Seeking Alpha
We cover over 5K calls/quarter
Profile| Send Message|
( followers)  

Elizabeth Arden (NASDAQ:RDEN)

F1Q08 Earnings Call

November 2, 2007 9:30 am ET


Allison Malkin – Investor Relations

Scott Beattie – Chairman, President and Chief Executive Officer

Stephen Smith - Executive Vice President and Chief Financial Officer

Joel Ronkin – Executive Vice President and Manager, North America Fragrances

Marcey Becker – Senior Vice President, Finance, Treasurer and Corporate Development


Kathy Reed - Stanford Eagle

Bill Chappell – SunTrust Robinson Humphrey

Joe Altobello - CIBC World Markets

Reza Vahabzadeh - Lehman Brothers

Rommel Dionisio - Wedbush Morgan Securities Inc

Mike Marinucci - Wagner


I would like to welcome everyone to the Elizabeth Arden Conference Call. (Operator Instructions) It is now my pleasure to turn the floor over to your host, Allison Malkin.

Allison Malkin

Thank you for joining us. Before we begin, if you have not received a copy of Elizabeth Arden’s press release, please call 203-682-8200 and we will send one out immediately. Also please note that this call is being broadcast live over the Internet and you can access the call at

Before we begin I would like to remind you that some of the comments made on this call as either prepared remarks or in response to your questions may contain forward-looking statements that are made pursuant to the Safe Harbor Provisions in the Securities Litigation Reform Act of 1995.

Such information is subject to risks and uncertainties that could cause actual results to differ materially from the statements as described in the press release and in Elizabeth Arden’s most recent annual report on Form 10-K filed with the SEC. We direct all listeners to that report.

The information contained in this call is accurate only as of the date discussed and investors should not assume that the statements made in this call remain operative at a later time. Finally, Elizabeth Arden undertakes no obligation to update any information discussed on this call.

I would now like to turn the call over to Scott Beattie, Chairman and CEO of Elizabeth Arden.

Scott Beattie

Thanks very much, Allison and welcome everyone to our first quarter conference call. Joining me today is Steve Smith, our Executive VP and Chief Financial Officer; Joel Ronkin, our Executive VP of our North American Fragrance Division; and Marcey Becker, our Senior Vice President of Finance.

Before we start, I will just provide a brief overview of the content today. First of all I will provide an overview of our first quarter corporate performance and outlook for the second quarter. I will provide also a summary of the international business and our Elizabeth Arden Prestige North American business. Joel will then go into an overview of our North American Fragrance business, as well as a performance review of our new fragrance innovation and launches. And Steve will provide a review of our key financial metrics during the first quarter. At the end of the three segments we’ll be happy to answer any questions.

In terms of the first quarter performance, as you can see from the press release, we are very pleased with the overall performance of our business. In fact, I think the business actually performed better than the numbers show.

As we stated in the press release and previously outlined in our guidance, we had budgeted and planned down our North American department store business. This decline was a function of both the anniversary of last year’s fragrance launches; some movement in the Elizabeth Arden department store calendar, both in terms of the retail calendar and the GWP program, as well as not anniversarying the new PREVAGE innovation during the first quarter.

Much of the reduction in our North American department store performance will be made up during the second quarter as we had budgeted and planned and we will go into that in a second in more detail.

In terms of our overall performance, our International business was up approximately 18% during the first quarter. Most markets had positive increases. In addition, the profitability, most notably in our European business, improved quite significantly. By brand, our fragrance sales were up 29% or by segment of business, our fragrance sales were up 29% and our Elizabeth Arden brand business was up 14%.

Specifically in Europe, our overall business was up 14%. The Europe domestic markets, which as we stated in our previous conference call, we went through a restructuring last year. For the last 3 quarters they have shown steady solid increases over budget both from a sales point-of-view and profit point-of-view. Europe domestic markets were up 35% for the first quarter and we had good growth across most of the markets led by both the increased fragrance sales and increased performance of our key accounts like Sephora, Marionnaud and Douglas. So we were very pleased with that.

