UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark one) ☒ Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2023 or pro (Exact name of registrant as specified in its charter) | Delaware | 13-3275609 | | --- | --- | | (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | | 551 Fifth Avenue, New York, New York | 10176 | | (Address of Principal Executi ...

Financial Data and Key Metrics Changes - Consolidated gross profit increased by 29% to $235 million, with a gross margin decline of 90 basis points in European operations due to an unfavorable product mix [10][11] - SG&A as a percentage of net sales decreased to 40.2% from 41.9% in the quarter, and year-to-date SG&A also declined by 190 basis points to 39.8% [11][22] - Working capital at the end of the quarter was $514 million, including approximately $184 million in cash and cash equivalents [12] - Full year 2023 net sales guidance affirmed at $1.3 billion, representing a 20% growth from fiscal year 2022, with earnings per diluted share guidance increased to $4.75 from $4.55 [13] Business Line Data and Key Metrics Changes - Owned brands saw strong sales, with Rochas fragrance sales growing by 21% to surpass $30 million year-to-date, while Lanvin sales increased by 6% [5] - GUESS fragrance sales surged by 59% during the quarter, building on a 45% increase in the same period last year [14] - U.S.-based operations net sales grew by 64%, driven by a 200% increase in Donna Karan and DKNY fragrance sales [35] Market Data and Key Metrics Changes - North America, the largest market, grew sales by 29%, while Western Europe saw a 24% increase [30] - Eastern Europe sales increased by 73%, Middle East by 48%, and Latin America by 42% [31] - Asia Pacific market grew by 20%, driven by sales in Australia and New Zealand [32] Company Strategy and Development Direction - The company aims to maintain a conservative approach in China, monitoring retail inventory levels closely [32][38] - Focus on five major franchises (Montblanc, Coach, Ferragamo, Jimmy Choo, and GUESS) for 2024, with plans for blockbuster launches [60] - The company is committed to investing in advertising and marketing to ensure sell-through at retail levels, despite potential top-line pressures [68] Management's Comments on Operating Environment and Future Outlook - Management noted the fragrance market is no longer growing at double-digit rates but emphasized the company's year-to-date sales growth of 27% [28] - The geopolitical tensions and economic instability are acknowledged, leading to a conservative guidance approach for the remainder of the year [67] - The company remains optimistic about travel retail, with improvements noted in airport traffic and sales [66] Other Important Information - Inventory levels increased by 26% from year-end 2022 to support sales growth, with lessons learned from past supply chain issues [20] - Promotion and advertising expenses increased significantly, representing 17.1% of net sales for the current quarter [22] Q&A Session Summary Question: Will gross margin improve in Q4 due to less gift sets? - Management prefers to maintain the same gross margin as the first three quarters, emphasizing significant advertising spend in Q4 [41] Question: Can Roberto Cavalli and Lacoste together add $100 million in revenue? - Management indicated that this is a fair estimate based on previous disclosures about the brands [42] Question: What is the current pricing strategy? - A modest pricing increase of around 5% was taken earlier in 2023, which offset inflationary expenses, with no further pricing actions expected at this time [53] Question: How is the current retail inventory level in China? - Management reported improved retail inventory levels in China, monitoring them weekly and seeing positive trends [51] Question: What are the key focuses for next year beyond Cavalli and Lacoste? - The focus will be on the five major franchises, with plans for blockbuster launches in 2024 [60]

[Part I. Financial Information](index=3&type=section&id=Part%20I.%20Financial%20Information) This section presents the company's unaudited consolidated financial statements, management's discussion and analysis of financial condition, market risk disclosures, and internal controls [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited consolidated financial statements for the period ended September 30, 2023, show a significant increase in total assets to **$1.39 billion** from **$1.31 billion** at year-end 2022, with net sales for the first nine months of 2023 rising to **$988.9 million**, a **27% increase** year-over-year, driving net income attributable to the company to **$142.2 million**, up from **$104.3 million** in the prior year period, and cash flow from operations improving to a provision of **$24.3 million** from a use of **$8.2 million** in the same period last year [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This statement details the company's financial position, showing total assets increased to **$1.39 billion** and total equity to **$876.8 million** as of September 30, 2023 Consolidated Balance Sheets (in thousands USD) | Account | Sep 30, 2023 (in thousands USD) | Dec 31, 2022 (in thousands USD) | | :--- | :--- | :--- | | **Total