UPDATE 3-Elizabeth Arden overseas' growth narrows loss

Thu May 6, 2010 12:53pm EDT

* Q3 adj loss $0.11/shr vs Wall Street view loss $0.15

* Sales rise 6.7 pct to $217 million

* Raises FY earnings guidance, confirms sales forecast

* Sees improved cash flow this year

* Shares up 7 percent at $18.04 (Adds looking for acquisitions, share buyback, outlet openings, byline)

By Jessica Wohl

CHICAGO, May 6 (Reuters) - Elizabeth Arden Inc (RDEN.O) posted a narrower-than-expected quarterly loss and raised its profit forecast on Thursday, helped by strong international growth and improved gross margins.

The cosmetics maker also raised its cash flow expectations for its fiscal year, which ends in June, and kept its sales forecast.

Its shares were up 7 percent at $18.04 in midday trading after rising as much as 10.8 percent.

Sales growth was led by Elizabeth Arden branded products as well as Juicy Couture and Britney Spears fragrances, said Chairman and Chief Executive E. Scott Beattie.

The company is selectively looking at buying brands, especially those that would help it grow its European fragrance business, Beattie said. [ID:nWEN4340]

He also said Arden would continue to with its share buyback program on a selected basis.

In the United States, Arden's largest market, sales continued to be better at mass retailers such as Wal-Mart Stores Inc (WMT.N) than at department stores such as Macy's Inc (M.N).

Wal-Mart sales are up in a "considerable" double-digit range since the discount giant started putting more fragrances on open shelves rather than in locked displays, Arden said.

But U.S. department stores have posted 20 consecutive months of fragrance sales declines, Joel Ronkin, who runs Arden's North American business, said during its quarterly call.

The continued pressure at U.S. department stores echoed comments from larger cosmetics maker Estee Lauder Cos Inc (EL.N). Last week, Lauder said weakness at those stores could dampen its near-term cosmetics sales and gave a higher profit forecast that fell short of Wall Street's expectations. [ID:nN27243612]

At Arden, much of the decline stemmed from department stores returning discontinued brands. The company is also seeing merchants reduce the number of brands they carry.

Arden hopes that new products will spur some growth. After seeing a 50 percent rise in Juicy Couture fragrance sales so far this year it will launch Peace, Love and Juicy Couture in upscale stores in August. Other items include Mariah Carey's Lollipop Bling, due in June, and Kate Spade fragrances, due out in the fall.

Juicy Couture and Kate Spade are both owned by clothing maker Liz Claiborne Inc LIZ.N, which has seen its shares sink after it gave a disappointing forecast [ID:nN06246066].

Arden also opened its first outlet store in Miami and executives said it plans to open several more.

BY THE NUMBERS

Arden lost $3.9 million, or 14 cents per share, in its fiscal third quarter that ended on March 31, versus a loss of $3.7 million, or 13 cents per share, a year earlier.

Excluding restructuring and other expenses, Arden posted a loss of 11 cents per share. Sales rose 6.7 percent to $217 million.

Analysts expected an adjusted loss of 15 cents per share on $215.21 million in sales, according to Thomson Reuters I/B/E/S.

Arden has been reducing inventory and taking other steps to improve its results. It said third-quarter gross margins improved by 440 basis points and inventories declined 24 percent.

The company now expects fiscal-year earnings of 69 to 76 cents per share, up from January's forecast of 63 to 73 cents. It still expects sales to rise 2.5 percent to 3.5 percent. Analysts are calling for fiscal year earnings of 71 cents per share.

Arden expects fiscal-year cash flow from operations of $90 million to $100 million, up from its prior target of $70 million to $75 million. (Reporting by Jessica Wohl; Editing by Derek Caney, Maureen Bavdek and Leslie Gevirtz)

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