Q1 2025 Inter Parfums Inc Earnings Call
Jean Madar: She is the one who is the most beautiful woman in the world She is the most beautiful woman in the world She is the most beautiful woman in the world [inaudible]
Speaker Change: Greetings and welcome to the Inter Parfums first quarter 2025 conference call and webcast. At this time, we'll participate in listening only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation.
Jean Madar: You may replace the question, queued any time by pressing star one on your telephone keypad.
As a reminder, this conference is being recorded.
Jean Madar: It's now my pleasure to travel over to your host, Karin Daly, Vice-President at the ECME Group and Inter Parfums in the sub-relations representative. Please go ahead, Karin.
Karin Daly: Thank you, Kevin. Joining us on the call today will be Chairman and Chief Executive Officer Jean Madar and Chief Financial Officer, Michel Atwood.
Karin Daly: On behalf of the company, I would like to note that this conference call may contain forward-looking statements which involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from projected results.
Karin Daly: These factors may be found in the company's filings with the Securities and Exchange Commission under the headings of Forward Booking Statements and Risk Factors.
Karin Daly: Forward-looking statements speak only as of the day on which they are made, and Inter Parfums undertakes no obligation to update the information discussed.
Karin Daly: As a reminder, Inter Parfums consultated results include two business segments, European-based operations through Inter Parfums SA, the company's 72%-owned friendship city area, and United States-based operations.
Karin Daly: It's now my pleasure to turn the call over to Jean Madar. Jean Madar, Jean Madar,
Jean Madar: Thank you, Karin. Good morning, everyone, and thank you for joining us on today's call.
Jean Madar: We started the year on a strong note with our reported net sales increasing by 5% for 7% on
Jean Madar: Three of our top brands, Coach, Jimmy Chu, and Donna Karan DTN-wide, performed exceptionally well, as did our newest brand, Lacoste and Cavali, in the second year under our management
Jean Madar: We also launched several compelling fragrances that contributed to our results.
Jean Madar: And we have many more sons to unveil for the diamonds of a girl.
Jean Madar: Our prestige brand portfolio, robust distribution network, and agile business model have positioned us well to deliver strong and encouraging results.
Jean Madar: The flexibility of our supply chain allows us to respond swiftly during challenging periods.
Jean Madar: to minimize potential disruptions and to consistently maintain our service level and competitive position.
Fragrance stands out within the beauty industry for its resilience.
Jean Madar: driven by strong non-lawial team and its appeal as an accessible luxury, especially to drink times when consumers are more selective with their spending.
Jean Madar: Our top brands continue to drive growth at our European-based operations, DIMITU's legacy franchises I want to show and DIMITU men, which included the introduction of DIMITU man extreme, performed exceptionally well.
Jean Madar: The new coachman extension, man-o-de-parfum, with NBA superstar Jason Tatum, as the new face of coach fragrances, drove coach Wolf.
Jean Madar: Hightened demand for the post-fragments continued in early 2025 as well.
Jean Madar: As for Moonblanc, cells are bound compared to the prior year period as a result of the timing of innovation, but we are confident that the brand will achieve more favorable comparisons for the balance of the year with yet coming launch of Explorer Xtreme as a catalyst.
Jean Madar: For our United States-based operations, net sales rules 3% on a like-for-like basis, on top of 11% Organic sales rules during the 2024 first quarter.
Jean Madar: Dona Karin, D. Kenwai, Fragrant Sells, Rose by 5%, resulting from the continued strength of our Kashmir-Mist franchise.
Jean Madar: Although we continue to expect sales gains in the full year, fragrance sales declined slightly during the quarter, given the high bar set in the prior year period when the brand grew by 21%.
Jean Madar: We've consumer demand for high quality and concentrated sense showing no signs of living up
Jean Madar: The recent launchers of Féragammal Fiamme are first dogbusters launched for the brand which is debuted at the end of March, very end of March, expressing the modern femininity in Féragammal's place, Florence, Italy.
and we also know this.
La Coste Lanche, L-12-12 Silver and Silver Rose
Speaker Change: We will also introduce a new blockbuster for Roberto Cavalli in June , called Serpentine.