In terms of our Travel Retail business, it was up 19%. There were increases in all the markets across all categories. The Elizabeth Arden branded products and skin care color and PREVAGE and fragrances was up 22%. That was led by the PREVAGE business, which was up almost 30%. Fragrances also had a double-digit growth of 13% due to the launch of Mediterranean during the first quarter in Travel Retail. And so we were extremely pleased with the performance of that business.

In terms of Asia-Pacific, which also includes our South African business and Australia-New Zealand, the business was up 21%. All markets were up across the whole region with the exception of Korea. Australia was very strong, particularly with the new launch of Mariah Carey as well as our Mediterranean launch, and the PREVAGE business is also very strong.

In terms of China, our business in Mainland China was up 75%, which is over what we had budgeted for. Taiwan business was up 24% and overall in the region we saw very solid growth. We’re seeing extremely solid improvements in productivity per door. We’re also seeing rollout in both the regional airports as well as additional distribution in traditional department stores both in Taiwan and China.

The most interesting thing about our greater China business is, we’re attracting a much younger customer to our counters in those markets and particularly with our new whitening products and our Intervene products, so that’s very encouraging.

The last piece of our international business is what we call the distributor business, and those are the markets in which we don’t have captive affiliates, but we use local distributors or partners in those markets to sell our products, and that business is up 40% in the first quarter year-over-year.

We saw strong growth in Japan and Latin America, the Ukraine, Middle East and India. Our business in India, we’re ranked number 3 in India, it’s still a very small market but growing. We’re very well positioned to continue to grow in that prestige segment of the market in India, although it will be somewhat slower than the growth of our China business, it also has a very strong fragrance market, and we’re also capturing some additional growth with our fragrance business.

In terms of the operating expenses, SG&A and EBITDA, I’ll leave that to Steve to provide more detail.

I would also like to just comment briefly on our corporate initiative. As we outlined in our last conference call, we continue to see benefits from our re-engineering of our extended supply chain project, which we are in the midst of implementing many of the recommendations we identified in late fiscal ‘07. We are working hand-in-hand with external consultants to help us do that. We’ve seen improvement in our account management and sales and ops planning processes. We’ve seen improvements in our strategic purchasing organization and we will see improvements in gross margin and cost of goods as we roll out into latter ‘08 and into ‘09. We are continuing to see improvement in our global logistics infrastructure.

All of these initiatives, including the initiatives to improve not only our extended supply chain, but our allocation of capital across our brand portfolio, are focused on maximizing our return on invested capital and moving ourselves up to our targeted 10.5% EBITDA margin and we’re very comfortable that we will obtain that this year.

One last comment before I introduce Joel, I would just like to announce as well that we’ve signed a licensing agreement with the Rocawear Apparel Company to launch fragrance, skin care and cosmetics. A full press release will be issued on this on Monday in partnership with the Iconix Group.

Iconix had purchased the Rocawear brand in the spring of ‘07. As many of you know, we have been in partnership with Iconix, and are very impressed by their business model and their capability at building brand. We are in partnership with the Badgley Mischka brand and we look forward to the launch of the Rocawear fragrance brand during fiscal ‘09.

On that note, I’d like to hand it over to Joel Ronkin to discuss the North American fragrance business.

Joel Ronkin

Thank you, Scott. I’m going to provide, as usual, an overview of the performance of our North American Fragrance group, as well as discuss our new launches, and I’ll briefly give a preview of Christmas.

Our North American Fragrances group, as you recall, represents approximately 60% of our overall sales for the company; includes our department store business in the US and our mass business in the US, our e-Commerce business, and our business in Canada and in Puerto Rico.

We experienced net sales growth for the quarter of 7%, with solid growth in our mass business, which was somewhat offset by a budgeting decline in our department store group, which Scott referenced earlier.

Net sales in our mass group increased by 14%. Last year we acquired the Sovereign Sales business mid-quarter, and as a result, we got some benefit this quarter, but it was on top of a big quarter last year in the first quarter as well, a big increase.

New launches that significantly contributed to the net sales growth in mass: During this quarter, we shipped Hillary Duff and Danielle Steele to mass, as well as a number of new distributor brands to our mass accounts. I think I mentioned last call there really was an unprecedented pipeline of new brands going into mass.

