Elizabeth Arden Partners with Wildfox - Analyst Blog

Elizabeth Arden Inc. RDEN has been reporting lower-than-expected earnings for the past few quarters due to poor sales and persistent declining demand in the fragrance business. In order to boost sales of the fragrance sector, the prestige beauty product company entered into an agreement with designer fashion brand, Wildfox Couture, to develop and market Arden's flagship fragrance brands.

Wildfox is a clothing and accessories brand sold in selected boutiques and department stores over 30 countries, including the U.K., France, Spain, Germany, Brazil, Japan, South Korea, Australia, Russia and Taiwan. The brand was founded by Jimmy Sommers and Kimberley Gordon.

The partnership is a strategic fit for Elizabeth Arden as it will be able to reach young, fashion-conscious consumers who prefer the popular designer knitwears by Wildfox Couture. For Wildfox, the agreement will provide a ready platform to debut in the fragrance business.

In the recently reported second quarter fiscal 2014 results, Elizabeth Arden's earnings of 84 cents fell short of the year-ago earnings as well as the Zacks Consensus Estimate due to continued poor demand in the fragrance business. Reduced store traffic and unprecedented store closings due to harsh winter resulted in the decline in the fragrance category.

Net sales of $210.8 million of the Zacks Rank #5 (Strong Sell) company also lagged year-ago results and the Zacks Consensus Estimate by 20.3% and 17.7%, respectively, due to lower year-over-year sales in all the geographical segments. Net sales of branded skin care, color and fragrance products declined 19% in the quarter due to poor demand.

Other Stocks to Consider

Other stocks in the industry that are performing well at the current level and are worth considering include Coty Inc. COTY, The Kroger Co. KR, Ingles Markets, Inc. IMKTA. While Coty sports a Zacks Rank #1 (Strong Buy), Kroger and Ingles Markets have a Zacks Rank #2 (Buy).