Speaker Change: We have a strong lineup of fragrance in extensions for many blends including all our largest blends, Dimitriou Momblant, Coach Guest, Donna Karan, Cereganon, La Coste.
Speaker Change: Plus, we'll be adding new extension for Kate Spade, Rocha Sla Gafel, and then Cliff Females
As we look ahead,
Speaker Change: We are continuing to strategically refine our brand portfolio to build an exceptional group of brands that further solidifies our position in the prestige and luxury categories.
Speaker Change: But sometimes Khors were excited, exceeding the licensed agreements with some of our smaller or underperforming brands.
Speaker Change: These suppliers represent a small portion of our portfolio and our focus is on offsetting their exit by continuing to grow our existing portfolio.
Speaker Change: while adding new, high potential brands that better align with our long-term growth strategy.
Speaker Change: This is already in the works as we are preparing to launch our own brand called Solferino in July
Speaker Change: And, as we mentioned on our last call, we will assume full ownership of all of white Brown-Brenn names and registered trademarks in 2026.
Speaker Change: In addition, we announce the acquisition of a legal brand in March, which is also set to official religion, our portfolio in 2036.
Speaker Change: Planning is already well underway for both off-white and brutal, with exciting developments to be envied in the monsters in the monster head.
Speaker Change: As a testament to the strife of our brand partnership, we renewed our coach license for another five years through June , 2013.
Speaker Change: Before I turn it over to Michel, I would like to briefly mention a few key operational updates.
Michel Atwood: In terms of our omni-channel capabilities, we sell directly to many retailers in Tea Market, such as France, the United States and Italy.
Michel Atwood: This direct model delivers higher margins compared to wholesale distribution, though our wholesale partners remain essential for achieving broader markets to reach and will continue to be a vital part of our strategy.
Michel Atwood: E-commerce, as you know, is an increasingly important and fast-going part of our business given by the ongoing digital shifting consumer behavior.
Thank you.
Michel Atwood: A strong performance and expanding our presence on Amazon while platforms like DivaBox and Tik Tok Shop continue to gain traction, power by the rich and engagement of our content creators and influencers across social media platforms.
Regarding our supply chain
Streamlining our operation is more critical than ever
Michel Atwood: And that's mentioned also on our previous call, we are making significant progress [inaudible]
Michel Atwood: In transitioning out of our own operated facility in Dayton, New Jersey, by the second half of 2025, we expect to fully utilize third-party logistics companies for packing, shipping, warehousing, and order full filmant.
Michel Atwood: The strategic shift will reduce overhead cost and enhance our agility, enabling us to better respond to consumer needs and market dynamics.
Michel Atwood: And the key areas of interest is of course studies and we'll be in Michel, we'll answer.
Michel Atwood: some of your questions later. We are actively scenario planning and beginning to implement strategies to mitigate the potential impact of the recent tariffs on our business through the three key interventions.
Michel Atwood: Firstly, while looking to try to better align our supply chain footprint to the countries where the products are sold.
Michel Atwood: This means producing in Europe fragrances that sell in Europe , producing in the US fragrances that sell in the US. Some of these changes will be quick, while others will take of course more time.
Michel Atwood: Secondly, we are identifying alternative sources, sourcing for some of the parts, components like plastic and metal that we still purchase from China and need to import into the US.
Michel Atwood: Clearly, we are considering implementing mid-single DG price increases on select grants and regions with summer
Michel Atwood: A line with but less aggressive and broader industry trends as a way to offset the additional cost we will innovate inevitably not be able to fully mitigate.
Michel Atwood: Our game plan is clear, but we will adjust our executions once we have more certainty of how terrorists will evolve after this 90-day moratorium.
Michel Atwood: Overall, we do not view these factors as exposing the material risks
to the company.
While we navigate the current macroenvironment, the global fragrance market remains strong.
Michel Atwood: and we are well positioned to deliver on our goals for the year.
Michel Atwood: We are focused on making continued progress on all fronts of our business.
Michel Atwood: From Susan Arming to ESG scores, among the subjectives is to improve our MSCI score. We have still been improving and recently moved up to a BDWD rating.
Michel Atwood: We also have a line of side to BBB Triple B, which we target to get with a next major rating update.
Michel Atwood: Are we not turning it over to Michel for a review of our financial results? Michel?
