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Inter Parfums Inc (NASDAQ:IPAR)
Q4 2019 Earnings Call
Mar 3, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Inter Parfums Fourth Quarter and Year-End 2019 Conference Call. At this time, all participants are in listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Russell Greenberg, Executive Vice President and Chief Financial Officer. Thank you sir, you may begin.

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Thank you, operator. Good morning and welcome to our 2019 fourth quarter and year-end conference call. We will proceed with our standard format. After I review financial performance, Jean Madar, our Chairman and CEO, will provide an overview of our business and update you on our future plans. Then, we will open the floor to questions.

Before proceeding further, I just want to remind listeners that this conference call may contain forward-looking statements, which involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from projected results. These factors include, but are not limited to the risks and uncertainties discussed under the headings Forward-Looking Statements and Risk Factors in our Annual Report on Form 10-K and the reports we file from time to time with the Securities and Exchange Commission. We do not intend to and undertake no duty to update the information discussed. When we refer to our European-based operations, we are primarily talking about sales of prestige fragrance products conducted through our 73% owned French subsidiary Interparfums SA. When we discuss our United States-based operations, we are primarily referring to sales of prestige fragrance products conducted through our wholly owned domestic subsidiaries.

Before I review the final quarter and full-year results, please be mindful that a strong US dollar has a negative impact on our sales, but a positive effect on our gross profit margin. This is because over 45% of net sales of our European operations are denominated in dollars, while almost all costs of those operations are incurred in euro. The average dollar/euro exchange rate for the 2019 fourth quarter was $1.11 compared to $1.14 in the fourth quarter of 2018. The difference for the full year is over 5% as the average dollar/euro exchange rates were $1.12 and $1.18 for the 2019 and 2018, respectively.

With regard to the final quarter of 2019 as compared to 2018, net sales were $177.8 million, up 0.3% from $177.2 million. At comparable foreign currency exchange rates, net sales increased 1.5%. Net sales by European-based operations decreased 4.2% to $129.1 million from $134.8 million and net sales by US-based operations came in at $48.7 million, up 14.7% compared to $42.4 million. Gross margin was 64.5% compared to 66.1%. SG&A expenses as a percentage of net sales were 57.6% compared to 60.1% in 2018. Operating income rose 16.5% to $12.3 million as compared to $10.6 million. Operating margin came in at 6.9% as compared to 6%. Net income attributable to Inter Parfums, Inc. increased 1.8% to $8.2 million as compared to $8.0 million. And finally, net income attributable to Inter Parfums per diluted share was $0.26 for both periods.

So for the year ended -- for the full year ended December 31, 2019, net sales totaled $713.5 million resulting in net income attributable to Inter Parfums of $60.2 million or $1.90 per diluted share. This is a 5.6% increase in sales, a 12% increase in net income attributable to Inter Parfums, and 11.1% gain on diluted EPS.

Our consolidated gross margin was 62.5% and 63.3% in 2019 and 2018 respectively. While the strong dollar benefited our gross margin, that benefit was offset by the higher-than-typical costs for sales of Montblanc Explorer, which launched in the first quarter of 2019 and rolled out throughout the year, essentially for that reason, the gross margin for European operations declined 60 basis points to 65.7% from 2018's 66.3%. For US operations, gross margin increased to 52.5% from 51.4% in 2018. That 110 basis point improvement is primarily due to increased sales of higher margin prestige products under licenses. The slight decline in our consolidated gross margin also reflects the fact that in 2019, our US operations grew at a faster rate than European operations. In 2019, US operations represented 24% of consolidated sales versus just over 20% in 2018.

For us, the big story is our operating leverage. In 2019, selling, general and administrative expenses rose 2.5% on a 5.6% increase in net sales and as a percentage of net sales, SG&A expenses came in at 47.8% and 49.3% for 2019 and '18 respectively. Once again, promotion and advertising, that's included in selling, general and administrative expenses, peaked in the fourth quarter which brought the total for the full year to 20.3% of net sales, down slightly from the 20.7% in 2018. While we budgeted 21% of net sales for this expenditure in 2019, minor fluctuations in certain launch schedules warranted a change in our spending. In 2019, there was a $1.1 million loss on foreign currency, while in 2018, that loss was $0.3 million and our effective income tax rate came in at 27.7% in 2019 versus 27.3% in 2018.

