IPAR - Earnings call transcript Q1 2022

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Operator

Greetings, and welcome to the Inter Parfums First Quarter 2022 Conference Call and Webcast. At this time, all participants are in a listen-only mode. A brief question-and -- will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the call over to Russell Greenberg, Executive Vice President and Chief Financial Officer of Inter Parfums. Mr. begin. may you Greenberg,

Russell Greenberg

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

conference Securities French Fragrance contain not not we factors we operations, call the involve this factors to refer undertake with materially always, As may calls. update sales projected unknown and actual to of owned These uncertainties to different cause Fragrance obligation our from known through but forward-looking risks, Prestige Parfums and U.S.-based may other are domestic that European-based XX% our are include, time Inter results subsidiaries. other our discuss be and through Exchange managed which SA. XX-K primarily and in Commission. do no Prestige our to When and to we we Annual limited, to discussed intend we uncertainties XX, talking Factors We and reports the about year under our the are December referring on discussed. time Risk wholly Form for operations, owned from subsidiary, products, the managed risks information headings, the of ended Forward-looking to and primarily statements file sales Report When XXXX, statements, products,

business. Moving on to today's

rose And recall same. sales as on Jean more XXXX. a budget. over of than was QX, may XXXX February XXXX, XX% conference were XX% ahead QX the the mentioned way, year-end result, in quarter call, You that our that well and which, was sales better net January Well, of by first March

result the The is of was first margin stronger XXXX respectively. US XX.X% XXXX, operations, and of European-based dollar. the XX.X% quarters margin XXXX For gain primarily in the profit and gross in

to address to point-of-sale gross fixed and mostly XXXX to significant of and the absorb margin expenses. us better tooling and transport and chain to will the into gross mitigate and profit quarter hard have at sales due record increase array it's costs With to respectively. yet, little XX.X% issues we when have related of operations, what depreciation, the such supply have of in And and that are sales, done impact continue in sales allowed complain goods But future. Jean ability XX.X% and a on a improvement US which negative profit margin For and to levels. cost our foreseeable the XXXX, increases first their earnings impact. was as will

European operations, and and For the general net XXXX XX.X% periods. selling, sales XX.X% XXXX represented administrative in and expenses of

net relate promotion in SG&A we of below XX% XX.X% levels. XXXX quarters sales operations, in represented periods. and investment spent But the and In both still XX.X%, US and advertising XX.X% in the first increase first XXXX, of period even advertising. For quarter, In same expenses we the in net XX.X% are versus XX% advertising XX.X% at of last sales, respectively. and net sales current sales, of XX.X% the and and net of year. XXXX The XXXX segments pre-pandemic represented promotion and to XXXX, our promotion on

on a such sales. of basis, in our to are better spending, As advertising we to compared position and XX% net an to year, expect promotion that approximately at last allocate be we annual

was the and for approximately XXXX XXXX quarters. margin operating XX% Our both first

to operational. March France. to rate interest, closed earned $XXX at was share, last up diluted minority yet rates per XXXX inventory tax working and year-end. of with capital quarter. That respectively. short-term first million from relates ratio We now but rose million, which in of is $X capital our cash, effective consolidated and is in approximately share. affirmed Inter equivalents XX% of $XXX headquarters, per difference million not Better of for debt $XXX Yesterday, XX, diluted $X.XX year's ahead corporate guidance, net resulting of acquisition the of SA XX% $XXX sure, which long-term Our had Parfums cash tax primarily including first At new a million approximately to After XXXX, the was our we of quarter million, XXXX in The ideal. out for lower X.X:X. backing we and for XXXX sales million, primarily $XXX fully the working XX% quarter $XXX investments. the And due we calling

China we are revisit be the guidance the lockdowns will to a better subject position lifted. in However, of once in

usual Our caveats -- and, rate, COVID-XX guidance Europe. geopolitical the in regarding course, Eastern the the the pandemic euro-dollar situation dollar comes of with exchange the

Jean. over turn I Now to call will the

Jean Madar

Thank you, good morning, Russ, everyone. and

our from our the this by U.S. both industry benefiting robust growth distribution in sales achieved are sales We largest across XX%. and of increased fragrance our quarter Europe Comparable IT and subsidiary. third second Pacific, problems America, a market, despite globe. largest Asia North Western markets, XX%

shipment East XX% and America, most in the quarter, sales the our and in increased rose Middle sales made XX%. sales Eastern in early With Our of in Europe rose XX%. first Central South