Michel Atwood: Thank you Jean, and good morning everyone. I will begin by discussing the consolidated results before breaking it down into our European and United States-based operations.
Michel Atwood: As Jean shared, and as previously reported, we delivered net sales of $339 million, a 5% increase from the first quarter of 2024, but on the like for like basis, our sales grew by 7%.
Michel Atwood: and we remain on track to meet our guidance for the year.
Michel Atwood: As a reminder, there is some seasonality to our business as a result of gifting occasions and lung cycles, so not every quarter will always necessarily line up.
Michel Atwood: Gross Margin expanded by 120 basis points to 63.7% from the prior year period as a result of favorable brand and channel mix.
As GNA expenses as a percentage of net sales increased modestly
Michel Atwood: by 10 basis points to 41.6, with $52 million in AMP expenses to support sell-through at our retailers and drive traffic across all distribution channels in store and online.
Michel Atwood: Once again, with 7% growth in ANP, we remain committed to continuing to spend ANP ahead of our top line growth while funding it through scale and other efficiencies.
Michel Atwood: Our royalty expenses paid to brand owners or licensures averaged 8% of net sales during the first quarter which is broadly in line with our historical run rates but slightly favorable to the prior year period largely due to brand mix
Michel Atwood: Overall, our consolidated operating income was $75 million for the quarter, a 10% increase for the prior year period.
Michel Atwood: Resulting an operating margin of 22% or 120 basis point improvement from 2024 first quarter.
Michel Atwood: Other income and expense for the three months ended March 31, 2025, was a loss of $1.7 million as compared to a gain of $2.1 million in the corresponding period, leading to a negative quarter-over-quarter impact of $3.8 million.
Michel Atwood: One of the main factors behind this swing is foreign exchange. We saw a gain of $900,000 in the first quarter of 2024, but that turned into a loss of $800,000 in the first quarter of 2025.
Michel Atwood: Another factor is the change in our unrealized gains and losses on marketable securities. In quarter one 2025, we recorded an unrealized loss of $700,000 compared to 1.4 million unrealized gains in the same period last year.
Michel Atwood: We did not experience a significant change in our blended effective tax rate, which was 24.5% Up 60 basis points from 23.9 from the prior period largely driven by geographic mix
Michel Atwood: For European-based operations, NIT sales rose 7% or 9% excluding the impact of foreign exchange
Michel Atwood: Gross Margin increased by 150 basis points, driven by favorable brand and channel mix.
Michel Atwood: and in a high base period, which last year was particularly impacting.
Michel Atwood: While SGNA expenses increase 6% to 96 million, SGNA as a percentage of net sales decrease 40 basis points to 38.7% of net sales, from 39.1% in the prior year period.
Michel Atwood: This reduction was driven by scale benefits in fixed cost and favorable brand mix on royalties, partially offset by higher A&P expenditure.
Michel Atwood: Overall, net income attributable to European operations based grew 7% to 48 million for the quarter.
Now turning to our United States-based operations [inaudible]
Michel Atwood: Net sales increased by 3% on the like-for-like basis on top of the 11% like-for-like gain in 2024 or first quarter. On a reported basis, net sales declined by 1% as a result of the discontinuation of the Dunhill license which had a negative 4% impact.
Michel Atwood: Gross margins remain flat at 58.7% as their brand and channel mix remain consistent.
Michel Atwood: largely driven by the annualization impact of the investments in infrastructure and headcount made through 2024.
Michel Atwood: to support the growth of the business plus higher A and B spending, which was partially upset by efficiency realized in other SDNA expenses.
Michel Atwood: Net income attributable to US based operations was $9 million for the quarter as compared to 10, little below 10 in the prior year period.
Michel Atwood: At March 31, our balance sheet remains strong, with $172 million in cash and cash equivalents and working capital of $600 million [inaudible]
Needless to say, the hot topic is tariffs [inaudible]
Michel Atwood: As a global import export fragrance company with no own manufacturing facilities, we have much flexibility with our vast group of trusted partners for the first time in the world.
Michel Atwood: As Jean mentioned, while we are making a concerted effort to manufacture products more locally to the point of sale, we have some exposures on the components and gifts with purchases
Michel Atwood: We have not seen any material impact from tariffs yet, mainly due to the inventory we had previously built up and our five-fold accounting. But we are actively working with our counterparts to source components from locations other than China to mitigate any future cost increases.
