IPAR's Fragrance Segment Shines: Analyst On Europe's Swift Recovery And Asia's Growing Luxury Embrace

D.A. Davidson analyst Linda Bolton Weiser reiterated a Buy rating on the shares of Inter Parfums Inc IPAR with an unchanged price target of $187.

IPAR is seeing no weakening anywhere in the world, and the fragrance segment continues to be the star of the global prestige beauty market, said the analyst.

IPAR views industry growth potential as a CAGR of 6%-8% over the next 5-10 years versus historical growth of +4%-6%, noted the analyst.

According to the analyst, Europe has the highest fragrance penetration (~50%). Though post-COVID recovery was slower than in the U.S, now growth is catching up at a double-digit pace. 

The analyst also noted that Asia is outgrowing its historic under-penetration of fragrance as consumers are embracing fragrance just as they did other luxury goods like cognac, handbags, and skincare products.

IPAR is sticking to their 2024 Lacoste sales guidance of $60 million - $80 million as they want to clean up the distribution, Coty Inc COTY may over-ship into the channel in calendar 2H23 and IPAR's sales are recorded ex-factory, which reduces the numbers, said the analyst.

Roberto Cavalli, also transferring from Coty, is expected to contribute sales of $30 million - $40 million in 2024, including some new product launches, said the analyst.

The DKNY line, transferred from Estee Lauder Companies Inc EL, has been a great, great surprise; it is beating internal projections and should be close to $100 million after only one year.

In the analyst's view, Ferragamo changed their designer and logo and IPAR is quite optimistic about the brand's refresh.

The analyst raised 3Q23E sales and EPS to above consensus, to $360 million (+28% Y/Y) from $351 million and to $1.20 from $1.09, respectively.

Price Action: IPAR shares are trading higher by 1.84% at $136.24 on the last check Friday.