Fragrance maker and distributor Inter Parfums
Is the licensee of such perfume lines as Burberry, Lanvin, Christian Lacroix, and Diane von Furstenberg about to begin smelling as fetid as a septic tank? Well, it's not quite that dire, but it's no bouquet of roses either. There are signs that the company is struggling to expand its distribution lines, even as it prepares some major product launches.
Sales for the past few quarters have been relatively flat, and growth for the full year is expected to be only around 10%, down from 15% the year before, and 27% the year before that. Earnings have also been hurt, since the company has had to negotiate more expensive licensing agreements. Despite being Inter Parfums' strongest seller, its premium Burberry line has also eaten away at profits, since the British company has demanded more royalties.
Two recent licensing deals, though, make you wonder whether the company will soon be marketing the smell of sweat. In March, the company announced an expanded licensing deal with Motley Fool Stock Advisor pick Gap
With competitors Estee Lauder
Inter Parfums needs its premium brands to keep selling, because its mass-market lines continue to fade. The prestige brands accounted for 89% of revenues, while the mass-market brands made up only 11% for the quarter. Yet mass-market product sales were also off 11% -- a slower rate of loss than before, yet not as good as the company had hoped. In other words, it stinks, but not as badly.
Because the fragrance maker services a rather fickle market, it needs to find another Burberry -- a brand with cachet, longevity, and the ability to command a premium price. Sure, it'll have to pay up for the privilege, but the scent will linger longer than simply bringing on another overexposed media starlet. With $49 million in the bank, Inter has the wherewithal to acquire the next hit fragrance if it has to. But it will need to do more than simply align itself with the next sweat-inducing sport to get its stock moving again.
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Fool contributor Rich Duprey does not own any of the stocks mentioned in this article. The Motley Fool has a disclosure policy .