But interestingly, the brand, which has significantly outperformed our plan, in some cases by more than 200%, is Danielle Steele. We repositioned this brand this spring with new visuals and added value, and after somewhat of a disappointing launch of Prestige, and it really has turned around. We’re also pleased that our Hillary Duff brand is performing well at mass.

Our Prestige departments or business declined about 19% in net sales during Q1, which was consistent with our plan, and this largely was due to a change in our launch strategy, as well as timing of launch shipments, as well as there was a change in the Prestige retailers’ calendars, which moved things back a week in a number of cases, and that negatively impacted our year-over-year comparisons.

Now as Marcey has mentioned before, we manage our business, and our first half in particular, together, and it’s very, very difficult, if not impossible, to precisely estimate whether a holiday shipment is going to happen in Q1 or Q2, and that includes our new launches as well.

One of our most significant new launches is the Mariah Carey fragrance, M by Mariah Carey. And that began shipping to Prestige department stores around the world in mid-August and September. It’s important to remember that this is a global coordinated rollout, the first time in a long time that we’ve launched a brand globally at the same time. And the timing and manner of the way we spend our money and the account distribution strategy is managed in that approach.

In fact, about two-thirds of our sales will come from outside the US on this brand at the other international Prestige accounts. So therefore, we caution you just a little bit at looking just at NPD data and trying to determine how a launch is doing, and even in the United States, only 70% of our Prestige shipments are covered by NPD because a number of our Prestige accounts do not report to NPD. I just want to also mention on Mariah that globally we achieved our brand plan for Q1.

Now Mariah herself is popular. Last week we had a personal appearance event at Macy’s Herald Square, which just went very, very well. We had people sleeping on the sidewalk overnight waiting for just the opportunity to participate in the event, and it literally shut down Macy’s Herald Square. Macy’s had told us it’s the largest personal appearance they’ve ever had.

We’re also were lucky; that day and the day before she made many guest appearances, including on the Today’s Show, BET’s 106 & Park, as well as The View, and created over 25 million impressions and included spots on MTV, TRL, E!, Extra, Access Hollywood, virtually everybody, and on the web it’s really been covered everywhere.

We also just started airing the TV commercial although you’ll see that principally we’ll air that commercial during Christmas time where most of the holiday shipments obviously occur. And so we’re very pleased, and as a result of all this activity, we see that there’s real retail sales momentum behind this brand and it’s starting to accelerate and really well timed for the holiday season.

Overall, the sales of the Britney Spears fragrances remain on plan this year with approximately 50% of our sales occurring outside the US. So far, and this is always the question we get, we are seeing little to no impact to the performance of her fragrance brand at retailers due to all of the negative publicity she has received regarding her personal life. Probably you have all taken notice that her new album “Blackout” is receiving great accolades and is on its way to becoming the number one album in the US. Her first single from that album, “Gimme More,” achieved the number one downloaded song in just three days of its release on iTunes. It’s still a top ten song. It’s the number one song on Yahoo! Music; number three on Billboard Hot 100. So the point is her career and her music and her fragrances are far from dead; and in fact, they’re very healthy. The song was also number one on a number of charts around the world including in the UK. So this is really a global phenomenon.

We mentioned before that we were going to launch, and we have launched Britney Spears Believe in late September and early October to US department stores. While we exceeded our targets for shipments in the first quarter, we’re really just now starting to see our retail sales on the brands, so it’s really too early to comment on retail sales.

We also are, for the first time, introducing a Britney Spears Fantasy set, holiday set for the mass account this holiday season, and that should help us as well with our rankings on Fantasy. Fantasy and Curious both remain top ten brands at retail and the mass category here in the US.

Now overall, as far as the holiday season, it’s obviously a busy time. We will say that we stand cautiously optimistic. We feel we’re very well-positioned in both our mass and Prestige businesses with our new launches, our value on our existing brands, and just an unprecedented number of new distributor brands that are very high ranking into our US mass accounts.

