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II

INTERPARFUMS INC (IPAR)·Q3 2024 Earnings Summary

Executive Summary

  • Record quarter: Net sales rose to $424.6M (+15% YoY), operating margin expanded to 25.0% (+130 bps YoY), and diluted EPS reached $1.93 (+16% YoY), driven by strength in prestige brands and contributions from Lacoste and Roberto Cavalli .
  • Guidance maintained: Management reaffirmed FY2024 net sales of $1.45B and diluted EPS of $5.15; gross margin expected to be ~64% for the year, with heavier Q4 A&P spend to support holiday and 2025 pipeline .
  • Mix/FX dynamics: Consolidated gross margin was flat YoY at 63.9%; net income was impacted by a $3.4M FX loss (vs. a $0.7M gain last year), partially offset by SG&A leverage and strong operating execution .
  • Regions/pipeline: Western Europe (+25%), North America (+12%), and Asia/Pacific (+15%) led growth; new brand additions contributed ~10% of Q3 topline, with broad-based innovation slated for 2025 (e.g., Montblanc, Jimmy Choo, Lacoste) .
  • Near-term catalysts: Nov 12 initial 2025 guidance, heavy holiday sell-through aided by gift sets and well-stocked channels; travel retail trending toward a 10% net sales target over time .

What Went Well and What Went Wrong

  • What Went Well

    • “Best quarter in our history”: Q3 net sales hit $424.6M and operating income rose 22% YoY to $106.0M as brands and new licenses scaled effectively .
    • Geographic outperformance: Western Europe (+25%), Asia/Pacific (+15%), North America (+12%) with travel retail +24% YTD to ~7% of net sales; strong gift set programs replenished ahead of holiday .
    • Mix and SG&A discipline: SG&A grew 12%, below sales growth (+15%), lowering SG&A ratio by 130 bps YoY; CFO expects full-year gross margin ~64% and A&P ~21% of sales to support sustainable growth .

  • What Went Wrong

    • FX headwind: Net income was reduced by a $3.4M FX loss vs. a $0.7M gain last year, a swing of ~$4M YoY .
    • Destocking vs. sell-out: Industry-wide sell-in lagged sell-out by ~1 point, varying by geography; retailers’ leaner inventory approach affected sequential cadence .
    • Eastern Europe constraints: Earlier-year supply sourcing issues weighed on 1H results, though Q3 growth rebounded to +23% in the region .

Financial Results

MetricQ3 2023Q2 2024Q3 2024Notes
Revenue ($USD Millions)$367.969 $342.229 $424.629 Record quarter
Diluted EPS ($)$1.66 $1.14 $1.93 EPS impacted by FX loss
Gross Margin (%)63.9% 64.5% 63.9% Mix-driven flat YoY
Operating Income ($USD Millions)$87.202 $64.828 $105.994 Margin expansion YoY
Operating Margin (%)23.7% 18.9% 25.0% +130 bps YoY
Net Income attributable to IP ($USD Millions)$53.214 $36.823 $62.259 FX loss weighed on net
Q3 Consensus Revenue ($USD Millions)N/AN/AN/AWall Street consensus via S&P Global unavailable this cycle
Q3 Consensus EPS ($)N/AN/AN/AWall Street consensus via S&P Global unavailable this cycle

Segment Net Sales

SegmentQ3 2023Q3 2024
European based net sales ($USD Millions)$233 $282
United States based net sales ($USD Millions)$134 $146
Eliminations ($USD Millions)$0 $(4)
Total ($USD Millions)$368 $425

KPIs and Operating Metrics

KPIQ3 2024YTD 2024Prior Year/Notes
A&P as % of Net Sales15.7% 16.6% Significant spending planned for Q4
SG&A as % of Net Sales38.9% 41.8% Down 130 bps YoY in Q3
FX Gain/(Loss) ($USD Millions)$(3.355) —Q3 2023 was +$0.669M
Net Cash from Operations ($USD Millions)$76.1 —Up vs. $17.5 in Q3 2023
Days Sales Outstanding (DSO)83 days —Up from 72 days 3 months ago
Cash + Short-term Investments ($USD Millions)$157 —Strong liquidity
Working Capital ($USD Millions)$617 —Healthy balance sheet
Long-term Debt incl. Current ($USD Millions)$179 —As of Q3
Dividend per Share ($)$0.75 —Payable Dec 31, 2024

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net Sales ($USD Billions)FY2024$1.45 $1.45 Maintained
Diluted EPS ($)FY2024$5.15 $5.15 Maintained
Gross Margin (%)FY2024“Broadly in line with 2023 (~64%)” “~64%” Maintained
A&P as % of Net SalesFY2024~21% ~21% Maintained
Dividend per Share ($)Q4 2024—$0.75 payable Dec 31, 2024 Announced
Initial 2025 GuidanceFY2025—Scheduled Nov 12, 2024 Upcoming event

