Inter Parfums, Inc. Reports Record 2024 Second Quarter Results

Rhea-AI Summary

Inter Parfums, Inc. (NASDAQ GS: IPAR) reported record second quarter results for 2024. Key highlights include:

- Net sales increased 11% to $342 million
- Gross margin expanded 360 bps to 64.5%
- Operating income rose 18% to $65 million
- Diluted EPS grew 5% to $1.14

The company saw double-digit sales growth in major markets, with Central and South America showing exceptional 26% growth. New brands Roberto Cavalli and Lacoste performed above expectations. Inter Parfums reaffirmed its 2024 guidance of $1.45 billion in net sales and $5.15 in diluted EPS. The company also announced a quarterly dividend of $0.75 per share.

Positive

• Record Q2 2024 results with net sales up 11% to $342 million
• Gross margin expanded 360 bps to 64.5% in Q2 2024
• Operating income increased 18% to $65 million in Q2 2024
• Double-digit sales growth in major markets, with 26% growth in Central and South America
• New brands Roberto Cavalli and Lacoste performing above expectations
• Van Cleef & Arpels license renewed for 9 years, starting January 1, 2025
• Reaffirmed 2024 guidance of $1.45 billion in net sales and $5.15 EPS

Negative

• Net income for the first half of 2024 decreased 13% to $78 million
• Operating margin for the first half of 2024 declined 350 bps to 19.9%
• Sales in Eastern Europe declined in the first half of 2024 due to sourcing constraints
• SG&A expenses as a percentage of net sales increased in both Q2 and H1 2024
• Other expenses of $1.5 million in H1 2024 compared to $2.8 million gain in H1 2023

Insights

Financial Analyst

Inter Parfums' Q2 2024 results demonstrate strong performance with $342 million in net sales, an 11% increase year-over-year. The company's gross margin expanded significantly by 360 basis points to 64.5%, indicating improved profitability. Operating income grew 18% to $65 million, with operating margin increasing to 18.9%.

However, it's worth noting that year-to-date net income declined by 13% to $78 million, primarily due to increased SG&A expenses and higher promotional spending. The company's strategic investments in advertising and new brand launches are pressuring short-term profitability but may drive future growth.

Inter Parfums maintains a strong financial position with $77 million in cash and $525 million in working capital. The reaffirmed 2024 guidance of $1.45 billion in net sales and $5.15 EPS suggests management's confidence in the company's trajectory despite global challenges.

Market Research Analyst

Inter Parfums' Q2 results reflect the robust fragrance market, with strong performance across major regions. North America, Western Europe and Asia/Pacific saw growth of 5%, 11% and 6% respectively. The standout performance in Central and South America, with 26% growth, highlights the success of the Lacoste brand acquisition.

The company's strategic brand portfolio, including new additions Roberto Cavalli and Lacoste, is driving growth. The planned launches for various brands in the second half of 2024 indicate a strong product pipeline. The renewal of the Van Cleef & Arpels license for 9 years strengthens Inter Parfums' long-term brand portfolio.

However, challenges persist in Eastern Europe due to sourcing constraints related to ongoing conflicts. The slower sell-in compared to sell-out suggests potential inventory build-up in the distribution chain, which could impact future orders.

Business Strategy Consultant

Inter Parfums' Q2 results showcase a successful execution of its growth strategy. The company's focus on balancing new launches with investments in advertising and promotion is yielding positive results, as evidenced by the strong sales growth and margin expansion.

The rapid integration of new brands like Roberto Cavalli and Lacoste demonstrates Inter Parfums' expertise in brand management and market penetration. The company's global distribution footprint is proving to be a significant advantage, allowing for diversified growth across regions.

However, the increased SG&A expenses, particularly in advertising and promotion (19.4% of net sales in Q2), are impacting short-term profitability. This strategy may pay off in the long run by strengthening brand equity and market share, but it requires careful balance to maintain profitability.

The renewal of key licenses and a robust product pipeline for 2025 indicate a strong foundation for future growth. However, management should closely monitor the challenges in Eastern Europe and the global economic environment to ensure continued success.

Double-Digit Sales Growth Leading to Margin Expansion; Positive Trajectory to Meet FY2024 Guidance

NEW YORK, Aug. 06, 2024 (GLOBE NEWSWIRE) -- Inter Parfums, Inc. (NASDAQ GS: IPAR) today reported results for the second quarter and six months ended June 30, 2024.