Travel lockdowns. of Spade, recurrences stops sales. launches, performance Finally, regional notably in Sparkle, Legend Rose Montblanc legacy is Red, slow and but to contributed the increase and Strong stemming pandemic making and More steady fragrance retail despite from Kate GUESS starts Do comeback Coach, a product Wild and several

Moncler Ungaro, growth. factored incremental MCM our Ferragamo, course, line products into Of sales of top and

in better being of our had sales at been partner that bottleneck considerably logistics will second subsidiary, been distribution the there change issues. quarter fulfill quarter. the shipping US a resulted orders not we that in related in software First the in have half its About the quarter in by following North couldn't America shipped are a first

Our of social promotion in digital about the our of the current beauty, influencers and acting billboards. year. dividends big as in XX% XXXX final this in and sports and investment Snapchat, field as and Once paying music, WeChat, Tik in quarter devoted is Instagram, TV and in been again, media, to promotion like Tok has advertising well advertising spend ads,

dollars and we by we our more pleased and have very call, last on to mentioned devoted Amazon, effort are on that return business I that doing are on investment. As advertising we

with demand is of fragrance increasing and fragrance about Our around multiple sales in sales recognized us both avenue for revenues. industry growth growth men in buying an fragrance wearing are luxury. the are to affordable for like Scent and capitalize expression, as engines have fashion surge brick-and-mortar fragrances. Explanation increasingly on enabled the for an e-commerce heightened self more

Social of popularity. media the number fragrance growing are and influencers driving

that That I I'm answer Much During will and course, of on focused above And being China China. severely of and Gen pandemic, urban China. have China, China said, diminished. with much concentration lockdowns these of and the infiltrated of luxury X% is population supply spend yes, XXXX growing only that final is Z Sales the homebound questions on penetration of quarter X% been exacerbating fragrance the and of men, is why high more sales rapidly not and urban China. in expensive, the fragrance with and opportunity your in in China, our [indiscernible] immense higher became chain are closures has women brands sure, returned you problems. was -- big hampering the the of

our GenZsumers and expensive for on of luxury most much directed the looking have brands. are premium who We attention the

Van February dozens the of trucking first and China lockdowns factory restricted thanks strong us, Jimmy almost to For of with in then Choo and great services doubled our Moncler, quarter came a sales Ferragamo, in are cities brands demand. Cleef January that means, guarantees in and European-based And in shutdowns.

operations Our in, nothing out. to a ground and halt. in came distribution Shanghai, went Nothing

to has advertising. in been sales April rebuild. steadily March our reduced and and we severely Our business of in Hopefully May China so will end and lockdowns have in and lift, thus for far look soon,

Moving on, still persist, the supply while the us have in critical actions initiated gotten the in point beyond saga. chain problems XXXX

made challenges. that we all suppliers doing Christmas Europe. production utilizing pleased carrying got well the US our new being components in our from sourcing are the sourcing in closer of produced which I'm in reduced of to and have in multiple in consumed Italian where more instance, subsidiary, We are a resources need, the advance extent, have that overall, are for been and great sets, Europe to products very producing our similar sold are be inventory of being will products US to sold,

and our to prices higher and cardboard, dramatically now start wood, energy systems raised will staff Add inflation. rising. we we crucial number And that, years. We between I costs. The As At upgrading this prior more hadn't function. of we the to prices been management are of X% the and prices address to have in call, relayed a on turn our aluminum shipping the year, on X%. raised brought glass, of inventory including components,

more who consumers the so, we do What inflation most that is to cannot facing greater those got in for make price are retailers forgo distributors blowback recently, affordable who our and The now. minimal the purchase we forward increase and until are more, and and look they we concern, is changing, finding from PRL that a or resistance and So is part, fall. major pay selection. next I the but don't a can

the our It of to holding. up protected Pour in war imposed don't we've done from of While the our the and reach some obstacles, in to and country countries launch in payments pile Moncler, regulations about outstanding receivables Femme will is sanction, Russian and the the ahead distributor. doors. to Ukraine Russia is of all another sit with have lockdowns, stemming temporary and speak price that but to customers hard impacted XXXX X,XXX shipments Despite We our and as tried overstock has made uncertainty year. early best to country. business increase, Homme accounts poised supply ordering scents chain adhere begun, official Having the is for in Russian our we to from inventory. a Russian limit Moncler must. quarter, most has which The of war inflation, insurance first business our China of it's invasion with condition the to record customers rollout want Needless so and the negatively the implications say, Moncler to the credit on of Ukraine both advance of Ukraine Pour the be in ultimately heartless, in vary tragic I operations goals we part