Cash provided by operating activities aggregated $76.5 million in 2019 and we closed the year with working capital of $389 million, including approximately $253 million in cash, cash equivalents and short-term investments. We had a working capital ratio of over 3 to 1 and only $10.7 million of long-term debt.

Now, to the outlook for 2020. While the fundamentals of our business remain strong, like most companies doing business around the globe, ours is being impacted by the coronavirus. While it is nearly impossible to calculate the full potential impact of the coronavirus on our Company at this time, the only certainty is that the next several months will be challenging. Beyond China, there are now new cases cropping up around the world. As a result of this situation and the corresponding and significant decline in air travel and consumer traffic in key shopping areas, we postponed several launches until later this year. For these and related reasons, our 2020 guidance needs to be revised. If the impact on the coronavirus is limited to the first few months of this year, we expect 2020 net sales and earnings to be in line with our 2019 results. Obviously, our expectations are subject to change with the fluidity of this situation.

Jean, please continue.

Jean Madar -- Chairman of the Board, Chief Executive Officer

Yes. Thank you, Russ, and good morning to you all.

We will talk later -- I'm sure you had questions about our plans and -- during this coronavirus crisis. But before moving on to our future plans, I will review our sales performance by region and the message that I wish to convey here is that we are building upon successive years of growth. For example in North America, our largest market, 2019 sales were 11% ahead of 2018, which were 19% ahead of 2017. Similarly, sales growth in Western Europe of 2.5% in 2019 comes on the heels of 9% sales gains in 2018. Also in Eastern Europe, net sales rose nearly 5%, layering upon the 7% gain in the preceding year. The biggest percentage gainer was in the Middle East where in 2019 sales increased 22% over 2018, which were 17% ahead of 2017. Also in Asia, our third largest market, we're down nominally in actual dollars in 2019, but ahead in constant dollars, which we consider quite respectable in light of trade tariffs on goods coming in and out of China from the United States. Also keep in mind, our sales in Asia climbed 24% in 2018, setting a high bar for the year just ended. Our smallest market, Central and South America, has continued to decline.

Moving on to brand news. We are moving forward with our plans to build two new fragrance enterprise with the Kate Spade brand, which we signed agreements in June of last year respectively. As we have reported, we are retaining two popular legacy scents, Live Colorfully and Walk On Air for which distribution should commence in the next several weeks and we will unveil an entirely new women's scent in end of the summer, beginning of the fall.

We are also very enthusiastic about our new worldwide licensing agreement with MCM that we signed in November. Since 1976, this German fashion house has been pushing fashion boundaries and redefining luxury level goods on a global scale through innovation, cutting-edge technology, exceptional creativity and superior quality. So our team has begun work on developing an extraordinary MCM fragrance for women and men with initial launch targeted for the first quarter of 2021. We'll be ready we think in January of 2021 and our distribution strategy includes MCM stores, high-end department stores, prestige beauty retailers with a geographic focus on Asia, America and Europe.

With regard to our brand ranking, Montblanc is still Number 1, especially, with the launch of Explorer this year, followed by Jimmy Choo Number 2 and Coach Number 3. However, in less than two years, GUESS has taken over fourth place and GUESS could become in the next two years, Number 3 brand in the Company. The importance of this ranking cannot be overstated. Some of you on today's call have been following our progress for a long time and will remember that not that long ago one brand Burberry accounted for more than half of our annual sales. Today, four brands in the aggregate have more than filled that space, making us a much stronger company.

Moving on to our launch pipeline for the year, we have already unveiled several new products including Coach Dreams which just launched and is doing some great numbers at Macy's, we were last month -- excuse me, last week we were in the Top 5 at Macy's. We have launched also a business by Rochas and L'Homme Rochas, both recently began to roll-out. The new women's signature scent for Montblanc is still scheduled for the first half. It will be called the Montblanc Signature, but keep in mind, Montblanc Explorer, which rolled out in 2019 was a huge success for the smell-centric brand. The women scent for Montblanc is not expected to perform comparably. Also, we are moving ahead with Jimmy Choo L'Eau product, even though it's a still -- a small program with limited distribution. Our primary goal is in testing products and see if we can expand the selling space for our Jimmy Choo fragrance like the new women scents coming to markets in the second half.

