Elizabeth Arden Loss Widens; Company to Explore Strategic Alternatives

By Dow Jones Business News, 
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By Anna Prior

Elizabeth Arden Inc. ( RDEN ) said its board is exploring strategic alternatives as the beauty-products company reported a wider fiscal third-quarter loss.

The company said that it has enlisted Goldman Sachs & Co. (GS) to help its board look for potential strategic alternatives to enhance shareholder value, while also adding that it is implementing a broad restructuring and cost- savings program focused on reducing overhead structure and improving gross margins.

Elizabeth Arden expects the plan to result in annual savings between $40 million and $50 million, and is also looking into a potential shift in the focus of its international business to rely more heavily on distributors and regional joint ventures.

"We have been hampered this year by weak performance in our North America mass fragrance business and a global environment that has been highly promotional," said Chief Executive E. Scott Beattie on Monday, adding that while the company is encouraged by recent retail sales performance in the company's North American mass fragrance business, the economic environment remains challenging.

Elizabeth Arden, whose products include Prevage anti-aging cream and the celebrity fragrance brands of Britney Spears, earlier this year tempered expectations for the fiscal year because of declining sales and deep discounting.

In recent quarters, the company has been hit with expenses related to the rebranding program for the namesake Elizabeth Arden brand, which includes newly packaged and reformulated products as well as updated displays and counters at retailers.

Last month, South Korean cosmetics and health-food manufacturer LG Household & Healthcare Ltd. (051900.SE) said it is considering a bid for Elizabeth Arden, saying it had identified the company as a potential takeover target and that it would update the market in a month about the progress of any potential deal.

Elizabeth Arden didn't mention LG Household & Healthcare in its quarterly earnings release Monday.

At Elizabeth Arden's North American business, net sales fell 23% in the latest quarter, reflecting fewer fragrance launches compared to the year-earlier quarter and lower replenishment orders at a number of non-prestige retail accounts. Internationally, sales fell 16%.

Sales of Elizabeth Arden branded products, meanwhile, fell 19% at constant currency rates.

Overall, Elizabeth Arden reported a loss of $26.4 million, or 89 cents a share, compared with a year-earlier loss of $ 1.3 million, or four cents a share. Excluding restructuring costs and other items, the loss was 84 cents a share, compared with a per-share profit of two cents a year earlier.

Net sales slumped 20% to $210.8 million.

Analysts polled by Thomson Reuters had forecast breakeven earnings and revenue of $256.9 million.

Gross margin narrowed to 42.5% from 47.7%.

Total operating expenses fell 2.6% to $118.6 million.

Shares closed Monday at $35.63 and were halted in after-hours trading. The stock has fallen 22% in the last 12 months.

Write to Anna Prior at anna.prior@wsj.com

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