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Edited Transcript of IPAR earnings conference call or presentation 3-Mar-20 4:00pm GMT

Q4 2019 Inter Parfums Inc Earnings Call

New York Mar 13, 2020 (Thomson StreetEvents) -- Edited Transcript of Inter Parfums Inc earnings conference call or presentation Tuesday, March 3, 2020 at 4:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jean Madar

Inter Parfums, Inc. - Chairman, CEO & Co-Founder

* Russell Greenberg

Inter Parfums, Inc. - Executive VP, CFO & Director

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Conference Call Participants

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* Hamed Khorsand

BWS Financial Inc. - Principal & Research Analyst

* Linda Ann Bolton-Weiser

D.A. Davidson & Co., Research Division - Senior Research Analyst

* Stephanie Marie Schiller Wissink

Jefferies LLC, Research Division - Equity Analyst and MD

* Wendy Caroline Nicholson

Citigroup Inc, Research Division - MD and Head of Global Consumer Staples Research

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Presentation

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Operator [1]

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Greetings, and welcome to the Inter Parfums Fourth Quarter and Year-End 2019 Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Russell Greenberg, Executive Vice President and Chief Financial Officer. Thank you, sir. You may begin.

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Russell Greenberg, Inter Parfums, Inc. - Executive VP, CFO & Director [2]

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Thank you, operator. Good morning and welcome to our 2019 fourth quarter and year-end conference call. We will proceed with our standard format. After I review financial performance, Jean Madar, our Chairman and CEO, will provide an overview of our business and update you on our future plans. Then we will open the floor to questions.

Before proceeding further, I just want to remind listeners 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. These factors include, but are not limited to the risks and uncertainties discussed under the headings Forward-Looking Statements and Risk Factors in our annual report on Form 10-K and the reports we file from time to time with the Securities and Exchange Commission. We do not intend to and undertake no duty to update the information discussed.

When we refer to our European-based operations, we are primarily talking about sales of Prestige Fragrance products conducted through our 73% owned French subsidiary, Interparfums SA. When we discuss our United States-based operations, we are primarily referring to sales of Prestige Fragrance products conducted through our wholly-owned domestic subsidiaries.

Before I review the final quarter and full year results, please be mindful that a strong U.S. dollar has a negative impact on our sales but a positive effect on our gross profit margin. This is because over 45% of net sales of our European operations are denominated in dollars, while almost all costs of those operations are incurred in euro.

The average dollar-euro exchange rate for the 2019 fourth quarter was 1.11 compared to 1.14 in the fourth quarter of 2018. The difference for the full year is over 5% as the average dollar-euro exchange rates were 1.12 and 1.18 for the 2019 and 2018, respectively.

With regard to the final quarter of 2019 as compared to 2018, net sales were $177.8 million, up 0.3% from $177.2 million. At comparable foreign currency exchange rates, net sales increased 1.5%. Net sales by European-based operations decreased 4.2% to $129.1 million from $134.8 million. And net sales by U.S.-based operations came in at $48.7 million, up 14.7% compared to $42.4 million. Gross margin was 64.5% compared to 66.1%. SG&A expenses as a percentage of net sales were 57.6% compared to 60.1% in 2018.

Operating income rose 16.5% to $12.3 million as compared to $10.6 million. Operating margin came in at 6.9% as compared to 6.0%. Net income attributable to Inter Parfums, Inc. increased 1.8% to $8.2 million as compared to $8.0 million. And finally, net income attributable to Inter Parfums per diluted share was $0.26 for both periods.

So for the year ended -- for the full year ended December 31, 2019, net sales totaled $713.5 million, resulting in net income attributable to Inter Parfums of $60.2 million or $1.90 per diluted share. This is a 5.6% increase in sales, a 12% increase in net income attributable to Inter Parfums and an 11.1% gain on diluted EPS.

Our consolidated gross margin was 62.5% and 63.3% in 2019 and 2018, respectively. While the strong dollar benefited our gross margin, that benefit was offset by the higher-than-typical costs for sales of Montblanc Explorer, which launched in the first quarter of 2019 and rolled out throughout the year. Essentially, for that reason, the gross margin for European operations declined 60 basis points to 65.7% from 2018's 66.3%.

For U.S. operations, gross margin increased to 52.5% from 51.4% in 2018. That 110 basis point improvement is primarily due to increased sales of higher-margin Prestige products under licenses. The slight decline in our consolidated gross margin also reflects the fact that in 2019, our U.S. operations grew at a faster rate than European operations. In 2019, U.S. operations represented 24% of consolidated sales versus just over 20% in 2018.

