Q1 2008 Elizabeth Arden Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good morning, ladies and gentlemen. My name is Markita and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Elizabeth Arden conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. (OPERATOR INSTRUCTIONS) Thank you.

It is now my pleasure to turn the floor over to your host, Allison Malkin. Ma'am, you may begin your conference.

ALLISON MALKIN, IR, ELIZABETH ARDEN INC.: Good morning. Thank you for joining us. Before we begin, if have you not received a copy of Elizabeth Arden's press release, please call 203-682-8200 and we'll send one out immediately. Also, please note that this call is being broadcast live over the internet and you can access the call at www.elizabetharden.com.

Before we begin, I'd like to remind you that some of the comments made on this call, as either prepared remarks or in response to your questions, may contain forward-looking statements that are made pursuant to the Safe Harbor Provisions in the Securities Litigation Reform Act of 1995. Such information is subject to risks and uncertainties that could cause actual results to differ materially from the statements as described in the press release and in Elizabeth Arden's most recent annual report on Form 10-K filed with the SEC. We direct all listeners to that report.

The information contained in this call is accurate only as of the date discussed, and investors should not assume that the statements made in this call remain operative at a later time. Finally, Elizabeth Arden undertakes no obligation to update any information discussed on this call.

I would now like to turn the call over to Scott Beattie, Chairman and CEO of Elizabeth Arden. Scott, please go ahead.

SCOTT BEATTIE, CHAIRMAN, CEO, ELIZABETH ARDEN INC.: Thank you very much, Allison. And we welcome everyone to our first quarter conference call. Joining me today is Steve Smith, our Executive VP and Chief Financial Officer; Joel Ronkin, our Executive VP of our North American Fragrance Division; and Marcey Becker, our Senior Vice President of Finance.

Before we start, I'll just provide a brief overview of the content today. First of all, I'll provide an overview of our first quarter corporate performance and outlook for the second quarter. We'll have a -- provide also a summary of the international business and our Elizabeth Arden Prestige North American business. Joel will then go into an analysis and overview of our North American fragrance business, as well as performance review of our new fragrance innovation and launches. And Steve will provide a review of our key financial metrics during the first quarter. At the end of the three segments, we'll be happy to answer any questions.

In terms of the first quarter performance, as you can see from the press release, we're very pleased with the overall performance of our Business. In fact, I think the Business actually performed better than the numbers show. As we stated in the press release and previously outlined in our guidance, we had budgeted and planned down our North American Department Store business. This decline was a function of the -- both the anniversarying other last year's fragrance launches, some movement in the Elizabeth Arden department store calendar, both in terms of the retail calendar and the GWP programs, as well as not anniversarying new PREVAGE innovation during the first quarter. Much of the reduction in our North American Department Store performance will be made up during the second quarter, as we have budgeted and planned -- and we can go into that in a second in more detail.

In terms of our overall performance, our international business was up approximately 18% during the first quarter. Most markets had positive increases. In addition, the profitability, most notably in our European business, improved quite significantly. By brand, our fragrance sales were up 29% -- or by segment of business, our fragrance sales were up 29% and our Elizabeth Arden brand business was up 14%. Specifically in Europe, our overall business was up 14%. The Europe domestic markets, which as we stated in our previous conference call, we went through a restructuring last year. For the last three quarters they have shown steady, solid increases over budget, both from a sales point of view and a profit point of view. The Europe domestic markets were up 35% for the first quarter and we had good growth across most of the markets, led by both the increased fragrance sales and increased performance of our key accounts like Sephora, [Mareano] and [Duglass]. So we were very pleased with that.

In terms of our Travel Retail business, it was up 19%. There was increases in all of the markets across all categories. The Elizabeth Arden branded products from skin care, color, and PREVAGE and Fragrances was up 22%. That was led by the PREVAGE business, which was up almost 30%. Fragrances also had a double-digit growth of 13% due to the launch of Mediterranean during the first quarter In Travel Retail. And so we were extremely pleased with the performance of that business.

In terms of Asia Pacific, which also includes our South African business and Australia and New Zealand -- the business was up 21%. All markets were up across the whole region, with the exception of Korea. Australia was very strong, particularly with the new launch of Mariah Carey as well as our Mediterranean launch. And the PREVAGE business is also very strong.

In terms of China -- our business in mainland China was up 75%, which is over what we had budgeted for. Our Taiwan business was up 24%. And overall in the region, we saw very solid growth. We're seeing extremely solid improvements in productivity per door. We're also seeing roll-out in …