Assets** | **$1,394,397** | **$1,308,542** | | Total Current Assets | $876,854 | $787,724 | | **Total Liabilities** | **$517,530** | **$520,396** | | Total Current Liabilities | $363,095 | $344,567 | | **Total Equity** | **$876,867** | **$788,146** | - Key changes in the balance sheet from December 31, 2022, to September 30, 2023, include a significant increase in Accounts Receivable (from **$197.6 million** to **$288.1 million**) and Inventories (from **$290.0 million** to **$364.3 million**), reflecting higher sales activity[16](index=16&type=chunk) - Cash and short-term investments decreased from a combined **$255.5 million** to **$183.5 million**[16](index=16&type=chunk) [Consolidated Statements of Income](index=5&type=section&id=Consolidated%20Statements%20of%20Income) This statement presents the company's financial performance, highlighting **27.5% growth in net sales** to **$988.9 million** and a **36.3% increase in net income** for the nine months ended September 30, 2023 Consolidated Statements of Income (Nine Months Ended Sep 30, in thousands USD) | Metric | Nine Months Ended Sep 30, 2023 (in thousands USD) | Nine Months Ended Sep 30, 2022 (in thousands USD) | YoY Change | | :--- | :--- | :--- | :--- | | Net Sales | $988,936 | $775,865 | +27.5% | | Gross Margin | $626,368 | $494,340 | +26.7% | | Income from Operations | $232,502 | $171,091 | +35.9% | | Net Income Attributable to Inter Parfums, Inc. | $142,234 | $104,339 | +36.3% | | Diluted EPS | $4.42 | $3.26 | +35.6% | Consolidated Statements of Income (Three Months Ended Sep 30, in thousands USD) | Metric | Three Months Ended Sep 30, 2023 (in thousands USD) | Three Months Ended Sep 30, 2022 (in thousands USD) | YoY Change | | :--- | :--- | :--- | :--- | | Net Sales | $367,969 | $280,462 | +31.2% | | Income from Operations | $87,202 | $64,476 | +35.2% | | Net Income Attributable to Inter Parfums, Inc. | $53,214 | $41,423 | +28.5% | | Diluted EPS | $1.66 | $1.30 | +27.7% | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This statement outlines the sources and uses of cash, showing a significant improvement in cash provided by operating activities to **$24.3 million** for the nine months ended September 30, 2023 Consolidated Statements of Cash Flows (Nine Months Ended Sep 30, in thousands USD) | Cash Flow Activity (Nine Months Ended Sep 30) | 2023 (in thousands USD) | 2022 (in thousands USD) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $24,278 | $(8,175) | | Net cash provided by (used in) investing activities | $40,504 | $(33,888) | | Net cash used in financing activities | $(90,471) | $(80,634) | | **Net decrease in cash and cash equivalents** | **$(24,949)** | **$(127,110)** | - The significant improvement in operating cash flow was primarily driven by higher net income, despite increased cash usage for accounts receivable and inventories[25](index=25&type=chunk) - Investing activities provided cash due to net proceeds from short-term investments, contrasting with cash used for property purchases in the prior year[25](index=25&type=chunk) - Financing activities used more cash due to increased dividend payments and treasury stock repurchases[25](index=25&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations of significant accounting policies, new license agreements, inventory changes, and segment information supporting the consolidated financial statements - The company closed a new worldwide license agreement with Roberto Cavalli, effective July 2023, and is preparing for the Lacoste license to become effective in January 2024[30](index=30&type=chunk)[31](index=31&type=chunk) - Conversely, the Dunhill fragrance license expired on September 30, 2023, and entered a 12-month sell-off period[32](index=32&type=chunk) - Inventories increased to **$364.3 million** as of September 30, 2023, from **$290.0 million** at year-end 2022, with finished goods growing from **$143.2 million** to **$212.9 million** to support sales growth and mitigate supply chain risks[42](index=42&type=chunk) Segment Performance (Nine Months Ended Sep 30, 2023, in thousands USD) | Segment (Nine Months Ended Sep 30, 2023) | Net Sales (in thousands USD) | Net Income Attributable to Inter Parfums, Inc. (in thousands USD) | | :--- | :--- | :--- | | United States | $327,359 | $46,067 | | Europe | $661,577 | $96,167 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management reports exceptionally strong performance for the first nine months of 2023, with net sales increasing **27%** to **$988.9 million**, driven by both the European (up **21%**) and U.S. (up **43%**) segments, with key brands like Coach, Montblanc, Jimmy Choo, and GUESS performing well, and the newly added Donna Karan/DKNY brands contributing significantly, leading to an improved operating margin of **23.5%** from **22.1%** year-over-year due to strong sales growth allowing for better absorption of fixed costs, while maintaining a strong liquidity position with **$183.5 million** in cash and short-term investments and continuing to invest in brand growth and return capital to shareholders through increased dividends [Overview](index=19&type=section&id=Overview) This section provides an overview of the company's business segments, key brand contributions, and strategic approach to growth through new