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It has been about a month since the last earnings report for Inter Parfums (IPAR). Shares have added about 3.3% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Inter Parfums due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Inter Parfums Q3 Earnings Beat Estimates, Sales Down
Inter Parfums delivered third-quarter 2020 results, with the top and the bottom line declining year over year. Further, sales were in line with the Zacks Consensus Estimate, while earnings beat the same.
The company believes that business momentum has improved compared with preceding quarter’s levels. Moreover, management is impressed with its productivity in 2020 amid the coronavirus outbreak. In this regard, the company introduced MCM and Moncler brands in its portfolio. Also, it made an equity investment in Divabox, the parent company of Origines-parfums.
Apart from these, Inter Parfums launched limited number of new products and brand extensions like L’Homme Rochas, Oscar de la Renta’s Bella Essence, Coach Dreams and Abercrombie & Fitch Authentic Night in 2020.
Quarter in Detail
Inter Parfums posted net income per share of 52 cents, which surpassed the Zacks Consensus Estimate of 41 cents. However, the metric declined 21.2% from 66 cents per share reported in the year-ago quarter.
Net sales amounted to $160.6 million, down 16% (down 18.3% at constant currency) from $191.2 million reported in the year-ago quarter. The metric was in line with the Zacks Consensus Estimate of $160.6 million. The company’s Europe-based operations registered net sales of $129.7 million, down 9.6% year over year. In U.S.-based operations, net sales slumped 35.1% to $30.9 million.
In a recent press release, the company stated that third-quarter sales in Europe-based operations declined at a significantly lower pace compared with 68.6% year over year slump in the second quarter. Sales in general benefitted from favorable rebound in various markets including Asia and North America. Also, Coach and Lanvin fragrance sales increased 7.9% and 1.8%, respectively. Notably, Coach brand’s sales were driven by benefits stemming from the debut of Coach Dreams at the start of 2020. Further, Lanvin brand saw robust growth in key markets including Asia and Eastern Europe. Montblanc and Jimmy Choo brand sales fell 11.3% and 31.0%, respectively.
Talking about U.S.-based operations, the company saw significant improvement sequentially in the third quarter. However, absence of new product launches during 2020 put pressure on sales during the third quarter. Notably, the launch of Guess?’s Bella Vita and Anna Sui Sky have been postponed. Nevertheless, management is optimistic about its product pipeline for 2021 that includes debut of products for the Kate Spade and MCM brands.
In the press release, management also stated that it saw strong business momentum and better-than-expected rebound. The upside is caused by reopening of stores as pandemic-led restrictions were relaxed as well as solid e-commerce business of its retail customers.
Further, gross margin was 60.5%, up from 59.8% posted in the year-ago quarter.
SG&A expenses amounted to $65.8 million, down from $77.8 million reported in the year-ago quarter. The upside can be attributed to cost-control measures amid the COVID-19 outbreak. As a percentage of net sales, SG&A expenses were 41%. The metric increased from 40.7% in the prior-year quarter.
Operating income came in at $31.4 million, down 14.4% from operating income of $36.6 million reported in the year-ago quarter. Further, operating margin was 19.5%, up from prior quarter’s figure of 19.2%.
Other Financial Aspects
The company ended the quarter with cash and cash equivalents of $133.4 million, long-term debt (excluding current portion) of $19.4 million and shareholder’s equity of $499.5 million.
The company reiterated its 2020 guidance, which was raised last month. For 2020, management expects net sales in the range of $495-$500 million. Notably, the Zacks Consensus Estimate for 2020 sales is pegged at $504.28 million.
Further, it envisions net income per share in the band of 80-84 cents. Notably, the consensus mark for 2020 earnings is pegged at 85 cents per share.
How Have Estimates Been Moving Since Then?
It turns out, estimates revision have trended downward during the past month. The consensus estimate has shifted -55.86% due to these changes.
Currently, Inter Parfums has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. Following the exact same course, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Inter Parfums has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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