IPAR - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by. Greetings, and welcome to the Inter Parfums Third Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. pleasure and your Inter Chief my Executive Russell Parfums. now President Vice Financial is to host, introduce Greenberg, It Officer of Thank you, sir.

begin. may You

Russell Greenberg

XXXX Thank quarter operator. Good and to you, morning, conference our call. welcome third

must of only Rather margin of yesterday a pleased tell all while issued improvement afternoon, with swelling also gross quarter XX% sales, quarter a weaker margin. would rate you compared the of referring euro. the impact XX% third risks under annual costs The average the the is dollar Prestige I wholly-owned operations, SA. to also Exchange and sales and primarily on our These the conducted Interparfums the quarter XX% year those file our forward-looking do operations materially And refer to basis reopening basis distancing discussed exchange September very rose sales X.XX, through Securities yielding say, we We Because in the reminder, are of add to the euro, Form and U.S. as to, and French are X.XX different when to our to our comparable on of remind sales are subsidiaries. Factors, e-commerce Form European-based not time basis social Fragrance operations to domestic update a Needless Risk to Fragrance XXXX, in not Prestige ended contain XX, of the other and quarter involve dollars, in on the of almost That When XX discuss dollar/euro value by we to are a December call about which that versus XX, factors sales the XXXX. that, are brought XXXX may weakness net we third in the owned we Commission. duty our e-tail are the products we the subsidiary, favorable we conducted SG&A Statements denominated our usual, compares a our a primarily because European XX to of following. third to expanded were from was think reread we cause uncertainties customers. margins to release XX in results. and operations, intend limited information U.S.-based This negatively while over XXXX. course, no this let that we XX-Q retail net through news recent begin As X.XX point back for and statements, points, the sales This with talking points. of time Forward-looking products, operating headings, risks, unknown discussed. our I undertake me in that the be the customers third reports for are results. for in weak Even in XXXX, include, stores second report conference of U.S. and and but takeaways. our and affected. has report our listeners ended gross incurred what from known On factors projected restrictions, decline dollar, important dollar than the to may the uncertainties quarterly results our read like quarter with XX-K actual other the of

an third aberration as but the a the lows second I our quarter sales the As increased Admittedly, the to me, quarter. each compare in XXXX second month of result, since quarter April. humor was

gross year. rate, which prior decline margin, the of X% despite at increased quarter achieved resumed sales XX.X%, euro/dollar And basis came third margin slightly which XX.X% Positive rose points. the in operating XXX headwind period of the nearly quarter the the corresponding actually the exceeded in Third in exchange XXX%. leverage average our in

operations, XX.X% quarter year’s was as for gross European XX.X% decline. margin the in of dollar last third to the our compared with weakened most that profit third For responsible quarter,

conference XXXX. which at a we on versus acquired XX.X% assumption in on call, licensee through sold a the liability XX.X% drag XXXX, profit of current months which As first former discussed our of we the return month a last gross a in came the license, products in put by margin, of period the nine for nine brand

the was the employees profit and XX.X%, U.S. lower margin were prospects, in operations, volume. cut operations third business attributed furloughing basically without quarter sales or to our right-sizing product quarter. our modest improvement Without discharging XX% up our year’s growth compromising was we future to from third plans prior or to expenses able For gross mix. that And

and As we more just slightly last XX.X% in XX.X% than third of reported net yesterday, quarter of third reduced year’s quarter represented to XXXX. XX% expenses the SG&A were as by sales the compared

for are decline sales. SG&A leverage on which operations, difficult European our a net XX.X% drop more a on XX.X% For sales. carry to expenses SG&A operations expenses decreased as as for efficiently higher U.S. European operations, And of U.S. fixed XX.X% X.X% a our those in declined in operations, costs that

the in of result, very level, with much during X.X% of cutting XX.X% reduced to continue compared at X.X% out minimum $XX as XXXX cooperative Also, I reducing promotion waving current represented quarter third And XX.X% Royalty to to period, compared and column. existing year’s last year’s current as on last quarter. – promotion first call, and significantly of or quarter guarantees. expense net lines quarter. third as represented million advertising, advertising sales accommodating royalty as have net our a the sales expense for mentioned last We support in third this approximately but licensors our and been a

