August 8, 2013 / 12:11 PM / 4 years ago

UPDATE 3-Elizabeth Arden results, forecasts well below estimates

* Problems with Wal-Mart continue

* Sees FY EPS $2.15-$2.30 vs analysts’ view $2.85

* Shares fall as much as 24.6 pct (Adds CEO comments, downgrade by analyst, updates stock price)

By Jessica Wohl

Aug 8 (Reuters) - Elizabeth Arden Inc on Thursday turned in much weaker results and forecasts than expected, as Wal-Mart Stores Inc ordered less than planned and the beauty products company struggled to make over its namesake brand.

Chief Executive E. Scott Beattie kicked off a conference call by apologizing for the poor execution and performance. Investors pushed the shares down as much as 24.6 percent to $30.37, the lowest level in nearly two years. The shares were still down 20 percent at $32.31 in midmorning trading on the Nasdaq.

“We all understand that we have to regain the confidence of our shareholders,” Beattie said.

Adjusted earnings in the fiscal fourth quarter were less than one-third of analysts’ target and the company’s forecasts for the current quarter and full year also suggested profit will continue to disappoint Wall Street.

Elizabeth Arden has been working to overhaul its namesake cosmetics brand for months and is cutting some jobs in areas such as sales and getting out of unprofitable businesses. Its results and forecasts showed the plan is taking longer than the company anticipated.

Wells Fargo analyst Tim Conder downgraded the shares to “market perform,” suggesting investors move to the sidelines pending clarity on the company’s long-term plans.

Elizabeth Arden said its largest U.S. mass retailer ordered less than it had anticipated, especially in June. It also saw weak sales in Europe, particularly in the United Kingdom.

While Elizabeth Arden did not specifically identify Wal-Mart and its Walmart U.S. unit as the source of its problems, the world’s largest retailer accounts for about 13 percent of its total sales and 20 percent of sales in North America.

Elizabeth Arden, like many consumer goods makers, is affected by sales trends at Wal-Mart. Walmart U.S. same-store sales unexpectedly fell 1.4 percent in its quarter ended in April, and the chain has forecast second-quarter same-store sales to be flat to up 2 percent.

The reduction in orders was a surprise, Beattie said, adding that he thinks the issue was not unique to Elizabeth Arden or its categories.

FOREIGN CURRENCY HIT

Elizabeth Arden, which sells a variety of beauty products and celebrity fragrances, lost $5 million, or 17 cents per share, in the fiscal fourth quarter ended June 30, compared with a profit of $3.6 million, or 12 cents per share, a year earlier.

Adjusted earnings per share, excluding items such as costs related to its brand repositioning, fell to 10 cents from 28 cents. Analysts had expected earnings of 33 cents per share.

Sales rose 0.8 percent to $267.6 million while analysts looked for sales of $289.8 million, according to Thomson Reuters I/B/E/S.

Along with the issues at Wal-Mart, the company also saw weakness in Europe, particularly in the United Kingdom.

Sales should rise 3 to 5 percent in the fiscal year ending next June, including a hit of about 1 percentage point from foreign currency, it said.

The company forecast earnings per share of $2.15 to $2.30, including a hit of about 19 cents from foreign currency translation. Analysts had expected earnings of $2.85 per share.

For the current first quarter ending in September, it forecast sales flat to down 1 percent, with adjusted earnings per share of 13 to 18 cents. Analysts expected 50 cents per share this quarter.

The company expects to spend $11 million to $16 million for the Elizabeth Arden repositioning this year, including about $7.5 million in the first quarter. It also forecast about $5 million in restructuring and severance charges, with $3.5 million in the first quarter.

Editing by Jeffrey Benkoe and Matthew Lewis

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