Financial Highlights: ($ in millions, except per share amounts)	Three Months Ended June 30,			Six Months Ended June 30,
	2024	2023	% Change	2024	2023	% Change
Net Sales	$342	$309	11%	$666	$621	7%
Gross Margin	64.5%	60.9%	+360 bps	63.5%	63.0%	+50 bps
Operating Income	$65	$55	18%	$133	$145	(9%)
Operating Margin	18.9%	17.8%	+110 bps	19.9%	23.4%	(350 bps)
Net Income attributable to IP	$37	$35	+5%	$78	$89	(13%)
Diluted EPS	$1.14	$1.09	+5%	$2.41	$2.77	(13%)
At comparable foreign currency exchange rates, net sales increased 11% from the second quarter of 2023. The average dollar/euro exchange rate for the second quarter of 2024 was 1.08 compared to 1.09 in the second quarter of 2023, while for both the first half of 2024 and 2023, the average dollar/euro exchange rate was 1.08, leading to a negative 0.4% foreign exchange impact for the second quarter and no impact for the first half.

Operational Commentary
Jean Madar, Chairman & Chief Executive Officer of Inter Parfums noted, “The robust fragrance environment, the strength of our legacy brands, rapid ramp-up of our new brands, effectiveness of our advertising and promotional activity, and our global distribution footprint resulted in record sales through the first half of the year despite a high base in the prior period.

“Our three largest markets, North America, Western Europe, and Asia/Pacific grew sales by 5%, 11% and 6%, respectively. Central and South America’s sales growth was exceptional at 26%, thanks in great part to Lacoste fragrance sales, while our sales in the Middle East and Africa rose by 8%. Sales in Eastern Europe declined in the first half of 2024 due to sourcing constraints associated with the ongoing conflict, but we are now seeing signs of improved sourcing in the region as the current second quarter is generally in-line with the prior year period.”

He continued, “Our newest brands, Roberto Cavalli and Lacoste, are acclimating well under our expertise and continue to perform above our expectations with sustained sell-in, similar to the first quarter.

“As mentioned in our sales release last month, we have a series of fragrance variations coming in the balance of 2024 for United States based operations, including GUESS Elements and Uomo Intenso, DKNY 24/7, and for Roberto Cavalli, a Just Cavalli brand extension, plus Sweet Ferocious, and the Wild Heart duo for men and women.

“For European based operations, we are debuting a new addition to the Moncler Les Sommets line called Ciel d’Hiver, a Lanvin Modern Princess extension, plus the international launch of Lacoste Original for men.

“As we announced last month, discussions have been underway since 2023 with a view to renewing the license agreement with Van Cleef & Arpels. The new agreement will strengthen the selective distribution of Van Cleef & Arpels fragrances worldwide. The license is to be renewed for an additional 9-year term, beginning January 1, 2025. We appreciate the continued partnership from the brand owner, Richemont, for entrusting us to continue to bring best-in-class Van Cleef & Arpels fragrances to consumers.

“We are proud of our half-year performance, particularly with consideration of the outstanding results in the prior year period. Our strategic approach to balancing launches and our advertising and promotional investments are paying off, and we anticipate further momentum in the back half of the year.”

“Looking further ahead into 2025, we are well into planning new scents for our Coach brand fragrances, GUESS Iconic for men, a new collection for MCM, new extensions of the legacy Lacoste scent, Montblanc Explorer, Jimmy Choo Man and I Want Choo lines, among many others.”

Financial Commentary
Michel Atwood, Chief Financial Officer of Inter Parfums pointed out, “Consolidated gross margin expanded 360 bps to 64.5% and 50 bps to 63.5% in the second quarter and first half of 2024, respectively. For European based operations, gross margin expanded by 570 bps in the second quarter, and 80 bps in the first half of 2024 driven by favorable segment, geographic and channel mix, as well as the one-time charge related to inventory reserves made in 2023. Excluding the inventory reserve, gross margins expanded by 250 bps in the second quarter, partially offsetting the unfavorable channel/mix observed in the first quarter.

“For United States based operations, gross margin declined modestly to 56.5% in the second quarter of 2024 as compared to 57.2% in the second quarter of 2023 due to a slightly unfavorable brand mix. However, year-to-date gross margin increased slightly to 57.5% in 2024 from 57.4% in the first half of 2023.”

Mr. Atwood continued, “SG&A expenses as a percentage of net sales were 45.6% and 43.6% for the second quarter and first half of 2024 as compared to 43.1% and 39.6% for the comparable periods in 2023. The increase was largely driven by higher levels of promotional and advertising expenditures in 2024, which represented 19.4% and 17.2% of net sales for the second quarter and first half of 2024, compared to 17.6% and 14.5% for the corresponding periods of the prior year.