prior XX, reduction is XXXX months as as compared where the year. operations also operations September the Singapore, Our for ended Switzerland and favorable for European tax corresponding effective the that such the to for jurisdictions, other tax rate in to And XX% States. conduct at rate European due United business in XX% period of our came nine

of for the true-up accrual, benefit an September nominal serious corresponding by receivables operations, result period the year. covered to of a XX.X% of in for – taxes XXXX, our months U.S. as accounts the of tax as the for in compared not approximately been resulted prior a haven’t a expense ended of XXXX nine much our were Thus insurance. As income receivable been far has issue

activity, outstanding the days dropped quarter. is this in last of third year’s to as important XX the to days considerably receivable since the days cause. up discussion accounts as compared upturn sales But XX sales the part improvement explains collection in While mid-year, in is

million, of capital cash Our balance We sheet closed in the cash, including quarter with million and $XXX approximately remains strong. short-term investments. equivalents working $XXX.X

$XX.X We our in have XX.X% borrowings recent Origines-parfums.fr. million untapped with a – and company parent working $XX facilities in capital ratio X.X the of debt, to credit connection the which only of equity includes long-term stake of million X, with in made

return I Jean? we call closer Now are to are look and the we will over doing. at doing Jean a how what for

Jean Madar

good Yes, Russ, everyone. morning, thank and you,

has business expectations. better we As rebounded best reported, than our far

sales two most sales slowed have of to Not operations, had Coach for big earlier exceptionally brand introduction operations, had well in fragrance major Lava doing comparable quarter brands the Coach time It a two none of surprisingly, and very us. from U.S.-based fragrance in And of declining sales, in XX% Asia Coach year declined X.X%, very year’s year, launch which sales markets, our is brand Unlike exceptions, Lava. decline Europe. be last forward. third popular, of European quite XXXX have to is as benefited XXXX. third quarter our is there to result, look larger of European For sales while where the rate from its looks our and Dreams a were Eastern good. but a been quarter. product this

gift limited we flankers’ addition a launches. of have In number to major collections, and edition

largest Montblanc, the a Signature And family. to scent adding women fragrance Our work. brand is in has brand, Explorer also the a

have for and year. scents a for Lanvin And I to Choo Jimmy new Choo, launched Hollister scheduled for For we woman’s is XXXX. the for in later called we product winter market also Want coming both

fragrance In end will Kate very addition, first which we our Spade are early XXXX. excited in ever in about launch,

we’ll and MCM first out with woman’s year Z rolling start quarters. the of second fragrance millennials targeting operation, Gen the and U.S. launch in For the first

by be which bottle the by was MCM backpack. design, I impressed iconic will think inspired the you

third de this Our The la market this Lesedi new Renta Canyon Oscar in and de quarter, we’ll La Sui in Oscar bag. the pipeline for the debut the Sky is Alibi pillar draws Escape will quarter quarter. and second debut In also la called products. Renta to quarter in second Asia, Alibi fragrance the for deo the the the package so comes in from is new first called Hollister anticipated new relaunch design the first the quarter for collection in Rona Graff Anna highly Abercrombie will and the similarly

Regarding on very XXXX will retail different. be announce the we recognize We guidance. December will world on numbers our X, post pandemic that

has concerns supply challenges destocking But and and travel had such been have with hand. volatility, questions solve capital it and we discussion problems a retail. a always currency chain business. stock bankruptcy, The control to we’ve the on fact, been at stricter is. regulation. as travel issues because In restructurings, already adjust an include important in tariff, face we as me of working changes part and know interruptions, usual our that brings And closings, That able on it to coupled the is retail, of lot

Hainan severely rather stores has China. to example, restrictions e-commerce to to sales helped the Chinese has But the in South Chinese shop I brick-and-mortar in travel, an lifted in restricted. on resumption boom Chinese may people read than purchase fill specifically have surge government you international and about halt. why China, The trouble briefly limitation. in businesses the in island ground like To Korea, nearly would segment encourage gap. The retail that explain We’re of for duty-free a have

