Inter Parfums (IPAR) Q4 2025 Earnings Transcript

Image source: The Motley Fool.

Date

Feb. 25, 2026 at 11 a.m. ET

Call participants

• Chairman & Chief Executive Officer — Jean Madar
• Chief Financial Officer — Michel Atwood

Takeaways

• Net sales -- $386,000,000 in the fourth quarter, up 7% on a reported basis and 3% organically; full-year sales reached a record $1,490,000,000.
• Gross margin -- 63.6% for 2025, down 20 basis points, largely due to $12,800,000 in tariff-driven higher costs, equating to 0.9% of sales.
• Operating income -- $28,000,000 for the quarter (7.1% margin); full-year operating income declined 2% to $270,000,000, with an 80-basis-point drop in margin to 18.2%.
• Net income -- $28,000,000 in the quarter ($0.88 diluted EPS, up 16%); full-year net income reached $168,000,000 ($5.24 diluted EPS, up 2%).
• Segment performance -- European-based operations sales rose 9% (4% organic, 4% FX) in the quarter; U.S.-based operations sales up 4% (2% organic, 2% FX), with full-year U.S. sales down 3% excluding phased-out Dunhill.
• Brand highlights -- Cavalli fourth-quarter and full-year sales rose 33%; MCM up 40% in Q4 and 17% for the year; Lacoste increased 23% in Q4 and 28% for the year, reaching $108,000,000; Montblanc Q4 sales grew 22%.
• Cash & liquidity -- $295,000,000 in cash, cash equivalents, and short-term investments; operating cash flow rose to $215,000,000, representing 103% of net income.
• Inventory management -- Inventory down 6% year-end, days on hand decreased to 244 from 259, marking lowest levels since 2022; accounts receivable up 17% due to sales and FX, with days sales outstanding at 73.
• Shareholder returns -- $14,000,000 in share repurchases; annual dividend maintained at $3.20 per share.
• Guidance -- 2026 outlook is for net sales of $1,480,000,000 and diluted EPS of $4.85, a decline due mainly to a one-time 2025 gain, tariffs, and brand investments; management described the guidance posture as "conservative" and will revisit as conditions evolve.
• Operational efficiencies -- Transition to 100% third-party logistics by March; move of GUESS production from China to Italy/EU for 15% of U.S. manufacturing yielded $3,500,000 in annual tariff savings.
• Portfolio additions -- Signed long-term fragrance licenses for David Beckham and Nautica; extended GUESS license 15 years to 2048; extended Coach license five years to 2031.
• Distribution channels -- Amazon cited as one of the largest and fastest-growing channels; early TikTok Shop presence generated strong consumer engagement, especially for Donna Karan/DKNY.
• Travel retail -- Channel sales grew 6% and represented about 7% of annual net sales.
• Sulphurino expansion -- Ultra-luxury direct-to-consumer line, now available in 40 doors globally and entering the U.S. through Bloomingdale's; targeting 50 more doors in 2026 and 500 by 2030.
• Tariff and FX dynamics -- Tariffs continue to be a headwind for 2026; foreign exchange added 4% to Q4 and 2% to full-year European sales but generated $3,700,000 in currency losses.
• Promotional activity -- CFO Atwood said, "we did see an uptick in promotions in the fourth quarter, a little bit more discounting than usual... but nothing out of the ordinary."
• Pricing -- 2025 price increases averaged 2%, lower than industry average, and no further increases planned unless market conditions change materially.
• Brand pipeline -- 2026 features primarily "flankers" for market share defense, with management stating 2027 will bring major new blockbuster launches across the top brands.

Need a quote from a Motley Fool analyst? Email pr@fool.com

Risks

• CFO Atwood said, "tariffs will continue to represent a significant headwind in 2026," with anticipated impacts on gross margin and operating income.
• Management noted, "The environment remains very, very volatile," and cited "a slowdown in market growth" to 2% in Q4 and 3% for the year in tracked markets, with structural destocking expected to continue.
• "Foreign exchange helped us on the top line but really hurt us significantly," causing $3,700,000 in losses and margin pressure.
• Full-year guidance reflects "a decline from 2025" due to loss of a one-time gain, ongoing tariff costs, and significant investments in new brands, indicating expected profit headwinds despite stable revenue.

Summary

Inter Parfums (NASDAQ:IPAR) delivered record full-year revenue and net income, driven by growth across Cavalli, MCM, Lacoste, and Montblanc, but margin pressures from tariffs and currency volatility led to declines in gross and operating margins. The company maintained cash discipline, improved inventory efficiency, and supported cash flow growth through lower working capital needs and active share repurchases. Management adopted a cautious guidance stance for 2026, expecting continued tariff headwinds, cautious consumer spending, and limited pricing power due to industry dynamics, but projected a return to "significantly stronger growth" in 2027 based on major innovation launches. Operational initiatives included logistics restructuring and cost mitigation, while strategic expansion of the brand portfolio and sales channels increased global reach and set the stage for future growth.

