Q3 2025 Inter Parfums Inc Earnings Call
Greetings and welcome to inter parfum zincs 2025 third quarter conference call and webcast.
At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator systems during the conference. Please press star zero on your telephone keypad. As a reminder, this conference call is being recorded at this time. I'd like to turn the call over to Karen Daly vice president at the Equity Group in interparfums investor relations representative. Thank you. You may begin.
Thank you, operator.
Joining us on the call today will be chairman and chief executive officer Jean Madar and Chief Financial Officer. Michelle Atwood.
As a reminder, 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.
These factors may be found in the company's filings with the Securities and Exchange Commission under the headings, forward-looking statements and risk factors.
But we're looking statements speak only as of the date on which they are made and Inter Park rooms undertakes. No, obligation to update the information discussed
In Department's Consolidated results, include 2, business segments, european-based operations.
Through inter Park rooms essay. The company is 72% owned French subsidiary and United States based operations. It's now my pleasure to turn the call over to Jeanne Madar Jean
Thank you, Karen. Uh good morning everyone uh consistent with what we started to see in the second quarter.
Self continue to moderate in the first quarter as macroeconomic conditions remained in uncertain.
We are limiting server into Innovation across our portfolio focusing on products enhancement and new launches that better meet the dynamic preferences of consumers around the world.
This efforts are backed by compelling advertising and promotional support.
Increase brand ours Drive consumer, penetration and strengthen our overall competitive position.
As announced last month, first quarter and year to date sales were up 1% for both periods.
With European based operation sales, Rising 5% for the first quarter building on top of last year's momentum. Plus a stronger euro compared to the dollar while US based operations sales declined, 5% for the first quarter, excluding them here.
In addition, the 6% quarter over quarter growth in coach fragrance, Delta was fueled by its established lines and the launch of Coach gold.
While mumblr fragrance sells dipped slightly due to Innovation. FAA phasing.
And lacos fragrances are on track for 100 million 100 million in sales this year.
I would like to note that in the first 9 months of 2024,
Sales by us-based. Operation was 11% with the addition of Roberto cavali into our brand. Portfolio, stating a high bar for this year.
In 2025, we are further capitalizing on this newer brand through the successful launch of Stan time. The new feminine fragrance from Cavani
Additionally, we are seeing increasing consumer demand in Denmark and fragrance, adjacencies such as the very popular. The other ones.
We also had new products roll out late in the first quarter that will mostly support fourth quarter sales in our US based operation which include La belvita for guests, sub lever from farago 2. New extensions for DKNY.
A new sub collection of Roberto cavali called marvelous. Plus the just give magic and Abercrombie and fierce Reserve.
We started face 3 of a distribution of fierce roll out in May to additional countries, including the UK, and launch, Fierce and fierce Reserve together at nearly 50 different point of sale.
we see the momentum accelerating and move to server the brand, which
the third quarter was also a milestone for us with the introduction of our first Ultra Luxury direct to Consumer offer.
The 10th century. No collection.
Our Flagship Boutique opened in the heart of Paris luxury district. And we are now selectively building relationships with approximately 40 retail doors rolling out the brand.
School.
By next September, we have set aside from 100 doors with a goal of product placement in 500 stores by the end of 2030.
As we refine our craft in luxury and artisanal fragrance. We will Leverage The insights. We gain to elevate and better serve the other brand within our portfolio.
We invite you to discover the passion behind sulfur.
As you can see on our website, this is our first fully owned direct-to-consumer e-commerce channel.
So fragrance sales are accelerating across digital platforms, as e-commerce has firmly established itself.
In fact, according to your monitor,
Fragrance has roughly a 50% market share within the beauty category on Amazon.
We are seeing similar Trends, as e-commerce platform, continue to be a bright spot for us.
Our business on Amazon is strong Diva box and Tik Tok shop. Allow us to Market and transact smaller sized products.
Increasing our visibility to Consumers, looking to play in Prestige and luxury with more affordability.
All told the influencer magic of social media plays a powerful role in driving both traffic and purchases on Amazon.
Another important, the relatively small channel for us is travel retail, which grew 13% in the third quarter compared to last year, driven by lack of Gmail, coach and guests.
As well as others in our portfolio.
The popularity of our products across traveling consumer is helping us in securing, more shelf, space.
And expand SKU Presence at duty-free revenues.
We anticipate incremental growth in our travel retail business going forward.