We’ve got a very extensive media schedule planned, which encompasses our new brands as well as a significant reinvestment behind our core brands, including White Diamonds and Red Door. In fact, in the case of White Diamonds, our media spend is going to be up 50% and that was already a very big number, and it’s largely TV.

We’re embarking for the first time in many years on a print campaign for Red Door, which is still a very important brand to us and has very high rankings. We’re running significant TV campaigns for the Britney brands. We’re going to have TV for our Provocative Woman, which is the brand that features Catherine Zeta-Jones. Also With Love, Hilary Duff is going to have a strong TV campaign and then a print campaign for Danielle Steele.

As far as retail sales, what we’re seeing is that at mass the category has flattened out somewhat and it’s really a mixed bag. We see an uneven trend with, I would say, our chain drug accounts being more to the positive side and some of our mass volume retailers showing somewhat of a bit of a negative trend and we’ll continue to watch that.

Of course over the past several quarters our market share has really risen in the mass business and we’ve been the beneficiary of that; I think our market share now has risen from about a year ago at 45% to about 60% now, so we feel like we’re very well positioned to take advantage of what we hope to be a very strong holiday season.

So with that, I will turn it over to Steve Smith.

Stephen Smith

Thank you, Joel. Gross margin for the quarter was 39.1%, which was up 20 basis points from the prior year. Higher percentage of distributor brands, 25% versus 22% the prior year, which negatively impacts gross margin, was more than offset by our lower supply chain costs this year, primarily as a result of the acquisition-related expenses we incurred last year.

For the quarter, our SG&A expenses increased by 6% over flat as a percentage of sales. Advertising promotion expenses increased by 8% or slightly higher as a percentage of sales while our G&A costs declined as a percentage of sales. Our tax rate was 24.9%.

During the quarter we also incurred $950,000 in restructuring charges. These charges impacted EPS by $0.03 a share. We are continually evaluating ways to reduce our indirect cost structure by being more efficient and thereby increasing our operating margins. These particular severance costs relate to some final portions of our European restructuring project and the streamlining of our logistics management structure in the United States.

Our restructurings in Europe are substantially complete based on current plans and we do not expect further significant charges in Europe. We finished the quarter with $223 million outstanding on our credit facility. Net of cash, the balance was $196 million compared to $185 million from the prior year. We have peaked on our credit facility and our peak was about $10 million lower than last year.

DSO at 87 days compared to 96 days in the prior year and we compute that on a rolling 12-month basis. Cash flow used in operations was $116 million as compared to $82 million in the prior year. That amount did not reflect beyond the $68 million of inventory that we financed through the Sovereign acquisition last year. Additionally, if you recall from last year, it took some time to get the Riviera products fully ramped up for production due to supplier issues.

In total, inventory was up some $64 million versus the prior year of Q2. 40% of the increase is due to increased investment in distributor brands, due to innovation and new relationships. And our cost basis in this inventory is some 3 to 4 times over our owned brand portfolio on a unit basis. 20% of the increase is due to the Riviera inventory situation and 40% is due to increases in new innovation activity for our owned brand portfolio, which was also exacerbated by the shift in the US department store retail calendar, which shifted a week of shipments into October.

Additionally, from a supply chain perspective, it is at times more efficient to do our promotional set runs once while the shipments could occur at multiple waves. We are encouraged by the results of our supply chain and logistics initiatives to date and believe these initiatives will lead to positive cash flow generation from inventory this year.

Capital expenditures were $7.2 million in the quarter, and in addition, during the quarter, we paid the first installment of contingent consideration of $6.3 million on the Sovereign acquisition. Currency did favorably impact sales for the quarters compared to expectations, although with our hedging program in place, we are capped on some of that upside. At current rates, potential full year benefit is included in the range of annual guidance provided. Given the recent volatility of certain currencies and questions as to whether current rates will be sustained, we are not changing our sales estimates at this time.

It is important to note that our first quarter is not significant related to our full-year guidance. We do not manage our business on a quarterly basis but over planning horizons that are longer. And with that, I will turn it back to Scott.

