This company, primarily a manufacturer (sourcing), marketer, and distributor of fragrance and fragrance related products (owned brands and licensed brands), has been grouped into cosmetics& perfumes sector in personal care industry.
It seems that demand, from retail distribution channels, for cosmetic, perfume, or skin& hair care products of companies in this sector in US market has been weak since 2015. This has been reflected by the decreasing sales volumes among most of those companies (-3-1% of annual growth rate) during this period. International market seems to have had a better performance than US market.
The downward trend in US market seems also related to the slowing down shopping mall traffics. And this may be the reason why higher price products performed better. And it seems that it may be helpful in improving sales performance of companies as they give more focus on e-commerce sales. Unfavourable industrial retail environment may probably be behind the increasingly consolidation activities in this sector.
Sales pressure resulted in increasing pressure on price and the intensive promotions obviously hurt margin of companies in this sector. We have seen a slight declining in typical companies ‘gross margin (about 59% in 2017) and the larger spending in SG&A including promotion (typical SG&A as percentage of sales is about 53% in 2017). Therefore, the typical operating margin went down to about 7% from about 12% since 2014.
The typical average stock price/sales ratio is about 1.5.
It seems that the demand for products of this company has been quickly increasing in the past two years as indicated by increased sales, especially sales in European based prestige products.
The increase has been most driven by new products launches.
The fiscal 2017 compared with the 2016
Organic sales (excluding currency) increased 12% primarily due to increase of 18% in European based prestige products sales offset by decrease of 2% in US based products sales.
The fiscal 2016 compared with 2015
Organic sales (excluding currency) increased 12% primarily due to increase of 11% in European based prestige products sales and increase of 11% in US based products sales.
Fiscal 2015 compared with 2014
Organic sales (excluding currency) increased 1.5% primarily due to increase of 1.8% in European based prestige products sales and increase of 1% in US based products sales.
Its gross margin has increased from around 58% in 2014 up to about 63% of 2017 due to product mix’s shifting to higher margin products and as well to foreign currency impacts. Its operating margin thus decreased to about 11% in 2017 with a slightly lower SG&A as percentage of sales (about 47% at 2017).
Stock performance
This stock currently has a stock price/cash flow ratio of 29. We think that its stock is being relatively undervalued compared with its peers.