Supply chain to help manage cost cost pressure and support long-term growth. We are confident in the steps. We have recently taken including
Transitioning to 100% third party providers for packing, shipping, warehousing, and other fulfillment. We expect this to be completed by the end of the year.
We are also actively shifting our manufacturing closer to the point of sale for certain us products. Produced SKU stole Primary in Europe and other regions.
These operational improvements will help us navigate the ongoing geopolitical or macroeconomic uncertainty with more agility, while allowing us to maintain strong service levels.
Regarding tariffs.
Our view remains largely consistent with that of 3 months ago.
We have successfully implemented, many of the interventions. We had previously identified to limit the expected impact for imports into the United States.
Our immediate actions and strategic supply chain initiative, have proven effective and our last few minutes step is to implement a more cost effective approach leveraging. The first sale rule for the finished goods that we import into the us that are made in Europe by our European based operation.
This will require additional it development, which we expect to have implemented by the second quarter of 2026.
As noted previously, we also began implementing pricing actions in August.
And we are now starting to see the effects.
Early indicators show that this higher prices will help offset higher input cost in dollars but will still likely result in some gross margin erosion.
We are also being more pricing. We're also seeing more pricing in the freelance and cosmetic Market. Namely in the us where we saw unit prices increase during the first quarter by by an average of 5.9% up from 1.2% at the end of June.
During the month of September, you need price increases have reached 7.2% for the industry. Indicating 5 to 6% price in mix, making its way to the consumer which will likely slow overall growth.
Of note, we have only taken pricing on select brand.
Mostly Prestige and luxury. As life Lifestyle brand consumers, tend to be more sensitive to price increase.
At the company level.
Our 2%, average price increase will continue to take Effect 2 year round and into 2026.
At this time, we do not plan to implement any further pricing actions unless a significant change in the market occurs.
On the inventory, front, some retailers are using Ai and other tools to optimize their inventory levels.
While store level sales have been growing. We are not yet seeing the same strength in reorders as sales through out spaces sell in.
That said, we are ready to move quickly to make sure retailers have our products on their shelves. Should they choose to replenish?
Before I turn things over to Michelle, I am proud to share some great news. Women's wear daily, has beauty company of the year in the public company category. This recognition is truly rewarding and reflects the strength of Our Brands, the creativity of our teams, and the enduring partnership. We have built with fashion house.
Distributors and retailers around the world.
So, I was at this event to accept the award on behalf of our talented team and Leadership and I look forward to continuing to explore new ideas and help shape the world of fragrance together with each of you.
with that, I will turn it over to Michelle, Michelle
Uh, thank you Gene and good morning, everyone.
for both the 3 and 9 months and it's September 30th 2025
The impact of foreign exchange aided our topline performance, contributing 2 points of growth in the third quarter and 1% on a year-to-date basis.
But the stronger euro also increased our costs based on the rest of the P&L and our balance sheet.
Organic sales excluding FX and Dunhill declined 1% in the third quarter. But Rose 1% for the first 9 months of the year.
Gross margin for the first 9 months expanded by 80 basis points to 64.4% from 63.6% during the prior year period.
And this was driven by favorable segment brand and channel mix in the first 9 months of 2025.
In the third quarter, however, gross margins declined by 40 basis points to 63.5%. As these favorable tailwinds were more than offset by the impacts of higher tariffs on our U.S. imports, which represented about $6 million for the quarter.
although we implemented price increases and also tariff interventions, and these price increases happened, later in the quarter, and only had a minor benefit on the results for the quarter, if we exclude, the tariffs
Gross margins would have improved by 100 basis points.
SG&A expenses as a percentage of net sales were 38.2% for the third quarter and 42.4% for the first nine months of 2025.
as compared to 38.9% and 418% for the prior year periods.
The decrease during the quarter and increase your to date reflect. A more, even distribution of A&P activities over the course of 2025, which total 66 million or 15.3% of third, quarter sales, and 186 million or 16.9% of year-to-date, net sales respectively.
We continue to invest in amp activities ahead of our growth and in line with our expected sellout Trends and we will continue to do. So in the fourth quarter,
Overall Consolidated operating income and margin improved for both the quarter and year to date compared to Prior year periods. Operating income was 109 million for the quarter at 2% increase resulting in an operating margin of 25.3%
We're a 30 basis points expansion, from prior year.
On the year to date basis, operating income increased by 2% to 243 million, with an operating margin of 22% or 10 basis, points Improvement versus prior year.