• Net sales growth in Q4 received a positive 3% contribution from foreign exchange, but unfavorable FX also increased costs and resulted in net currency losses below the operating line.
• Inventory days on hand achieved their lowest level since 2022 after proactive inventory reduction, with a favorable mix shift toward finished goods versus components.
• U.S. operations achieved improved gross margin (up 40 basis points to 58.3%) for the year, primarily from brand and channel mix as well as Dunhill's exit, despite declining segment sales.
• Fourth-quarter promotional activity increased slightly, particularly with gift sets and friends-and-family discounts, but management does not view this as a material risk to long-term profitability.
• Brand expansion included entry of Sulphurino into the U.S. and new partnerships with David Beckham, Nautica, and an extended GUESS agreement, underscoring the company's continued capacity and ambition for portfolio growth.
• Regional commentary indicated stronger trends in the U.S., Southern Europe, and Australia, with continued category weakness in China and tougher market conditions in Northern Europe.
• Management cited e-commerce channels, especially Amazon and sales via TikTok Shop, as delivering rising global visibility and premiumization, supporting both core brands and new customer acquisition strategies.
• Capital allocation remained shareholder-friendly with $14,000,000 spent on share repurchases and a maintained dividend despite a cautious outlook.

Industry glossary

• Flanker: In the fragrance industry, a flanker is a new variation or extension of an existing perfume line, typically designed to maintain consumer interest and sales between major new launches.
• Travel retail: Sales channel targeting travelers, often through duty-free and airport stores, contributing a measurable share of total company revenue.
• SKU: Stock Keeping Unit; a distinct item for sale, tracking inventory within distribution and retail channels.
• Sell-through: The rate at which product is sold by retailers to consumers, indicating end-user demand rather than shipments to intermediaries.
• Friends-and-family discounts: Targeted promotional offers that provide select consumers with temporary, percentage-based price reductions, often to stimulate short-term sales volume.

Full Conference Call Transcript

Jean Madar: Thank you, Devin. And good morning, everyone, and thank you for joining us on today's call. 2025 was a record year with sales rising to $1,490,000,000, including fourth quarter sales of $386,000,000, representing our best-ever fourth quarter performance. We saw the industry, including ourselves, return to a more historically normalized level of growth. And while new and ongoing challenges such as tariffs and exchange rate pressures have influenced the environment, we have been able to manage through them with disciplined operational execution. Fragrance remains a resilient category and is widely considered an everyday essential luxury that delivers an irreplaceable experience of self-expression and daily indulgence.

In 2025, we energized our portfolio through the launch of several blockbuster fragrances and new line extensions across our brands, including the introduction of Sulphurino, our first proprietary ultra-luxury offering, and strengthened our marketing efforts with impactful advertising and promotional support. Our diverse portfolio of fragrances attracted consumers throughout the year, with impressive annual performances by several of our top brands as well as brands newer to our portfolio such as Lacoste and Roberto Cavalli. We generated growth in the majority of our markets, made meaningful progress to improve efficiencies and optimize our supply chain to mitigate cost pressure and support long-term growth, and continued to deepen our sales reach on increasingly meaningful platforms such as digital and travel.

We delivered a high level of client service, maintained a strong financial position, and continued to skillfully navigate lingering macroeconomic headwinds in certain key markets, mainly caused by the effect of tariffs and trade destocking and, of course, geopolitical conflicts. Innovation will continue to define our success, including the rollout of brands recently signed or acquired, namely Longchamp, Off-White, and Goutal, as well as a 15-year extension of our GUESS license and our strengthening partnership with Authentic Brands Group and their exciting brand portfolio. We will touch on that shortly. I am very proud of our team for their hard work and dedication. These record results and continuing operational progress reflect their shared commitment to our pursuit of excellence.

Now on to discussion of our results and operating activities. As we noted on last quarter's call, we expected that fourth quarter sales would be supported by new rollouts late in the third quarter and the robust holiday sales season, and that is exactly what happened. Consolidated fourth quarter 2025 sales rose 7% on a reported basis and 3% on an organic basis, driven by higher sales for both U.S. and European-based operations. Sales via our U.S. operations increased 4% in 2025, driven by performance from our two largest U.S.-based brands, GUESS and Donna Karan/DKNY, and even greater growth from Cavalli and MCM.

