Inter Parfums, Inc. reported its sales rose 18 percent in the second quarter ended 30th June, 2021.
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In light of the near cessation of business in the second quarter of 2020, the Company is comparing its current midyear results with those of 2019. For the first half of 2021, net sales rose 18 percent to US$406.1 million from US$344.5 million in the same period of 2019.
At comparable foreign currency exchange rates, net sales rose 16 percent. Year-to-date net income attributable to Inter Parfums, Inc. rose 61 percent to US$50.3 million compared to 2019’s US$31.2 million.
For the six months ended 30th June, 2021 and 2019, diluted earnings per share were US$1.58 and US$0.99, respectively, for an increase of 60 percent. The average U.S. dollar/euro exchange rate was 1.20 and 1.13 for the six months ended June 30, 2021 and 2019, respectively.
Jean Madar, Chairman & CEO of Inter Parfums, Inc. noted, “Once again, last year’s outbreak of the COVID-19 pandemic and the business conditions that ensued make comparisons with the very depressed second quarter of 2020 mostly irrelevant. Far more meaningful is a comparison with the second quarter of 2019 and the operating leverage resulting from the nearly 25 percent increase in net sales in 2021.”
He continued, “Through the first half of 2021, sales in our largest market, North America, rose 59 percent compared to the same period in 2019, while sales in Western Europe and Asia approximated those of the first half of 2019. Two of our smaller markets, Eastern Europe and Central and South America, experienced sales growth of 54 percent and 10 percent, respectively, over the first half of 2019. The only region where sales declined was the Middle East, by 23 percent to be precise. Similarly, there has been growth of our four largest brands. In the first six months of 2021, Montblanc, Jimmy Choo, Coach, and GUESS brand sales rose 3 percent, 39 percent, 34 percent and 58 percent, respectively, compared to the first half of 2019. In the first half of 2019, the debut of Montblanc Explorer caused a surge in brand sales, which helps explain the modest increase in Montblanc brand sales in the current first half.”
Discussing recent events, Mr. Madar highlighted the signing of a transaction agreement for the exclusive worldwide license for the production and distribution of Ferragamo brand perfumes. Subject to certain conditions, the 10-year license is expected to start in October 2021 and has a 5-year optional term.
“We will operate through a wholly-owned Italian company, based in Florence, with both legacy and newly created entrants produced in Italy. Once the business and existing inventory are transferred to us, we will be in a better position to estimate the contribution Ferragamo fragrances will make to 2021 sales. With our flexible business model, strong balance sheet, global distribution network, and committed staff, our pursuit of additional license agreements continues as we focus on established brands whose owners are seeking to reinvigorate their fragrance business. While there can be no assurance that any agreements will be finalized, adding select brands to our portfolio remains a high priority,” said Mr. Madar.
Mr. Madar concluded, “The rollout of products unveiled over the course of the first half continues. These include Montblanc Explorer Ultra Blue, I Want Choo for Jimmy Choo, Coach Sunset Dreams, the Kate Spade signature scent, Rochas Girl, Alibi for Oscar de la Renta, Bella Vita for GUESS, Away by Abercrombie & Fitch, Canyon Escape for Hollister and Driven by Dunhill. Of special note, the MCM genderfluid fragrance that we introduced in first quarter continues to dazzle. With orders nearly triple our initial first year expectations, we have had to refill the pipeline several times to keep pace with sales. Brand extensions dominate our new product pipeline for the remainder of the year, including flankers for Jimmy Choo Urban Hero, the Oscar de la Renta Bella family, the Hollister Wave collection, and the Anna Sui Fantasia pillar. We recently debuted Effect, a full suite of men’s grooming and fragrance products under the GUESS label.”
Russell Greenberg, Executive Vice President and CFO noted, “The slight decline in second quarter gross margin compared to the same period in 2019 is primarily attributable to a weaker dollar and its effect on European operations. In the current second quarter, gross margin for European operations was 67 percent compared to 68 percent in the same period in 2019. Gross margin for U.S. operations was 53 percent, up from 52 percent in the second quarter of 2019. Once again, sales rose at a faster rate than we had expected, as was the case in the first quarter. As a result, 2021 second quarter promotion and advertising expenditures, included in S, G & A expense, of US$33.2 million or 16 percent of net sales, were well below what we would typically spend in a quarter when sales exceeded US$200 million. By way of comparison, in the second quarter of 2019, promotion and advertising expenditures were US$36.4 million or 22 percent of net sales of US$166.2 million. For the year as a whole, we continue to expect promotional and advertising expenses to approach historical levels of 21 percent of net sales.”
Mr. Greenberg also noted, “Our 2021 second quarter and year-to-date bottom lines were negatively impacted by two items. The first is interest expense incurred in connection with the borrowings related to the April 2021 acquisition of the future headquarters of our Paris-based 73% owned subsidiary, Interparfums SA. The second was an unusually high tax rate, which factors in a global tax settlement with the French Tax Authority covering the period 1st January, 2010 through 31st December, 2020 relating to a
wholly-owned subsidiary of Interparfums SA.”
Mr. Greenberg continued, “We closed the second quarter with working capital of US$461.7 million, including approximately US$298 million in cash, cash equivalents and short-term investments, and a working capital ratio of 3.1 to 1. The US$133.2 million of long-term debt relates to the previously mentioned headquarters acquisition, which was financed by a 10-year approximately US$143 million bank loan.”
“Approximately US$93 million of the variable rate debt was swapped for fixed interest rate debt. Cash provided by operating activities aggregated US$38.1 million for the six months ended 30th June, 2021,” added Mr. Greenberg.
Mr. Greenberg concluded, “The uptick in COVID-19 cases and the highly transmissible Delta variant could change our expectations, but based upon year-to-date results, and current order levels for the second half, we continue to expect 2021 net sales of approximately US$750 million, resulting in diluted net income per share of US$1.95.”
Guidance assumes that the average dollar/euro average exchange rate remains at current levels, there is no significant resurgence of the COVID-19 pandemic and excludes potential Ferragamo fragrance sales following the closing of the pending transaction.