licenses and product introductions - The company operates in two segments: European based operations (**67%** of 9M 2023 sales) and United States based operations (**33%** of 9M 2023 sales)[83](index=83&type=chunk)[84](index=84&type=chunk)[85](index=85&type=chunk) Brand Contribution to Net Sales | Brand | % of Net Sales (Nine Months Ended Sep 30, 2023) | % of Net Sales (Nine Months Ended Sep 30, 2022) | | :--- | :--- | :--- | | Montblanc | 18% | 19% | | Jimmy Choo | 17% | 18% | | Coach | 15% | 15% | | GUESS | 11% | 11% | | Donna Karan/DKNY | 7% | 1% | | Ferragamo | 5% | 5% | - The company's growth strategy involves adding new brands through licenses or acquisitions and introducing new products for existing brands, supported by advertising and merchandising[90](index=90&type=chunk) [Results of Operations](index=21&type=section&id=Results%20of%20Operations) This section analyzes the company's financial performance, detailing sales growth by segment, gross margin trends, and improvements in operating margin due to sales leverage Segment Sales Performance (in millions USD) | Segment | Q3 2023 Sales (in millions USD) | YoY Change | 9M 2023 Sales (in millions USD) | YoY Change | | :--- | :--- | :--- | :--- | :--- | | European based | $233.5 | +18% | $661.5 | +21% | | United States based | $134.5 | +64% | $327.4 | +43% | | **Total** | **$368.0** | **+31%** | **$988.9** | **+27%** | - Gross margin for the first nine months of 2023 was **63.3%**, slightly down from **63.7%** in 2022[108](index=108&type=chunk) - European operations' margin decreased due to one-time inventory reserves, while U.S. operations' margin expanded significantly due to price increases, favorable product mix, and better absorption of fixed costs[109](index=109&type=chunk)[110](index=110&type=chunk) - Selling, general and administrative (SG&A) expenses as a percentage of net sales decreased to **39.8%** for the first nine months of 2023 from **41.7%** in the prior year, driven by sales leverage over fixed costs[114](index=114&type=chunk) - Operating margin for the first nine months of 2023 improved to **23.5%** from **22.1%** in the same period of 2022, reflecting strong sales growth and operational leverage[119](index=119&type=chunk) [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's financial flexibility, highlighting its strong cash position, working capital, operating cash flow generation, and capital allocation strategies including dividends - As of September 30, 2023, the company had a strong liquidity position with **$183.5 million** in cash, cash equivalents, and short-term investments[130](index=130&type=chunk) - Working capital was **$514 million** with a current ratio of **2.4 to 1** as of September 30, 2023[131](index=131&type=chunk) - Cash provided by operating activities was **$24.3 million** for the first nine months of 2023, a significant improvement from the **$8.2 million** used in the same period of 2022, primarily due to higher net income[134](index=134&type=chunk) - The Board of Directors increased the annual dividend to **$2.50 per share** in February 2023, a **25% increase** from the prior year's **$2.00 per share**[140](index=140&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages financial exposures through a controlled risk management program, primarily using derivative financial instruments, with foreign exchange risk from receivables and future sales mitigated with foreign currency forward exchange contracts, holding contracts worth approximately U.S. **$58.0 million** and GB **£2.0 million** as of September 30, 2023, and interest rate risk managed by monitoring rates and using interest rate swaps to convert variable-rate debt to fixed-rate debt or vice versa when appropriate - The company uses foreign currency forward exchange contracts to hedge exposure from receivables and future sales denominated in foreign currencies[144](index=144&type=chunk)[145](index=145&type=chunk) - As of September 30, 2023, the company had outstanding forward exchange contracts of approximately U.S. **$58.0 million** and GB **£2.0 million**, all with maturities of less than one year[148](index=148&type=chunk) - Interest rate risk is mitigated by monitoring interest rates and using swaps to manage exposure on floating-rate debt[149](index=149&type=chunk) [Controls and Procedures](index=30&type=section&id=Item%204.%20Controls%20and%20Procedures) Based on a review and evaluation as of the end of the third quarter of 2023, the Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective, and there were no changes in the company's internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, these controls - The CEO and CFO concluded that as of September 30, 2023, the company's disclosure controls and procedures were effective[152](index=152&type=chunk) - No material changes to the company's internal control over financial reporting occurred during the third quarter of 2023[153](index=153&type=chunk) [Part II. Other Information](index=30&type=section&id=Part%20II.