or are just you to XX running then, sales doing just same at business kind in that anything operating or I cost usual? the things can a about just million as the on the you try keeping mitigate wise keep decline first SG&A

Russell Greenberg

certain sorry, I’m I Well go - Jean. ahead,

Jean Madar

and you later a of the lot but No, besides the for spent but is year, advertising other be the are money launches the but in will our we I Russ. marketing have some moved that that the toward as that, in later same. services say year, G&A will expert, advertising,

Russell Greenberg

we SG&A right. will needle fixed good is on therefore of of those move nature that for follow a and that The we fortunately us, however is easily, the the but is can are the portion fluctuations exactly later not very variable control of Yes, something G&A really part spend to expenses our year. the is less than sales. of can where respect Marketing, John as you and part much in we one mentioned always do with the typically area the marketing the in early year

won’t leverage the erosion we of of over see we the have last positive that hopefully, significant couple a years. much So too seen from

Linda Bolton Weiser

thank Okay, much. you very

Russell Greenberg

have it, You Linda. got

Jean Madar

Thank you.

Operator

Wendy your Our Please Citigroup. with next Nicholson question with comes from the line proceed of question.

Wendy Nicholson

picture, time. Hi. a is at the think, than, least a Virus, actually you mean, margin put operating we in seen have bigger My talked very the question ever leverage Corona I from higher XXXX for long away step taking you about, I Russ, or up

where but more much how there lots term, those to we so, here, is And you feel much of do XXXX an margins there go? longer structurally? are and how of from about moving can going and go know I be that and pieces, sort Again, is just higher how anomaly juice

Russell Greenberg

a Linda, very ago, question. which is margin. asking XX.X% We margin, this reach operating been. to about have question. Thank came a it XX% us XX% highest we great for talking you back we for the operating pleasing the It short ever years is quarter just in not to very, kept because did few achieving actually

ago. close exceeded a got pretty have full-year XX% and We XX% several actually to years back in

Our goal was always that to kind XX%. of reach

grow situation unfortunate again, continue over in if to we the think top last forward, our that seeing move the can we we we barring like as years. have several XXXX, that, I are line

that can level, XX% start very probably high a approaching operating is one our margin think, which industry. for of I level we

an proud So, is very are that that of. achievement we very,

Wendy Nicholson

but period then been can generally successful, I amount been And you talk, great been were have also, strong tremendous I of market is good is of that helps have it. of you know big generally, and been activity this have get you a in brand had this part a sort Got of growth. kind multi-year is have we space. fragrance shares picture, there what mean, revenue is your just

by willingness fragrance, part increased Virus, to what sort of So, on XXXX, today? is of of of course again, industry much getting dynamics how on consumers can the your your what driven Asian you just high growth just for through about level kind use being on Corona the saw just of outlook the you on is talk the take the Thanks. maybe your

Russell Greenberg

Jean, you want to...

Jean Madar

that that the with able start, Maybe we because the can with It growth of we parts can many try. have strongly have is quite the in we grow Russ. true been world. to have, quite portfolio been you Yes. pleased I

in but you or more have de U.S., that strong absolutely is also Abercrombie Europe. is Montblanc Renta fragrance Oscar in in population in the is have than in impressive. and regionally, one strong but have Asia, look true going that our XXXX, It XX% believe at What la more XX% it brands some that Asian quite use with than before that like when is growth this because market, after especially, only we growing our used will are we we We only very seen years seen, that with Southeast think skincare, years for course, of market but to say have strongly a makeup, is Asia we and the the brands on Asia that people Choo of as that they in Jimmy If those we Lanvin some will that top growth. Coach have them accelerate we this or such portfolio, the or fragrance. give or recognize that, we

So we side, Virus good balanced. we can G&A. again positioned Corona term, we aside, was a our year long be are portfolio that and to the the Virus going is think but XXXX think we on leverage, very We Corona well think well

So, we are quite confident.

now. forget sign sales license have. the a can with -- could existing not have, what we that some existing Let’s new are we and working also We we that can do structure on we we more have than the deals people, right

we stop definitely portfolio. will So, the not increasing

Wendy Nicholson

Great, thank you much. very

Operator

the Please of question. next Jefferies. Steph your line Our question comes Wissink proceed with from with

Stephanie Wissink

Hi, good of just everyone. questions. Russ, morning a couple

Jean Madar

morning. Good

Stephanie Wissink

was launch half? the mean, sure second for the timing calibrated first from pushed the just as Jean, the of calendar. and of the had morning, Anna half I that delayed the all Was well. you in make Sui only Good changes we to I mentioned to launch want the that

Jean Madar

couple mean, but keep in almost almost Sui the the for except launches all Asia. Sui I Anna because of is Anna a on or of of minus Today, weeks, Yes. time, XX% Sui, to plus have business Anna I decided

launches. So we do of not change the calendar

more thought a we market toward in end during we the the launches will year. left end some re-promote of of what will I money keep and than We the have need the share to need maybe think year be if spend to to our re-promote the little order toward to

Stephanie Wissink

supply cut Russ, you. on it future your as question about being Linda’s some a is you for what the maybe actions the think So, supply Hey, sequence just longer help the a reduced a right to cadence we then changes? maybe, the actions, are sense bit Corona orders And just or it beyond thank demand you seeing and regarding of are and that seeing your whether working drift coming of is a back the reorders or impact of of staging question great, not you, of Are Virus. as you talking were Can the you recalibrating about are that of March now follow-up how should demand? immediate channel through a give through? us potentially just is

Russell Greenberg

It we [indiscernible]. change impact just last very is few are the because Yes. of Things see to answer the starting difficult weeks. now within just to some a question

Jean Madar

Or even today.

