Fragrance and perfume company Inter Parfums (NASDAQ:IPAR) fell short of analysts' expectations in Q1 CY2024, with revenue up 3.9% year on year to $324 million. On the other hand, the company's outlook for the full year was close to analysts' estimates with revenue guided to $1.45 billion at the midpoint. It made a GAAP profit of $1.27 per share, down from its profit of $1.68 per share in the same quarter last year.
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Inter Parfums (IPAR) Q1 CY2024 Highlights:
- Revenue: $324 million vs analyst estimates of $328.7 million (1.4% miss)
- EPS: $1.27 vs analyst expectations of $1.54 (17.5% miss)
- The company reconfirmed its revenue guidance for the full year of $1.45 billion at the midpoint (EPS maintained as well)
- Gross Margin (GAAP): 62.5%, up from 57.4% in the same quarter last year
- Market Capitalization: $3.84 billion
With licenses to produce colognes and perfumes under brands such as Kate Spade, Van Cleef & Arpels, and Abercrombie & Fitch, Inter Parfums (NASDAQ:IPAR) manufactures and distributes fragrances worldwide.
Personal CareWhile personal care products products may seem more discretionary than food, consumers tend to maintain or even boost their spending on the category during tough times. This phenomenon is known as "the lipstick effect" by economists, which states that consumers still want some semblance of affordable luxuries like beauty and wellness when the economy is sputtering.
Consumer tastes are constantly changing, and personal care companies are currently responding to the public’s increased desire for ethically produced goods by featuring natural ingredients in their products.
Sales GrowthInter Parfums is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefitting from better brand awareness and economies of scale. On the other hand, one advantage is that its growth rates can be higher because it's growing off a small base.
As you can see below, the company's annualized revenue growth rate of 30.9% over the last three years was incredible for a consumer staples business.
This quarter, Inter Parfums's revenue grew 3.9% year on year to $324 million, falling short of Wall Street's estimates. Looking ahead, Wall Street expects sales to grow 11.4% over the next 12 months, an acceleration from this quarter.
Operating MarginOperating margin is a key profitability metric for companies because it accounts for all expenses enabling a business to operate smoothly, including marketing and advertising, IT systems, wages, and other administrative costs.
This quarter, Inter Parfums generated an operating profit margin of 21%, down 8 percentage points year on year. Conversely, the company's gross margin actually increased, so we can assume the reduction was driven by operational inefficiencies and a step up in discretionary spending in areas like corporate overhead and advertising.
Zooming out, Inter Parfums has been a well-managed company over the last eight quarters. It's demonstrated it can be one of the more profitable businesses in the consumer staples sector, boasting an average operating margin of 18.3%. However, Inter Parfums's margin has declined by 2.2 percentage points on average over the last year. Although this isn't the end of the world, investors are likely hoping for better results in the future.
Key Takeaways from Inter Parfums's Q1 Results We struggled to find many strong positives in these results. Its operating margin missed analysts' expectations and its EPS missed Wall Street's estimates. That it reaffirmed previously-given full year guidance is somewhat comforting, but the market will question whether that is achievable now given this quarter's miss. Overall, the results could have been better. The company is down 1.3% on the results and currently trades at $122 per share.