%20Other%20Information) This section includes disclosures on equity security transactions, share repurchases, a list of exhibits filed, and the official signatures for the report [Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities](index=30&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%2C%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Under a share repurchase program authorized in December 2022, the company repurchased **85,060 shares** of its common stock for **$11.3 million** during the first nine months of 2023, with no repurchases during the third quarter, and the remaining balance available for repurchase under the 2023 plan being **81,000 shares** - In the first nine months of 2023, the company repurchased **85,060 shares** at a cost of **$11.3 million** under its authorized share repurchase program[155](index=155&type=chunk) - No shares were repurchased during the three months ended September 30, 2023[155](index=155&type=chunk) - The company has **81,000 shares** remaining for repurchase under the current plan for 2023[155](index=155&type=chunk) [Exhibits](index=31&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, which include certifications from the Chief Executive Officer and Chief Financial Officer as required by the Sarbanes-Oxley Act, as well as interactive data files - The exhibits filed with this report include CEO and CFO certifications required by Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act, along with interactive data files[159](index=159&type=chunk) [Signatures](index=32&type=section&id=Signatures) The report was duly authorized and signed on November 7, 2023, by Michel Atwood, the Chief Financial Officer of Inter Parfums, Inc

Inter Parfums, Inc. (NASDAQ:IPAR) Q2 2023 Earnings Conference Call August 9, 2023 11:00 AM ET Company Participants Karin Daly - VP, Equity Group, IR Jean Madar - Chairman and CEO Michel Atwood - CFO Conference Call Participants Ashley Helgans - Jefferies Korinne Wolfmeyer - Piper Sandler Hamed Khorsand - BWS Financial Linda Bolton-Weiser - D.A. Davidson Operator Greetings and welcome to the Inter Parfums 2023 Second Quarter Earnings Conference Call and Webcast. At this time, all participants are in a listen ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (MARK ONE) ☒ Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2023. OR ☐ Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ___________to ________. Commission File No. 0-16469 INTER PARFUMS, INC. (Exact name of registrant as specified in its charter) Delaware 13-3275609 (State or o ...

Financial Data and Key Metrics Changes - In the first quarter of 2023, the company reported a significant increase in net sales, with a growth of 24% compared to the previous year [10][30][70] - Gross margins expanded by 180 basis points, primarily driven by pricing actions [68][70] - Net income attributable to non-controlling interest rose by 53%, reflecting the growth and profitability of European operations [72] Business Line Data and Key Metrics Changes - U.S. based operations achieved a sales growth of 19%, building on a previous growth of 77% in the first quarter of 2022 [10] - European based operations saw a sales increase of 26% in U.S. dollars, or 29% in constant currency [21] - The Jimmy Choo brand outperformed Montblanc, with sales growth of 63% compared to 28% for Montblanc [36] Market Data and Key Metrics Changes - Sales in North America, the largest market, increased by 36% [1] - Sales in Central and South America rose by 43%, while Eastern Europe and the Middle East grew by 25% and 5%, respectively [35] - Sales in China were underwhelming, but improvements were noted post-lockdowns, albeit at a slower pace than expected [2][14] Company Strategy and Development Direction - The company plans to continue its extensive innovation program, focusing on brand extensions and new product launches throughout 2023 [38][39] - There is a commitment to invest 21% of net sales in promotion and advertising to drive brand equity and growth [50][74] - The company is diversifying its sourcing for components to improve supply chain resilience [113] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the fragrance market's strength and the company's operational capabilities, indicating expectations for continued growth [34] - The company anticipates that sales growth will outpace earnings growth for the full year, with guidance of 15% topline and 12% EPS [50][74] - Management acknowledged challenges in the supply chain but noted improvements in sourcing strategies [65][113] Other Important Information - The company initiated a small share repurchase program, buying back 43,000 shares at a cost of $5.6 million in the first quarter [75] - The effective income tax rate for the quarter was 23%, down 100 basis points from the previous year [121] Q&A Session Summary Question: Will the distribution of the Fierce brand add to earnings? - Management confirmed that the distribution of the Fierce brand will be accretive to earnings [52][79] Question: What is the outlook for inventory and travel retail in China? - Management noted that while travel retail recovery is slow, there is still significant potential for growth in the duty-free market [56][64] Question: How is the company addressing supply chain challenges? - Management indicated improvements in sourcing and inventory management, allowing for better fulfillment of orders [65][113] Question: What are the expectations for marketing spend and ROI? - Management emphasized the importance of investing in marketing to support growth, with a focus on social media and brand desirability [89][111]