For us, the big story is our operating leverage. In 2019, selling, general and administrative expenses rose 2.5% on a 5.6% increase in net sales. And as a percentage of net sales, SG&A expenses came in at 47.8% and 49.3% for 2019 and '18, respectively. Once again, promotion and advertising, that's included in selling, general and administrative expenses, peaked in the fourth quarter, which brought the total for the full year to 20.3% of net sales, down slightly from the 20.7% in 2018.

While we budgeted 21% of net sales for this expenditure in 2019, minor fluctuations in certain launch schedules warranted a change in our spending. In 2019, there was a $1.1 million loss on foreign currency, while in 2018, that loss was $0.3 million, and our effective income tax rate came in at 27.7% in 2019 versus 27.3% in 2018.

Cash provided by operating activities aggregated $76.5 million in 2019, and we closed the year with working capital of $389 million, including approximately $253 million in cash, cash equivalents and short-term investments. We had a working capital ratio of over 3:1 and only $10.7 million of long-term debt.

Now to the outlook for 2020. While the fundamentals of our business remain strong, like most companies doing business around the globe, ours is being impacted by the coronavirus. While it is nearly impossible to calculate the full potential impact of the coronavirus on our company at this time, the only certainty is that the next several months will be challenging. Beyond China, there are now new cases cropping up around the world.

As a result of this situation and the corresponding and significant decline in air travel and consumer traffic in key shopping areas, we postponed several launches until later this year. For these and related reasons, our 2020 guidance needs to be revised. If the impact on the coronavirus is limited to the first few months of this year, we expect 2020 net sales and earnings to be in line with our 2019 results. Obviously, our expectations are subject to change with the fluidity of this situation.

Jean, please continue.

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Jean Madar, Inter Parfums, Inc. - Chairman, CEO & Co-Founder [3]

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Yes. Thank you, Russ, and good morning to you all. We will talk later. I'm sure you had questions about our plans and -- during this coronavirus crisis. But before moving on to our future plans, I will review our sales performance by region. And the message that I wish to convey here is that we are building upon successive years of growth.

For example, in North America, our largest market, 2019 sales were 11% ahead of 2018, which were 19% ahead of 2017. Similarly, sales growth in Western Europe of 2.5% in 2019 comes on the heels of 9% sales gains in 2018. Also, in Eastern Europe, net sales rose nearly 5%, layering upon the 7% gain in the preceding year. The biggest percentage gainer was in the Middle East, where, in 2019, sales increased 22% over 2018, which were 17% ahead of 2017. Also, in Asia, our third largest market, we are down nominally in actual dollars in 2019, but ahead in constant dollar, which we consider quite respectable in light of trade tariffs on goods coming in and out of China from the United States. Also keep in mind, our sales in Asia climbed 24% in 2018, setting a high bar for the year just ended. Our smallest market, Central and South America have continued to decline.

Moving on to brand news. We are moving forward with our plans to build 2 new fragrance enterprise with the Kate Spade brand which we signed agreements in June of last year, respectively. As we have reported, we are retaining 2 popular legacy scents, Live Colorfully and Walk On Air, for which distribution should commence in the next several weeks. And we will unveil an entirely new women's scent in end of the summer, beginning of the fall.

We are also very enthusiastic about our new worldwide licensing agreement with MCM that we signed in November. Since 1976, this German fashion house has been pushing fashion boundaries and redefining luxury leather goods on a global scale through innovation, cutting-edge technology, exceptional creativity and superior quality. So our team has begun work on developing an extraordinary MCM fragrance for women and men, with initial launch targeted for the first quarter of 2021. We'll be ready, we think, in January of 2021. And our distribution strategy includes MCM stores, high-end department stores, Prestige beauty retailers with a geographic focus on Asia, America and Europe.

With regard to our brand ranking, Montblanc is still #1, especially with the launch of Explorer this year; followed by Jimmy Choo, #2; and Coach, #3. However, in less than 2 years, GUESS has taken over fourth place and GUESS could become, in the next 2 years, #3 brand in the company. The importance of this ranking cannot be overstated. Some of you on today's call have been following our progress for a long time and will remember that not that long ago, one brand, Burberry, accounted for more than half of our annual sales. Today, 4 brands in the aggregate have more than filled that space, making us a much stronger company.

