IPAR Stock Analysis (NASDAQ)
I wanted to investigate US listed cosmetics or aesthetics company, so i filtered it and saw the list (generated on my local environment)
Among the list, 3 companies were distinguished for me - ELF, HIMS, and IPAR.
I found one stock in particular - IPAR - which revenue YoY is big but seems to not risen last year - curious about the reason so analyzed it for a moment.
Key points
Revenue growth vs Revenue growth eliminating Acquisition
24 1Q Review - Revenue growth by regions
How could they gathered so many brands?
Is Their Brands still growing?
Estimates and possibility of surpassing it.
Hopes for middle-sized brands licensing increase
0. Brief Overview
IPAR: Inter Parfums, Mkt cap 3.65B$, 2023 Revenue 1.32B$ / OP 251M$.
Perfume Contractor/Distributer, mainly on US and Europe.
Current Brands: MONTBLANC, COACH, Jimmy Choo, GUESS, DKNY, Ferragamo, etc.
1. Revenue growth / Acquisition effects
Revenue Growth was 21.3%, 23.6%, 63.2% respectedly on 2023, 2022, 2021.
However, in 2023, There was no significant increase in Revenue quarterly. (except for 3Q, which has pre-bf effect)
We also have to note that IPAR gathered moncler in 2020, Ferragamo in 2021, DKNY in 2022, cavalli in 2023, lacoste in 2024.
but since cavalli and lacoste didn't appear in the IR files, their seem to composite less than 9M$, which is under 3% of Revenue.
(monblanc +15%, Jimmy choo +19%, COACH +25%, GUESS +23%, DKNY +205%)
So 2023's growth consists of a huge percentage of contemporary brand's growth.
2. 24 1Q Review - Revenue growth by regions
They showed Results of 1.27$/share, which was a big miss for the consensus.
By regions, Central & South America showed 31% growth, and Western Europe Showed 10% growth(85M$).
In 2023, North America's fast grow leaded the total Revenue growth. And it seems that in 2024, the base was too high to meet the all expectations.
So regional Purchase may not seem fast-growing now in main continents like US or Europe, but still IPAR looks good in value.
So the most alarming part of 24 1Q review is that Projection of Executives were right - +10% growth during the year.
3. How could they gathered so many brands?
Since their cash generating ability is strong(now having 182M$ for Cash or equivalents + short term investment), They can gather brands that might be valuable in the future.
Lacoste fragrances acquisition will strengthen IPAR's lineup of sportswear fragrance, and DKNY(2022 acquired) became the 5th brand of IPAR in 2023,
As a outsider, it seems that being a solely fragrance company makes the position of IPAR much stronger, making companies to prefer when taking a choice.
there are were other companies that gathers brands like COTY, but fragrance in particular, there is no other brand that showed this amount of repetitive growth.
4. Is their Brands still growing?
Looking at the brand growth of IPAR, we have take a look on their top6 brands, which sales increased for over 15%s in 2023.
I gathered some information by their conference call mentions.
Jimmy choo: Their line - Fever Eau De parfum came out january. By that, 2023 1Q revenue increased 63% YoY. other quarter did not showed that much critical increase, but year total of 19% growth seems fine.
Montblanc showed continued growth in 1Q(28%), 2Q(21%), 3Q(20%), meaning that low growth was made on 4Q.
Coach and GUESS all showed strong growth on 1 ~ 3Q, meaning that no growth was made on fourth quarter.
DKNY’s 200% growth is because they joined in July 2022. But in 2024 1Q, DKNY showed 44% revenue growth compared to 2023 1Q, making us to expect further growth on 2024 as well.
In summary, we can say that by the base effect of 22 4Q and 23 1Q, 23 4Q/24 1Q didn’t showed significant growth.
Since 22 4Q’s growth was because of shipment latency and revenue delay from 22 3Q, I can say that 23 4Q was not a moment of stagnation.
However, there is not much to say about 24 1Q’s slow growth, mainly because of their two top brand’s revenue reduce. we can say that it was because of exceptional growth on 23 1Q, where jimmy choo growed 63% with a new product launch.
Then, can we expect another new launch, triggering another revenue growth?
IPAR said that there will be a blockbuster release of Top brands, including JC and Montblanc. Some of them are revealed, including Montblanc’s ‘The collection’, Ferragamo’s ‘Signorina Unica’, GUESS’s ‘ICONIC’.
Since I could not find any visible explosion-of-demand for those brands, i cannot say that they will surely increase IPAR’s revenue in the near future.
5. Estimates and possibility of surpassing it.
By their conference calls, they tend to weakly give their guidance of the whole Finance Year, and tend to rearrange it.
Throughout 2022 and 2023, they always highered their estimation in every conference calls they make, and did not show significant shock results.
I personally think this year might have the chance of that tendency, since newly gathered brands are facing their first year to be promoted by IPAR.
6. Hopes for middle-sized brands licensing increase
According to CustomMarketInsights, Global perfume market size is 38.8B$ in 2024(Expected CAGR 6.5%)
Since IPAR is showing revenue of 1.45B$(estimated), we can say that it still has a long way to go.
IPAR is different with other fragrance companies, since its brands are all license-outs of other brands. So when analyzing IPAR, taking into account some Strong marketing ability of the company itself, and ability of licensing middle-sized brand in the fragrance market may be important.
We have to remember that end of licensing agreements can be a risk, since recently Dunhill's license was expired on 09.2023. Similarly, we have a risk of ending in 2026 - COACH, which consists 15% of net sales. But I think speed of affiliation will be faster then expiration. (Which was true until now) And Since IPAR showed mega growth on newly - integrated brands, business position might be strong among fragrance companies, I'd guess.
IPAR may be a good choice for strong luxury brands, which wants to expand their fragrance line while not being taken over by other big luxury brands. Maybe brands like Diesel, Off-white, Givaudan might be included in IPAR’s customers in the future.
7. Conclusion
By the slowdown of growth from 24 1Q, it may not be a perfect timing to buy IPAR stocks. However, we have to take into account that 1. the executives have several times spoke conservatively about their estimations and surpassed it, 2. This year, recently licensed brands might have a strong growth, which will led to surprise in sales, 3. in the Long Term, more middle-sized brands may license with IPAR to increase their presence in the fragrance market.
If we have insights on those aspects, It's time for us to bet at the low price.
