Inter Parfums, Inc. Q3 FY2025 earnings call

• Sales continued to moderate in the third quarter due to uncertain macroeconomic conditions. Focus on innovation across portfolio with product enhancement and new launches.
• Third quarter and year-to-date sales up 1% each. European-based operations sales rose 5% in first quarter. U.S.-based operations sales declined 5% in third quarter (excluding Dunhill).
• Jimmy Choo Fragrance sales surged 16%, Coach fragrance sales grew 6% q-o-q, Montblanc fragrance sales dipped slightly, Lacoste fragrances on track for $100M sales this year.
• U.S.-based operations sales rose 11% in first 9 months of 2024 with Roberto Cavalli addition. Launched new products in third quarter to support fourth quarter sales.
• Introduced first ultra-luxury direct-to-consumer offering, Solférino collection. Flagship boutique opened in Paris; aim to have 100 doors by next September and 500 stores by end of 2030.
• Fragrance sales accelerating across digital platforms. Amazon has roughly 50% fragrance market share in beauty category.
• Travel retail grew 13% in third quarter. Transitioned to 100% third-party providers for packing, shipping, warehousing, and order fulfillment by end of year.
• Implemented pricing actions in August, higher prices helping offset higher input costs but likely causing gross margin erosion. Industry unit prices increased in third quarter.
• Women's Wear Daily named Interparfums Beauty Company of the Year in Public Company category.

European-based operations

• Net sales rose 5% and 6% on a reported basis and 1% and 4% on an organic basis for the first 3 and 9 months ended in September.
• Gross margin was 66% for the quarter and 66.6% year-to-date compared to prior year periods of 66.2% and 66.3%.
• SG&A expenses as a percentage of net sales declined by 110 basis points and 40 basis points, respectively.
• Net income attributable to European operations as a percentage of net sales exhibited strong growth, with net income margin expanding 230 basis points for the quarter and 50 basis points for the year.

United States-based operations

• Net sales declined by 5% and 6%, excluding the phaseout of Dunhill for the 3- and 9-month period.
• Gross margin declined by 110 basis points in the third quarter due to transitional tariff impacts and brand and channel mix, but expanded by 80 basis points to 59% year-to-date, largely due to the discontinuation of the low-margin Dunhill sales that impacted the prior year period.
• SG&A decreased 4% for the quarter and 2% for the year as cost containment measures were put in place, but SG&A as a percentage of net sales rose to 39.7% and 44% for the first 3- and 9-month period, reflecting lower sales.

• Refining full year 2025 outlook: expect sales of approximately $1.47 billion (1% y-o-y growth) and diluted earnings per share of $5.12 (in line with 2024).
• Moderate top and bottom line growth anticipated in 2026, with stronger growth expected in 2027 driven by enhanced innovation including Off-White, Longchamp, and Goutal licenses.

• Geopolitical or macroeconomic uncertainties. Impact of tariffs on U.S. imports, which represented about $6M in third quarter.
• Disconnect between sell-in and sell-out in inventory management where sell-through outpaces sell-in.
• Selective price increases may impact consumer sensitivity for some lifestyle brands.

Q: Just curious if you can share a little bit more about what you're seeing heading into holiday maybe that gives you confidence or caution there? And then in terms of the price increase, I would love to hear what feedback you guys received from retailers as well as the consumers.

A: Jean Madar said they had a strong October, gift sets arriving in November/December, forecast for November is strong, retailers continuing to buy, inventory at store level not high; pricing was modest, well accepted, not increased across all brands, no too much resistance from retailers or consumers. Michel Atwood added about unit pricing acceleration in third quarter, selective from brand to brand, unit sales roughly growing 1%, market growth driven by pricing.

Q: If I can maybe just poke one more in there. And apologies if I missed, but there was some talk last quarter about just shipment timing maybe shifting between Q3 and Q4. Maybe I missed if you guys mentioned kind of where that ended up shaking out?

A: Michel Atwood said they've seen a little less holiday sets sold into third quarter relative to normal, some picked up in October, but not significant, still a disconnect between sell-in and sell-out, markets still up, U.S. market up 7% in third quarter and 4% y-t-d, inventories down as they try to be more efficient with inventory.