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INTER PARFUMS INC (IPAR)·Q2 2024 Earnings Summary

Executive Summary

  • Record Q2 revenue of $342.2M (+11% y/y), with gross margin expanding 360 bps to 64.5% and operating margin up 110 bps to 18.9%; diluted EPS was $1.14 (+5% y/y) .
  • Management reaffirmed FY2024 guidance of $1.45B revenue and $5.15 diluted EPS, citing a vibrant fragrance market but prudent stance amid trade destocking and Eastern Europe challenges .
  • Segment sales grew in both regions: Europe +14% y/y to $226M; U.S. +8% y/y to $120M, aided by Lacoste and Roberto Cavalli contributions and strong legacy brands .
  • KPI strength: working capital $525M, cash+STI $77M, DSO 72 days; inventory up to support new licenses and H2 launches .
  • Consensus estimates from S&P Global were unavailable due to access limits at the time of writing; estimate comparisons are not provided (S&P Global data).

What Went Well and What Went Wrong

What Went Well

  • Robust margin expansion: consolidated gross margin up 360 bps to 64.5% driven by European operations mix and lapping a prior-year inventory reserve; operating margin rose to 18.9% .
  • Portfolio momentum: Jimmy Choo +31% y/y; midsized brands Karl Lagerfeld and Rochas +13% in Q2; strong innovation pipeline including DKNY 24/7 and Lacoste Original supports H2 .
  • Management quote: “We achieved record second quarter sales… spacing our launches to minimize potential cannibalization… and investing more time and money back into our brands” – Jean Madar, CEO .

What Went Wrong

  • SG&A leverage tighter: SG&A rose to 45.6% of sales (from 43.1%), reflecting higher A&P (19.4% of sales) and amortization of the Lacoste license, pressuring operating expense ratios .
  • Sell-in vs sell-out dynamic: sell-in growing slower than sell-out; trade destocking persisted in select U.S. and European markets (e.g., UK), though July orders improved .
  • Regional headwinds: Eastern Europe sourcing constraints and continued challenges noted; China demand remains slower, with Hainan yet to improve materially .

Financial Results

MetricQ2 2023Q1 2024Q2 2024Consensus (S&P Global)
Revenue ($USD Millions)$309.2 $324.0 $342.2 N/A (S&P Global unavailable)
Gross Margin (%)60.9% N/A64.5% N/A (S&P Global unavailable)
Operating Income ($USD Millions)$55.0 N/A$64.8 N/A (S&P Global unavailable)
Operating Margin (%)17.8% 21.0% 18.9% N/A (S&P Global unavailable)
Net Income attributable to IPAR ($USD Millions)$35.0 N/A$36.8 N/A (S&P Global unavailable)
Diluted EPS ($)$1.09 N/A$1.14 N/A (S&P Global unavailable)
SG&A (% of Net Sales)43.1% 41.5% 45.6% N/A (S&P Global unavailable)
A&P (% of Net Sales)17.6% 14.9% 19.4% N/A (S&P Global unavailable)

Segment Net Sales

SegmentQ2 2023 ($USD Millions)Q2 2024 ($USD Millions)
European based operations$198 $226
United States based operations$111 $120
Eliminations$0 ($4)
Total$309 $342

KPIs and Balance Sheet Highlights

KPIQ4 2023Q1 2024Q2 2024
Working Capital ($USD Millions)$514 $530 $525
Cash + Short-term Investments ($USD Millions)~$183 ~$100 $77
Long-term Debt incl. current ($USD Millions)$128 $145 $137
DSO (Days)60 73 72
Inventories ($USD Thousands)$371,859 (12/31/23) —$433,716 (6/30/24)

Notes:

  • FX impact: Q2 2024 had a negative ~0.4% FX impact (avg USD/EUR 1.08 vs 1.09) .
  • U.S. GM: Q2 2024 56.5% vs 57.2% in Q2 2023; YTD 57.5% vs 57.4% .
  • European GM driver: +570 bps Q2 expansion; excluding 2023’s inventory reserve, +250 bps .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Billions)FY 2024$1.45 $1.45 Maintained
Diluted EPS ($)FY 2024$5.15 $5.15 Maintained
Gross Margin (%)FY 2024Broadly in line with 2023 (~64%) Broadly in line with 2023 (~64%) Maintained
A&P (% of Net Sales)FY 2024Target ~21% Target ~21% Maintained
DividendQ3 2024$0.75 per share declared in prior cadence $0.75 per share payable Sept 30, record Sept 13 Maintained (scheduled payment)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023, Q1 2024)Current Period (Q2 2024)Trend
Market growth & premiumizationPrestige growth, premiumization; 2023 record sales; strong POS across regions Market moderating to mid/high single-digit; still healthy demand; sell-out > sell-in in some channels Moderating but healthy
A&P strategy & spend cadenceTarget 21%; heavy Q4; move to more balanced quarterly spend Q2 A&P 19.4%; balancing spend across quarters; ROI visible Structurally higher, front-loaded
Eastern Europe & supply chainVolatility risk; ~$50M Russia sales disclosed; cautious guide Sourcing constraints easing vs Q1; still cautious backdrop Gradual improvement, risk remains
Travel RetailRebound underway; strategic investment +20% y/y; ~8% of sales; long-term target ~10% Strengthening
China/APACAPAC demand improving (ex China caution) China still slow; Hainan unimproved; Asia up +6% H1 Mixed
New brands (Lacoste, Cavalli)Combined ~$90M FY24 targeted; ahead of budget On track/exceeding expectations; international rollout and H2 launches Positive
Licensing (Van Cleef & Arpels)Renewal discussions flagged 9-year renewal beginning 1/1/2025; tighter selective distribution Secured, strategic

