Interparfums, Inc. IPAR has seen its shares rally 19.2% in the past three months, outperforming the industry’s growth of 2%. This fragrance and fragrance-related products company has also crushed the broader Zacks Consumer Discretionary sector and the S&P 500’s respective gains of 5.5% and 3.4% in the same time frame.
IPAR Price Performance vs. Industry, S&P 500 & Sector
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Technical indicators also support the stock, which is trading above its 50-day and 200-day moving averages, which signals bullish sentiments.
What’s Behind IPAR Stock’s Rally?
Interparfums has been benefiting from continued momentum in the fragrance market, the strength of legacy and new brands, effective advertising and promotional efforts and an extensive global distribution network. These upsides contributed to its record-breaking third-quarter 2024 sales, which grew 15% to $424.6 million. Sales were driven by continued demand across global markets, particularly in North America, Western Europe and Asia/Pacific, where sales rose 12%, 25% and 15%, respectively. Central and South America also posted strong growth of 20%, while Eastern Europe rebounded with a 23% increase after a soft start earlier in the year due to supply-chain challenges.
In addition to regional growth, the inclusion of new brands such as Roberto Cavalli and Lacoste has been a notable success, contributing 10% to quarterly sales. The company expects sales from these brands to have exceeded $100 million in 2024. Inter Parfums has been witnessing increased market share stemming from new product launches and brand extensions. The company is set to deliver an impressive array of product launches in 2025, focusing on both innovation and expansion across European and U.S. markets.
For its European operations, the company will introduce new extensions to existing fragrance families, including Montblanc Explorer, Jimmy Choo Man, Coach Woman and Man, and Lacoste L12.12 and Original. Also, Solferino, a proprietary brand featuring a collection of ten luxury fragrances crafted by renowned perfumers, will debut in 2025.
In the United States, the company plans to launch Iconic, a new blockbuster men’s fragrance for GUESS, along with extensions for existing GUESS lines to capitalize on the brand’s strong performance. For MCM, a four-scent collection will be introduced alongside a refreshed look and scent for the MCM Diamond backpack fragrance in the first half of the year. The Ferragamo line will also see significant additions with the introduction of a new pillar, Fiamma, and an extension for Ferragamo Men later in 2025. The company is also exploring opportunities to expand into new personal care categories, including body mists and creams.
What to Expect From IPAR?
With a strategic focus on innovation and product launches, Inter Parfums is well-positioned for growth. The strength of a diverse brand portfolio, combined with the flexible operating model, should help it gain market share. For the full year 2024, the company anticipates net sales of $1.45 billion and earnings of $5.15 per share. This guidance suggests 10% growth in net sales and an 8% increase in the bottom line from the 2023 levels.
In November 2024, the company announced its initial financial guidance for 2025, expecting net sales of $1.51 billion and earnings per share (EPS) of $5.35, both indicating a 4% increase from 2024 estimates. This outlook implies a cautious approach, factoring in global market dynamics, potential geopolitical tensions and policy changes in the United States. The company’s growth is expected to stem from both its existing portfolio and new product innovations.
Has the Recent Jump in Stock Price Made IPAR Expensive?
Interparfums’ current market valuation is stretched compared to the industry. IPAR’s forward 12-month price-to-earnings (P/E) ratio is 26.62, surpassing the industry average of 12.48. This higher ratio implies that investors are potentially paying a premium for Interparfums’ stock relative to its anticipated earnings performance. The company’s lofty valuation is concerning in light of the near-term challenges.
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Current Challenges for Interparfums
Despite the global fragrance market's continued vibrancy and robust demand, the company’s sell-in has been slower than its sell-out, with retailers adopting a leaner inventory approach. While this is partly due to industry-wide destocking, the lag in sell-in could indicate weakening demand momentum. Management’s 2024 sales guidance implies upper single-digit growth for the fourth quarter, which reflects a sequential slowdown.
Inter Parfums has been grappling with higher SG&A expenses for a while. During the third quarter of 2024, the company’s SG&A expenses increased 11.7% to $165.2 million. The upside was primarily due to higher advertising and promotion (A&P) expenses, which rose 6% and represented 15.7% of net sales. Although such investments are likely to contribute to growth, they might put pressure on profits in the near term.
Investors’ Guide to IPAR Stock
Inter Parfums is poised to leverage its strong portfolio and strategic innovations to drive growth amid a competitive market landscape. With a focus on expanding existing brands and introducing high-end lines like Solferino, the company is well-positioned to meet consumer demand for both classic and luxury fragrances. However, the stock’s premium valuation and near-term challenges, including high SG&A costs and global market dynamics, may limit momentum. Investors should balance IPAR’s strong market position with the current risks. The company currently carries a Zacks Rank #3 (Hold).
Some Solid Staple Bets
We have highlighted three better-ranked stocks from the Consumer Staples sector, namely United Natural Foods, Inc. UNFI, Freshpet FRPT and Tyson Foods TSN.
United Natural currently sports a Zacks Rank of 1 (Strong Buy). UNFI delivered a trailing four-quarter earnings surprise of 553.1%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for United Natural’s current financial-year sales and earnings suggests growth of 0.3% and 442.9%, respectively, from the year-ago period’s reported figure.
Freshpet, a pet food company, presently sports a Zacks Rank #1. FRPT has a trailing four-quarter earnings surprise of 144.5%, on average.
The Zacks Consensus Estimate for Freshpet’s current financial-year sales and earnings suggests growth of 27.2% and 228.6%, respectively, from the year-ago period’s reported figure.
Tyson Foods, a meat products behemoth, currently carries a Zacks Rank #2 (Buy). TSN delivered a trailing four-quarter average earnings surprise of around 57%.
The consensus estimate for Tyson Foods’ current fiscal-year sales and earnings indicates growth of about 2% and 13.6%, respectively, from the prior-year reported levels.
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