Inter Parfums(US:IPAR)2019-05-11 21:58Financial Data and Key Metrics Changes - Net sales for Q1 2019 were $178.2 million, up 3.8% from $171.8 million in Q1 2018, with a 7.4% increase at comparable foreign currency exchange rates [7] - Gross margin was 61.6% of net sales compared to 61.5% in the prior year [8] - Operating income increased 9.5% to $33.3 million from $30.4 million, with an operating margin of 18.7% compared to 17.7% [9] - Net income attributable to Inter Parfums increased to $18.9 million, up 18.8% from $15.9 million, with diluted earnings per share rising 17.6% to $0.60 from $0.51 [9] Business Line Data and Key Metrics Changes - Sales by European-based operations declined 3.8% to $143.7 million from $149.5 million [7] - Sales by U.S.-based operations rose 54.8% to $34.5 million from $22.3 million [8] - Gross profit margin for U.S. operations was 55.1%, up from 51.4% in Q1 2018, driven by higher margin Prestige products [12] Market Data and Key Metrics Changes - Comparable quarter sales growth was 8.5% in North America and 12.7% in Western Europe, while the Middle East saw a 22.9% increase [17] - Asia experienced a 9.3% decline primarily due to lower sales of Lanvin products, but future launches are expected to improve performance [17] Company Strategy and Development Direction - The company is focusing on expanding its product lines and leveraging existing brands, with significant launches planned for Montblanc, Jimmy Choo, and Lanvin [18][20][21] - The strategy includes careful product development to avoid cannibalization and to enhance brand sales [19] - The company is also exploring opportunities for additional brands and licenses with minimal increases in SG&A expenses [42] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in sustaining operating margins due to the leverage gained from increased sales, particularly in U.S. operations [34][41] - The company anticipates continued growth in Asia, despite recent declines, with new product launches expected to drive sales [17][18] Other Important Information - The company entered Q2 2019 with strong financials, including $387 million in working capital and only $39.6 million in long-term debt [15] - Guidance for 2019 net sales is projected at around $712 million, with net income per diluted share expected to be $1.88 [15] Q&A Session Summary Question: Sustainability of Overhead Leverage - Management indicated that while 55% top-line growth is not expected to continue, the operating margins achieved are sustainable due to the leverage gained from increased sales [34] Question: Insights into Abercrombie Authentic Launch - Initial retailer reactions to the Abercrombie Authentic launch have been positive, with strong sales expected based on consumer testing [35] Question: Channel Performance Between Department Stores and Specialty Multi - The company continues to sell products through independent perfumeries in Europe and department stores in the U.S., with e-commerce growing rapidly in Asia [38] Question: Changes in Business Focus - The signing of the GUESS license has significantly impacted profitability, allowing for increased sales without a proportional increase in fixed expenses [41] Question: Expansion Plans for Rochas - The company has already begun expanding Rochas' market exposure beyond Western Europe and plans to continue this strategy [43]