Michel Atwood: We are also accelerating the conversion of raw materials into finished goods. At March 31st, finished goods represented 63% of our inventories.
Michel Atwood: Finally, from a cash flow perspective, accounts receivable was up 8% from year end, and day sales on Sunday was 74 days similar to prior year period. We have a strong collection to process with limited risk.
by effectively managing or working capital increases.
Michel Atwood: from 52 million in prior year period to 7 million in the first quarter of 2025. We continue to expect strong free cash flow productivity in 2025, and as you know, we have initiated a share repurchase program.
Michel Atwood: As announced in our press release yesterday, our regular quarterly cash dividend of 80 cents per share will be paid in June 30th, 2025 to shareholders of record on June 13th, 2025
Michel Atwood: Despite the ongoing volatility across the macroeconomic landscape, remained confident in our ability of our business and the ongoing momentum of the global fricking market to drive another recordier for Inter Parfums.
Michel Atwood: As such, we are reaffirming our folder guidance for 2025 of 1.51 billion net sales and EPS of $5.35 cents a share.
Michel Atwood: As always, we will revisit guidance and share expectations with intention to continue to provide transparency to our shareholders. Thank you very much.
With that operator, please open the line for questions.
Michel Atwood: Certainly, when I'll be conducting a question and answer session, if you'd like to be placed into question Q, please press star 1 on your telephone keypad. If you'd like to remove yourself from the Q, please press star 2. One moment please, probably pull for questions.
Michel Atwood: Our first question is coming from Susan Anderson, from Kenna Courgine, what is your line of life?
Susan Anderson: Hi, thanks for taking my question. Nice job on the quarter.
Susan Anderson: And then also, I think North America was at 14, so if you can maybe just talk about the rest of the drivers there given that the US was only up 3-6.
Speaker Change: Let me show you all you can. Yeah, so overall, I think, you know, as you know, we had, you know, last year, there was some destocking that happened at the beginning of the year, but that was largely abated as we, as the year progressed. At this point in time, we're not really seeing a significant...
Speaker Change: Disconnect between Selin and Selop, obviously retailers continue to be focused on cash and are managing their inventories tightly. But overall, we're not releasing a significant impact there. Actually, our US business was quite strong this quarter. Despite the market being a little bit tight, as you know last year, the market was up 20%.
Speaker Change: Mark, it is holding up pretty well. And if anything, what we're seeing is some moderate share growth here in the U.S.
Speaker Change: So I believe that answers that question. Yeah, that's just a good color. And then maybe you could just talk about globally, I guess, what you're seeing from a consumer perspective in terms of fragrance trends. Are you seeing any slowdown, you know, in Europe , I guess, and then also in Asia.
Thank you.
Speaker Change: As you know, we are a pure player in fragrance, so fragrance lies still again in the first quarter growing, comparing to the other segments of the beauty, which are makeup and skincare.
Speaker Change: Regarding Europe , I think it is more challenging, especially in France and Germany where there are NPD members who are quite low or maybe negative in the first quarter.
Speaker Change: Of course, we expect a smaller growth than last year, but the fragrance business is still growing.
Speaker Change: Okay, great. Thanks so much. That was really helpful. Good luck, the rest of your.
Thank you.
Speaker Change: Thank you. Next question is coming from Korinne Wolfmeyer, from Piper Sandler. Your line is not live
Speaker Change: Thank you for taking the question. I do want to touch a little bit more on tariffs and any other color you can provide us on how you're quantifying the overall tariff exposure, both direct and indirect. And I know it's going to be a minimal impact and it seems like you have a lot of efforts in place to help mitigate. But how should we be thinking about the gross margin progression for the remainder of 2025 and even into 2026 when considering the tariff?
Thanks.
Speaker Change: We're going to try both to answer, but as you know, we do not import any Finnish proverbs from China for instance.
Speaker Change: because some of our components come from China, mostly metal pieces, caps, pumps, colors that are made in the US.
Speaker Change: So, as I said in my remarks, where we have learnt, like, guests or...