Excluding the phase-out of Dunhill Fragrances, which was completed in August 2024, full-year 2025 U.S. operations sales declined 3%. Fragrance sales of GUESS and Donna Karan returned to growth in the fourth quarter with increases of 7% and 8%, respectively. GUESS continues to benefit from the ongoing success of the Iconic and Seductive franchise as well as the Q3 introduction of GUESS L'Amia Bella Vita. The Donna Karan growth was mainly driven by the Cashmere Mist and DKNY Be Delicious franchises. For the full year, GUESS sales were flat, and the Donna Karan/DKNY decline of 4% was mostly due to unfavorable growth comparisons related to the timing of 2024 product launches.

In just the second full year under our management, Cavalli fragrance sales rose 33% in both the fourth quarter and full year, a testament to our ability to elevate a brand's profile creatively and strategically. The exclusive May introduction of Roberto Cavalli’s Borne Time at Dubai Duty Free was highly successful and has helped drive significant brand market share growth in the region. We have expanded the distribution of Serpentine globally through multiple retail channels where it is enjoying ongoing success. Additional 2025 Roberto Cavalli rollouts included the Gold Collection extension, the Paradiso extension, the Paradiso Rosa, and the striking Three Senses Marvellous sub-collection and the dual-gender Just Cavalli Give Me Magic fragrance duo.

In 2026, we plan to keep this momentum going with additional extensions that reflect and reinforce the brand’s established allure. MCM fragrance sales rose 40% in the fourth quarter and 17% for the full year, driven by continued performance of a new six-scent MCM collection launched in early 2025. In 2026, we expect to debut new extensions to expand the brand and are excited to be at Milan Design Week this April, where we will have an MCM-centric display highlighting the newest fragrance that we launched in early 2026.

Despite a challenging year, where the brand declined 9%, and despite the launch of Fiama, fragrance sales of Ferragamo held steady in the fourth quarter, supported by the third quarter launch of Sublime Leather. We remain confident in the brand's potential heading into 2026, where we plan to roll out new extensions across pillars. Sales from our European-based operations increased by 9% in the fourth quarter, driven equally by a 4% rise in organic growth and a 4% positive effect of foreign exchange. Coach, Lacoste, and Montblanc led the way in the fourth quarter. For the year, sales increased 7% on a reported basis and 4% organically.

While channel performance was mixed among regions, sell-through has been strong thus far in 2026. Jimmy Choo, our largest brand, continued its momentum and delivered another year of sales growth. The success of the Jimmy Choo I Want Choo women's franchise has continued to strengthen since its launch in 2021, particularly in the United States. The launch of I Want Choo With Love combined with a strong performance of the Jimmy Choo Man franchise helped drive 6% growth of Jimmy Choo fragrances in 2025. We have two new extensions on the web for 2026, and we will be using the year to prepare for a new women's franchise in 2027.

Coach grew 5% in the fourth quarter and 15% for the full year, reflecting strength across essentially all of the men's and women's line, reinforcing its timeless multigenerational appeal as a mainstay of casual elegance. We benefited from the launches of Coach For Men and Coach Gold in the first half of the year. We have had a wonderful relationship with the Coach brand since 2016, and we are incredibly happy to extend our agreement for an additional five years through 2031. We expect to introduce new extensions for the men's and women's line in 2026. Similar to Jimmy Choo, we will be using the year to prepare a new women's franchise in 2027.

In much the same way that we rejuvenated Roberto Cavalli, our success with the Lacoste brand was certainly a positive highlight in 2025. In just the second full year under our management, Lacoste fragrance sales grew 23% in the fourth quarter, leading to a 28% increase in the full year, reaching $108,000,000, exceeding our initial expectation of $100,000,000. The Lacoste license took effect in January 2024, and we immediately went to work crafting and implementing a strategy and then curating and introducing a collection of fragrances for men and women that key into the timeless elegance of the brand.

In 2025, we enriched the Original line with a new men's fragrance called Original Parfums, and the line's first women's fragrance, Original Femme. We also introduced a new L.12.12 dual-gender duo, Silver Rose and Silver Grey. In 2026, we will further expand the Lacoste fragrance lines with additional extensions, leveraging the solid foundation we have built in our first two years overseeing the brand. Montblanc sales rose 22% in the fourth quarter, reflecting the success of Montblanc Explorer Extreme in 2025 and the strength of the original Montblanc Legend line.

This strong fourth quarter performance, in combination with favorable foreign exchange, helped to offset the sales softness we experienced in 2025, resulting in full year 2025 sales that were broadly in line with 2024. We plan to launch two new line extensions in 2026 and are preparing for a big launch of a new men's franchise in 2027. The men's fragrance market remains underdeveloped in general, presenting a substantial opportunity for us to continue offering meaningful innovation and expand our reach across our entire portfolio for years to come.