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Market normalizationQ1: Moderation vs post-COVID surge; still robust sell-out . Q2: Market healthy but slowing; prudent outlook .Market remains healthy; expecting softer landing and sustainable growth rates .Moderating but resilient
Destocking vs. sell-outQ1: Sell-out sometimes > sell-in . Q2: Sell-in slower than sell-out; destocking in U.S./UK .Sell-in slower by ~1 point; destocking easing and largely behind the industry .Improving
Digital marketing & influencersQ2: Expanded e-commerce/amazon strategy in Europe .Greater focus on Instagram/TikTok; user-generated content; male influencers driving engagement .Expanding
Regional dynamicsQ1: WE +10%; APAC +13%; MEA down; Eastern Europe constrained . Q2: NA +5%, WE +11%, APAC +6%; MEA +8%; Travel Retail +20% .Q3: NA +12%; WE +25%; APAC +15%; Eastern Europe +23% rebound; Travel Retail +24% YTD (~7%) .Strengthening
China strategyQ2: Macro caution; limited improvement in Hainan; preparing Asia-focused lines .Underpenetrated; strategic promotional program groundwork now, measured expansion targeted for 2026 .Deliberate, cautious
Inventory & cash conversionQ1: Inventory up to support launches . Q2: Inventory up 19% vs YE 2023 .Finished goods now 63% of inventory; Op cash flow improved to $76.1M; working capital $617M .Improving efficiency
Pipeline & product launchesQ1: Lacoste/DKNY blockbusters and multiple extensions . Q2: Balanced 2H cadence; 2025 blockbusters across core brands .2025: New pillars (Montblanc, Jimmy Choo), Lacoste expansions; Solferino luxury collection limited rollout in summer 2025 .Robust pipeline

Management Commentary

  • CEO: “Sales in the current third quarter were the highest for any quarter in our history led by the ongoing strength of the global fragrance market, solid performance of our largest brands, and the addition of our newest brands.”
  • CFO: “Operating margins were 25.0%… Our net income in the third quarter takes into account a foreign exchange loss of $4 million… We delivered $76.1 million [net cash from operations] compared to $17.5 million in the prior year third quarter.”
  • CEO: “We anticipate healthy sell-out performance for the balance of the year… The Roberto Cavalli and Lacoste fragrance lines… contributed 10% to our topline performance in the third quarter.”
  • CFO: “We are reaffirming our 2024 guidance of net sales of $1.45 billion… EPS of $5.15… expect full year 2024 gross margins to be slightly ahead of ’23 at approximately 64%.”

Q&A Highlights

  • Sequencing concerns: Asked about ~15% sequential decline implied for Q4; management emphasized seasonality and lapping high-growth periods, projecting ~10% YoY growth for Q4 consistent with YTD .
  • Promotional mechanics: Gift sets viewed as healthier promotional instruments than price cuts; margin impact manageable; growing demand in Europe/Middle East .
  • Destocking trajectory: Destocking has slowed significantly, largely behind the industry; retailers are well stocked for holiday .
  • China outlook: Underpenetrated; initial promotional groundwork now, measured expansion in 2026; macro challenges acknowledged .
  • Luxury line update: Solferino targeted for summer 2025; small initial scale, strategic entry into niche segment without royalties to allocate more A&P .

Estimates Context

  • Wall Street consensus (S&P Global) for Q3 2024 revenue and EPS was unavailable due to data limits at time of retrieval; therefore, no beat/miss determination vs consensus can be made for this quarter. Management reaffirmed FY2024 guidance ($1.45B revenue; $5.15 EPS), providing anchor points for sell-side modeling .

Key Takeaways for Investors

  • Record Q3 with broad-based strength and margin expansion; topline buoyed by Western Europe and new licenses (Lacoste, Roberto Cavalli) .
  • Near term: Heavy Q4 A&P spend and well-stocked channels point to robust holiday sell-through; travel retail continues to recover toward 10% of sales .
  • Profitability: Operating margin up 130 bps YoY; gross margin ~flat YoY; FX loss weighed on net income—monitor FX and other below-the-line items .
  • Working capital and cash conversion improving; operating cash flow sharply higher YoY with inventory shifting toward finished goods .
  • Destocking pressures are easing; management indicates sequential dynamics are seasonal and YoY growth remains intact into Q4 .
  • 2025 pipeline is robust across core brands with initial guidance event on Nov 12; measured China entry in 2026 provides optionality without near-term risk .
  • Dividend continuity ($0.75/share in Q4) and strong liquidity ($157M cash/STI; working capital $617M) support capital discipline amid growth investments .

Notes: Wall Street consensus via S&P Global was unavailable for this cycle; comparisons to estimates could not be provided.