Fragrance and fragrance company Inter Parfums (NASDAQ:) fell short of analyst expectations in the first quarter of CY2024, with revenue up 3.9% year over year to $324 million. On the other hand, the company’s full-year guidance was close to analyst estimates, with revenue coming in at $1.45 billion at the midpoint. It posted GAAP earnings of $1.27 per share, compared with earnings of $1.68 per share in the same quarter last year.
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Inter Parfums (IPAR) Q1 CY2024 Highlights:
- Gain: $324 million vs. analyst estimates of $328.7 million (1.4% wrong)
- EPS: $1.27 vs. analyst expectations of $1.54 (17.5% wrong)
- Company reaffirmed its full-year revenue expectations of $1.45 billion at the midpoint (earnings per share also maintained)
- Gross margin (GAAP): 62.5%, compared to 57.4% in the same quarter last year
- Market capitalization: $3.84 billion
With licenses to produce colognes and perfumes under brands such as Kate Spade, Van Cleef & Arpels and Abercrombie & Fitch, Inter Parfums (NASDAQ:IPAR) produces and distributes fragrances worldwide.
Personal Care While personal care products may seem more discretionary than food, consumers tend to maintain or even increase their spending on this category during tough times. This phenomenon is known by economists as the “lipstick effect,” which argues that consumers still want some semblance of affordable luxuries like beauty and wellness while the economy sputters.
Consumer tastes are constantly changing, and personal care companies are currently responding to the public’s increasing demand for ethically produced goods by incorporating natural ingredients into their products.
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Sales growthInter Parfums is a small consumer goods company, which sometimes comes with disadvantages compared to larger competitors who benefit from better brand awareness and economies of scale. On the other hand, an advantage is that growth rates can be higher because it grows on a small base.
As you can see below, the company’s annualized revenue growth of 30.9% over the past three years has been incredible for a consumer goods company.
This quarter, Inter Parfums’ revenue grew 3.9% year over year to $324 million, below Wall Street estimates. Looking ahead, Wall Street expects revenue to grow 11.4% over the next twelve months, an acceleration from this quarter.
Operating marginOperating margin is an important measure of business profitability because it includes all costs that enable a business to function smoothly, including marketing and advertising, IT systems, wages and other administrative costs.
This quarter, Inter Parfums generated an operating profit margin of 21%, down 8 percentage points year-over-year. Conversely, the company’s gross margin has actually increased, so we can assume the reduction was driven by operational inefficiencies and an increase in discretionary spending in areas such as corporate overhead and advertising.
Zooming out, Inter Parfums has been a well-run company over the past eight quarters. It has been shown that it can be one of the most profitable companies in the consumer staples sector, with an average operating margin of 18.3%. However, Inter Parfums’ margin has fallen by an average of 2.2 percentage points over the past year. While this isn’t the end of the world, investors are likely hoping for better results in the future.
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Key takeaways from Inter Parfums’ first quarter results We struggled to find many strong positives in these results. Operating margin fell short of analyst expectations and earnings per share missed Wall Street estimates. The fact that it reconfirmed previously given expectations for the full year is somewhat reassuring, but the market will wonder whether that is now feasible given this quarter’s miss. Overall, the results could have been better. The company is down 1.3% on its results and currently trades at $122 per share.
