Elizabeth Arden Inc.RDEN

Morningstar Rating

Stock Research and Analysis

by Morningstar Analysts

The fragrance category has been hit hard by the economic downturn. Although Elizabeth Arden is one of the leading players in this space, it has not been immune to the increasingly challenging consumer-spending environment. Further, while the short term Read more

Bulls Say

Elizabeth Arden has done a good job of keeping tried-and-true brands such as White Diamonds chugging along while also attracting new customers with successful celebrity marketing campaigns.

The company reduces dependence on one channel by supplying to a variety of retailers ranging from department stores to mass merchants.

Strong sales growth in China, Taiwan, and Hong Kong is likely to continue because the firm is still operating from a relatively small sales base in these countries.

Elizabeth Arden has a relatively low-cost business model for the cosmetics industry. Manufacturing, research, and development are outsourced, and the firm acts as a distributor for other prestige fragrance brands. Read more

Bears Say

Fragrance is certainly a discretionary item, and Elizabeth Arden has been negatively impacted by the overall slowdown in the macroeconomic environment. A prolonged downturn could continue to weigh on sales.

The company is striving to make improvements in its working capital, but problems with inventory buildups and returns plague this industry.

Celebrity fragrances are subject to fashion risk, are expensive to launch and support, and offer no guarantee of success. As more are introduced, the likelihood of success diminishes.

Competition in the cosmetics industry is fierce. Elizabeth Arden has been successful in the fragrance category, but it will face much larger rivals such as L'Oreal LRLCY and Procter & Gamble as it tries to expand into skin care.

Elizabeth Arden is still a relatively small player at around $1 billion in sales. Larger competitors have deeper pockets and could put more dollars behind fragrance launches. Read more

Strategy

Elizabeth Arden plans on driving sales by investing in its existing portfolio of brands, while adding new lines through in-house development and acquisitions. The company is also looking to improve profitability Read more

Management

E. Scott Beattie has been CEO since 2006 and chairman since 2000. We'd prefer that the two roles were split to ensure that an independent party is overseeing the CEO. In general, however, we think that corporate governance is good at the firm. We are Read more

Profile

Elizabeth Arden markets and distributes fragrance, skin care, and cosmetics to a variety of retailers. Customers include department stores, mass retailers, boutiques, and Read more

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