Moving on to US-based product launches, the new member of the Oscar de la Renta family called Bella Essence recently debuted domestically. For GUESS, in 2020, we'll be launching a blockbuster fragrance that includes Bella Vita perfume and Bella Vita Rosa Eau de Toilette, both on our plan to be introduced domestically in the spring and internationally in the fall. We are also working on a men's fragrance and grooming line that will be scheduled for end of the year for the grooming line, women's line will happen in 2021.

It is worth noting that GUESS is a major brand in the Middle East, which also happen to be our fastest growing market in 2019. We have planned on introducing the GUESS brand in China this year, but the decision and its timing will, of course, will have to wait. We're also going to test some GUESS Color Cosmetics in GUESS stores. We are moving, of course, conservatively on this, but the goal is to use Color Cosmetics to strengthen the brand's fragrance distribution.

So, before the onset of the coronavirus, we were confident that the launch of a new fragrance called Sky by Anna Sui will be a catalyst for 2020 brand sales growth. Asia is the biggest market for Anna Sui and therefore we have decided to push back the launch to fall 2020. Within two weeks, we will be launching a new collection for Graff in Harrods. Selective luxury distribution will be planned for the fall and we have also got a number of brand extensions planned for Abercrombie, Hollister, a new fragrance duo called Canyon Escape is being ready for a mid-year introduction.

I reported on our last conference call that we have extended our licensing arrangement with the Oscar de la Renta brand through the end of 2031 and we've an additional five-year extension option after that. And more recently, we have extended our license for Abercrombie and Hollister. Having added two new brands to our portfolio in 2019, we have a lot on our plate to build new fragrance enterprise, but that doesn't mean we are not prepared to further enlarge our portfolio. As we have said many times over, we've got the financial strength, the human talent and the drive to entertain transactions that are compatible with our business model, that are backed by solid licensing partner and offer superior growth potential.

Before taking your questions, I want to mention that Russ will be meeting with investor at the D.A. Davidson Consumer Growth Conference on March 12.

Now operator, let's open the floor for questions. Thank you.

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Linda Bolton Weiser with D.A. Davidson. Please proceed with your question.

Linda Bolton Weiser -- D.A. Davidson -- Analyst

Yes. Hi, how are you.

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Good morning, Linda.

Jean Madar -- Chairman of the Board, Chief Executive Officer

Hi, Linda.

Linda Bolton Weiser -- D.A. Davidson -- Analyst

Hi. So, just on the coronavirus impact, so I guess what we did in our model is we just reduced the revenue and earnings for the first quarter since that's what we're seeing as the current impact. Can you give us some sense of what you're seeing in your markets and the magnitude of the declines. I guess, we were thinking of travel retail is 20% of your revenue. Maybe it's down 50%. So, maybe your revenues down 10% or 12% in the first quarter. Am I thinking along the right lines? Maybe you could just give us a little color on what you're seeing.

Jean Madar -- Chairman of the Board, Chief Executive Officer

Russ, you want to?

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Yeah, sure. You're actually very, very close. Looking at the numbers for January and February, the sales are actually surprisingly holding up surprisingly well. It's really the March month that we are anticipating the most significant decline. For those of you who saw the press release that was put out by our European operations, we've indicated that sales for the European operations, we are anticipating that they're going to be down approximately 10% for this first quarter. US operations so far, as I just mentioned, we really have not seen a significant impact. We think that sales at best will be flat, but I think we can actually achieve that. So far from what we've seen with the orders that we have in the system, those sales should be able to come in very, very similar to that of last year. So with that, the combination, we're looking at first quarter somewhere down maybe 8% or 7.5%, something along those lines.

Jean Madar -- Chairman of the Board, Chief Executive Officer

Yes, I agree. If I may add to give you a little bit more color, when this coronavirus started at the very beginning, we were worried first about the supply of certain components coming from China because we have some plastic and some metal and some special cartons coming from China, but because of the tariff that started with China in the middle of last year, we had already started to look at alternative sourcing before the coronavirus. So we have not -- we are not worried about any impact -- any serious or material impact on the supply of components coming from China.