Now, looking below the operating line, we reported a loss of 7.7 million for the first 9 months of 2025. And this is pretty close to what we had last year where we had a loss of 7.1 million years million dollars.
The year-over-year change was primarily reflects a couple of factors. First we have higher losses on foreign currency, we lost 4.6 million dollars compared to 3.1 in the prior year.
And as you know, the significant swings in the euro exchange rate throughout the year have helped our top line but have a large to larger um larger than usual FX losses.
the second Factor was the impact on marketable Securities, where we recorded a loss of 2.5 million in the first 9 months of 2025 compared to a loss of 800,000 in the first 9 months of 2024,
Conversely and thanks to the strengthening cash positions.
Changes in interest expenses and interest income, were favorable year-over-year with net. Interest expenses of 1.8 million during the first 9 months of this year as compared to a net, interest expense of 2.9 Million in the prior year, period.
Our consolidated effective tax rate on a year-to-date basis was 23.5%, down 20 basis points from 23.7% in the prior year period.
As we benefited from a 1-time favorable tax gain of 2 million in the quarter, following a positive outcome from prior year tax assessments. And essentially, it was the mutual uh agreement procedure that we that we uh successfully uh got through
These factors combined with our discipline execution and cost management, led to third quarter, net income of 66 million, or $2.55 per diluted share, which is a 6% increase over last year's third quarter.
And for the first 9 months of the year, net income is consistent at 140 million with diluted earnings up modestly. Uh 2 cents to $4.36.
Starting with European based operations.
as there's some pointed out and also net sales, Rose 5 and 6% on a reported, uh, basis and 1 in 4%, on an organic basis for the first 3 and 9 months ended in September,
Gross margin was 66% for the quarter and 66.6% year to date, compared to Prior year periods of 66 and 2 and 66.3. The slight quarterly decline reflects tariff impacts on our European operations which were partially offset by pricing gains in the United States and favorable brand and channel. Mix.
While sgna expenses, increase 1% and 5% for the quarter and year to date, respectively sgna is a percentage of net sales declined by 110 basis points and 40 basis points respectively.
A&P expenses uh totaled 44 million for the quarter and 133 million on the year to date basis, representing 15 and 17% of net sales.
Overall, net income attributable to European operations as a percentage of net sales, exhibited strong growth. When that income margin expanding 230 basis points,
Uh, for the quarter and 50 basis points for the year.
Turning to our United States based operations net sales declined by 5% and 6% excluding the phase out of Dunhill for the 3 and 9 month period.
The phase out of Daniel fragrances was completed in August 2024. So at this point in time, we've completely lapped that event
gross margin declined by 110 basis points in the third quarter, due transitional terrific impacts and brand and channel. Mix but expanded by 80 basis points to 59%. Largely due to the discontinuation of the low margin downhill sales. That impacted the prior year period.
On the NSG side sgna, decreased 4% uh for the quarter and 2% for the year. As we put in place strong Cost, Containment measures however sgna as a percentage of net sales, Rose to 39.7% and 44% uh for the first 3 and 9 month period reflecting really the lower sales.
A&P expenses represented 16% of net sales for the quarter and year-to-date basis, representing $21 million and $53 million, respectively.
overall, net income attributable to United States operations, declined 14% to 21 million, for the quarter and 20% uh to 39 million year to date, primarily reflecting these lower selling
at September 30th, our balance sheet remains strong
with 188 million in cash and cash, equivalents and short-term Investments and working capital of 688 million.
Accounts receivable was up, 3% from last year's third, quarter slightly ahead of growth driven by Channel mix and foreign exchange.
We continue to have a strong collection activity.
We've also made meaningful progress on Inventory management this quarter.
Inventory levels as of September 30th, 2025 decreased 6%.
From 2024, third quarter, as we remain focused on executing on inventory reduction strategy.
The composition of our inventory has also improved with a higher mix of finished goods, relative to components.
This shift positions as well to continue to drive inventory efficiencies. As we get into the year end
By effectively managing or working capital in line with sales year-to-date operating cash flow, increased 68 million up, 18 million from prior year prior year period reflecting 38% of an income net income compared to 50 million or 28% of net income in in the same period last year.
Obviously, um, we know the cache is always is higher in the, in the run-up until um the last quarter of the year.
And should get better at the end of the year.
We also took advantage of our stronger cash position and the recent drop in the stock price. To continue our share repurchase program year to date. We have repurchased 7.5 million, in shares and will continue to evaluate additional share repurchases. If the stock price remains below what is believed, uh, what we believe is the intrinsic value.