So shopping. buying not their them some amount are struggled Chinese to and duty-free but them. bringing It retail, goods, of selling large locals back people international

fraction there, really Chinese small a but products. will But the customer products Our come are we’ll if fragrance. more have on sold beauty buy represents The questions than the that. you of skincare back fragrance

as XXXX before present Jefferies December the will next X, D.A. as thing at questions, Retail year. Davidson to we of well Inter move Parfums March on last X one at Consumer – Summit Thursday, virtually Just & Conference Growth Davidson Brands on the

you floor questions. So for can now the operator, open

Operator

Altobello [Operator question proceed with Joe Please line Instructions] from Raymond James. the question. first comes you. Thank of Our with your

Joe Altobello

Hey Good morning. guys. Thanks.

do So virus there and of think think will would make and first the the your launch If big that’s it’s fragrance market I some people we picture. we on that fragrance in more is be assume about travel question, the launches other year. the going XXXX? do we that almost How busy. progress time, same delaying pretty kind global company at been throughout out, same for this schedule And every substantial

a in you get all and so any foresee launches, some supply both is yourselves operational others, at crowded of are with that chain there issues these year launches launches a also, out? Thanks. once? or And those many going fear of there So with that guys on

Jean Madar

for you, your question. Joe Thank

Regarding the them. calendar for should we because ready some delayed happened and very launches just of this are have for of them we this year next launches year,

from of view, all. at and view, point worried of supply So not a point execution chain inventory I’m

Choo, and before, a said can Jimmy Cleef major Rochas, launch every brands all our year, where this of As one almost a we we will GUESS, I Montblanc, I name of Van have brands we that have as blockbuster. on unusual it’s have, maybe

achieve up, for will it’s We we will problem what is visibility spending. they we quite all give going is – of our products it’s that But are we of have you reopen of are we it presented year. course, a optimally before again, want good. approach we’ll France lack difficult to big reaction we’re have when conservative the is very year. But make to early countries to of advertising, closed, maybe projections on think open, it if optimistic, December if have course, we do. have would just be quite The we great us no is like UK deliver that unusual. stay locked to will of plans be, in these Christmas, So – some But now we trade, cautiously the in today where next terms

in everything is So place.

And have that, did internally third quarter did but was The first reassuring it’s of reassuring sure really everybody, the quarter good were the for quarter we lose really course. than for anticipated. also touch, but of that numbers we a see the very of fourth course, first we better the beating that to street, is our we beginning

have to want but we okay, something? are So, to bigger add do Russ, you visibility. difficult

Russell Greenberg

I’d want time mentioned, chain world. products just really products to Yes. for more to even supply no is we’ve in that the of respect distribution thing address the than launches I industry. X,XXX other in that there Jean our year, fragrance times, for is the because to to get new order Even to and the to to launch issues as fact with only like unusual distress, ready The a actually had new launches. if X,XXX, not influx additional that substantial network around anywhere show in you could have the not, even from is any one normal

of But competitors industry. is many a it will launches. something that especially exaggerated, I very, be that very that delayed but unusual think don’t for is since I only Parfums, also have this certain not think little our Inter

we are as looking things we get the little with to bit, optimistic it. are cautiously worse future. today, to And forward much don’t they subside for if are we said, pandemic the Jean So a respect than

Joe Altobello

if shift overheads actually a was see very fact, especially could mostly, gears it if reduction you. I quarter the you the the modestly And at in details, were for But mentioned in up royalties, year-over-year SG&A guys. SG&A, Russ, to you, substantially in year-over-year. your look up and can and I That’s quarter-over-quarter. you I think helpful, Thank maybe bit

or terms some overheads million to use $XX a for run the is that of million $XX in good QX So, quarter to was a future? rate catch-up from the

Russell Greenberg

Interesting.

to right Your numbers close on. pretty are

million which a matter around even at that point variable we $XX.X the royalty, of and As are million disclose, up expenses SG&A fact, of out end fees, typical $XX normally so. XX you we and took reported promo – if service freight or you

But included the fixed $XX on additional that quarter. in there other somewhere ongoing still as And highlight We much mind, expenses going per million we’re also numbers. that should that With part with expenses run variable don’t those are reporting target quarter, XXX-and-somewhat-percent. to sales compared However, mechanism. Joe, that. our that, are indicating that variable are on record keep normal of went think the expenses is that right in we we think I second quarterly around to up come our pretty

Joe Altobello

it. Okay. Thank you. Appreciate

Russell Greenberg

problem. No

Operator

you. Thank

Please from with Bolton next Our with question proceed Linda Weiser comes Davidson. D.A. your question.

