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Inter Parfums Down on 2020 View, Travel Retail Woes to Stay

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The novel coronavirus has adversely impacted several industries across the world, with cosmetics being no exception. This is evident from the recent performances of companies like Inter Parfums, Inc. (IPAR - Free Report) , whose first-half results were largely hit by coronavirus-related concerns. Though trends have been improving since the lows witnessed in April, the company’s guidance for 2020 remains below year-ago levels. Shares of the company tumbled 7.5% on the news, on Sep 9. Further, the stock has crashed 20.6% in six months, against the industry’s growth of 21.6%. 

For 2020, Inter Parfums expects net sales of roughly $442 million, suggesting a decline from $713.5 million reported in 2019. Further, management envisions 2020 earnings per share to be 46 cents compared with the current Zacks Consensus Estimate of 84 cents. In the year-ago period, the company posted earnings of $1.90 per share.

Incidentally, coronavirus-induced retail outlet closures in many parts of the world took a toll on Inter Parfums’ sales in the first half of 2020. Restrictions on travel have also been playing a spoilsport for the company’s travel retail network. During the first half of 2020, the company’s net sales slumped 43.6% from the year-ago period’s levels to $194.3 million. Notably, its two largest brands —Montblanc and Jimmy Choo — saw sales declines of 50.8% and 43.6%, respectively. Also, Coach and GUESS sales fell 21.3% and 21%, respectively.

Nonetheless, management stated that trends had begun to improve after April and continued to remain favorable in the third quarter of 2020. In fact, the company expects its fourth quarter (which is inclusive of the vital holiday period) to be the strongest this year. While Europe and Asia had already started seeing business revivals (per the second-quarter earnings call), sales in North America have also started to pick up now. However, travel retail is likely to remain under pressure and the company doesn’t expect its duty-free business to revive anytime soon.

Markedly, this Zacks Rank #3 (Hold) company expects to deliver profits in 2020, despite witnessing gross margin concerns and operating leverage losses stemming from reduced sales. Profits are likely to be backed by the company’s flexible business model, along with a major decline in advertising and promotion expenses.

Apart from this, Inter Parfums remains optimistic about its planned product launches for 2021. In this regard, its scents for the MCM and Kate Spade New York brands are scheduled to be launched in 2021. The company also plans to launch several programs under Jimmy Choo and GUESS brands in 2021. Further, management expects to launch its first collection under Moncler during the first quarter of 2022.

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