Management Commentary

  • “Consolidated gross margin expanded 360 bps… European-based operations improved by 570 bps due in part to favorable mix and the prior-year inventory reserve; excluding the reserve, margins expanded ~250 bps” – Michel Atwood, CFO .
  • “Our newest brands, Roberto Cavalli and Lacoste, are acclimating well… performing above our expectations with sustained sell-in… and we anticipate further momentum in the back half of the year” – Jean Madar, CEO .
  • “Once again, we are reaffirming our 2024 guidance of net sales of $1.45 billion… EPS of $5.15… while observing some slowdown, tailwinds continue to outweigh headwinds” – Michel Atwood, CFO .
  • “We began to amortize the cost of the Lacoste license… $3.2 million in SG&A during the first half of the year… advertising and promotional expenditures to approximate 21% of net sales for the full year” – Michel Atwood, CFO .

Q&A Highlights

  • Own-brand strategy (Solferino): Niche, high-end luxury line launching 2025; no royalties, enabling incremental A&P; positioned not to compete with designer licensors .
  • Destocking & channel dynamics: U.S. NPD sell-out +6–7% vs ~5% sell-in; UK distributor destocking; July orders near record as holiday gift sets sell-in begins .
  • Gross margin drivers: Lapping a $6.2M excess/obsolescence reserve (Moncler) in Q2 2023; normalized, margins expand ~1.5 pts driven by channel/segment mix .
  • H2 cadence & 2025 setup: Expect balanced Q3/Q4 growth, mid-single-digit overall; 2025 to feature more blockbusters; core brands mid-single-digit growth .
  • A&P spend trajectory: Up ~28% YTD into Q3; Q4 dollars roughly flat y/y; strategy is more evenly distributed spend across quarters .

Estimates Context

  • Wall Street consensus estimates (EPS, revenue) via S&P Global were not retrievable at time of writing due to access limits; therefore, estimate comparisons are not provided. Values would be retrieved from S&P Global.

Where estimates may need to adjust:

  • Margin trajectory: With Q2 gross margin ahead of the prior year and European mix improving, models assuming flat gross margins may pivot slightly upward, tempered by higher A&P and license amortization .
  • H2 sales cadence: Management’s balanced mid-single-digit H2 growth outlook, plus strong July sell-in, may justify modest upward revisions for Q3, with caution in Eastern Europe .

Key Takeaways for Investors

  • Margin quality improved: Strong gross margin expansion (64.5%) and resilient operating margin (18.9%) despite elevated A&P and license amortization – supportive of sustained profitability as mix normalizes .
  • Guidance intact: Reaffirmed FY2024 $1.45B/$5.15, signaling confidence despite sell-in moderation and Eastern Europe risk; watch holiday sell-in pacing and July/Aug order books .
  • Portfolio breadth drives resilience: Legacy pillars (Jimmy Choo, Montblanc, Coach) plus Lacoste/Cavalli underwrite H2; brand extensions and DKNY 24/7 rollout are near-term demand catalysts .
  • Cash discipline and working capital: Healthy working capital ($525M), DSO 72 days; inventory built for new licenses—expect improved inventory efficiency by year-end .
  • Travel Retail and APAC: TR continues to surge (+20% y/y) with a ~10% long-term target; China remains a watch item, but broader APAC and travel retail trends are constructive .
  • Licensing durability: Van Cleef & Arpels 9-year renewal with tighter selective distribution reinforces premium positioning; supports long-term brand equity and margin structure .
  • Trading implications: Near-term catalysts include H2 launch pipeline and strong July sell-in; monitor SG&A/A&P mix for operating leverage, and any updates on Eastern Europe recovery and U.S. destocking easing .