a campaign the UK focusing During and activated US, support rollout, on quarter, the promotion major second the advertising this is to and Japan. being

most extensions, of fragrance have are also new and We Open major Jimmy our Éclat. products Single. Road Lanvin Aqua, brand Mon with But for Choo including for launches Man Coach Boucheron men's with

the strength the supply is because predecessors. often good put flankers as extension timing in of their Our they use and less as many same components chain

starting We are joining portfolio X. July Dona and very excited Karan our about DKNY the fragrances

We the former buying inventory be will Estée licensee. from Lauder,

to the be So running. we should able ground hit

new managers sense. have brands brand these seasoned assigned of Both development. next products have strong under and the are debuting We legacy year

time, all for If in made its included while brands of issue, Wear Delicious of you saw the Donna The Women’s its Be this best Marie Claire’s by the Daily additional all time. of is fragrances April [indiscernible] ongoing. Karan XXXX greatest February of hunt in list list fragrance of year,

targets, of types two with both with have and established We potential. start-up businesses great enterprises

calling We portfolio, licenses our to expire. also smaller, are less allowing promising

that I'm guidance owners. an Maybe But end is to attractive calls think We partner the your during consistent the Inter conference why we about sure, service redundancy. its have our will message brand Parfums decided always talk, question to maintain. on overrides I for

it Here goes.

brand commitment As the a pure and a have owners. brand we translates greater royalties fragrance, for licensor’s to know-how, That fragrance higher necessary a business. to and talent grow playing recognitions

and a in their take very network has bandwidth We've got distribution Parfums when proficiency operations arise. right motivated with strong Paris each management with a in Inter headquarters ready countries, encompasses to the action our XXX Italy. opportunities now new France, local and greater even Our also sheet now balance markets.

for Now operator, questions. you the lines can open

Operator

Thank you.

question-and-answer be you. [Operator a now session. Instructions] will We conducting Thank

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

Linda Bolton-Weiser

How are you doing?

Jean Madar

Thank Great, Linda. you.

Linda Bolton-Weiser

Good.

like So little impacted. talked bit being sounds China. – about you And just you can are it a you

some March. March, Sorry, missed it you say was you that, us what but China, how down if first actually performed quarter sense? give did Can or in in the how like I in it much

Jean Madar

they're not high in optimistic double down need lockdown Yes. -- end going We But March double lot do to because are more reopen, I'm improve think of than to digits. before that, we a also it's that when going of XX%, again, I In April, know merchandise. May. digit they still

So have inventory ready. we this

the zone products. we duty center Shanghai Our full distribution in in have of Shanghai, warehouse in is free a

– on Kong. Hong products transit also have to We in

business. strong soon think as China So be a reopens, I we'll as to back

this we it a So ball, just of don't drop but lockdown. because the setback,

Linda Bolton-Weiser

you I And what XX%? of Right. sales roughly like China it less understand. percent is normalized? for than Is

Russell Greenberg

X% In XXXX, China approximately sales. represented of

to million $XX around $XX So million. between that's somewhere

Linda Bolton-Weiser

quantify rate? to growth to Okay. Ungaro And there any the That's quarter, growth way what contributed is of much like the how then, sales portion the helpful. Ferragamo and in

Jean Madar

Yes. I'm yeah go question – Russ, Russ. at the ahead, maybe sure, look

Russell Greenberg

say million, in sales itself. in was I were got What able which close generating is somewhere going and take we heyday we Ferragamo indicated to business of the cut that of is was one that to its had half, reasons to $XX over the why

So million, during overall so. the that on somewhere right business the would second mean much And be quarter. it's $XX would target that, or million $XX around pretty

very Our sales close will the a million mark. were very, that little million to $XX over have XX

Jean Madar

the During first quarter.