Speaker Change: They have, let's say, 50% of their sales in the US and 50% of their sales in Europe . Eventually, we want to make these products...
Speaker Change: Some of this is used in Europe and also in the US.
So, Antares, oh yes, we're going to have to, we're going to have to, too.
Thank you very much.
Speaker Change: We are lucky because as we have improved our IT and information system, we are able to to analyze quickly, in order to make the decision, but it is...
This is a definitely a challenge, Michel.
Michel Atwood: Yeah, sure. Thanks, Jean. Yeah, Karin, hi, Karinne. Tara, right now we've estimated if we do nothing scenario is about 300 basis points. We have a number of interventions that Jean has talked about that. It should enable us to get that down by about two thirds.
Michel Atwood: The rest will take a bit of time and what we're planning to do is offset that through pricing, so to answer your question around gross margin, you know, because of the FIFO accounting and because we do have high inventory levels, we're not expecting any significant impacts at this year.
Michel Atwood: And we're feeling comfortable that we know how to mitigate this [inaudible]
Michel Atwood: Ultimately, it's going to depend a lot on what really inevitably happens, and some of the actions that we're taking may be triggered or not depending on that situation. But overall, we're feeling pretty good about our ability to mitigate the impact.
Okay, fine now, we'd like to add-
Michel Atwood: I would like to add that we have, on average, nine months of inventory for our products.
Michel Atwood: to the terrorists. And as we said, we will do some pricing, not on every product, but on certain lines.
Michel Atwood: And I'm sure you're going to ask me what happened to pricing, if tariff is appear, we will maintain the pricing increase.
Michel Atwood: And if Tariq is a peer, but we will spend this money in extra advertising, that we will, when we decide to increase prices you cannot come back.
Speaker Change: Great. Thanks so much for all that helpful color. And then if I could squeeze in just one more on the operating margin in the quarter, it was a came in a little bit higher than we had expected. And I know there were some drivers there. Can you just dive a little bit deeper into what the primary components of that upside were and how we should be thinking about the sustainability of that operating margin lift throughout the remainder of the year. Thanks. [inaudible]
Speaker Change: Yeah, Karinne. So, I mean, there were really two key drivers of the operating margin. One was really the brand mix and the channel mix that drove the higher gross margin that was expected. A lot of the sales upside that we got actually came from our US domestic, domestic market which comes at a higher, you know, because it's direct to... [inaudible]
Speaker Change: Directive Retail at a much higher gross margin, so that was clearly...
Speaker Change: a big factor in the upside surprise. On the other end, when we looked at our A&P investments,
Speaker Change: We were expecting to invest a little bit more in our original plans and I think as we look through the situation we felt it wasn't necessary so we're shifting some of that to the second quarter but those are really the two main drivers of the change. [inaudible]
Wonderful. Thanks so much.
Thank you.
Thank you.
Speaker Change: Hi, thanks for taking our questions and congrats on the nice quarter. So, just want to know how you think about making the portfolio more premium in a recessionary scenario and do still anticipate luxury to outperform as a category or do you think we might start to see a bit of a trade down? Thanks.
Michel Atwood: Michel, if you want to try to answer? Yeah, I mean, ultimately the...
Michel Atwood: Ultimately, the luxury category is continuing to grow faster than prestige. Prestige is going to always be a large segment of the business.
Michel Atwood: But if we continue to see where the growth is coming from, the growth is certainly coming from there because consumers, you know, this is part of consumers becoming more involved in the category when they become more involved. [inaudible]
Michel Atwood: They show more interest. They're looking for more premium products, more distinctive products. So I think we'll continue to see the luxury segment outperforming. And I think the way we're planning to play with this really is I think that you see this very clearly with some of the choices we've done around our brand portfolio, you know, Van Cleve, where we're clearly moving up in distribution and premiumization and we obviously have the launches of...
Michel Atwood: Soferino and more recently the Anikutal acquisition. I mean, those are all basically plays.
Michel Atwood: on Dona Karen, for example, where we've launched the cashmere collection on MCM where we've launched the park collection. So we continue to play on the higher end of the segment to offer the consumers some of the stuff that they're actively looking for. [inaudible]
John .
Speaker Change: Yes, in general, when I look at the workforce for you, we perform better with brands that have product that sell at over 100 dollars or 100 euros at retail.