“Once again, we are budgeting promotional and advertising expenditures to approximate 21% of net sales for the full year. Of note, in 2024, we began to amortize the cost of the Lacoste license which amounted to $3.2 million in SG&A expense during the first half of the year.

“In summary, these impacts resulted in operating margins aggregating 18.9% and 19.9% for the current three and six months periods, respectively, as compared to 17.8% and 23.4% for the corresponding periods of 2023.

“Below the operating line, first half net income was depressed by $1.5 million in other expenses versus a $2.8 million gain in other income in the last year’s first half. The main driver of this swing stems from the one-time realized gain of $3.1 million recognized in 2023 related to the sale of marketable securities compared to a $0.6 million unrealized loss in 2024. Despite this impact, we achieved record second quarter net income attributable to Inter Parfums of $37 million or $1.14 per diluted share.

“Working capital increased as a result of our efforts in building inventory and growth of our accounts receivables, largely explained by the launch of our two new licenses and the expansion of our business. We maintain a healthy financial position with $77 million in cash, cash equivalents and short-term investments, and working capital of $525 million.”

Reaffirms 2024 Guidance
Mr. Atwood concluded, “While the global fragrance market remains vibrant with positive trends leading to strong demand for our products, sell-in continues to grow more slowly than sell-out, and we are seeing continued challenges in Eastern Europe. Given this dynamic backdrop and despite our record second quarter sales and strong earnings, we are maintaining our 2024 guidance of net sales of $1.45 billion, resulting in earnings per diluted share of $5.15.”

Dividend
The Company’s regular quarterly cash dividend of $0.75 per share will be paid on September 30, 2024 to shareholders of record on September 13, 2024.

Conference Call
Management will host a conference call to discuss financial results and business operations beginning at 11:00 am ET on Wednesday, August 7, 2024.

Interested parties may participate in the live call by dialing:

U.S. / Toll-free: (877) 423-9820
International: (201) 493-6749

Participants are asked to dial-in approximately 10 minutes before the conference call is scheduled to begin.

A live audio webcast will also be available in the “Events” tab within the Investor Relations section of the Company’s website at www.interparfumsinc.com, or by clicking here. The conference call will be available for webcast replay for approximately 90 days following the live event.

About Inter Parfums, Inc.
Operating in the global fragrance business since 1982, Inter Parfums, Inc. produces and distributes a wide array of prestige fragrance and fragrance-related products under license agreements with brand owners. The Company manages its business in two operating segments, European based operations, through its 72% owned subsidiary, Interparfums SA, and United States based operations, through wholly owned subsidiaries in the United States and Italy.

The portfolio of prestige brands includes Abercrombie & Fitch, Anna Sui, Boucheron, Coach, Donna Karan/DKNY, Emanuel Ungaro, Ferragamo, Graff, GUESS, Hollister, Jimmy Choo, Karl Lagerfeld, Kate Spade, Lacoste, MCM, Moncler, Montblanc, Oscar de la Renta, Roberto Cavalli, and Van Cleef & Arpels, whose products are distributed in over 120 countries around the world through an extensive and diverse network of distributors. Inter Parfums, Inc. is also the registered owner of several trademarks including Lanvin and Rochas.

Forward-Looking Statements
Statements in this release which are not historical in nature are forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in such forward-looking statements are reasonable, we can give no assurance that such plans, intentions, or expectations will be achieved. In some cases, you can identify forward-looking statements by forward-looking words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "should," "will," and "would," or similar words. You should not rely on forward-looking statements, because actual events or results may differ materially from those indicated by these forward-looking statements as a result of a number of important factors. These factors include, but are not limited to, the risks and uncertainties discussed under the headings “Forward Looking Statements” and "Risk Factors" in Inter Parfums' annual report on Form 10-K for the fiscal year ended December 31, 2023 and the reports Inter Parfums files from time to time with the Securities and Exchange Commission. Inter Parfums does not intend to and undertakes no duty to update the information contained in this press release.