Scott Beattie

Thanks very much, Steve. Operator, we would by happy to open up the lines for questions right now.

Question-and-Answer Session


Our first question comes from Kathleen Reed – Stanford Eagle.

Kathy Reed – Stanford Eagle

Good morning. First of all, can you just talk a little bit about SG&A spending in the quarter, if there is going to be a shift into the second quarter? I think in your prior guidance you were expecting it to be up 150 basis points year-over-year as a percent of sales and it was actually down slightly, so are we going to just see higher TV spending - and you commented a lot about all your media plans in the second quarter.

Scott Beattie

Yes, I wouldn’t read too much into that. As Steve just mentioned, we really manage the business on the two 6-month segments, the first and second quarter because of the split here in October, it’s difficult to manage specifically the calendar of shipments as well as of spend.

I think we’re very confident of our numbers for the first half, and we’ve obviously had a very strong first quarter, and as Joel went through, we have a very aggressive spend against not only our new launches and innovation but also our existing brand portfolio.

In addition to that, as I tried to state in going through the details of our international business, we’ve got great momentum in our international business. Our Elizabeth Arden brand, which many people don’t realize, 65% of that volume is in the international markets, and the Elizabeth Arden brand is growing very rapidly across all of our segments of our international business, including the PREVAGE brand. And so, combined with the strong currencies in those markets, are providing a good, solid strength to our overall business.

Kathy Reed - Stanford Eagle

But just to clarify, it sounds like if anything, you’re actually increasing or spending; you didn’t pull back on any of your spending for the first half?

Scott Beattie


Kathy Reed - Stanford Eagle

And secondly, just I guess a quick question on your first-half sales guidance, because it really sounds like you had a lot of positive momentum like you just discussed in international and it sounds like you’re even getting some new distributed brands, which maybe you can comment on for mass.

And I just wondered why then you just slightly adjusted your sales guidance for the first half from 6 to 7 to 5 to 7, because if you hit that 5 it would imply kind of like only a 4% growth in the second quarter. So is that just really due to more conservative outlook for Christmas, or is there one thing that you’re particularly cautious on?

Scott Beattie

I think that guidance there is really to be just slightly more conservative in our US business. Our international business, as you say, has a number of growth drivers, both across its fragrance portfolio, as well as the Arden brand and PREVAGE, and we’re very confident of that. But in the US, we’re in a position here that with high gas prices and the credit issues that we have and so on, just being a little bit more conservative.

We don’t see anything right now in any of our customers or with any of our specific programs, including our new launches, that would give us concern, but you look across all of our customers and their guidance into the second quarter, or what is the fourth quarter in terms of the calendar year, and they are being conservative.

I think the other thing that we need to focus on here is what Joel mentioned, is our increased market share. Even though some of our mass retailers and some of our department stores are having difficult comps, we are seeing tremendous growth in our market share, and that’s a result of new innovation, new brands, as well as new launches of fragrance brands for us, and a very active calendar of innovation for the Elizabeth Arden brand.

What we see gives us confidence in our outlook, is the confidence in our innovation pipeline, as well as our increased market share and performance.

Kathy Reed - Stanford Eagle

Just lastly, can you quantify what your department stores would have been down if you didn’t have the one-week shift in the calendar?

Scott Beattie

We try to do that and it’s very difficult. We figured that our best estimate on that is it’s not just the calendar, but as I mentioned, we had a change in our Macy’s GWP date, as well as some innovation for PREVAGE and Ceramide color that was in the first quarter last year, which weren’t anniversaried.

In fact, we’ve got a new PREVAGE night cream coming out in the second quarter, and we’ll get the benefit and the pickup of some of the things that we missed in the first quarter in the second quarter this year. So, there’s a lot of moving variables here. I would say that the calendar probably represented about 25 or 30% of the total shortfall.

Kathy Reed – Stanford Eagle

Is there any way to give that on a dollar basis, or no?

Scott Beattie

No, I don’t think we have that number handy here.


Your next question comes from Bill Chappell – SunTrust Robinson Humphrey.

