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RDEN Buys Stake in Red Door Spas

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Makeup and skin care company, Elizabeth Arden, Inc. recently announced that it has taken a minority stake in Red Door Spa Holdings, the owner of Elizabeth Arden Red Door Spas and the Mario Tricoci Hair Salons.

Red Door Spa Holdings is privately-owned by North Castle Partners and currently gets the trademark licenses for the Elizabeth Arden and Red Door brands from Elizabeth Arden. The upscale Red Door Spas is one of the most popular names in global spa industry.

Elizabeth Arden has acquired the minority interest worth $12 million in partnership with hotel and resorts builder, J.H. Anderson Holdings, Inc and its head John Anderson. The companies have the option to acquire the remaining interest in Red Door Spa Holdings. The deal is expected to boost sales of Elizabeth Arden products as well as the business of Red Door Spas.

Elizabeth Arden is a leading global marketer and manufacturer of prestige beauty products. Its brands include fragrance brands like Elizabeth Arden and Red Door, celebrity fragrance brands of Britney Spears, Elizabeth Taylor etc., skin care brands like Visible Difference and Ceramides; and some cosmetic products under the Elizabeth Arden brand. The Elizabeth Arden brand is one of the most widely recognized beauty brands in the world.

Our Recommendation

We currently have an Outperform recommendation on Elizabeth Arden. The stock carries a Zacks #1 Rank (a short-term ‘Strong Buy’ rating).

Elizabeth Arden delivered solid fiscal fourth quarter results, which included a 40.0% earnings surprise. In fact, the company has beaten the Zacks Consensus Estimates for seven straight quarters. With an encouraging outlook for the first quarter and fiscal 2013, this company has bright prospects ahead.

Elizabeth Arden’s main priorities are to expand international distribution of its fragrance brands, mainly in Europe, and to accelerate growth of its Elizabeth Arden brand. These initiatives, augmented by some recent fragrance brand acquisitions, bode well for healthy sales and margin growth in fiscal 2013.

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