Linda Bolton Weiser

when…. actually I’m Hi, Yes.

Russell Greenberg

Linda. Hi,

Linda Bolton Weiser

When about fact quarter, fragrance Hi. some area they as fragrance that in highlighted about actually their I the they success they and their think talking L’Oreal talked launches Coty market they’ve about gained areas went well. think talked has because share ahead been with and they some certain

those think So, that share by launches? some do lost delaying market you’ve you

Jean Madar

through L’Oreal read I and Coty.

the couldn’t what launches think that first really of were in in happened I the and was really quarter amount the that was done they launches second that quarter stop.

in it second So, would the – terrible. this delayed think we purpose. have launches do glad they they did been – to I a don’t that that – I’m our And it on quarter,

getting absolutely on quarter inventory of had were to that were the but think some of that have what And they unload regret not the slowly I to products. countries no our trying we do normal, the back for open, lost countries share we’ve I market before. Third have done. some

– year market. the general. think our end of this think sure down will markets. down – than – is we will when I’m I But lost I of end at products are at I NPD. don’t the we when that the of season the Christmas at at look market have that none the more look in our will that we we don’t

Linda Bolton Weiser

very Thank Okay. you much.

Jean Madar

Linda. you, Thank

Operator

you. Thank

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

Steph Wissink

I question to everyone. Joe’s the morning, earlier is are up on fourth and quarter Good year to but earnings third guidance Russ want SG&A quarter, for follow somewhat similarly the against the imply on and just does Thanks. the your down lower. it

margin in in earnings? and And happening degradation understand imply the just sharper mechanically in balance QX a gross a that I so, wanted little what’s bit about would the SG&A to

Russell Greenberg

going connection only therefore, is QX. into QX given that amount So variable November to in we for guidance a are The that we’re is depending as rest we going with the the into that’s the continue of usually put really being in visibility bit There are place. little the wait And on as into and of to see to early and depend and we is that and from. the And the upon trying in December, see programs the different more kind mode, retail just to and sales a marketplace. dollars speak. to decided really those come want are of through advertising actually within how pick trend we of that biggest we Part that really see number typically, sales put we momentum really variables then several be on we’ve earnings up, case advertising conservative where are market.

Steph Wissink

Okay. helpful. two-part then That’s categories level I under really of just beauty, taking it. other that but fragrance actually was of on merchandise also Hainan may you question gave that a government And for to be and up and you, back reselling is, buying both within that question Island, that thought it disclosure issued indexes some interesting customers really

how goods like dotcoms wholesale versus we bit the Can clarification a licenses talk selling you. selling a retail? just about Thank big brand.com? question just cross-border with then Jimmy those us to those local what through also work travel the around some little more you you observations brands dotcom. remind could Are travel your would Montblanc, you If And just of on call Choo? a your retail you’re if market

Jean Madar

because what to Hainan, but who thousands buy it. shopping, today it bring was to products, a they of back briefly of for resell go Hainan, you Mainland beaches in talking Hainan people, suitcase really or, I have I to known tens discussed am the talking, hundreds and they back mean, and go their house China to they that they and Well, put it I about

So, were This when Hainan of also coming price traveling a – to Mainland it’s this I’ve a were advantage XX% difference with and all Chinese semi-wholesale. really people There and is pricing. bringing take we seen They have seen XX% is to to between Korea. products. China. suitcases this back

So, it. retail? Is it that’s travel duty Not what really, doing why are we really. call, people free

how as, back I we of should me, This maybe go were not is consider we When retail transfer we think to – local back where normal? year. take to is think, for to now; the will not travel I It going get say, it’s for it XXXX. For before real it’s in we merchandise. three years next

is we on Russ, sell… do you answer answer my this So, do on how Hainan. to want

Russell Greenberg

Yes.

dotcom On the our – us that are sell through – that – of most the sure arena certainly, in of licenses, sales always any the to. dotcom most brick-and-mortar of allow and on our we sell customer to

to we or – the or markets Harrods or Gloss or So, to Macy’s around whether or those world. not sell to any even to retailers major international in Sephora of the or

able – words, venues. they us of customers. basis. us always give venues, States, in in through dotcom sell through to their other go normally we those their through in in sales through other their our product to today and wanted here to segment, to to most would But of licensors typically for it approved sell brick-and-mortar through are to allows also are permission beauty United if We case-by-case back would we most different dotcom our the are Amazon, example, on In and go a those addition, environment. licenses, dotcom our And sell

Steph Wissink

you. Thank

Operator

Thank you.