Actually, we have -- not only we have alternative sources, but we have seen factories going back to work at a rate of maybe 25% to 30% two weeks ago. Maybe now we are up to 50%. So we have -- we are receiving parts from China. The problem is really the sales and the sales, of course, we immediately moved some launches, especially the Anna Sui launches which we are going to do in the second quarter, we moved it to third and fourth quarter for all the Asian region, but the problem like you said and that is not only China. It's the whole region, it's the travel retail, it's the Chinese tourist buying in Europe or elsewhere. And this is what will be missing, but that's true that so far January and February were started OK. I mean, quite good, but we're going to start feeling the pressure in March.

Linda Bolton Weiser -- D.A. Davidson -- Analyst

Thanks. And then, just on the cost side, as you face a little bit of sales decline here in the first quarter, are you doing anything cost wise to try to mitigate the negative operating leverage or are you just kind of keeping things as -- I guess, your SG&A is running at about $36 million per quarter. Is that something you can reduce in the near term or just keep the same business as usual?

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Well I certain -- I'm sorry, go ahead, Jean.

Jean Madar -- Chairman of the Board, Chief Executive Officer

No. No, you are the expert, but I will say that as we have moved some launches toward later in the year, a lot of advertising money will be spent later in the year, but that other [Phonetic] services for the marketing and advertising, but besides that, our G&A is the same. Russ?

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Yeah, that's exactly right. The fixed G&A is not something that we can really move the needle on very easily, but fortunately for us, a good portion of our SG&A expenses is of the variable nature and therefore those will follow however the fluctuations are with respect to sales. Marketing, as John mentioned is one area where you can [Phonetic] control and we always typically spend much less marketing in the early part of the year than we do in the later part of the year. So hopefully, we won't see too much of a significant erosion from the positive leverage that we've seen over the last couple of years.

Linda Bolton Weiser -- D.A. Davidson -- Analyst

Okay, thank you very much.

Russell Greenberg -- Executive Vice President, Chief Financial Officer

You've got it, Linda.

Jean Madar -- Chairman of the Board, Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Wendy Nicholson with Citigroup. Please proceed with your question.

Wendy Nicholson -- Citigroup -- Analyst

Hi. My question actually bigger picture, taking a step away from coronavirus, Russ, the operating leverage you talked about, I mean, the margin you put up for 2019 is higher than, I think, we've ever seen or at least in a very long time. And so, how do you feel about that and where we go from here, just structurally? Again, I know 2020 is going to be an anomaly and there are lots of moving pieces, but sort of longer term, how much more juice is there and how much higher can those margins go?

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Linda, it's a great question. Thank you for asking the question. It's actually very, very pleasing for us because back just a few short years ago, we kept talking about achieving 14% to 15% operating margin. We came in this quarter to 14.7% operating margin, which did not reach the highest we've ever been. We have exceeded 15% and actually got pretty close to 16% in a full-year back several -- several years ago. Our goal was always to kind of reach that 15%. I think that, again, barring the unfortunate situation that we're seeing in 2020, as we move forward, if we can continue to grow our top line like we have over the last several years, I think, we can start approaching that 16% operating margin level, which is probably one of a very high level for our industry. So, that's an achievement that we're very, very proud of.

Wendy Nicholson -- Citigroup -- Analyst

Got it. And then just generally, can you talk, this is sort of big picture, I mean, part of what helps you get there is strong revenue growth. I know your market shares have been great and you've had a tremendous amount of brand activity that's been successful, but also, we've been in this kind of multi-year period were fragrance is generally have been a good space. So, can you just talk about kind of your outlook on maybe just what you saw through the course of '19, how much of your growth is being driven by sort of the increased willingness on the part of Asian consumers to use fragrance, again, for getting the coronavirus, just high level on what's your take on the industry dynamics today? Thanks.

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Jean, you want to...

Jean Madar -- Chairman of the Board, Chief Executive Officer

Maybe you can start, Russ. Yeah. I can try. It's true that with the portfolio that we have, we have been quite pleased with the growth because we have been able to grow quite strongly in many parts of the world. We have Montblanc that is strong in more than one market, but we have also some brands like Oscar de la Renta or Abercrombie that are strong in only regionally, but when you look at our growth in 2019, 30% in the US, 20% in Europe. It's quite impressive.