IP hasn't conducted any business. We do not expect this murder to have any material impact on our shareholders. Following the completion of the merger. Next month, our company, interpreter Inc, will continue to own roughly 72% of uh interparfums essay. But this will now be a direct uh, ownership as opposed to an indirect ownership and will supply uh, simplify our corporate structure.
Moving to our current year guidance, and as per earnings released yesterday evening and reflective of current market dynamics in year to date Trends through September. We are refining our full year 2025 Outlook. We now, expect sales of approximately 1.47 billion representing 1% year-over-year, growth and diluted earnings per share of $5.12, which is in line with 2024
Additionally, while we will provide more formal guidance for your 2026 on Tuesday, November 18th.
We currently anticipate moderate top and bottom line growth in that year. Generally in line with what we are seeing this year.
We anticipate a return to Stronger growth in 2027, driven by enhanced Innovation, including the developments and distribution of our newest licenses. Um, off-white
Um, sulfur, um off-white uh loan Shaw, uh, as well as gout.
While demand has moderated in several International markets, our Core Business and fundamentals remain strong.
We have robust pipeline of innovation, enduring Partnerships with global Distributors and retailers and a resilient consumer base.
Overall, we remain confident in the strength of our business model and our ability to deliver sustainable performance and long-term value. As we have for more than 4 decades.
Okay, thank you.
Thank you. I'll now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad,
Confirmation tone will indicate your line is in the question queue? You may press star 2. If you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star Keys 1 moment, please while we pull for your questions.
Our first question comes from the line of Ashley helgons with Jeffrey's, please proceed with your question.
Hi. This is Sydney on for Ashley, thanks for taking our question. Um, just curious, if you can share a little bit more about what you're seeing heading into holiday, um, maybe that gives you confidence or caution there and then, in terms of the price, increase would love to hear what feedback you guys received. Um, from retailers, as well as, you know, the consumers, um, any extra callers. That would be helpful. Thank you.
Uh I can uh hello. I can try to answer on the holiday. What do we see for Holiday? Um,
We had a a strong October. Um we continue to sell gift set in October. These sets will arrive in stores in November or December and
And our forecast for November is also quite strong. Uh, so it means that uh, uh,
Retailers are buy, are continuing to buy the inventory. At store level is not high. I was we are monitoring this.
Daily basis, Amazon sells are starting to pick up but of course, this type of of purchase will be done in the last 2 weeks over here. Uh, so
Um, we see we are we are we are not worried for the holiday season.
Uh, price. Uh, the second part of your question is about pricing. We took a very modest pricing approach compared to other companies, and I would say it was quite well accepted. We didn't increase prices across all our brands; we selected the most prestigious, the most elevated. This is where we think there is more elasticity.
Brands that we have in the portfolio, but we didn't see too much resistance.
Measures from retailers, nor more consumers.
Yeah, maybe just to build on Jean. I mean, ultimately, I think uh, everybody was expecting that uh, with the impact of tariffs um that we're going to be inevitably, some of that was going to be passed on to the consumer. And I think clearly we've seen this across the the board in uh particularly in the US and the third quarter. As I was saying before, you know, we're seeing uh you know before you know a year to date June unit pricing which you reflects obviously pricing mix and other factors was up by about 1.2% versus prior year.
And we've clearly seen an acceleration in the third quarter, our unit pricing is up close to 6%. And if you really zoom into September, it's close to 7. So definitely, uh, there's been a lot of pricing that's been taken. Um, it's not it's very selective, uh, from Brand to brand. But generally speaking, we are seeing that acceleration and it hasn't really significantly impacted units. Uh, units, uh, units, uh, sales are roughly, uh, growing about 1%. Uh, so, the, the the market growth is is driven by pricing again, in this third, in this third quarter
That's helpful. Um, if I can maybe just poke 1 more in there and apologies if I missed. But um, there was some talk last quarter about just shipment timing, maybe shifting between Q3 and Q4. I, maybe I missed if you guys mentioned kind of where that ended up shaking out
I mean we've we've certainly seen a you know a little bit less holiday sets being sold into the third quarter relative to what we normally see. Um and you know we have seen some of that pickup and and during the month of October um but it isn't it isn't significant. I think the main thing here really Ashley is Sydney. Sorry. Is that um, is that we continue to see a, a bit of a disconnect between Selden and sell out there? There there are, there is, uh, continues to be a couple of points difference. Uh, the markets are still up. Um, the market actually in the US for the third quarter, uh, was up 7%, um, and is up 4% on a year to date basis. So consumption remains very, very healthy. Uh, we're just seeing, you know, continuing to see a, a small disconnect of a couple of points between 7 and sell out. And, uh, not only for us but also for our competitors. I'm sure you've you've all seen all of our competitors have now, uh, published their earnings and, uh, and and pretty much everybody, you know, with the, with the exception of, uh,
Maybe Cody, which was an outlier on the way down and louder. Now, liar, on the way up, everybody's been hovering around 2%, um, which is pretty consistent in what we, what we posted. So, um, overall I think, uh, we, we are seeing that a macro level, uh, this continued, um, you know, destroying that's impacting Us. By the way, this isn't any different than what we're doing as well, because if you look at our inventories, our inventories are also down as we're trying to get more efficient with our inventory. And of course, everybody is basically doing that.
