So much for the sweet smell of success.
Elizabeth Arden, the beauty company, blamed its celebrity fragrance lines featuring Justin Bieber and Taylor Swift, among others, for a steep drop in sales in the fiscal fourth quarter.
Its earnings report
delivered a bleak picture — recording Arden’s worst quarterly decline
in a decade — for a company that has tried to appeal to a younger
clientele by teaming up with pop stars and by retooling some of its signature Red Door salons.
Along with “Someday,” a soft, musky scent in Mr. Bieber’s line,
Elizabeth Arden also has fragrances from the rapper Nicki Minaj and the
former teenage idol Britney Spears.
Net
sales fell close to 30 percent to $191 million for the three months
that ended June 30. For the year, net sales fell to $1.1 billion, from
$1.3 billion in 2013.
The
immediate future does not look too bright, either. In its earnings
release, the company warned that the first quarter of its 2015 fiscal
year “will continue to be challenged by the same factors that affected
recent quarters.”
Elizabeth
Arden relies more heavily on sales of its fragrances than rivals like
Estée Lauder, and it has a large presence in mass-market stores like
Walmart. Fragrances make up 75 percent of the company’s sales, while its
own brand of cosmetics accounts for 25 percent.
And
unlike the high-end fragrances at department stores, celebrity lines
stock the shelves at retailers like Walmart and Kohl’s, whose
budget-conscious customers have not recovered from the recession.
“The
celebrity fragrance market is still a good market,” said Jason Gere, a
consumer product analyst at KeyBanc Capital Markets “Right now, it seems
to be buckling a little bit with the weaker consumer out there.”
The earnings report on Tuesday sent the company’s stock plummeting more than 23 percent.
Companies
like Elizabeth Arden have had some success capitalizing on their
celebrity partnerships. At its height, Ms. Spears’s perfume generated
more than $100 million in sales a year, Mr. Gere said. And celebrities,
as well as their handlers, continue to seek partnerships with the
fragrance business to help build a star’s brand.
Elizabeth
Arden still carries a line of fragrance featuring the actress Elizabeth
Taylor, who introduced a fragrance more than 20 years ago, when such
celebrity branding was far less common.
Since
then, the world of celebrity perfumes has become more democratized as
many companies have tried to target a younger audience. Perfumes bear
the names of actresses like Sarah Jessica Parker, Jennifer Aniston and
Halle Berry, along with socialites who include Kim Kardashian and Paris
Hilton.
Elizabeth
Arden’s cosmetics mainly appeal to middle-age and older women, who are
familiar with its red-and-white logo. For the fragrance lines aimed at
younger consumers, however, many of the bottles use designs that
prominently feature celebrity names rather than the company logo.
The
company’s other celebrity fragrances include lines from Mariah Carey
and Usher. And all its perfumes may still have an audience, even if that
audience is unwilling, or unable, to buy them right now.
“There’s
this attraction to wearing the same things that movie stars wear or
singers,” Mr. Gere said. “There’s just this natural aspiration to be
like somebody else.”
The
company also announced on Tuesday that the private equity firm Rhône
Capital had agreed to buy $50 million of preferred stock and warrants to
purchase 7.6 percent of the company.
In its earnings release, E. Scott Beattie, Elizabeth Arden’s chief executive, said:
“I
am very excited to have Rhône Capital as an equity partner, to support
the turnaround of our business in the short term and the continued
global growth and development of our brands and organization in the
future. I am confident that we have a compelling business plan to
improve the company’s performance.”