What's going with Asia, it is absolutely true that we believe that Asian population will use more fragrance than before and we have seen this years after years because people used to say that, oh, Asia is only a market for skincare, of course, and makeup, but we think that we've seen, especially, Southeast Asia growing very strongly with our fragrance. If on the top of that we give them some brands that they recognize such as Coach or Jimmy Choo or Lanvin or those that we have in the portfolio, this will accelerate the growth. So coronavirus aside, we think that we are very well positioned and 2020 was going to be a good year coronavirus on the side, but long term, we think the portfolio is well balanced. We think we can leverage, again our G&A. So, we are quite confident. Let's not forget also that with the existing structure that we have, the existing people, we can do more sales than what we have. We can have -- we could sign a new license and we are working on -- we are working on some deals right now. So, we will definitely not stop increasing the portfolio.

Wendy Nicholson -- Citigroup -- Analyst

Great, thank you very much.

Russell Greenberg -- Executive Vice President, Chief Financial Officer

You got it.

Jean Madar -- Chairman of the Board, Chief Executive Officer

Thank you.

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Thank you, Wendy.

Operator

Our next question comes from the line of Steph Wissink with Jefferies. Please proceed with your question.

Jean Madar -- Chairman of the Board, Chief Executive Officer

Yeah.

Steph Wissink -- Jefferies -- Analyst

Hi, good morning everyone. Russ, just a couple of questions.

Jean Madar -- Chairman of the Board, Chief Executive Officer

Good morning.

Steph Wissink -- Jefferies -- Analyst

Good morning, Jean, as well. I mean, you mentioned the delayed launch for Anna Sui and I just want to make sure we had calibrated all of the changes in the timing of the calendar. Was that the only launch that was pushed from the first half to the second half?

Jean Madar -- Chairman of the Board, Chief Executive Officer

Yes. Today, I have decided to keep all the launches almost -- I mean, plus or minus a couple of weeks, but almost on time, except for Anna Sui because Anna Sui, 90% of the business of Anna Sui is in Asia. So we keep -- we do not change the calendar of launches. We will maybe spend a little more than what we thought during the launches in order to have some money left to repromote toward the end of the year if need be and I think we will need to repromote to keep our market share toward the end of the year.

Steph Wissink -- Jefferies -- Analyst

Hey, great, thank you. And then maybe, Russ, for you, just a question and follow-up to Linda's question regarding coronavirus. Can you help a sequence the staging of actions, whether it's on your supply recalibrating or as you were talking about some of the demand changes? Are you seeing reduced reorders right now or is it that your future orders are being cut back as the channel supply is not working through? So, maybe just give us a sense of what the cadence of actions are that you're seeing coming through March and how we should think about potentially a bit longer of a drift of the impact beyond just the immediate demand?

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Yeah. It's a very difficult question to answer because we're just starting to see some of the impact just now within the last few weeks. Things change [Speech Overlap].

Jean Madar -- Chairman of the Board, Chief Executive Officer

Or even today.

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Yeah, exactly. Things change very, very quickly as this virus has spread. I mean just think of what's happened over the past two weeks. Look at your stock market, it really has declined within a one-week period. So, it's really difficult for us to try to predict what's going to happen in the future. Right now, we do see some effect, of course, in the travel retail. That is the area that has been mostly hit as certain areas have become no fly zones, but to the extent of how that's going to spread and to the extent of how long or the duration of these no-fly zones are going to last, this is something that's really unknown and almost impossible to try to make a prediction at this time.

Jean Madar -- Chairman of the Board, Chief Executive Officer

Yeah. I'm going to try to add and to give you some color, because we have been on the phone with many distributors and many operators in the last -- in the last week actually. And what we see is definitely a big downside in travel retail. Some airports are completely empty. So, of course if there is no travelers, there is no sales.

On the other hand, I was -- and I want to stay very, very prudent and very conservative, but in China, in Mainland China, where as you know there is a lot of sales done through e-commerce, the e-commerce was quite strong in the last three weeks. So, I was looking at sales actually. They were much better than what we expected. So, of course, the business is down, but we've -- because of our strength in e-commerce in China, I think that it's going to be -- it's going to be a little bit better than what we think and I think also, but this is a personal opinion, that China will be the first to recover. We are more worried about travel retail in general. Europe, as you know, Italy has been hit. We don't know what's going to happen in France or in Germany in the next hours or days. This is why we have almost zero visibility today on this very important market.

Steph Wissink -- Jefferies -- Analyst

Thank you very much.

Jean Madar -- Chairman of the Board, Chief Executive Officer

I hope that helps you. Thank you.

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Thanks.