Moving on to our launch pipeline for the year, we have already unveiled several new products, including Coach Dreams, which just launched and is doing some great numbers at Macy's. We were last month -- excuse me, last week, we were in the top 5 at Macy's. We have launched also Byzance by Rochas and L'Homme Rochas. Both recently began to roll out.

The new women's signature scent for Montblanc is still scheduled for first half. It will be called Montblanc Signature. But keep in mind, Montblanc Explorer, which rolled out in 2019, was a huge success for the smell-centric brand. The women scent from Montblanc is not expected to perform comparably.

Also, we are moving ahead with Jimmy Choo lip and nail product, even though it's still small program with limited distribution. Our primary goal is in testing these products and see if we can expand the selling space for our Jimmy Choo fragrance like the new women's scent coming to market in the second half.

Moving on to U.S.-based product launches. A new member of the Oscar de la Renta family called Bella Essence recently debuted domestically. For GUESS in 2020, we'll be launching a blockbuster fragrance that includes Bella Vita perfume and Bella Vita [Rosa] Eau de Toilette. Both are now planned to be introduced domestically in the spring and internationally in the fall. We are also working on a men's fragrance and grooming line that will be scheduled for end of the year for grooming line. Women's line will happen in 2021.

It is worth noting that GUESS is a major brand in the Middle East, which also happened to be our fastest-growing market in 2019. We had plan on introducing the GUESS brand in China this year, but that decision and its timing, of course, will have to wait. We're also going to test some GUESS color cosmetics in GUESS stores. We are moving, of course, conservatively on this, but the goal is to use color cosmetics to strengthen the brand's fragrance distribution.

So before the onset of the coronavirus, we were confident that the launch of a new fragrance called Sky by Anna Sui will be a catalyst for 2020 brand sales growth. Asia is the biggest market for Anna Sui, and therefore, we have decided to push back the launch to fall 2020.

Within 2 weeks, we will be launching a new collection for Graff in Harrods. Selective luxury distribution will be planned for the fall. And we have also got a number of brand extension plan for Abercrombie, Hollister, a new fragrance duo called Canyon Escape is being readied for a mid-year introduction.

I reported on our last conference call that we have extended our licensing arrangement with the Oscar de la Renta brand through the end of 2031 and with an additional 5-year extension option after that. And more recently, we have extended our license for Abercrombie and Hollister.

Having added 2 new brands to our portfolio in 2019, we have a lot on our plate to build new fragrance enterprise. But that doesn't mean we are not prepared to further enlarge our portfolio. As we have said many times over, we've got the financial strength, the human talent and the drive to entertain transactions that are compatible with our business model, that are backed by solid licensing partner and offer superior growth potential.

Before taking your questions, I want to mention that Russ will be meeting with investors at the D.A. Davidson Consumer Growth Conference on March 12.

Now operator, let's open the floor for questions. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Linda Bolton-Weiser with D.A. Davidson.

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Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [2]

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So just on the coronavirus impact. So I guess what we did in our model is we just reduced the revenue and earnings for the first quarter since that's what we're seeing as the current impact. Can you give us some sense of what you're seeing in your markets and the magnitude of the declines? I guess we were thinking if travel retail is 20% of your revenue, maybe it's down 50%. So maybe your revenue is down 10% or 12% in the first quarter. Am I thinking along the right lines? Maybe you could just give us a little color on what you're seeing.

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Jean Madar, Inter Parfums, Inc. - Chairman, CEO & Co-Founder [3]

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Russ?

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Russell Greenberg, Inter Parfums, Inc. - Executive VP, CFO & Director [4]

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Yes, sure. You're actually very, very close. Looking at the numbers for January and February, the sales are actually surprisingly -- holding up surprisingly well. It's really the March month that we're anticipating the most significant decline. For those of you who saw the press release that was put out by our European operations, we've indicated that sales for the European operations, we're anticipating that they're going to be down approximately 10% for this first quarter.

U.S. operations so far, as I just mentioned, we really have not seen a significant impact. We think that sales at best will be flat. But I think we can actually achieve that. So far, from what we've seen with the orders that we have in the system, those sales should be able to come in very, very similar to that of last year. So with that combination, we're looking at first quarter somewhere down maybe 8% or 7.5%, something along those lines.

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Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [5]

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And then...

