Teeny-bopper Justin Bieber may have the opposite of the King Midas touch if recent history is any indication. Add to his list of infamy now Elizabeth Arden's (NASDAQ:RDEN) earnings release today. He had help in this escapade, as he often does, but in this case it was RDEN's other celebrity fragrances, including lines endorsed by Taylor Swift, Britney Spears, Jennifer Aniston, Nicki Minaj and Mariah Carey, that were also cited in part for RDEN's profit and sales collapse in FQ4 2014.
"Our primary focus as an organization is to improve performance and restore profitability" E. Scott Beattie, Chairman, President and Chief Executive Officer stated in today's pre-market earnings release. RDEN opened down almost 8% and continued collapsing all day, closing at down 23.25% losing $4.56 off of the share price.
RDEN is destocking many retail outlets who sell their brands at steep discounts, and this destocking along with declining sales of the celebrity brands contributed to the sales declines of 14% in the North America segment and 8% in the International segment. The company has hopes that reducing distribution via discounted retail will eventually lead to better gross margins, but guidance set the expectation that the current headwinds could be a constant challenge all the way through the first half of Fiscal 2015.
Additional market pressure may have been created by the announced strategic investment by Rhone Capital, a Private Equity firm which acquired $50 Million of redeemable preferred stock and warrants, the total of which represents almost 8% of RDEN's outstanding shares.
The horrible trading day was probably a winner for many of the bears who have been calling RDEN out, including Zacks Investment Research and Jeremy Raper and the short float of 8.85%, but the real question begins to be--when has RDEN become oversold enough to be attractive? I would be hesitant to put in a position at the current price of $15.05 as I believe there is further down for this very hated stock to go. Should it near single digits I would place a low-conviction turn-around bet with a very tight loss limit below it. I would encourage others with experience in Options to consider similar strategies. Additionally, I might consider a short position to the $10 range if RDEN shows weakness pre-market tomorrow.
Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.