Russell Greenberg

quarter. In the first

Linda Bolton-Weiser

Okay.

implementation? you. for And of that inventory just have do timing you stock? safety you that your duplicative you Thank make finally, describe system Okay. And mentioned. updating what's And of management this this entails? then just like the inventory to what Can

Russell Greenberg

ahead, This Jean. implementation – go

Jean Madar

ahead. No, no, go

Russell Greenberg

system, has year. ERP it's ongoing entire for now The management implementation our been almost the not a inventory This is system. just

and We inventory for If to on of well said, warehouse things scanning our programs management, cloud-based in warehouse. a is, over third-party assist are project management upgrading systems to been for that going system as year. systems, using I it's and a a sort

for sometime it entered to But at probably either really the third or this our of systems, basically we year-end revamping expect not just as all impetus the It's between management. is into XXXX. to We inventory transition management endeavor. why inventory quarter

Linda Bolton-Weiser

I'll Okay. much. Thank them you Thanks. so pass now.

Jean Madar

Thank you.

Russell Greenberg

you, Thank Linda

Operator

Our with proceed Stephanie your question Please next question. Jefferies. [Operator from Instructions] comes Wissink with

Grace Menk

of Steph. cadence we the for can my Thank quarterly Wondering Hi, about Grace pacing remainder good year? the Thanks highlight morning. thinking taking then the This should here? on of be you how launches is if And the for for tangentially, question. you. from

Jean Madar

course, can of we Yes, do that.

continue man, that, launch launched brands -- you're So one, we Coach, and for We'll more of basically And had for we Karan Moncler the with after for that the have Aqua. a women. going shoe and DKNY. QX, you of Dona men -- to men's rollout, remember for Moncler, number course, July, three takeover in being starting GE

we're what So X. new and it's not brands we rest quite over launch, of it's going a a but are starting distribution will to us, worldwide we call July because start And have the a for the taking business strong flankers.

year good flankers. of of a it's and So good it's a -- mix blockbuster

Grace Menk

That’s helpful. Thank you/

Operator

Thank you.

question. Khorsand with question next BWS Hamed from Our is of Financial. proceed Please your

Hamed Khorsand

the you're with and reacting euro especially with talk in to how the adjusting for just about there weaker consumer pricing you Could is weaker -- euro? Europe, the how if compensate

Jean Madar

The have -- because customer in to Europe euro. price have retail doesn't not in really react we not changed our

have to of So American even we it's expensive. pricing. though not the wave we'll our much little that have yet. a changed retail dollar a will be do true bit is second That's price distributors more for But why stronger, products

We have increase. to careful be with price

retail or Cleef But are more There think for is a I brands this GUESS have it's to We disciplined else. has careful it because be and to customer. I others we that limits. its big keep and to be $X or acceptable want Boucheron brands want Van certain than deal. more a think to go democratic something when him buy price [indiscernible] like to it not or higher, Abercrombie, have don't comes we

monitoring we are for carefully, looking do it very very, thing So very we are selectively. the at same We everywhere. and don't

Hamed Khorsand

year next macro release any Yes. change And the current is your of was, schedule plans then as question other making my the as for environment you is far concerned?

Jean Madar

no. No,

plans. we temporary. same. -- We our Actually, it's but setback we had changing know a not that again, are had we China, We with everything the big kept

inventory. We have not decreased our

in and decreased, that launches not China rollout XXXX. have for have in instance, the We the we'll

that the release our when are for we sales a ship had cannot and reopened. said I ship China sure and we we maintained -- in press March cannot we today, Russia, revisit Russell and us, of in And China, will, we for no, the towards mean, at though guidance. Ukraine like a guidance even end products July course, any even has of I of have in hope, So, lot setback earlier sales profit the though June in now,

Hamed Khorsand

you. Thank Okay.

Jean Madar

Thank you.

Operator

like the There no management back this turn at for comments. further over you. floor I'd are closing any time. to questions Thank to

Russell Greenberg

for for All Thank tuning thank today conference everybody you. and call. our in right

be how by Just Nantucket. XXnd Consumer safe. from invitation any it presenting Jefferies e-mail. well and Thank further at at be will have XXst you, you a the quick Conference, in Thank reminder, nice I be If again. and in-person Steph, please for me which the stay June event. contact will Stay runs and of you questions, to the any

Operator

you. Thank today's This conference. concludes

You patience. may Thank your you time. disconnect for at this

Inter Parfums (IPAR) 11 May 222022 Q1 Earnings call transcript