INTERPARFUMS INC Q3 FY2024 earnings call

• The fragrance market is robust but growing at a more sustainable pace. • Third quarter was the best quarter in the company's history with strong sales across various markets. • Strategic initiatives include focusing on social media and influencer marketing, with increased content creation on platforms like Instagram and TikTok. • The Italian subsidiary has been performing favorably since January, and online sales are trending positively in Europe. • The gift set program is seeing growing demand in Europe and the Middle East, with healthy sellout and reorders.

The company has two business segments: European-based operations and United States-based operations. In the third quarter, sales across all markets were strong. North America saw a 12% sales growth, Western Europe 25%, Asia Pacific 15%, Central and South America 20%, and Eastern Europe 23%. The Travel Retail business increased 24% in the first nine months of 2024, representing approximately 7% of net sales. Direct sales to retailers and travel retail accounted for approximately 37% of net sales in the first nine months of 2024, up from 35% a year earlier.

• Reaffirmed 2024 net sales target of $1.45 billion, with upper single-digit growth expected in the fourth quarter. • Full-year 2024 gross margins are expected to be slightly ahead of 2023 at approximately 64%. • A&P expenses are targeted at 21% of net sales for 2024, with significant spending planned for the fourth quarter to support the holiday season and 2025.

• Market volatility and changing consumer preferences could impact sales performance. • Foreign exchange fluctuations may result in significant changes to financial results. • Inventory management challenges due to seasonality and channel mix variations.

Q: Can you talk a little bit more about the changes in consumer preferences you called out?

A: Yes, the men's fragrance business is getting stronger. There's a trend towards premiumization in fragrance, with younger people willing to pay more. The commercial designer fragrance business with brands like Coach or GUESS is still doing well.

Q: What are the expectations for Q4 sell-in trends and retail order patterns?

A: Projecting double-digit growth in Q4. Sell-in has been slower than sell-out, with destocking continuing across the industry. Retailers are well stocked for the holiday season.

Q: What is the benefit or impact of selling more gift sets versus the traditional individual?

A: Gift sets are value offers to keep customers close to the brand. They have a little impact on margin but are managed well, with growing demand in Europe and the Middle East.

Q: Update on the luxury line release in 2025?

A: Plan to launch in the summer of 2025. It's still very small and takes time to build up.

Q: When do you expect the fragrance market moderation to abate and thoughts on the China market?

A: Market continues to have healthy demand with double-digit growth. China market is underpenetrated, with a strategic promotional program planned for 2026.