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Jean Madar, Inter Parfums, Inc. - Chairman, CEO & Co-Founder [6]

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If I may add, to give you a little bit more color. When this coronavirus started at the very beginning, we were worried first about the supply of certain components coming from China because we have some plastic and some metal and some special cartons coming from China. But because of tariff that started with China in the middle of last year, we have -- we had already started to look at alternative sourcing before the coronavirus. So we have not -- we are not worried about any impact, any serious or material impact on supply of components coming from China. Actually, we have -- not only we have alternative sources, but we have seen factories going back to work at a rate of maybe 25% to 30% 2 weeks ago. Maybe now we are up to 50%. So we have -- we are receiving parts from China.

The problem is really the sales. And the sales, of course, we immediately moved some launches, especially the Anna Sui launches that we are going to do in the second quarter. We moved it to third and fourth quarter for all the Asian region. But the problem, like you said, that is not only China, it's the whole region. It's the travel retail. It's the Chinese tourists buying in Europe or elsewhere. And this is what we'll be missing. But it's true that, so far, January and February were -- started okay. I mean quite good. But we're going to start feeling the pressure in March.

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Linda Ann Bolton-Weiser, D.A. Davidson & Co., Research Division - Senior Research Analyst [7]

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And then just on the cost side, as you faced a little bit of sales decline here in the first quarter, are you doing anything cost-wise to try to mitigate the negative operating leverage? Or are you just kind of keeping things as is? I guess your SG&A is running at about $36 million per quarter. Is that something you can reduce in the near term? Or just keep the same, business as usual?

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Russell Greenberg, Inter Parfums, Inc. - Executive VP, CFO & Director [8]

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Well, I certainly -- I'm sorry. Go ahead, Jean.

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Jean Madar, Inter Parfums, Inc. - Chairman, CEO & Co-Founder [9]

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No, I -- you're the expert, but I will say that as we have moved some launches towards later in the year, a lot of advertising money will be spent later in the year. But -- so this is for the marketing and advertising. But besides that, our G&A is the same. Russ?

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Russell Greenberg, Inter Parfums, Inc. - Executive VP, CFO & Director [10]

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Yes, that's exactly right. The fixed G&A is not something that we can really move the needle on very, very easily. But fortunately for us, a good portion of our SG&A expenses is of the variable nature. And therefore, those will follow however the fluctuations are with respect to sales. Marketing, as Jean mentioned, is one area where you can't control. And we always typically spend much less marketing in the early part of the year than we do in the later part of the year. So hopefully, we won't see too much of a significant erosion from the positive leverage that we've seen over the last couple of years.

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Operator [11]

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Our next question comes from the line of Wendy Nicholson with Citigroup.

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Wendy Caroline Nicholson, Citigroup Inc, Research Division - MD and Head of Global Consumer Staples Research [12]

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My question is actually, bigger picture, taking a step away from coronavirus. Russ, the operating leverage you talked about, I mean, the margin you put up for 2019 is higher than I think we've ever seen or at least in a very long time. And so how do you feel about that and where we go from here just structurally? Again, I know 2020 is going to be an anomaly, and there are lots of moving pieces. But sort of longer term, how much more juice is there? And how much higher can those margins go?

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Russell Greenberg, Inter Parfums, Inc. - Executive VP, CFO & Director [13]

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Wendy, that's a great question. Thank you for asking the question. It's actually very pleasing for us because back just a few short years ago, we kept talking about achieving 14% to 15% operating margin. We came in this quarter to 14.7% operating margin, which did not reach the highest we've ever been. We have exceeded 15% and actually got pretty close to 16% in a full year back several years ago. Our goal was always to kind of reach that 15%. I think that, again, barring the unfortunate situation that we're seeing in 2020, as we move forward, if we can continue to grow our top line like we have over the last several years, I think we can start broaching that 16% operating margin level, which is probably one of -- a very high level for our industry. So that's an achievement that we're very, very proud of.

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Wendy Caroline Nicholson, Citigroup Inc, Research Division - MD and Head of Global Consumer Staples Research [14]

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Got it. And then just generally, can you talk sort of big picture, I mean, part of what's helped you get there is strong revenue growth. And I know your market shares have been great, and you've had a tremendous amount of brand activity that's been successful. But also, we've been in this kind of multiyear period where fragrances generally have been in a good space. So can you just talk about kind of your outlook on maybe just what you saw through the course of '19? How much of your growth is being driven by sort of the increased willingness on the part of Asian consumers to use fragrance? Again, forgetting the coronavirus, just high level, what's your take on the industry dynamics today?

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Russell Greenberg, Inter Parfums, Inc. - Executive VP, CFO & Director [15]

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Jean, you want to take a shot at that?