[Part I. Financial Information](index=4&type=section&id=Part%20I.%20Financial%20Information) [Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for the three months ended March 31, 2023, detailing financial position, performance, and cash flows with accompanying notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Total Current Assets** | $851,601 | $787,724 | | **Total Assets** | $1,380,206 | $1,308,542 | | **Total Current Liabilities** | $362,169 | $344,567 | | **Total Liabilities** | $530,599 | $520,931 | | **Total Equity** | $849,607 | $788,146 | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) Q1 2023 vs Q1 2022 Income Statement (in thousands, except per share data) | Metric | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net Sales | $311,723 | $250,678 | | Gross Margin | $202,957 | $158,658 | | Income from Operations | $90,279 | $61,217 | | Net Income | $70,908 | $46,291 | | Net Income Attributable to Inter Parfums, Inc. | $54,068 | $35,299 | | Diluted EPS | $1.68 | $1.10 | | Dividends Declared per Share | $0.625 | $0.50 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Q1 2023 vs Q1 2022 Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($7,358) | ($23,944) | | Net cash provided by (used in) investing activities | $61,644 | ($11,803) | | Net cash used in financing activities | ($12,555) | ($20,032) | | **Net increase (decrease) in cash** | **$44,342** | **($58,265)** | | **Cash and cash equivalents - end of period** | **$149,055** | **$110,122** | [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) - The company continues to experience significant strains on its supply chain, affecting component procurement, transportation, and costs, with disruptions not expected to ease until the second half of 2023[30](index=30&type=chunk) - Key licensing updates include a new exclusive worldwide license with Lacoste effective January 2024, the non-renewal and expiration of the Dunhill license on September 30, 2023, and new fragrance launches under the Donna Karan and DKNY brands planned for 2024[31](index=31&type=chunk)[32](index=32&type=chunk)[33](index=33&type=chunk) Net Sales by Segment (in thousands) | Segment | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | European Operations | $230,269 | $182,182 | | United States Operations | $81,454 | $68,502 | | **Total Net Sales** | **$311,723** | **$250,678** | - In Q1 2023, the company initiated a share repurchase program, buying back **43,060 shares** for **$5.58 million**, with plans to continue repurchasing shares throughout 2023[69](index=69&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=19&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's strong Q1 2023 financial performance, highlighting sales growth, improved margins, and a robust liquidity position [Overview](index=19&type=section&id=Overview) - The company operates in two segments: European based operations (**74% of Q1 2023 sales**) and United States based operations (**26% of Q1 2023 sales**), achieving business growth by adding new brands and introducing new products[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk) Sales Percentage by Largest Brands | Brand | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Montblanc | 20% | 19% | | Jimmy Choo | 20% | 15% | | Coach | 15% | 15% | | GUESS | 9% | 11% | [Results of Operations](index=21&type=section&id=Results%20of%20Operations) - Net sales for Q1 2023 increased **24.4%** to **$311.7 million**, or **29%** at comparable foreign currency rates, with European operations sales growing **26.4%** and U.S. operations sales growing **18.9%**[93](index=93&type=chunk)[94](index=94&type=chunk) - Sales growth was strong across major brands, with Jimmy Choo up **63%**, Montblanc up **28%**, and Coach up **24%** YoY, and robust across all major geographic regions, led by North America (**+36%**) and Central/South America (**+43%**)[95](index=95&type=chunk)[100](index=100&type=chunk) - Consolidated gross margin improved, driven by pricing actions, favorable exchange rates for European operations, and a favorable brand/channel mix for U.S. operations[103](index=103&type=chunk)[104](index=104&type=chunk) - SG&A expenses increased due to higher promotion and advertising costs (**$35.2 million** in Q1 2023 vs. **$34.2 million** in Q1 2022) to support new product launches and build brand awareness[107](index=107&type=chunk)[110](index=110&type=chunk) [Liquidity and Capital Resources](index=26&type=section&id=Liquidity%20and%20Capital%20Resources) - As of March 31, 2023, the company had a strong liquidity position with **$238 million** in cash, cash equivalents, and short-term investments, and a working capital of **$489 million**[126](index=126&type=chunk)[127](index=127&type=chunk) - Cash used in operating activities was **$7.4 million**, an improvement from **$23.9 million** in the prior-year period, primarily due to higher net income despite increased working capital needs for accounts receivable and inventory[130](index=130&type=chunk) - In February 2023, the Board of Directors increased the annual dividend to **$2.50 per share**, with a quarterly dividend of **$0.625 per share** payable on June 30, 