Bill Chappell - SunTrust Robinson Humphrey

Good morning. Just wondered if you, just on a housekeeping basis, do you happen to have for the quarter percentage of sales, mass department store and international? And then also what percentage was your brands versus third-party brands?

Scott Beattie

Our international business is about 40% of our total business, and the 60% remaining in our North American business, about half of that is mass and the other component is Prestige.

Bill Chappell - SunTrust Robinson Humphrey

And then if you look at the restructuring charges, maybe can you tell us what you are expecting for total charges for the full year and then when you look at the synergies, supply chain initiatives, when do you expect to see the majority of the benefits? Will we see that next quarter or is it more third- fourth quarter as we move into ‘09?

Scott Beattie

No, what we talked about in our year-end conference call in August, Bill, is that the initiatives that we are implementing here, we have got de minimis contribution from the extended supply chain reengineering project this fiscal year. The majority of those benefits will come in ‘09 and ‘10.

And in terms of the restructuring charge, Steve and his organization, as well as the integration of our corporate initiatives that we have identified, including the extended supply chain, are continually reviewing ways to streamline our indirect overhead expense and drive our EBITDA and return on invested capital.

We don’t have any specific restructuring charges identified for the remainder of the year, but as part of the extended supply chain reengineering or any of our other corporate initiatives, we see an opportunity to drive that EBITDA and return on invested capital. That is our singular focus.

Bill Chappell - SunTrust Robinson Humphrey

I just want to make sure, so you are saying getting back to kind of 10.5% EBITDA margin is less because of the initiatives this year, but more just siphoning through the acquisitions and seeing synergies from that, as well as mix and just the overall improvement in the business?

Scott Beattie



Our next question comes from Joe Altobello - CIBC World Markets.

Joe Altobello - CIBC World Markets

First question, just wanted to follow-up on Bill’s question on the EBITDA margin target. It looks like if you guys do do 10.5 this year, you’re probably looking at EPS north of $1.80 and I’m curious if as you said, Scott, earlier, that you’re pretty comfortable with that, why you’re not there in terms of guidance?

Scott Beattie

Well, I think it’s prudent and conservative of us, given the size of our second quarter. And it’s again, Steve mentioned, we really manage our business with Q1 and Q2 as one integrated unit, and it’s really our fall launch and holiday season execution. I think we are very confident, we’ve got great momentum against our business. It is an uncertain world out there at the moment, and it has been in a number of years since the beginning of this business.

We’re seeing some strong indications of our programs for Christmas, and we got a good sell-through even though it’s very, very early days, but I think if we were to readjust guidance, we would do it at the end of our second quarter conference call, and we’ll see how everything unfolds through Christmas. By the time we’re finished with second quarter, we’ll have a very clear idea of the third and fourth quarter.

Joe Altobello - CIBC World Markets

In terms of M – it’s still pretty early here, but how does that launch at this point compare to Curious?

Scott Beattie

Well, Curious was a unique event. Curious was a very, very successful celebrity fragrance launch. There wasn’t as much competition, Britney was at the height of her career; it really redefined the celebrity fragrance launch. So, we’re not benchmarking the success of Mariah against the Curious launch.

As Joel mentioned, we’re very excited about the Mariah Carey launch. She is incredibly enthusiastic and effective at supporting the launch. We’ve got great results internationally as well as momentum domestically here. Most of our PR and advertising support, as Joel mentioned, is just now hitting. She’s got an incredibly loyal customer base that we’re seeing around the world, so we haven’t budgeted it at the level of Curious, but based on what we see now, we expect it to be very successful.

Joe Altobello - CIBC World Markets

M is a global launch; Curious I think was a North America launch initially?

Scott Beattie

Yes, right.

Joe Altobello - CIBC World Markets

And then lastly on the gross margin side, obviously it’s only one quarter, I’m not going to really focus on this, but the gross margin is a little bit below the guidance you had laid out coming into this quarter, I was curious what was going on there?

Steve Smith

The guidance we gave for the quarter was 25 to 75 basis points, we’re at 20 basis points.

Joe Altobello - CIBC World Markets

Right, it was sort of at the low end, that’s why I was just asking.

