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Shares of cosmetics company Elizabeth Arden Inc. slumped 17% on Jun 26, 2014, soon after South Korean company LG Household & Healthcare Ltd. reportedly announced lack of interest in pursuing an acquisition of company on the same day.

In Apr 2014, the South Korean company considered a bid to take over Elizabeth Arden as part of its strategy to expand overseas. LG Household & Healthcare, an LG Group affiliate, is one of South Korea's top cosmetics firms owning some top brands like O Hui and the Face Shop, well known among Chinese tourists.

Investors believe that LG Household lost interest in the acquisition after rumors regarding Elizabeth Arden’s plan to undertake a restructuring and cost cutting program in order to combat margin pressures and soft revenues spread on Jun 24.

Per media reports, Elizabeth Arden plans to start a restructuring and cost cutting program following its recent business slowdown. This program includes job cuts, exiting unprofitable businesses and discontinuing some products to boost long-term profitability.

This global prestige beauty products company has been witnessing soft revenues of late because of declining sales in the fragrance category. In May, the company reported weak third-quarter fiscal 2014 results. Elizabeth Arden reported a loss of 84 cents per share, unexpectedly lower than the Zacks Consensus Estimate and the prior-year quarter earnings of 2 cents per share. Reduced store traffic and unprecedented store closings in the third quarter due to harsh winter resulted in the decline.

Net sales decreased 23% in the North America segment during the quarter as the company was able to launch only a few new fragrances compared with the prior year. Also, lower replenishment orders at a number of non-prestige retail accounts led to the decline. Net sales decreased 16% in the International segment due to competitive pricing pressure.

Elizabeth Arden currently carries a Zacks Rank #5 (Strong Sell). Coty Inc. and Helen of Troy are better-ranked cosmetic companies sporting a Zacks Rank #1 (Strong Buy) and a Zacks Rank #2 (Buy), respectively. Another stock worth considering in the broader consumer staples sector includes Inventure Foods, Inc. with the same Zacks Rank as Helen of Troy.

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