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Jean Madar, Inter Parfums, Inc. - Chairman, CEO & Co-Founder [16]

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Yes, I can try. But it's true that with the portfolio that we have, we have been quite pleased with the growth because we have been able to grow quite strongly in many parts of the world. We have Montblanc that is strong in more than one market, but we have also some brands like Oscar de la Renta or Abercrombie are strong in -- only regionally. But when you look at our growth in 2019, 30% in the U.S., 20% in Europe, it's quite impressive.

What's going -- with Asia, it is absolutely true that we believe that the Asian population will use more fragrance than before. And we have seen this years after years. Because people used to say that, "Oh, Asia, it's on your market for skin care, of course, and make up." But we think that we've seen, especially Southeast Asia, growing very strongly with our fragrance. If on the top of that, we give them some brands that they recognize such as Coach or Jimmy Choo or Lanvin or others that we have in the portfolio, this will accelerate the growth.

So coronavirus aside, we think that we are very well positioned, and 2020 was going to be a good year, coronavirus on the side. But long term, we think the portfolio is well balanced. We think we can leverage again our G&A. So we are quite confident. Let's not forget also that with the existing structure that we have, the existing people, we can do more sales than what we have. We can have -- we could sign a new license and we are working on some deals right now. So we will definitely not stop increasing the portfolio.

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Operator [17]

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Our next question comes from the line of Steph Wissink with Jefferies.

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Stephanie Marie Schiller Wissink, Jefferies LLC, Research Division - Equity Analyst and MD [18]

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Russ, just a couple of quick questions. You mentioned the delayed launch for Anna Sui, and I just wanted to make sure we had calibrated all of the changes in the timing of the calendar. Was that the only launch that was pushed from the first half to the second half?

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Jean Madar, Inter Parfums, Inc. - Chairman, CEO & Co-Founder [19]

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Yes. Today, I have decided to keep all the launches almost -- I mean, plus or minus a couple of weeks, but almost on time, except for Anna Sui. Because Anna Sui, 90% of the business of Anna Sui is in Asia. So we keep -- we do not change the calendar of launches. We will maybe spend a little more than what we thought during -- for launches in order to have some money left to repromote towards the end of the year if need be. And I think we will need to repromote to keep our market share towards the end of the year.

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Stephanie Marie Schiller Wissink, Jefferies LLC, Research Division - Equity Analyst and MD [20]

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Okay. Great. And then maybe, Russ, for you. Just a question and follow-up to Linda's question regarding coronavirus. Can you help us sequence the staging of actions whether it's on your supply recalibrating or as you were talking about some of the demand changes? Are you seeing reduced reorders right now? Or is it that your future orders are being cut back as the channel supply is not working through? So maybe just give us a sense of what the cadence of actions are that you're seeing coming through March and how we should think about potentially a bit longer of a drift of the impact beyond just the immediate demand?

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Russell Greenberg, Inter Parfums, Inc. - Executive VP, CFO & Director [21]

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That's a -- it's a very difficult question to answer because we're just starting to see some of the impact just now, within the last few weeks. Things change rather quickly.

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Jean Madar, Inter Parfums, Inc. - Chairman, CEO & Co-Founder [22]

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Or within a few days.

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Russell Greenberg, Inter Parfums, Inc. - Executive VP, CFO & Director [23]

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Yes, exactly. Things change very, very quickly as this virus has spread. I mean just think of what's happened over the past 2 weeks. Look at your stock market. It really has declined within a 1-week period. So it's really difficult for us to try to predict what's going to happen in the future. Right now, we do see some effect, of course, in the travel retail. That is the area that has been -- is mostly hit as certain areas have become no-fly zones. But to the extent of how that's going to spread and to the extent of how long or the duration of these no-fly zones are going to last, this is something that's really unknown and almost impossible to try to make a prediction at this time.

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Jean Madar, Inter Parfums, Inc. - Chairman, CEO & Co-Founder [24]

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And I'm going to try to add and to give you some colors because I've been on the phone with many distributors and many operators in the last week, actually. And what we see is definitely a big downsize in travel retail. Some airports are completely empty. So of course, if there is no travelers, there is no sales.

On the other hand, I was and I want to stay very, very prudent and very conservative. But in China, in Mainland China, where as you know there is a lot of sales done through e-commerce, the e-commerce was quite strong in the last 3 weeks. So I was looking at sales, actually they were much better than what we expected. So of course, the business is down, but we've -- because of our strength in e-commerce in China, I think that it's going to be a little bit better than what we think.

