Inter Parfums, Inc. Reports Third Quarter Results

Business Wire, Nov 9, 2005

NEW YORK -- Inter Parfums, Inc. (NASDAQ National Market: IPAR) today reported third quarter 2005 results.

Third Quarter 2005 Compared to Third Quarter 2004:

--Net sales increased 12% to $75.4 million from $67.1 million. There were no discernable effects of changes in foreign currency exchange rates for the current third quarter;

--Gross margin rose to 56% of net sales, as compared to last year's 50%,

--S, G & A as a percentage of sales rose to 47% from 38% for the corresponding period of the prior year; and,

--Net income was $3.8 million or $0.18 per diluted share, as compared to last year's $4.0 million or $0.20 per diluted share.

Net sales through September 30, 2005 increased 21% to $207.9 million from $172.2 million in the first nine months of 2004; there were also no discernable effects of changes in foreign currency exchange rates for the current nine-month period. Net income was $11.4 million or $0.56 per diluted share as compared to $12.2 million or $0.60 per diluted share in the first nine months of 2004.

Jean Madar, Chairman & CEO, stated, "For the quarter, prestige product sales rose by 16% while mass market sales declined by 11%. Burberry fragrance sales generated a 14% increase with contributions from the entire portfolio. This increase comes during a period where no major launches took place and only a limited amount of pre-launch sales of Burberry Brit Gold (limited edition holiday fragrance) were registered. Lanvin product sales were also ahead of last year's third quarter driven by solid gains from the Eclat d'Arpege line. To a lesser extent, the debut of Christian Lacroix Tumulte mid-quarter and the geographic rollout of Celine Fever contributed to our third quarter sales growth. The launch of our first new Lanvin fragrance, Arpege Pour Homme, has begun in time for the 2005 holiday season with geographic rollout to ensue in the coming year."

He went on to say, "S, G & A expenses were higher primarily as a result of increased expenditure requirements under the license with Burberry. Increased royalties took effect July 1, 2004 while increased advertising requirements took effect January 1, 2005. Total royalty expense for the third quarter increased 19% to $8.8 million, as compared to $7.4 million for the corresponding period of the prior year. For the first nine months of 2005, royalties increased 76% to $23.6 million, as compared to $13.4 million, for the corresponding period of the prior year. Promotion and advertising aggregated $12.9 million for the third quarter and $31.9 million for the first nine months of 2005, up from $6.3 million and $16.6 million, for the respective periods in 2004. Improved gross margins continue to mitigate much of these increased expenses."

Mr. Madar added, "As we previously reported, we have a very ambitious new product schedule for 2006, which includes a major new Burberry fragrance family in spring 2006, in conjunction with Burberry's 150th anniversary."

Regarding the agreement with Gap Inc. under which Inter Parfums will develop, produce, manufacture and distribute personal care and home fragrance products under the Gap and Banana Republic brand names for Gap and Banana Republic retail stores in the U.S. and Canada, Mr. Madar noted, "With work now underway on design concepts and the initial lines, we expect to meet our goals of launching at Banana Republic in the fall of 2006 and at Gap in early 2007. As previously reported, we had budgeted between $1.5 million to $2.5 million in the second half of 2005 and in the third quarter, we incurred expenses of approximately $0.6 million. To propel these programs forward, these expenses are expected to continue in 2006. In addition, we are currently transitioning component sourcing and production of Gap's existing fragrance and personal care product lines to suppliers and contract fillers of the Company. Margins on initial sales to Gap of their existing product lines are expected to be minimal, as we plan to honor existing purchase commitments. Sales estimates for Gap's existing line, as well as initial estimates for the Banana Republic line expected to launch in September 2006 will be included in our guidance for 2006 which we intend to announce at the end of November 2005."

Russell Greenberg, Executive Vice President & CFO noted, "Our financial position remains strong. At September 30, 2005, working capital aggregated $129 million and cash and cash equivalents and short-term investments aggregated $44.0 million."

Regarding the recent common stock offering, Mr. Greenberg stated, "As has been reported, LV Capital USA, Inc., an Inter Parfums shareholder since 1999, sold its 3,436,050 share stake through an underwritten public offering. We believe that the increase in the public float following the offering will enhance trading volume and liquidity in our shares."

He closed by saying, "Assuming the dollar remains at current levels, we are reaffirming our 2005 sales guidance of approximately $274 million, which represents a nearly 17% increase over 2004 sales. We are also reaffirming our 2005 net income guidance of $14.6 million or $0.71 per diluted share."