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Inter Parfums (IPAR) Exhibits Strong Prospects Amid Risks

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Inter Parfums, Inc. (IPAR - Free Report) is focused on expanding its business through new licenses or acquisitions. The company has been benefiting from the booming fragrance market globally. In this regard, it is gaining market share with sizable demand for its key brands and new licenses.

In the first quarter of 2023, IPAR witnessed solid sales increases from its major brands, including Jimmy Choo, Montblanc and Coach, which delivered growth of 63%, 28% and 24%, respectively. In the company’s U.S. operations, brands like Oscar de la Renta and Ferragamo delivered double-digit sales growth in the first quarter. Sales of its various mid-sized brands like Karl Lagerfeld, Boucheron and Rochas also generated double-digit sales growth, driven by the robust performance of its established lines.

The company has entered into several partnerships with companies over time. In December 2022, Inter Parfums’ majority-owned Paris-based subsidiary, Interparfums SA, signed a license agreement with Lacoste, a well-known fashion sports brand. Both parties have entered into a worldwide exclusive 15-year fragrance license agreement, effective Jan 1, 2024. In December 2021, Inter Parfums, through its subsidiary Interparfums Italia, signed a 10-year exclusive global licensing agreement with Emanuel Ungaro. The partnership aims to create, develop and distribute fragrances and fragrance-related products under the Emanuel Ungaro brand.

The company remains on track to unveil new products and brand extensions. For instance, in the first quarter, IPAR introduced Rose Passion, a new flanker for Jimmy Choo. Also, its mid-sized brands rolled out new scents, like a collection for Moncler and Chérie by Kate Spade. It also added fragrances to Rochas and Van Cleef & Arpels families.

Following the upbeat sales numbers, management reaffirmed its encouraging top- and bottom-line view for 2023. The company expects 2023 net sales to come in at $1.25 billion, higher than $1.1 billion in 2022. Its earnings per share is anticipated to be $4.25, higher than $3.78 reported in 2022.

However, the company has been grappling with higher selling, general and administrative (SG&A) expenses for a while. In the first quarter, SG&A expenses amounted to $112.7 million, up 15.3% from the year-ago quarter. For the quarter, its SG&A expenses in European operations increased 12% year over year, while that in U.S. operations increased 25%. Higher promotion and advertising expenditures contributed to the rise in SG&A across European and U.S. operations. The persistence of these factors might be a concern for the company.

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The Zacks Rank #3 (Hold) company’s shares have gained 9.5% in the past three months against the industry’s 14.4% decline. Let’s delve deeper.


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