Liz Claiborne sells fragrance licenses to Elizabeth Arden
Worth $58.4m, the deal amends its long-term license agreements with Elizabeth Arden, allowing the fragrance and color cosmetics company to acquire the trademarks for the Curve fragrance brand and other smaller brands.
The deal also allows for a lower effective royalty rate associated with the fragrance brands that currently remain under license from Liz Claiborne to Elizabeth Arden, which include the Juicy Couture and Lucky brands.
Reduced roylaties on frgrance licenses
It also reduces the future minimum guaranteed royalties for the term of the license and requires a pre-payment of certain royalties, the two companies confirmed.
The cash settlement should allow Liz Claiborne to raise the necessary funds in order to invest in cash saving initiatives that will include a new and more cost efficient retail distribution system.
“At the heart of this deal is a testament to the successful partnership we have built over the years with Elizabeth Arden,” said William McComb, executive officer at Liz Claiborne.
“The key benefits to Liz Claiborne are that it provides a significant cash infusion that we will use to pay down debt, and support our goal of ending 2011 with lower debt levels than at year 2010.”
Scott Beattie, Elizabeth Arden CEO, last week pointed out that during 2011 the company has been particularly successful at increasing brand distribution with retailers in Europe, a factor that contributed to a 20 percent growth in fragrances to retail customers in the region, a trend that is expected to continue into financial year 2012.
Elizabeth Arden targets fragrance growth
Further growth in fragrance revenues is also expected to be attributed to the additional licensing agreements with Liz Claiborne that were agreed to in the deal.
The company expects the deal to modestly impact earnings in 2012, while having a ‘more accretive’ impact in fiscal 2013.
In its fourth quarter results, announced last week, Elizabeth Arden said that sales for the fourth quarter grew by 11.2 percent to $253.8m, which represented growth of 7.7 percent when taking into account the negative impact of currency translations.
Net profits for the period more than doubled from $2.3m in the corresponding period last year to reach $5.4m, a figure that was significantly boosted by cost savings from its global cost cutting initiative.
