Q4 2007 BARE ESCENTUALS INC Earnings Conference Call - Final.

Original Source: FD (FAIR DISCLOSURE) WIRE

OPERATOR: Good afternoon, ladies and gentlemen, and welcome to the Bare Escentuals fourth quarter fiscal 2007 results conference call. (OPERATOR INSTRUCTIONS) As a reminder, this conference is being recorded February 26, 2008. I'd like to turn the conference over to Andrew Greenebaum. Please go ahead.

ANDREW GREENBAUM, BARE ESCENTUALS INC: Welcome to Bare Escentuals fourth quarter fiscal 2007 conference call. On the call today from the company are Leslie Blodgett, Chief Executive Officer, Myles McCormick, Chief Financial Officer and Chief Operating Officer, and Jim Taschetta, Chief Marketing Officer who will be available for questions. By now, everyone should have access to the fourth quarter fiscal 2007 earnings release which went out today at approximately 4 p.m. eastern time. If you have not received your release, it is available on the investor relations portion of Bare Escentuals website at www.bareescentuals.com by clicking on the about Bare Escentuals tab. The call is being webcast and the replay will be available on the company's website for three months.

Before we begin, we'd like to remind everyone that prepared remarks contain forward-looking statements and management may make additional forward-looking statements in response to your questions. These statements do not guarantee future performance; therefore, undue reliance should not be replaced on them. We refer all of you to the risk factors contained in Bare Escentuals' most recent form 10-K for the year ended December 31, 2006, and the form 10-Q for quarter ended September 30, 2007, for more detailed discussions of those factors that could cause actual results to differ materially, those projected in any forward-looking statements. Bare Escentuals assumes no obligation to revise or update any forward-looking statements that may be made in today's release or call. I'd like to turn the call over to Leslie Blodgett.

LESLIE BLODGETT, CEO, BARE ESCENTUALS INC: Thank you, Andrew. Good afternoon everyone and thanks for joining us today. The format of today's call will include my brief overview of the quarter and current trends and an update of our business and Myles will give you additional detail on our operating and financial results before we open the call for your questions. We were very pleased with our healthy fourth quarter and full year 2007 sales and profit results and that our earnings per share was above the high end of our expectations, particularly in a challenging retail environment. At the outset of the year, indicated that the benefits of our growth initiatives would be in the latter part of 2007 and, as expected, we ended the year with a strong finish in great brand momentum across all of our wholesale and retail channels.

Our fourth quarter net sales increased 31% to approximately 145 million due to the increased brand awareness and expanded distribution both here and abroad and our net income rose 65% over the prior year. For the year we recorded sales of 511 million, up 30% from 2006, and our net income increased 75% from the prior year. It was a tremendous year for Bare Escentuals as we believe we strengthened our leadership position in the marketplace. Across our channels Bare Escentuals continues to drive growth as we were again the number one brand of Sephora, the number one brand at Ulta, the number one brand on QVC, and the number one beauty in commercial. What's even more impressive, not only do we believe that we're far and away the number one mineral makeup plan, but we believe when the industry numbers are finalized for 2007, we will be recognized as the top selling foundation brand in the U.S. bar none. This incredible achievement speaks not only to the terrific contributions and tireless efforts of our retail partners, our suppliers and our employees, but also to the tremendous loyalty of the growing community of Bare Escentuals users. As evidence of this, we witnessed broad strength across our channels in the fourth quarter as our teams working hand in hand with our partners did a great job executing on the quarter's product and merchandising initiative.

Beginning with October's highly successful Try Believe Love campaign with Sephora which was aimed at building awareness and bringing in new customers to the brand followed by our record breaking today's special value sellout on QVC in November and ending with terrific execution of holiday selling in December across our retail channel. The quarter truly exemplified the ability of Bare Escentuals to cut through the noise and communicate our message effectively to women in whichever channel they prefer to shop. With respect to our infomercial business, we continued to re-edit and refine the current show throughout the fourth quarter and our efforts yielded improved results. Our focus now is on the next version of the infomercial which is on track for testing and launch in the second quarter. As we've said before, we strongly believe in the strategic importance of both the infomercial as well as QVC in building brand awareness, educating consumers and ultimately driving customer acquisition across channel.

As pleased as we are with our financial success, we recognize it begins with our customers. That is why I'm so proud of the fact that Bare Escentuals won over 20 industry awards in 2007, the majority of which were consumer voted. We received our third consecutive Glammy award from the readers of Glamor Magazine, had four products voted as best of Sephora by their customers and won Shape Magazine's reader's choice for best foundation for the second year in a row to name a few of the awards we have received. We are extremely grateful for these honors as they are a true testament to the effectiveness to our products and connection that we have with our customers. As we move into 2008, we continue to carry strong brand momentum. To date, we have already been honored with three consumer voted awards, including reader's choice award for best foundation in Teen Vogue Magazine, the reader's choice award for world's best foundation in Elle Magazine and the …