Parlux Fragrances Inc. (PARL) filed Quarterly Report for the period ended 2009-09-30.
Parlux Fragrances Inc. is a manufacturer and international distributor of prestige products. It holds licenses for Paris Hilton fragrances watches cosmetics sunglasses handbags and other small leather accessories in addition to licenses to manufacture and distribute the designer fragrance brands of Perry Ellis XOXO Ocean Pacific Maria Sharapova Andy Roddick babyGund and Fred Hayman Beverly Hills. Parlux Fragrances Inc. has a market cap of $39.2 million; its shares were traded at around $1.9301 with and P/S ratio of 0.3.
Highlight of Business Operations:
Our license with GUESS?, which is scheduled to expire at the end of our third fiscal quarter on December 31, 2009, will not be renewed. As of September 30, 2009, our inventories of GUESS? products totaled $18.3 million ($27.7 million at March 31, 2009). We may be required to record charges to operations to reduce the recorded value of such inventories to the amounts which would be realized upon their sale or liquidation. We continue to discuss the transition of any remaining inventory with GUESS? and its new fragrance licensee and have implemented a plan to reduce the inventory levels of the GUESS? products. At December 31, 2009, the end of the license period, GUESS? and/or its new fragrance licensee have the option of purchasing the remaining inventory, or the inventory must be destroyed. While we believe that our inventory position in GUESS? products is stated at its lower of cost or market, if, at the end of the license period, inventory levels are significant, and GUESS? or its new fragrance licensee elects not to purchase the entire remaining inventory, we could have a material inventory write-off.
Our gross margins may not be comparable to other entities that include all of the costs related to their distribution network in costs of goods sold, since we allocate a portion of these distribution costs to costs of goods sold and include the remaining unallocated amounts as selling and distribution expenses. Selling and distribution expenses for the six-months ended September 30, 2009, and 2008, include $1.7 million and $2.6 million, respectively, ($1.0 million and $1.4 million for the three-months ended September 30, 2009, and 2008, respectively) relating to the cost of warehouse operations not allocated to inventories and other related distribution expenses (excluding shipping expenses which are recorded as cost of goods sold). A portion of these costs is allocated to inventory in accordance with US GAAP.
During the three-months ended September 30, 2009, net sales increased 8% to $56.5 million, as compared to $52.4 million for the same prior year period. During the six-months ended September 30, 2009, net sales increased 6% to $80.1 million, as compared to $75.7 million for the same prior year period. The increase was primarily due to the launches of our new Jessica Simpson fragrance, Fancy Love, and our new Paris Hilton fragrance, Siren, in June 2009, and the launches of our new product brand fragrances, primarily in our domestic market, of Queen Latifah fragrance, Queen, in late June 2009, Josie Natori fragrance, Natori, in July 2009, and Marc Ecko fragrance, Ecko, in late September 2009.
For the three-months ended September 30, 2009, net sales to unrelated customers, which represented 65% of our total net sales increased 8% to $36.5 million, as compared to $33.8 million for the same prior year period. The increase in net sales was primarily due to an increase in sales to the U.S. department store sector. Net sales to the U.S. department store sector increased 18% to $18.6 million for the three-months ended September 30, 2009, as compared to $15.6 million for the same prior year period, while net sales to international distributors decreased 1% to $17.9 million from $18.2 million for the same prior year period. During the three-months ended September 30, 2009, the increase in sales in our domestic market was primarily due to sales of our new Jessica Simpson fragrance, Fancy Love, resulting in an increase in gross sales of $3.7 million, sales of our new Paris Hilton fragrance, Siren, resulting in gross sales of $2.0 million, and sales of our new Queen Latifah fragrance, Queen, resulting in an increase in gross sales of $5.9 million. Additionally, in our domestic market we benefited from higher levels of sell-through in difficult economic conditions. During the three-months ended September 30, 2009, the decrease in international sales was partially offset by an increase of $1.1 million in gross sales of GUESS? brand fragrances, as compared to the same prior year period, which has typically had a stronger international brand presence. We anticipate an increase in international sales over the next quarter, as the current volatility in the U.S. dollar has improved the purchasing power and cash flow of many of our international customers.
For the six-months ended September 30, 2009, net sales to unrelated customers, which represented 69% of our total net sales remained fairly constant at $55.1 million, as compared to $55.3 million for the same prior year period, primarily due to a decrease in international sales and an increase in domestic sales, partially offset by an increase in sales returns and allowances in our domestic markets. Net sales to the U.S. department store sector increased 27% to $27.0 million for the six-months ended September 30, 2009, as compared to $21.2 million for the same prior year period, while net sales to international distributors decreased 18% to $28.1 million from $34.1 million for the same prior year period. During the six-months ended September 30, 2009, the increase in our domestic market was primarily due to sales of our new Jessica Simpson fragrance, Fancy Love, resulting in an increase in gross sales of $5.4 million, sales of our new Paris Hilton fragrance, Siren, resulting in gross sales of $3.0 million and sales of our new Queen Latifah fragrance, Queen, resulting in an increase in gross sales of $6.1 million. The increase in our domestic sales was partially offset by an increase in sales returns and allowances, as compared to the same prior year period, reflecting a difficult retail climate with retailers drastically reducing inventory levels resulting from declining consumer traffic. During the six-months ended September 30, 2009, the decrease in international net sales was primarily due to a shift in our sales from international to domestic, as well as to global economic conditions. We anticipate an increase in international sales over the next quarter as noted above.
For the three-months ended September 30, 2009, sales to related parties increased 8% to $20.0 million, as compared to $18.6 million for the same prior year period. For the six-months ended September 30, 2009, sales to related parties increased 23% to $25.0 million, as compared to $20.4 million for the same prior year period. The increase for the three and six-months ended September 30, 2009, is primarily due to an increase in gross sales of $3.7 million and $6.6 million, respectively, of GUESS? brand fragrances to Perfumania, Inc., a wholly-owned subsidiary of Perfumania Holdings. Inc. and sales to another related party Quality King Distributors, Inc. See Note G to the accompanying unaudited Condensed Consolidated Financial Statements for further discussion of related parties.
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