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

Vahid Khorsand

the Could bit for calling Hamed. what provide taking channel the Vahid background This is you a you in little of for Thank question. is? current Hi. inventory on

Jean Madar

cannot our call, when very, for the ship to inventory. We that still In sell air. We but did merchandise talk this retailers when inventory that a reasonable. is level buy we the two. I by distributors They that of very too month people a lot to receive It wait or means see long we to not, we talk and of the directly.

So, of year. like very for not the are high, the channel been goods amount it in has the whole this but

Vahid Khorsand

the this put I won’t – of inventory for And think you thinking is response, you travel Okay. looking you launch production another as to sales just and levels return heard production much the where level at you’re But three the years. going calendar, in of do channel? kind XXXX how gave what a into

Russell Greenberg

I – So, I’m think sorry.

Jean Madar

Russ. Yes,

Russell Greenberg

that, I represents travel of bring up only just or retail XXXX. XX% represented our only wanted to to sales attention is still in to XX% the

as place. of in some international that maybe course, call made mentioned I to of of travel is Hainan retail, don’t you of, want in And province brick-and-mortar. different Jean travel China, it, up being that, have a by retail, is Now, types taking not

going sort. very, not of it’s traveling the of norm are the that’s have there don’t and product international historic a So and that expectations will the once of vacationing a distribution be that well in very launches. can from for XXXX. only significant may end our or retail come people it’s a in true in back until significant new customers impact to that of And to product in – it’s travel the and going impact very major that matter standpoint early to going XXXX I happen new process, time. freely launches. of of, take have think travel product a significant a A or a But our But know as we things to that back

Jean Madar

or of XX% sales our travel retail. outside are of XX% done

Galeries or ask countries can the So travelled we and Lafayette and sephora.com, the that two Sephora have live absolutely in about trouble we we brands next – where macys.com it our be Macys when in will least. at or with and in for product, XXX sell in will for that all you be in our launches in have, retail years, we’ll launches

Vahid Khorsand

because I return. It’s normal going just when discussing the as that meant know to hard broadening on call, to even you I vaccine. tell were travel earlier is the apologize. topic I with a not retail, in just

are the output look is are it levels just will I’m production normal Like, a and are channel of – a you get look reopening may unknown. circumstance variables that so your of like, to better what launch, the anticipating, true is to given trying like, inventory the the like? picture anticipating what like, So how production many into you going put putting what with look what much to you calculating out anticipate given – you

Jean Madar

to And were for a we we supply in quarter. course, department the have good store because bit what instance were so is of how this world, – by are our a much what what much difficult. we are, products. product, we because little way it’s are not a it allocated two of XX taken is we sell, sell working startup, we good a also in the But for we of Yes, stock of of our improve sure the question, can And how for to make surprise first a years, idea month is we the again, all by our are to Definitely so space. is order conservative a space a that going out new the country, strength teams have we in everywhere chain quarter. delivery harder been third doing have will in working have our this months in we for approach,

brands, to launches, are because and we we are We back stock these are from – blockbusters back will for from have enough supply in bigger our in of we’ll we – take year-over-year fourth make in we most we have inventory be we’ll that sure quarter. accounts. new an approach aggressive – the But

Vahid Khorsand

Okay. Thank you.

Operator

Thank you.

time. We have this no additional questions at

back closing to Mr. floor the over any Greenberg additional comments. for So I’d to like pass

Russell Greenberg

all today you Thank conference the and Okay. you, on thank call. us joining Jessie; for

usual, thank discussion, again anybody me further safe. if by please joining and us or stay email. questions needs for today. stay you well As have further any And Everybody, does please contact

Operator

teleconference. conclude at for We thank you disconnect gentlemen, your may you and Ladies this your this does and participation, today’s time. lines

Inter Parfums (IPAR) 10 Nov 202020 Q3 Earnings call transcript