Interparfums outlines $1.47B full-year sales target and direct-to-consumer expansion amid continued macro headwinds

Earnings Call Insights: Interparfums, Inc. (IPAR) Q3 2025

MANAGEMENT VIEW

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CEO Jean Madar stated that "sales continued to moderate in the third quarter as macroeconomic conditions remain uncertain" and highlighted a strategic focus on "innovation across our portfolio, focusing on product enhancement and new launches." He reported third quarter and year-to-date sales up 1% for both periods, with European-based operations sales rising 5% for the first quarter, supported by a stronger euro, while U.S.-based operations declined 5% in the third quarter. Madar cited robust performance for Jimmy Choo Fragrance, with a 16% sales surge, and noted that Coach fragrances grew 6% quarter-over-quarter, driven by established lines and the launch of Coach Gold. Lacoste fragrances are "on track for $100 million in sales this year." He also emphasized new brand launches and product rollouts, including Roberto Cavalli's Serpentine, and discussed the company's first ultra-luxury direct-to-consumer offering, the Solférino collection, with plans to expand to 100 retail doors by next September and 500 stores by the end of 2030. Madar stated, "fragrance sales are accelerating across digital platforms as e-commerce has firmly established itself," with Amazon, Divabox, and TikTok Shop as growth channels. He also revealed travel retail grew 13% in the quarter. Operationally, Interparfums is transitioning to 100% third-party providers for logistics and shifting manufacturing closer to the point of sale for certain products, aiming to finish this by year-end.

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CFO Michel Atwood reported, "net sales of $430 million for the third quarter, resulting in a 1% increase for both the 3 and 9 months ended September 30, 2025," with foreign exchange aiding top-line growth. He noted, "gross margin for the first 9 months expanded by 80 basis points to 64.4%," but in the third quarter, gross margin declined by 40 basis points due to tariffs, which represented about $6 million. Atwood said, "operating income was $109 million for the quarter, a 2% increase, resulting in an operating margin of 25.3%." Net income for the quarter was $66 million or $2.05 per diluted share, a 6% increase year-over-year. Inventory decreased 6% from last year's third quarter, with improved finished goods mix, and operating cash flow rose by $18 million from the prior period. The company repurchased $7.5 million in shares year-to-date. Atwood announced a merger to simplify corporate structure, with no expected material impact on shareholders.

OUTLOOK

* Atwood provided updated guidance: "we now expect sales of approximately $1.47 billion, representing 1% year-over-year growth, and diluted earnings per share of $5.12, which is in line with 2024." He added that, while formal 2026 guidance will be provided later, "we currently anticipate moderate top and bottom line growth in that year, generally in line with what we are seeing this year," and expect "a return to stronger growth in 2027, driven by enhanced innovation, including the development and distribution of our newest licenses, Off-White, Longchamp, as well as Goutal."

FINANCIAL RESULTS

* Atwood reported consolidated operating income and margin improved for both the quarter and year-to-date. He detailed a loss of $7.7 million for the first 9 months due to higher foreign currency losses and marketable securities impact, partially offset by lower net interest expenses. Gross margin for European operations was 66% for the quarter. U.S.-based operations saw net income decline 14% to $21 million in Q3 due to lower sales. Cash and equivalents stood at $188 million, with working capital at $688 million. Inventory levels and operating cash flow improved, and the share repurchase program continued.

Q&A

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Sydney Wagner, Jefferies LLC: Asked about holiday outlook and price increases. Madar responded, "We had a strong October... our forecast for November is also quite strong. So it means that retailers are continuing to buy. The inventory at store level is not high... this year, we are not worried for the holiday season." On pricing, "We took a very modest pricing compared to other companies... we didn't see too much resistance, neither from retailers, nor our consumers."

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Wagner followed up on shipment timing. Atwood replied, "We've certainly seen a little bit less holiday sets being sold into the third quarter... but it isn't significant. The main thing... we continue to see a bit of a disconnect between sell-in and sell-out there... By the way, this isn't any different than what we're doing as well because if you look at our inventories, our inventories are also down as we're trying to get more efficient."

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Susan Anderson, Canaccord Genuity: Asked about growth from new brands and existing portfolio. Madar explained that "2026 will be... modest because... we will be working for the important launch at the end of '26, beginning of '27." Atwood added, "there is going to continue to be some work on cleaning up the portfolio and -- so that we can really focus on the largest brands."

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Anderson asked about Q4 gross margin impact from price increases. Atwood said, "I am expecting gross margins to slightly erode I'd say probably about 50 bps, something similar to what we saw in the third quarter."

SENTIMENT ANALYSIS

* Analysts' tone reflected cautious optimism, focusing on holiday demand, pricing acceptance, and growth prospects for new and existing brands.
* Management maintained a confident tone in prepared remarks, expressing belief in ongoing innovation and operational agility. During Q&A, management responses were factual and direct, with phrases such as "we are not worried for the holiday season" and "we didn't see too much resistance," indicating steady confidence. Compared to the previous quarter, management’s tone remained steady, with a continued emphasis on navigating macro headwinds and moderate growth prospects.

QUARTER-OVER-QUARTER COMPARISON

* Guidance for full-year sales was refined to $1.47 billion and EPS of $5.12, down from previous guidance of $1.51 billion in sales and $5.35 EPS. Strategic priorities continue to emphasize innovation, digital channels, and operational efficiency. Analysts' questions shifted slightly toward growth drivers for upcoming years and potential margin impacts, rather than immediate volatility or destocking. Management’s tone and confidence remained consistent, reiterating confidence in the business model and long-term value creation. Focus on inventory management and cost discipline persisted as key themes.

RISKS AND CONCERNS

* Ongoing macroeconomic uncertainty and currency volatility were cited as challenges. Management acknowledged continued margin pressure from tariffs and noted that further price increases are not planned unless there are significant market changes. The company is mitigating risks through supply chain streamlining, shifting manufacturing closer to sales points, and leveraging digital channels. Inventory risk remains as retailers optimize stock using AI, resulting in a disconnect between sell-in and sell-out.

FINAL TAKEAWAY

Interparfums' management presented a steady outlook for 2025, with a modest sales increase and earnings in line with the prior year. The company is leaning into innovation, direct-to-consumer channels, and operational efficiencies to navigate ongoing headwinds, while preparing for stronger growth in 2027 driven by new brand launches and expanded digital reach. Management remains confident in the resilience of its core portfolio, disciplined cost controls, and the ability to deliver long-term value creation.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/ipar/earnings/transcripts]

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