Scott Beattie

At the end of the day, again, as we’ve said a number of times, we don’t really manage specifically on a blended gross margin because we have a combination of owned and distributed brands. As Steve mentioned earlier, we have a larger percentage of distributed brands this first quarter versus last year first quarter as a result of new innovation from some of our beauty partners that we’re shifting into mass retail in the United States.

So that mix of between owned and distributed can affect that gross margin number. We really focus on gross margin per brand as opposed to a blended gross margin. I think as we get through the second quarter we’ll continue to see improvement in gross margin as a result of the reduction in some of those supply chain costs that Steve mentioned earlier.


Our next question comes from Reza Vahabzadeh - Lehman Brothers.

Reza Vahabzadeh - Lehman Brothers

I had a question for Steve. You mentioned inventory should be a source of cash this year. Can you comment on total working capital and how that could shake out as either source or use of cash for the year?

Scott Beattie

Well, we’ve provided guidance of operating cash flow in approximately the $80 million range for the year. So you can kind of back into the guidance based on our EBITDA targets and our capital expenditure number of approximately $25 million.

Reza Vahabzadeh - Lehman Brothers

Is the CapEx number that you suggested, is that a normalized CapEx number or is that a little higher this year than other years?

Scott Beattie

No, it’s normalized. We, for the last several years, have been in and around that $25 million number. That consists primarily of tools and dies for new innovation and new products. It consists of in-store counters, primarily in international, but throughout our organization for the Arden brand and for PREVAGE and fixturing and so on, and IT-type investments, desktop computers and so on.


Our next question comes from Rommel Dionisio - Wedbush Morgan Securities Inc.

Rommel Dionisio - Wedbush Morgan Securities Inc

I know the press release will come out in a few days but I just want to inquire about the Rocawear brand? First of all, congratulations on that contract win. Is that going to be a men’s or women’s fragrance, or both, just because I think the apparel is both men’s and women’s? And also what is the approximate timing of when a new product rollout would occur in calendar ‘08 I guess?

Scott Beattie

Yes, it is going to be both a men’s and women’s brands and it would be next fall. That is the plan.

Rommel Dionisio - Wedbush Morgan Securities Inc.

Also one last question on that, I think if I remember correctly, Jay-Z is the founder/developer of that brand? Would you have him available for the commercials or appearances or just as you have sort of marketed some of these celebrity brands in the past?

Scott Beattie

He will be very creatively involved in working with us and supporting that. He is really the vision behind the brands and has already begun with us. So he will be very involved.


Our next question comes from Mike Marinucci - Wagner.

Mike Marinucci - Wagner

I just wondered if you had a couple of numbers for me that weren’t in the release. The trade payables number at September 30, and then the breakdown of the inventory between raw material with finished goods? Do you have that?

Scott Beattie

Yes, the trade payable number was $182 million.

Steve Smith

We don’t break down the inventory between WIPs and componentry.

Scott Beattie

It is not a significant part of the overall inventory balance, maybe 15, 20%.

Mike Marinucci - Wagner

You break it out in the Qs. Am I going to need to wait for the Q, is that what you are trying to say?

Scott Beattie

The componentry is 15, 20%.

Mike Marinucci - Wagner

And then just so I understand you had the Sovereign acquisition for half of the quarter last year, so what was the contribution on a percentage basis for the total sales gain for this quarter? Was it something in the neighborhood of 3%?

Scott Beattie

I think we addressed that; it is almost impossible to break out Sovereign separately because a lot of the brands are shared brands. So it is hard to say what is from Sovereign and what is not. So we don’t break it out separately but it was a combination of the increase from Sovereign but a lot of new brands that we had coming into the mass channel had nothing to do with the Sovereign acquisition, so it was a combination of both.


At this time, there appear to be no further questions.

Scott Beattie

Thank you very much, operator. Appreciate everyone joining us for the conference call.

Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to All other use is prohibited.


If you have any additional questions about our online transcripts, please contact us at: Thank you!

Source: Elizabeth Arden F1Q08 (Qtr End 9/30/07) Earnings Call Transcript
This Transcript
All Transcripts