BEAUTY CARE

Bare Escentuals feels effects of economy even as it posts successful Q2

BY Antoinette Alexander

SAN FRANCISCO Bare Escentuals, a maker of mineral makeup, posted double-digit gains in second quarter sales and earnings but, according to at least one industry observer, is being impacted by the weak economy and lower-priced options available in the mass market.

Net sales for the second quarter ended June 29 were $138.5 million, an increase of approximately 12 percent from $124.1 million in the year-ago period.

Net income for the quarter was $24.7 million, or 26 cents per diluted share, an increase of 22 percent compared with $20.2 million, or 22 cents per diluted share, in the second quarter of fiscal 2007.

“The overall business is seeing pressure from the weak macro environment. Not only are Bare customers choosing lower priced kits and ‘open box’ products, the company is also seeing less success in attracting new customers who typically shop at the mass channel,” stated William Chappell, SunTrust Robinson Humphrey analyst, in a recent research note. “This second issue has been exacerbated by the high number of lower priced products which have hit mass shelves in the past six months.”

For fiscal 2008, the company now expects sales growth to be in the range of 15 percent to 20 percent compared to the prior year. This compares with it original guidance of between 20 percent and 25 percent growth. The company continues to expect diluted earnings per share for fiscal 2008 to be in the range of $1.13 to $1.18.

“We are clearly frustrated by the quarter and guidance. It feels like the company realized all the investor concerns (economic slowdown, increased competition, uncertainty of the Infomercial channel) in just one quarter,” added Chappell. “The tempered growth outlook will raise more questions as to whether the company is adequately supporting the brand versus competition (Bare doesn’t do traditional advertising) and the health of the infomercial channel. That said, we are not yet ready to throw in the towel on the stock.”

Chappell noted that, on the bright side, margins were better than expected (operating margin was 32.5 percent versus his 29.8 percent estimate) as the mix shift to smaller kits and open boxes provided a gross margin lift. Furthermore, the company continued to see solid growth internationally and management indicated that the sell through growth rates in the United States remain above 20 percent.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

Polls

Which area of the industry do you think Amazon’s entry would shake up the most?
BEAUTY CARE

P&G posts strong quarterly growth

BY Antoinette Alexander

CINCINNATI P&G announced on Tuesday that it posted its 24th consecutive quarter of top-line growth at or above the company’s targets as it completed the integration of Gillette.

“We’re leading innovations across the brand portfolio, building value for consumers and customers which is critical to delivering good results in a difficult economic environment,” stated A.G. Lafley, chairman and chief executive officer. “The strength of the portfolio and our focus on innovation and productivity give us confidence that we will continue to deliver sustained growth in the coming year and beyond.”

Beauty net sales rose 11 percent to $5 billion, as net earnings were flat at $569 million. Cosmetics volume grew high-single digits behind the CoverGirl Lash Blast mascara initiative, while skin care volume grew mid-single digits behind strong growth in developing regions. Hair care volume grew low-single digits as strong growth on Head & Shoulders, Rejoice and Nice ‘n Easy were partially offset by declines in professional hair and on Pantene in North America.

Grooming net sales were up 12 percent to $2.1 billion for the quarter, as net earnings increased 31 percent to $396 million. Earnings grew behind sales growth, lower overhead spending as a percentage of net sales and high base period marketing spending to support the Fusion expansion. Volume in blades and razors grew low-single digits as double-digit growth in developing regions behind the geographic expansion of Fusion was partially offset by lower shipments in developed regions. Fusion volume grew more than 30 percent globally in the quarter versus the prior year period. Volume for Braun was down low-single digits as strong growth in developing regions was more than offset by the exists of the U.S. home appliance business and Tassimo coffee appliance business.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

Polls

Which area of the industry do you think Amazon’s entry would shake up the most?
BEAUTY CARE

Stahl to join Delhaize board

BY Antoinette Alexander

BRUSSELS, Belgium Former Revlon chief executive officer, Jack Stahl, will join the board of directors for Belgian international food retailer Delhaize Group.

Stahl will serve as an independent director, filling in the vacancy created by the departure of Dr. William Roper until the next Ordinary General Meeting in May 2009. At that time, the board will submit Stahl’s appointment as member of the board and as an independent director to the shareholders.

Roper has decided to step down as a director to pursue other opportunities in the medical and related fields. Roper is dean of the School of Medicine at the University of North Carolina at Chapel Hill and chief executive officer of UNC Healthcare System, a biomedical research institution in North Carolina.

Stahl last served in the role of president and chief executive officer of Revlon from 2002 to September 2006. Before joining Revlon, Stahl had a 22-year career as an executive with the Coca-Cola Company culminating in the role of president and chief operating officer. He also served as chief financial officer and group president of Coca-Cola North America.

He currently serves on the boards of pharmaceutical company Schering-Plough and the soft drinks company Dr Pepper Snapple Group. He is also a board member of several non-profit organizations such as The Boys and Girls Clubs of America and The United Negro College Fund.

keyboard_arrow_downCOMMENTS

Leave a Reply

No comments found

TRENDING STORIES

Polls

Which area of the industry do you think Amazon’s entry would shake up the most?