2023[136](index=136&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=28&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages market risks, primarily foreign currency and interest rate exposures, using derivative financial instruments to minimize financial impact - The company uses foreign currency forward exchange contracts to hedge exposure on foreign currency-denominated receivables and future sales, particularly for its European operations where the functional currency is the euro[141](index=141&type=chunk) - As of March 31, 2023, the company held foreign currency forward exchange contracts totaling approximately **$37.0 million**, all with maturities of less than one year[144](index=144&type=chunk) - Interest rate risk is managed by monitoring rates and using interest rate swaps to convert variable-rate debt to fixed-rate debt or vice versa, as deemed appropriate[145](index=145&type=chunk) [Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) The CEO and CFO concluded that disclosure controls and procedures were effective, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[148](index=148&type=chunk) - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[149](index=149&type=chunk) [Part II. Other Information](index=29&type=section&id=Part%20II.%20Other%20Information) [Unregistered Sales of Equity Securities and Use of Proceeds](index=29&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's common stock repurchases conducted in open market transactions during Q1 2023 Issuer Purchases of Equity Securities (Q1 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | January 1-31 | 16,060 | $110.63 | | February 1-28 | 0 | n/a | | March 1-31 | 27,000 | $140.87 | | **Total** | **43,060** | **$129.59** | [Exhibits](index=30&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO/CFO certifications and interactive data files - Filed exhibits include certifications by the CEO and CFO under Rule 13a-14(a) and Section 906 of the Sarbanes-Oxley Act, as well as interactive data files (XBRL)[153](index=153&type=chunk)

Financial Data and Key Metrics Changes - In 2022, net sales reached $1.087 billion, a 24% increase from $880 million in 2021, with diluted EPS of $3.78, marking a 38% increase [31][27][60] - The fourth quarter of 2022 saw net sales of $311 million, a 47% increase from $211 million in the same period in 2021, with a 57% increase at comparable foreign exchange rates [27][31] - The company reported a working capital of $443 million, with a working capital ratio of 2.3:1, indicating a strong balance sheet [4] Business Line Data and Key Metrics Changes - U.S. operations achieved a sales growth of 58% in 2022, doubling sales compared to pre-COVID levels in 2019 [29][31] - Sales in Western Europe and Asia rose by 28% and 19% respectively, while Central and South America grew by 24% and the Middle East by 44% [20] - The Donna Karan and DKNY brands are expected to emerge as the second largest brand within U.S. operations, with production taken over from the former licensee [22] Market Data and Key Metrics Changes - The strength of the dollar negatively impacted sales but boosted gross margins, with European operations growing sales in U.S. dollars by 12% but 20% in constant currency [33][38] - The U.S. market grew about 12% last year, with the company outpacing this growth [73] - The company noted that only 3% of the Chinese population wears fragrance, indicating significant growth potential in this market [25] Company Strategy and Development Direction - The company plans to continue investing in marketing, targeting 21% of net sales for promotion and advertising to ensure long-term growth [41][78] - A 15-year exclusive fragrance license agreement with Lacoste was signed, expected to significantly contribute to future sales [35] - The company is focused on expanding its brand portfolio and enhancing its supply chain management through an upgraded ERP system [24][56] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the Chinese market, noting slow recovery post-COVID and challenges in product registration [5][45] - The company anticipates 2023 to be an even better year with new product launches and brand extensions [55] - Management highlighted the ongoing demand for fragrances, particularly among younger consumers in emerging markets [77] Other Important Information - The company announced a 25% increase in its annual dividend from $2 to $2.50 per share, reflecting confidence in future business prospects [44] - Inventory levels increased by 46% from year-end 2021, with a strategy to maintain higher inventory to mitigate supply chain issues [43] Q&A Session Summary Question: Update on the situation in China post-reopening - Management noted that the start in China has been slow, with some reservations about the pace of recovery, although there was increased store traffic during the Chinese New Year [45][67] Question: Component shortages and their current status - Management acknowledged ongoing challenges with certain components but emphasized a strategy to diversify suppliers and maintain inventory levels [70] Question: Retail inventory levels in the U.S. - Management reported strong sell-through during the holiday season, leading to low inventory levels at retail partners, necessitating replenishment [51][73] Question: Durability of demand across regions - Management confirmed that demand remains strong, particularly in the U.S. and Europe, with continued growth in the fragrance category [75][88] Question: Marketing spend strategy for 2023 - Management reiterated the importance of maintaining marketing spend to support brand growth and ensure long-term shareholder returns [78][94]

