Zacks Investment Research downgraded Elizabeth Arden Inc. (RDEN) to a Zacks Rank #5 (Strong Sell) on Feb 22, 2014 following weak results in the second quarter fiscal 2013.
Why the Downgrade?
Elizabeth Arden witnessed sharp downward estimate revisions after reporting weak second-quarter fiscal 2014 results on Feb 5, 2014. Notably, The Miramar, Fla.-based Cosmetics Company withdrew its fiscal 2014 guidance on Jan 21, 2014.
Elizabeth Arden’s second-quarter earnings of $1.08 fell short of the year-ago earnings by 31.6% due to lower sales and gross margins. Net sales of $418 million also lagged year-ago results by 10.1% due to lower year-over-year sales in all the geographical segments. Gross profit declined 17.3% year over year to $200.0 million due to lower sales and higher depreciation related to cost of goods sold.
Weak holiday sales due to bad weather conditions in December and January were responsible for the weak results in the reported quarter. Moreover, the company also reported higher inventory due to low traffic in the company’s mass retail accounts, and reduced discretionary spending by consumers facing macroeconomic headwinds.
However, both earnings and sales inched past Zacks Consensus Estimate. We would like to remind investors that the company released weak preliminary sales results for the second quarter on Jan 21, 2014 which led to the sharp downward revision of estimates. The actual results were in line with the revised expectations.
The Zacks Consensus Estimate came down 27.2% to $1.07 for the second quarter over the last thirty days. For fiscal 2014 most of the estimates were revised downward over the last thirty days, sinking the Zacks Consensus Estimate by .6% to $2.09.