119898 (RDEN) research, news, and more from GeoInvesting

Company description

Thu, 23 Jul 2015 15:50:17 GMT

Elizabeth Arden, Inc., a beauty products company, is engaged in the manufacture, distribution, marketing, and sale of fragrances, skin care, and cosmetic products worldwide. The company offers various fragrance products for men and women, including perfume, colognes, eau de toilettes, eau de parfums, and gift sets, as well as bath and body products, such as soaps, deodorants, body lotions, gels, creams, body and hair mists, and dusting powders. It also provides skin care products comprising serums, moisturizers, and cleansers; and cosmetics consisting of foundations, lipsticks, mascaras, eye shadows, and powders. The company’s brand portfolio includes Elizabeth Arden branded lipstick, foundation, and other color cosmetics products, such as Visible Difference, Ceramide, Prevage, and Eight Hour Cream; Elizabeth Arden fragrances comprising Red Door, Elizabeth Arden 5th Avenue, Elizabeth Arden Green Tea, and UNTOLD; and celebrity fragrance brands of Britney Spears, Elizabeth Taylor, Mariah Carey, Taylor Swift, Justin Bieber, Nicki Minaj, and Jennifer Aniston. Its lifestyle fragrance brands consists of Curve, Giorgio Beverly Hills, PS Fine Cologne, and White Shoulders; and designer fragrance brands comprising Juicy Couture, Alfred Sung, BCBGMAXAZRIA, Ed Hardy, Geoffrey Beene, Halston, John Varvatos, Lucky, Rocawear, and Wildfox Couture. The company sells its products primarily to department and specialty stores, mass retailers, perfumeries, boutiques, distributors, and travel retail outlets, as well as to independent fragrance, cosmetic, gift, and other stores. It also markets and sells its products through its e-commerce site at elizabetharden.com. The company was founded in 1960 and is headquartered in Miramar, Florida.

Research

Fri, 05 Feb 2016 18:01:03 GMT

Elizabeth Arden Misses Earnings Big in its Most Important Quarter

The holiday season is traditionally the most impactful quarter for RDEN, which is why the miss the company reported yesterday (in the midst of its turnaround efforts) continues to show that the company is failing in its restructuring. The company saw continued softness in celebrity fragrances.

Adjusted EPS of $0.10, which missed estimates by $0.50 and GAAP net loss of $0.19 per diluted share
Revenue of $316.2M, down 5.2% YOY and missing estimates by $27.8 million

Celebrity fragrances are still in a downturn, as we predicted would happen:

“Net sales of non-Elizabeth Arden branded fragrances decreased by 4%. Net sales of the Company's designer fragrances increased by 7% during the period behind strong momentum in the John Varvatos fragrance brand and growth in Juicy Couture fragrances, but were offset by lower sales of celebrity fragrances.”

A preliminary look at the company’s abbreviated financials in the press release continue to keep us confident that the company may have to do a dilutive raise moving forward, as it continues to burn cash. Recall, we published a research report in the summer of last year, when RDEN was trading at levels over $10, stating that we saw 52% downside in the stock with a potential insolvency scenario.

Research

Thu, 07 Jan 2016 16:07:39 GMT

Closed Our Short Position In $RDEN ($9.06)

Yesterday, via premium tweet we stated:

“Closing RDEN short to free up cash; stock on 52 wk low. RDEN may continue lower, our long term target 40-50% lower”

On July 28, 2015 we issued a short thesis report detailing a number of red flags about the embattled cosmetics and fragrance company:

RDEN’s dependence on celebrity fragrances comes at a terrible time, when the over-saturated fragrance industry is shifting to designer brands and quality over celebrity names.
We believe that many of the licenses that RDEN owns for fragrances are for celebrities and designers whose peak fame is years behind them.
Removing the value of questionable intangible assets on the company’s balance sheet reveals it may be much closer to an insolvency scenario than the numbers make it look.
Recent filings and an S&P downgrade of the company’s debt could be forecasting more tumultuous results when RDEN reports in mid-August.
Based on the average of numerous valuation scenarios, we believe RDEN shares could have 52% downside, alongside risk of a bankruptcy/insolvency scenario.
The company claims in its 10-Q that its intangible assets are “fully impaired” despite stating in the 10-Q that “net sales of Justin Bieber and Nicki Minaj fragrances fell significantly below expectations” and that there is an “expectation for a continued decline of sales in future periods.”

For the official GeoInvesting write-up in its entirety,click here.

Comments & Business Outlook

Thu, 06 Aug 2015 16:27:21 GMT

RDEN ($10.20, marked down to $9.50 pre-market) Elizabeth Arden reported earnings this morning that missed badly on the bottom line and barely met the top line estimates.

The company reported a loss of $1.57 per share against analyst estimates of a loss of $0.67 per share. The company’s revenue was in-line at $188.7 million, but still down 6.2% over the prior year.
Total shareholder’s equity is down over $235 million from 2014 to 2015 and now sits at just $132.4 million, which is inclusive of over $250 million in questionable intangible assets that we highlighted in our recent report, which came out last week.
Another point of criticism from our report was that RDEN was recklessly betting itself on an underperforming fragrance market. Adjusted net sales of non-Elizabeth Arden fragrances decreased by 9%.
Net sales in North America declined by 14%

This earnings report and sizable bottom line miss continue to validate our report that was published on July 28, 2015. In it, as a reminder, we stated that we believe shares to have an additional 52% downside and we placed a price target of $4.80 on RDEN.