Contact Information:
Inter Parfums, Inc.	or	The Equity Group Inc.
Michel Atwood		Karin Daly
Chief Financial Officer		Investor Relations Counsel
(212) 983-2640		(212) 836-9623 / kdaly@equityny.com
www.interparfumsinc.com		www.theequitygroup.com

See Accompanying Tables

INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share and per share data)
(Unaudited)
ASSETS
		June 30, 2024				December 31, 2023
Current assets:
Cash and cash equivalents		$	38,973			$	88,462
Short-term investments			37,735				94,304
Accounts receivable, net			299,375				247,240
Inventories			433,716				371,859
Receivables, other			5,050				7,012
Other current assets			23,620				29,458
Income taxes receivable			18,919				691
Total current assets			857,388				839,026
Property, equipment and leasehold improvements, net			161,064				169,222
Right-of-use assets, net			25,858				28,613
Trademarks, licenses and other intangible assets, net			282,379				296,356
Deferred tax assets			16,849				14,545
Other assets			20,454				21,567
Total assets		$	1,363,992			$	1,369,329
LIABILITIES AND EQUITY
Current liabilities:
Loans payable – banks		$	18,494			$	4,420
Current portion of long-term debt			28,743				29,587
Current portion of lease liabilities			5,949				5,951
Accounts payable – trade			108,509				97,409
Accrued expenses			145,129				178,880
Income taxes payable			25,612				8,498
Total current liabilities			332,436				324,745
Long-term debt, less current portion			108,482				127,897
Lease liabilities, less current portion			21,868				24,517
Equity:
Inter Parfums, Inc. shareholders’ equity:
Preferred stock, $.001 par; authorized 1,000,000 shares; none issued			—				—
Common stock, $.001 par; authorized 100,000,000 shares; outstanding 32,024,280 and 32,004,660 shares at June 30, 2024 and December 31, 2023, respectively			32				32
Additional paid-in capital			100,505				98,565
Retained earnings			724,268				693,848
Accumulated other comprehensive loss			(54,864	)			(40,188	)
Treasury stock, at cost, 9,981,665 and 9,981,665 shares at June 30, 2024 and December 31, 2023, respectively			(52,864	)			(52,864	)
Total Inter Parfums, Inc. shareholders’ equity			717,077				699,393
Noncontrolling interest			184,129				192,777
Total equity			901,206				892,170
Total liabilities and equity		$	1,363,992			$	1,369,329

INTER PARFUMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands except per share data)
(Unaudited)
		Three Months Ended June 30,								Six Months Ended June 30,
		2024				2023				2024				2023
Net sales		$	342,229			$	309,244			$	666,192			$	620,967
Cost of sales			121,472				120,840				243,050				229,606
Gross margin			220,757				188,404				423,142				391,361
Selling, general and administrative expenses			155,929				133,383				290,341				246,061
Income from operations			64,828				55,021				132,801				145,300
Other expenses (income):
Interest expense			1,941				2,276				3,748				4,633
Loss (gain) on foreign currency			634				(746	)			(270	)			13
Interest and investment loss (income)			1,076				(1,977	)			(1,944	)			(7,359	)
Other income			(74	)			(7	)			(37	)			(48	)
			3,577				(454	)			1,497				(2,761	)
Income before income taxes			61,251				55,475				131,304				148,061
Income taxes			14,653				12,957				31,403				34,635
Net income			46,598				42,518				99,901				113,426
Less: Net income attributable to the noncontrolling interest			9,775				7,566				22,030				24,406
Net income attributable to Inter Parfums, Inc.		$	36,823			$	34,952			$	77,871			$	89,020
Earnings per share:
Net income attributable to Inter Parfums, Inc. common shareholders:
Basic		$	1.15			$	1.09			$	2.43			$	2.78
Diluted		$	1.14			$	1.09			$	2.41			$	2.77
Weighted average number of shares outstanding:
Basic			32,024				32,006				32,033				32,012
Diluted			32,266				32,162				32,266				32,161
Dividends declared per share		$	0.75			$	0.625			$	1.50			$	1.30

FAQ

What were Inter Parfums' (IPAR) Q2 2024 financial results?

Inter Parfums reported Q2 2024 net sales of $342 million, up 11% year-over-year. Operating income increased 18% to $65 million, and diluted EPS grew 5% to $1.14.

How did Inter Parfums' (IPAR) gross margin perform in Q2 2024?

Inter Parfums' gross margin expanded 360 basis points to 64.5% in Q2 2024 compared to 60.9% in Q2 2023.

What is Inter Parfums' (IPAR) guidance for full-year 2024?

Inter Parfums reaffirmed its 2024 guidance of $1.45 billion in net sales and earnings per diluted share of $5.15.

Has Inter Parfums (IPAR) renewed any significant licenses recently?

Yes, Inter Parfums renewed its license agreement with Van Cleef & Arpels for an additional 9-year term, beginning January 1, 2025.

What dividend did Inter Parfums (IPAR) declare for Q2 2024?

Inter Parfums declared a regular quarterly cash dividend of $0.75 per share, payable on September 30, 2024, to shareholders of record on September 13, 2024.