Steph Wissink -- Jefferies -- Analyst

Very, very helpful. Thank you. Russ, could you just remind us -- final question for us, quick one, on the Jimmy Choo license, when that expires?

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Jimmy Choo license, oh that should...

Jean Madar -- Chairman of the Board, Chief Executive Officer

Jimmy Choo.

Russell Greenberg -- Executive Vice President, Chief Financial Officer

That was [Speech Overlap]. Obviously if I can quickly type, I think it's 2030 something, but let me see if I can quickly find it.

Jean Madar -- Chairman of the Board, Chief Executive Officer

We'll find that. Maybe we take another question and we find out.

Steph Wissink -- Jefferies -- Analyst

Yeah.

Russell Greenberg -- Executive Vice President, Chief Financial Officer

I have it right here. December 31, 2031.

Steph Wissink -- Jefferies -- Analyst

Thank you.

Jean Madar -- Chairman of the Board, Chief Executive Officer

So we have another 10 years. Yeah.

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Yeah. So at least 10 years. Yeah. We had recently renewed that license, if you don't -- if you remember. When Jimmy Choo was taken over by the Michael Kors group, we had -- just shortly after that acquisition, we had signed a new license with Jimmy Choo and added to the existing license. Thank you, Steph.

Operator

Our next question comes from the line of Hamed Khorsand with BWS Financial. Please proceed with your question.

Hamed Khorsand -- BWS Financial -- Analyst

Hi. So, first off, just to get corona out of the way, what kind of component sourcing are you conducting right now or is there any shortages on that front for you?

Russell Greenberg -- Executive Vice President, Chief Financial Officer

As Jean just indicated, just a few minutes ago that we really have not seen any significant impact from the standpoint of the supply chain. There were processes put into place even back in early in 2019 when we started to see the effects of the tariffs that were enacted between the United States and China. We had just begun to create alternative sources for our components. In addition, the virus also hit right at the same time as the beginning of the Chinese New Year. So, even for those parts that we still do acquire from China, most of the parts that we needed, at least for the first portion of 2020, we had already received because we knew that China was going to close down for several weeks for Chinese New Year. So and today, as Jean mentioned, shipments are starting to come in. We were fortunate enough that we did not have any factories in the area that was most hit with the coronavirus in China. So, so far we really have not seen any significant impact from the supply chain standpoint.

Hamed Khorsand -- BWS Financial -- Analyst

Okay. And my other question was in the -- the change in the sales composition, just given what's happening in travel retail, how is that changing your ad strategy and is there going to be a change in the cost estimate for this year?

Russell Greenberg -- Executive Vice President, Chief Financial Officer

No. I think it's really just a change in the allocation of dollars. We've certainly have gone with more dollar spending in social media type activities and content-related activities for the advertising. I will still stand at the approximately -- in a normal year I should say, at right around 21%. 2019 came in at 20.3% compared to 20.7% in 2018, but from an overall budgeting standpoint, I think, we're still looking at right around 21% of sales to be spent in A&P.

Hamed Khorsand -- BWS Financial -- Analyst

Okay, thank you.

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Thank you, Hamed.

Jean Madar -- Chairman of the Board, Chief Executive Officer

If I may, before we take the next question, I would like to answer a question that people have not asked. It's regarding inventory because I think it's important to say that we have not really lowered our goal of inventory, meaning that we think that when this coronavirus will be finished, the market is going to need a lot of products in a very short period. So, we think it's important to maintain what could look maybe a higher level of inventory for the next two months, or three months, or four months because when the demand, especially in Asia, will come back, we'll have to supply, very, very fast. Okay, next question?

Operator

We have no further questions at this time. Mr. Greenberg, I would now like to turn the floor back over to you for closing comments.

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Okay. Thank you, Christine. Thank you all for tuning into our conference call and as usual, if anybody does have any further questions, they can contact me at my office. Everybody have a great day and thank you so much. Bye.

Operator

[Operator Closing Remarks]

Duration: 41 minutes

Call participants:

Russell Greenberg -- Executive Vice President, Chief Financial Officer

Jean Madar -- Chairman of the Board, Chief Executive Officer

Linda Bolton Weiser -- D.A. Davidson -- Analyst

Wendy Nicholson -- Citigroup -- Analyst

Steph Wissink -- Jefferies -- Analyst

Hamed Khorsand -- BWS Financial -- Analyst

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