IPAR - Inter Parfums

[LC]

Inter Parfums is a branded perfume distributor. They are contracted by brands to handle their perfume business. These are not perfume-specific brands, rather household luxury names (Brooks Brothers, Jimmy Choo, etc.) that are looking to leverage their brand name into another revenue stream.

 

(Partial list of brands is at www.interparfumsinc.com)

 

In 2012, Burberry terminated their licensing agreement with Inter Parfums, resulting in a cash payout from Burberry to Inter Parfums.

 

The business itself is very attractive (five-year history of margins here: http://financials.morningstar.com/ratios/r.html?t=IPAR&region=USA&culture=en-US ). Large gross and net margins are stable as brands rotate in and out.

 

"Our business is not capital intensive, and it is important to note that we do not own manufacturing facilities. We act as a general contractor and source our needed components from our suppliers. These components are received at one of our distribution centers and then, based upon production needs, the components are sent to one of several third party fillers which manufacture the finished product for us and then deliver them to one of our distribution centers."

 

Valuation still seems high at 800m. I put normalized earnings in the 30-40m/year range. However this is on my watch list if it falls in the 600m range.

[Ballerx]

Hi, was wondering if anyone's still interested in this company. It looks very attractive considering how the price has plummeted recently. Taking a quick look at it's financials, a lot of it's SG&As are actually variable costs (royalties, handling costs & etc.) that should be listed as COGS when calculating future FCF, leaving actual GM at 30-40%. Seems like FCF margin still has room to run in the future, currently sitting at 10%. Would be awesome if anyone cares to leave their take on following issues:

 

1. Effect on the company's financial by acquiring distribution centers: IPAR is thinking about buying distributions outright to smoothen out their operations.

2. Working with big brand names: What's the likelihood that IPAR will be able to capture shares in brands under LVMH? Are IPAR's potential customers only those currently without a perfume line and would like to leverage their brand name? What about legacy in-housed perfume names that are underperforming, will they consider outsourcing to IPAR? Is the unit economics of outsourcing perfume attractive?

3. The perfume market saturation: With COVID effecting the entire population, will people go out as much? Will the TAM be the same as before? Is the TAM of perfume rising?