Sales Performance - European based fragrance product sales represented approximately 68%, 75%, and 78% of net sales for 2022, 2021, and 2020, respectively[266]. - United States operations represented 32%, 25%, and 22% of net sales in 2022, 2021, and 2020, respectively[267]. - Total net sales for 2022 reached $1,086.7 million, a 24% increase from $879.6 million in 2021, with European based product sales growing by 12% and United States based product sales increasing by 58%[296]. - North America achieved a sales growth of 22% in 2022 compared to 2021, while Western Europe and Asia grew by 28% and 19%, respectively[302]. Brand Contributions - The largest brands contributed the following percentages to net sales in 2022: Montblanc 18%, Jimmy Choo 18%, Coach 15%, and GUESS 12%[269]. New Product Launches - The company plans to launch new fragrances under the Donna Karan and DKNY brands in 2024, following a long-term global licensing agreement[282]. - The company anticipates a solid line-up of new product launches in 2023, including the Moncler Collection and GUESS Uomo Acqua, with expectations for continued growth despite inflation and supply chain challenges[300]. Financial Performance - Gross profit margin for European operations was 68.2% in 2022, up from 66.6% in 2021, while the United States operations saw a gross profit margin of 54.7%, an increase from 53.1% in 2021[303][305]. - Operating margins improved to 17.9% in 2022, up from 16.8% in 2021, reflecting better sales performance and cost management[312]. - Net income attributable to European operations was $107.3 million in 2022, up from $80.7 million in 2021, while net income from U.S. operations increased to $43.7 million from $29.4 million in the same period[322]. Expenses - Selling, general and administrative expenses for European operations were $358.3 million in 2022, representing 48.2% of net sales, while U.S. operations reported $134.0 million, or 39.1% of net sales[308]. - Promotion and advertising expenses totaled $212.4 million in 2022, accounting for 19.5% of net sales, consistent with the previous year[309]. - Royalty expenses increased to $87.0 million in 2022, representing 8.0% of net sales, driven by new licenses and increased royalty-based product sales[310]. Cash Flow and Liquidity - Cash provided by operating activities was $115.2 million in 2022, with working capital aggregating $443 million and a working capital ratio of 2.3 to 1[331][325]. - The company has $256 million in cash, cash equivalents, and short-term investments as of December 31, 2022, with no liquidity issues expected[324]. - Cash dividends paid in 2022 totaled $79.8 million, reflecting a 100% increase in the annual dividend to $2.00 per share authorized in February 2022[341]. Risk Management - The company has implemented a risk management program to address foreign currency exchange rate fluctuations, primarily using forward exchange contracts[273]. - The company employs a controlled risk management program primarily using derivative financial instruments to address financial exposures[345]. - The company believes the risk of loss due to nonperformance by financial institutions related to foreign currency contracts is remote[347]. - Interest rate risk is managed by monitoring interest rates and determining whether to swap fixed interest rates for floating rate debt or vice versa[348]. Acquisitions and Investments - In December 2022, the company closed a transaction with Lacoste for an exclusive worldwide license for perfumes and cosmetics, effective January 2024 for 15 years[276]. - The acquisition of the future headquarters in Paris was financed by a 10-year €120 million (approximately $128.0 million) bank loan[286]. - The company entered into a $53.3 million (€50 million) loan agreement in December 2022 to finance the acquisition of the Lacoste trademark, with a maximum interest rate of 2% per annum[335]. Inventory and Supply Chain - Inventory levels increased by 49% from year-end 2021, with inventory days on hand rising to 231 days in 2022[331]. - Supply chain disruptions are expected to continue affecting operations through at least the first half of 2023 due to the COVID-19 pandemic[275]. Impairments and Adjustments - The company took a $6.8 million impairment charge on the Rochas fashion trademark in Q4 2022 after an independent valuation[283]. - The company reported that if estimates for sales returns and allowances were adjusted by 5%, gross profit could have varied by approximately $0.8 million, impacting net income by $0.5 million[295]. - The company recognized a loss of $1.9 million in 2022 from foreign currency exchange contracts, a significant change from a gain of $2.3 million in 2021[314]. ERP Transition - The company has transitioned to a new ERP system for U.S. operations, aimed at improving efficiency and scalability for new brands[300].