And I think also that this is a personal opinion that China will be the first to recover. We are more worried about travel retail in general. Europe, as you know, Italy has been hit. We don't know what's going to happen in France or in Germany in the next hours or days. This is why we have almost 0 visibility today on this very important market. And I hope it helps you. Thank you.

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Stephanie Marie Schiller Wissink, Jefferies LLC, Research Division - Equity Analyst and MD [25]

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Very, very helpful. Russ, could you just remind us -- a final question for Russ, a quick one, on the Jimmy Choo license, when that expires.

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Russell Greenberg, Inter Parfums, Inc. - Executive VP, CFO & Director [26]

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Jimmy Choo license, that was renewed -- let me see if I can quickly tell you. I think it's 2030-something, but let me see if I can quickly find it.

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Jean Madar, Inter Parfums, Inc. - Chairman, CEO & Co-Founder [27]

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We'll find that. Maybe we'll take another question and we'll find out.

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Russell Greenberg, Inter Parfums, Inc. - Executive VP, CFO & Director [28]

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I have it right here. December 31, 2031.

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Jean Madar, Inter Parfums, Inc. - Chairman, CEO & Co-Founder [29]

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2031, so we have another about 10 years, yes.

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Russell Greenberg, Inter Parfums, Inc. - Executive VP, CFO & Director [30]

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Yes, at least 10 years. Yes, we had recently renewed that license. If you don't -- if you remember, when Jimmy Choo was taken over by the Michael Kors group, we had -- just shortly after that acquisition, we had signed a new license with Jimmy Choo and added to the existing license.

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Operator [31]

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Our next question comes from the line of Hamed Khorsand with BWS Financial.

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Hamed Khorsand, BWS Financial Inc. - Principal & Research Analyst [32]

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So first off, just to get the corona out of way. What kind of component sourcing are you conducting right now? Is there any shortages on that front for you?

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Russell Greenberg, Inter Parfums, Inc. - Executive VP, CFO & Director [33]

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As Jean has indicated just a few minutes ago, that we really have not seen any significant impact from the standpoint of the supply chain. There were processes put into place even back in early in 2019 when we started to see the effects of the tariffs that were enacted between the United States and China. We had begun to create alternative sources for our components. In addition, the virus also hit right at the same time as the beginning of the Chinese New Year. So even for those parts that we still do acquire from China, most of the parts that we needed, at least for the first portion of 2020, we had already received because we knew that China was going to close down for several weeks for Chinese New Year.

So -- and today, as Jean mentioned, shipments are starting to come in. We were fortunate enough that we did not have any factories in the area that was most hit with the coronavirus in China. So, so far, we really have not seen any significant impact from a supply chain standpoint.

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Hamed Khorsand, BWS Financial Inc. - Principal & Research Analyst [34]

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Okay. And my other question was, in the change in the sales composition, just given what's happening in travel retail, how is that changing your ad strategy? And is there going to be a change in the cost estimate for this year?

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Russell Greenberg, Inter Parfums, Inc. - Executive VP, CFO & Director [35]

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No. I think it's really just a change in the allocation of dollars. We've certainly gone with more dollar spending in social media-type activities and content-related activities for the advertising. I will still stand at the approximately -- in a normal year, I should say, at right around 21%. 2019 came in at 20.3% compared to 20.7% in 2018. But from an overall budgeting standpoint, I think we're still looking at right around 21% of sales to be spent in A&P.

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Jean Madar, Inter Parfums, Inc. - Chairman, CEO & Co-Founder [36]

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If I may, before we take the next question, I would like to answer a question that people have not asked. It's regarding inventory. Because I think it's important to say that we have not really lowered our goal of inventory, meaning that we think that when this coronavirus will be finished, the market is going to need a lot of products in a very short period. So we think it's important to maintain maybe what could look to be a higher level of inventory for the next 2, 3 or 4 months because when the demand especially in Asia will come back, we'll have to supply very, very fast.

Okay. Next question?

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Operator [37]

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We have no further questions at this time. Mr. Greenberg, I would now like to turn the floor back over to you for closing comments.

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Russell Greenberg, Inter Parfums, Inc. - Executive VP, CFO & Director [38]

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Okay. Thank you, Christine. Thank you all for tuning in to our conference call. And as usual, if anybody does have any further questions, they can contact me at my office. Everybody, have a great day, and thank you so much. Bye.

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Operator [39]

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Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.