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Elizabeth Arden Forays into Professional Skincare

Zacks Equity Research

Cosmetics retailer Elizabeth Arden (RDEN) is trying hard to boost its sales after reporting unimpressive second-quarter fiscal 2014 results last month. As part of this strategy, last week, the Miramar, FL-based company launched the latest Elizabeth Arden Rx skincare line. The new product will be available exclusively at physicians’ offices.

The launch goes in line with Elizabeth Arden’s omni-channel retail strategy under which it distributes its products at prestige retail outlets and spas. Using professional skin care offices as an outlet is expected to add a new dimension to the company’s marketing strategy. Consumers will be more confident about the product if it is available at their skincare specialists’ chambers. This will help the company to reach its consumers in a credible, science-based environment.

Elizabeth Arden has been striving to expand into the professional medical channel. It has also invested in US Cosmeceutechs, LLC (:USC), a skin care company that develops and sells skin care products through professional dermatology and spa channels. The two companies first partnered in 2005 to launch skin care brand Prevage which gained instant popularity. The new skincare line has also been jointly designed by the two companies.

Last month, the Zacks Rank #5 (Strong Sell) company posted weak second-quarter fiscal 2014 results and also withdrew its fiscal 2014 guidance.

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. Moreover, the company reported higher inventory due to low traffic in the company’s mass retail accounts, and reduced discretionary spending by consumers facing macroeconomic headwinds.

Like Elizabeth Arden, many U.S.-based retailers like Fred’s Inc. (FRED), Gap Inc. (GPS) and Ross Stores Inc. (ROST) registered lower-than-expected sales during the holiday season.

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