Thank you.
Just in the line of Susan Anderson with canaccord genuity please proceed with your question.
Hi, good afternoon. Thank you for taking my questions.
Um, I guess maybe.
Kind of looking out over the next 2 years. Um you know you have a number of new brands rolling out. I guess how should we think about just that growth profile in terms of what? We'll be driving the growth? Do you think that you know the combination of these new brands I guess how much growth are you expecting them to drive? As well as you know just continuing to grow your existing Brands whether that be the smaller ones or the larger ones? Thanks.
yes, I can try to answer, but
so when you look at the portfolio, today we have added 2, Excuse Me, 3, important license or purchase of trademark. Uh, 1 is of white and you will see a set of of writing 2027, we bought, we bought also the business of any goutal that is prestige line.
is a coach and we see we think that young son has a
Great grand territory that we can exploit for fragrances will be can be in 3 to 5 years, 100 billion dollar business, that's what we are giving so 2026 will be. I will say my best because we do a golf will be modest because we will be waiting for the important launch at at the end of 26, beginning of 27.
Michelle. Yeah, I would just also say that, you know, we have also added quite a lot of Brands, um, quite a lot of large Brands over the last couple of years with, you know, cavali, uh, Donna Karen, um, Lacoste and, you know, a little year before Farah Gamo at at this point in time, you know, if we look at the the portfolio that we've added these are large Brands and they're growing. Um but obviously you know the uh smaller brands in our portfolio are kind of you know, pulling us down. So you know there there is going to continue to be some work on on cleaning up the portfolio. And uh so that we can really focus on the the largest brands that will drive uh the business um, more sustainably going forward.
Okay, great. And then we we still think we're still thinking that gas Coach Jimmy Choo and M can go at at at a good place.
And maybe if I could just add 1 more on the model, I guess for fourth quarter, how should we think about gross margin now that the price increases have flow through? I think you said if it wasn't for the Tariff, third quarter would have been better by 100 bits so I guess should we expect that to be fully offset? Now in fourth quarter on the gross margin front
Look, uh it's a great question. I, you know, the reality is we've done, uh, a really great job and um you know realigning our supply chain and and and and looking at tariffs, there is 1, big item. That is takes a lot of time to do which is all the US stuff that all the European stuff that we import into the US. It's a pretty sizable business.
Um, and we've been hit not only with 10% tariff, but it's been up to 15. Uh, it's going to take us a bit of time to to basically uh, get the cost of those tariffs. Uh, down with the first sale rule as, as Gene pointed out in the uh in the prepared remarks. Uh that's going to I think continue to impact Us in the first uh in the fourth quarter. And in the um the first quarter of of next year, should get better in the second quarter. So no, I am expecting gross margins to slightly erode um I'd say probably about
50 bips um something similar to what we saw. What we saw in the in the third quarter.
Okay. Great. Thanks so much. Goodbye.
We've reached the end of our question and answer session. I'd like to turn the call back over to Mr. Attwood for any closing remarks
All right. Thank you very much. And thank you all for, for joining our call today, uh, with this being our final conference call of the year, uh, Gene. I extend our warmest wishes, uh, for a safe and joyful holiday season and a healthy and fulfilling New Year. Uh, I would like to mention that uh we will be hosting the counter cord, genuity team at our corporate headquarters, on December 4th for their annual uh Beauty bus tour. If you would like to participate, please feel free to reach out to the counter core genuity team. Uh, if you have any additional questions, please contact, Karen Daly from the Equity Group, our investor relations representative, and thank you and uh, have a great day.
Thank you. This concludes today's