Financial Data and Key Metrics Changes - For Q3 2022, sales rose 7% to a record $280 million from $263 million in Q3 2021, with year-to-date sales increasing 16% to $776 million from $669 million [28] - The company raised its 2022 guidance to approximately $1.025 billion in net sales and diluted EPS of $3.40 [9] - The average dollar-euro exchange rate negatively impacted sales by 5% for the third quarter and nine-month period [27] Business Line Data and Key Metrics Changes - U.S. operations saw a year-to-date sales growth of 24%, driven by the launch of new fragrances and the addition of new brands [17] - European-based operations reported a gross margin of 69.5% for Q3, up from 66.6% a year earlier, while U.S. operations' gross margin rose to 53.8% from 53.1% [29][30] - The three largest brands, Montblanc, Jimmy Choo, and Coach, saw sales growth of 19%, 23%, and 17% respectively in euros, but only 6%, 9%, and 4% in dollars due to currency fluctuations [15] Market Data and Key Metrics Changes - Sales in Western Europe rose 34%, while overall sales in Asia increased by 23%, despite a decline in China due to lockdowns [12] - Sales in the Middle East and Central and South America grew by 41% and 28% respectively [12] - Eastern European sales decreased by 16% due to halted shipments to Russia [13] Company Strategy and Development Direction - The company is focusing on operational efficiencies and scaling to support future growth, with plans for new product launches in 2023 and 2024 [21][24] - Management emphasized the importance of maintaining advertising and promotional spending to ensure brand visibility and market share, even in a strong demand environment [54] - The company is diversifying its supply sources to mitigate component shortages and has planned price increases to offset rising costs [52][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing challenges such as inflation, supply chain issues, and geopolitical tensions but expressed confidence in the company's resilience and growth potential [23] - The company anticipates a strong holiday season supported by significant advertising campaigns [10] - Management is conservative in its projections for the Chinese market in early 2023, expecting slow recovery [66] Other Important Information - The company reported a strong balance sheet with working capital of $459 million and a working capital ratio of 2.9:1 [38] - Inventory levels increased by 55% from year-end 2021, reflecting proactive measures to avoid shortages [40] Q&A Session Summary Question: Impact of special items on guidance - Management confirmed that the special items contributed approximately $0.14 per share to the guidance increase [48] Question: Organic sales growth in Q4 - Management expects about 18% growth in Q4, with an organic basis looking for 24% growth, noting $10 million in sales shifted from Q3 to Q4 due to component shortages [49] Question: Status of component shortages - Management indicated that while some improvements have been made, issues with glass and pumps persist, leading to planned price increases [52] Question: A&P spending in 2023 - Management emphasized the necessity of continued A&P spending to maintain brand visibility and market share despite strong demand [54] Question: Recovery of travel retail and China market - Management is cautiously optimistic about travel retail recovery but does not expect significant growth in the Chinese market in the first half of 2023 [66] Question: Inventory management for 2023 - Management plans to maintain higher inventory levels to mitigate risks associated with supply chain disruptions, targeting around five months of sales for inventory [78] Question: Market demand and competition - Management does not foresee a market shrinkage due to component issues, citing ongoing strong demand across various regions [82]