Speaker Change: Orange Reducing, New Roberto Caralli, Blockbuster at 120 or 130. This is higher price points than before.
Speaker Change: And we think that it's a good positioning to have a quite demand, and the consumer is willing to pay. The good news is...
Speaker Change: That there are more and more people in the US and in Europe .
Speaker Change: And also of course, Emejah, that understands the quality of the public.
Speaker Change: They are more interested in more concentrated fragrance, so it resonates better and we are seeing the good success at this higher price point.
Great. Thanks so much.
Thank you.
Speaker Change: Thank you. As a reminder, that star wants to be placed in the question queue. Our next question is coming from Hamed Khorsand from BWS Financial. Your line is now live.
Hamed Khorasan: Do you feel like it has to be a price move to attract a consumer or is it the rarity value that's driving a consumer action?
Speaker Change: I think it's a mix. I'm sorry, go ahead Michel. No, I was going to say hi on it. I was going to say that I think it's about consumers are smart. They don't just buy based on price. I think ultimately it's about...
I'm a
Speaker Change: and you see that pretty much as consumers become more involved in a category, their taste evolves, and they become more refined, and I think they become more involved, and I think that's really what the...
Speaker Change: without necessarily, you know, offering the consumer real value. I think those are all brands that are kind of suffering. You see that their sales are down and in units quite significantly. So I think that the consumer is looking for. [inaudible]
Speaker Change: is looking for higher quality and they're willing to pay for the price. They're not just buying because it's more expensive.
Thank you. Thank you. Thank you.
Speaker Change: Yes, absolutely. When we position a product at a higher retail price, because we are giving more to the product, and the consumer understands this very well and we act well.
Speaker Change: It's not just the price. Consumers do not react to a higher price or a higher price. You have to, you have to give them also the...
Thank you very much.
Speaker Change: And that's why we are being very careful on whether our bullets are sold.
Speaker Change: Okay, and then earlier you were talking about how there is some strength in the market, at least there wasn't Q1 and your plants potentially raised prices during the summer, so why is it the sales of the guidance staying flat?
Thank you.
Yes, go ahead Michel.
Michel Atwood: which is a ten-point swing. We are still trying to understand the potential impacts of the tariff, so I think what you're hearing is some degree of prudence here. Right now, this is what our run rates are giving us.
Michel Atwood: and we have a tendency to be a little bit prudent in our guidance until we feel that that upside potentially materializing, we're going to continue to be conservative with our guidance.
Yes, if I may, say...
Maybe more important now than ever to be very coolant
We have managed this company with...
Michel Atwood: with Prudence, but we are also realistic, so if we need to address or revisit guidance, we will do, but it's very, very maturely to date now.
Thank you.
Thank you on that.
Speaker Change: Thank you. Next question today is coming from Mukha Khora from Lombardy Capital. Your life is now live.
Hi. Thank you for taking me.
Speaker Change: Do you have Larry Chen, the work question and answer session? I'd like to turn the floor back over a bit further at closing comments.
Speaker Change: Okay, all right, thanks a lot. All right, so thank you for joining our call today and a really special thanks to our dedicated teams who continue to work diligently and adapt with fluidity to these uncertain times.
Speaker Change: You know, it's certainly been uncertain and we really been driving a greater efficiency in contributing to our ongoing success.
Speaker Change: I'd like to mention a couple of upcoming events. I'll be visiting Boston with Piper Sandler on May 20th. Then in June , I'll be participating in the TD Cowell and Consumer Conference here in New York on June 3rd and 4th.
Speaker Change: and the Jeffries Consumer Conference and Nantucket on June 17th and 18th and a little call out to Ashley. Thanks for your help with the logistics there. If you'd like to participate in these events, please reach out to their respective team members.
Speaker Change: If you have any additional questions, please contact Karin Daly from the Equity Group whose are investor relations representative.
Her telephone number and email address can be found.
Speaker Change: and our most recent earnings release. And we look forward to meeting with you at these events or the next conference call.
Thank you again and have a great day.
Speaker Change: Thank you. It does conclude today's fellow conference webcast. Let me just connect your lines at this time and have a wonderful day. We thank you for your participation today.