Elizabeth Arden Brings Rx Skincare Cream - Analyst Blog

Cosmetics retailer Elizabeth Arden RDEN is trying to boost sales after reporting unimpressive second-quarter fiscal 2014 results last month. As part of this strategy, last week, the Miramar, FL-based company forayed into professional skincare business with the launch of it latest Elizabeth Arden Rx skincare line. The skincare cream will be available exclusively at physician's office.

The cream is a stand-alone home skincare claimed to address four skin conditions — Anti-Aging, Brightening, Clarifying and Hydration. The cream is claimed to contain proprietary ingredients like several patent-pending technologies — AHA Retinoid Conjugate, an AHA/Vitamin A derivative combination; Allyl PQQ, a mitochondrial anti-oxidant; and an anti-oxidant complex designed specifically to protect essential skin proteins against harmful degradation.

The launch is in line with Elizabeth Arden's omni-channel retail strategy under which it distributes its products at prestige retail outlets and spas. Using professional skin care offices as outlets is expected to add a new dimension to the company's marketing strategy. Consumers will be more confident about the product if it is available at their skincare specialists' chambers. This will help the company to reach its consumers in a credible, science-based environment.

Elizabeth Arden has been striving to expand into the professional medical channel. It has also invested in US Cosmeceutechs, LLC (“USC”), a skin care company that develops and sells skin care products through professional dermatology and spa channels. The two companies first partnered in 2005 to launch skin care brand Prevage which gained instant popularity. The new skincare line has also been jointly designed by the two companies.

Last month, this Zacks Rank #5 (Strong Sell) company posted weak second-quarter fiscal 2014 results and withdrew its fiscal 2014 guidance.

Elizabeth Arden's second-quarter earnings of $1.08 fell short of the year-ago earnings by 31.6% due to lower sales and gross margins. Net sales of $418 million also lagged year-ago results by 10.1% due to lower year-over-year sales in all the geographical segments. Gross profit declined 17.3% year over year to $200.0 million due to lower sales and higher depreciation related to cost of goods sold.

Weak holiday sales due to bad weather conditions in December and January were responsible for the weak results. Moreover, the company reported higher inventory due to low traffic in the company's mass retail accounts, and reduced discretionary spending by consumers facing macroeconomic headwinds.

Like Elizabeth Arden, many U.S.-based retailers like Fred's Inc. FRED, Gap Inc. GPS and Ross Stores Inc. ROST registered lower-than-expected sales during the holiday season.