Shares of cosmetics company
Elizabeth Arden Inc.
) slumped 17% on Jun 26, 2014, soon after South Korean company LG
Household & Healthcare Ltd. reportedly announced lack of
interest in pursuing an acquisition of company on the same day.
In Apr 2014, the South Korean company considered a bid to take
over Elizabeth Arden as part of its strategy to expand overseas. LG
Household & Healthcare, an LG Group affiliate, is one of South
Korea's top cosmetics firms owning some top brands like O Hui and
the Face Shop, well known among Chinese tourists.
Investors believe that LG Household lost interest in the
acquisition after rumors regarding Elizabeth Arden's plan to
undertake a restructuring and cost cutting program in order to
combat margin pressures and soft revenues spread on Jun 24.
Per media reports, Elizabeth Arden plans to start a
restructuring and cost cutting program following its recent
business slowdown. This program includes job cuts, exiting
unprofitable businesses and discontinuing some products to boost
This global prestige beauty products company has been witnessing
soft revenues of late because of declining sales in the fragrance
category. In May, the company reported weak third-quarter fiscal
2014 results. Elizabeth Arden reported a loss of 84 cents per
share, unexpectedly lower than the Zacks Consensus Estimate and the
prior-year quarter earnings of 2 cents per share. Reduced store
traffic and unprecedented store closings in the third quarter due
to harsh winter resulted in the decline.
Net sales decreased 23% in the North America segment during the
quarter as the company was able to launch only a few new fragrances
compared with the prior year. Also, lower replenishment orders at a
number of non-prestige retail accounts led to the decline. Net
sales decreased 16% in the International segment due to competitive
Elizabeth Arden currently carries a Zacks Rank #5 (Strong Sell).
Helen of Troy
) are better-ranked cosmetic companies sporting a Zacks Rank #1
(Strong Buy) and a Zacks Rank #2 (Buy), respectively. Another stock
worth considering in the broader consumer staples sector includes
Inventure Foods, Inc.
) with the same Zacks Rank as Helen of Troy.
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