Russell Greenberg

it within exactly. Things happened Yes, change over of market, what two weeks. at spread. past as think your has period. I stock very, one-week is really very has virus Look declined just a quickly this the mean

really for predict happen difficult it going future. So, try in what to the is us is to to

try going this unknown to fly last, zones or have That become no to to prediction travel is almost the is of effect, that extent some going as has something time. really is the but extent how spread that to duration certain we these is make mostly been zones, at how and areas see retail. the area impossible course, of no-fly in this to Right a are now, of the do and that to hit long of the

Jean Madar

is going downside travel been what have to last give try And in to in phone a many color, on retail. add actually. I’m operators and the you week definitely with and big Yes. we some many to because we see distributors the

Some airports are completely empty.

is of if travelers, there sales. So, no there no course is

is in On hand, but you conservative, through e-commerce, China, last want was very, where lot the of as in Mainland strong to done the other and a very in e-commerce I stay sales the China, and three prudent quite there know weeks. very

what much I sales at They looking were So, expected. than actually. better we was

think strength that what the recover. be also, because course, a is but little business and of I the think China first So, we to a is is this of in e-commerce down, opinion, going personal to think that than in I will our bit it be China, better

Europe, We has as very don’t is hours or are in the France more Italy what next market. going visibility days. in on we to been you today hit. almost in worried about or Germany travel have important know retail We is this general. why know, happen This in zero

Stephanie Wissink

you much. very Thank

Jean Madar

helps that I hope you. Thank you.

Russell Greenberg

Thanks.

Steph Wissink

helpful. that for Very, remind quick us, Russ, just you. Choo the on very question one, - when Thank license, Jimmy you expires? could us final

Russell Greenberg

Choo license, that should… Jimmy

Jean Madar

Jimmy Choo.

Russell Greenberg

something, was type, me [indiscernible]. find it. I Obviously but see if let if quickly I it think That can XXXX quickly can is I

Jean Madar

We Maybe question find and we another we will find out. that. take

Steph Wissink

Yes.

Russell Greenberg

it XXXX. have here. I right December XX,

Steph Wissink

Thank you.

Jean Madar

So another Yes. years. we XX have

Russell Greenberg

Yes.

that So Thank Jimmy license, had existing recently taken Kors renewed license Michael Yes. at after We acquisition, we Choo When Jimmy remember. that Choo Steph. just by was signed you, group, least and the new the a shortly with license. had to you added XX if over years.

Operator

with question. Khorsand BWS comes with of proceed Our Hamed the your next Financial. Please from line question

Hamed Khorsand

Hi.

So, what right you sourcing or now that out of just is any first off, you? kind the to shortages way, get are component there for front of on conducting corona

Russell Greenberg

United and not see seen we place States were any significant the XXXX when chain. impact minutes started As back that Jean in standpoint There China. that in the processes we were to into just ago the of just even have really from the indicated, enacted between early effects of tariffs few a the supply put

create sources components. our for had to begun just We alternative

Year. virus hit same as right Chinese the the New at the of addition, time the also In beginning

XXXX, that those close going we already of for because weeks at Year. parts to even most down needed, Chinese acquire New still knew for that portion of from that several parts we we do China, China for had So, we least received for was the first the

were enough Virus area today, Jean We the in shipments was to that with in mentioned, fortunate factories not did in. have and are come Corona China. the we So that any starting hit as most

So, we have significant standpoint. from the not seen far chain so impact really any supply

Hamed Khorsand

what that strategy the the year? changing going composition, ad Okay. in is And a estimate just in other retail, the is change in sales for and your happening my question travel to there is was change how in cost this given be

Russell Greenberg

No.

I think change just really it of is a allocation the in dollars.

We have activities dollar gone spending in have certainly activities with social content-related type the for media and more advertising.

I will around still stand overall around at still at the right compared we approximately should in a A&P. came XX% at but at spent think, to from XX.X% say, in of normal XX.X% XXXX in sales I XXXX, budgeting year to right in are I looking an be XX%. standpoint,

Hamed Khorsand

Okay, thank you.

Russell Greenberg

Thank you, Hamed.

Jean Madar

that I answer would I think goal people a because that have this Corona need may, finished, we is that I we we not inventory, to be a the short think say will asked. like products a It that question, to Virus very is before take regarding is the meaning next inventory lowered period. question of important of our have not when If going to lot really market it in

So, in come supply, for the next four is very level to what of look when or will could maintain a demand, will higher Asia, months, it maybe we especially very, months think to three inventory have back, the we months, because two important fast.

question. next Okay,

Operator

for comments. would turn like back floor I now We to have you time. Mr. the to questions no further closing this Greenberg, over at

Russell Greenberg

office. tuning does our all conference any if further you, much. call and have Okay. great for my can into you thank you Thank so as they Everybody at anybody have questions, contact me Christine. a Thank day Bye. and usual,

Operator

conclude gentlemen, does today’s teleconference. and this Ladies

for wonderful day. lines have a your your Thank disconnect and at may this you You time. participation

Inter Parfums (IPAR) 3 Mar 202019 Q4 Earnings call transcript