We remain optimistic about the future potential of Sulphurino, our first ultra-luxury direct-to-consumer offering that includes a collection of 10 unique premium scents designed to cater to the growing niche high-end luxury market. Our flagship store in Paris and dedicated e-commerce platform are attracting encouraging levels of consumer traffic. Sulphurino reached 40 doors worldwide by 2025, and we are on track to expand this artisanal fragrance house to an additional 50 doors in 2026, with a long-term goal of up to 500 doors by 2030. We are excited that Maison Sulphurino has entered the U.S. with a launch on Bloomingdale's online store and in seven store locations, with additional store rollout to come this fall.

We have always taken a strategic approach to portfolio expansion, adding brands that strengthen our global reach and long-term growth profile. This year, we advanced that strategy with new partnerships that further enhance our competitive position. In January, we announced separate exclusive long-term worldwide fragrance license agreements with David Beckham and Nautica along with a 15-year extension of our license agreement with GUESS that maintains our relationship through 2048. These distinctive brands reflect our approach to an increasingly global and diverse fragrance market: identify iconic category leaders, and apply our proven operational expertise to build a sustainable franchise.

Our opportunity pipeline is expanding as our ability to elevate and, in some cases, revive brands is becoming increasingly recognized in the market. I want to thank Authentic Brands Group (ABG), the company who co-owns and manages both the David Beckham and Nautica brands. We look forward to continuing a mutually beneficial relationship. While brick and mortar remains competitive, e-commerce is running strong, and we are benefiting from our expanded presence at Amazon and early foray into TikTok Shop, among others. These platforms significantly enhance our global visibility, deliver rich consumer insights, and enable us to introduce smaller-sized products that serve as an affordable entry point into prestige and luxury, supporting both recruitment and premiumization efforts.

Amazon remains one of our largest and fastest growing channels, generating rising consumer engagement and premiumization. We are very encouraged by our early success on TikTok Shop, most notably select products within our Donna Karan/DKNY brands. We are continuing to explore ways to leverage the increasingly significant sales potential of this platform, which has firmly established itself as a top-10 beauty retailer in the U.S., as well as the fastest growing. The travel retail market continued to perform well, with sales growing by 6% in 2025 and representing approximately 7% of our total net sales, consistent with prior years. Brands including Cavalli, Lacoste, and Coach performed well throughout the year.

Our strong appeal among traveling consumers, illustrated by the success of Cavalli Serpentine in Dubai, is helping us secure additional shelf space and broaden our SKU footprint across duty free locations. We anticipate steady growth in our travel retail business going forward. With respect to operational improvements, we have made good progress against our stated goals in the areas of tariff mitigation, inventory management, and operating efficiencies. For example, our transition to 100% third-party providers for packing, shipping, warehousing, and order fulfillment should be completed by March. We are also making progress in shifting our manufacturing closer to the point of sale, with a focus on changes that provide a measurable impact.

For example, as of 12/31/2025, we moved production for three GUESS lines to Italy and have since diverted all component shipments from China to Europe instead of the U.S. This one change, which represented approximately 15% of our U.S. manufacturing, produced tariff savings of $3,500,000. Retailers maintained a cautious stance on inventory levels throughout 2025, carefully managing their positions amid a dynamic demand environment. However, we began to see meaningful relief in Q4 2025 as ordering patterns stabilized and inventories declined. Encouragingly, that momentum has carried into 2026 with healthy ordering patterns since the beginning of the year. The tariff situation has become increasingly dynamic given last week's Supreme Court ruling and the aftermath.

While it is way too early to determine the long-term future of tariffs, we continue to focus on controlling what we can control in our own operations and have seen encouraging results. At present, we estimate that tariffs will remain a headwind in 2026. We will continue to implement strategies and cost savings to blunt this anticipated impact. These actions will be enhanced by the select pricing actions we took during 2025 that averaged approximately 2% across our brands, primarily focused on prestige and luxury in the U.S. market. Our pricing adjustments remained more modest than the prestige fragrance industry average as of late 2025.

We do not plan to implement any further pricing actions beyond what we initiated last year, unless a significant change in the market occurs. Our creative innovation, continued resilience of the fragrance market, and the breadth of our brand portfolio position us to deliver long-term growth. We expect a continuing period of transition in 2026, leading to more stable market conditions as we prepare for what we expect will be a more favorable operating environment in 2027 and beyond. As such, we have maintained quite a conservative posture with respect to our guidance, but we will revisit it as the year evolves.

Over our 30-plus-year history, we have earned a global reputation for excellence, and where there is opportunity, we will be there to capitalize on it. I am also pleased to share that I will be speaking at the Women's Wear Daily CEO Summit in Palm Beach this May, representing our company on an exciting industry stage. With that, I will now turn it over to Michel Atwood for a review of our financial results. Michel?

Michel Atwood: Thank you, Jean, and good morning, everyone. I will begin by discussing the consolidated results before breaking them down into our two operating segments, European- and United States-based operations. As reported, we delivered net sales growth of 7% to $386,000,000 during the fourth quarter, leading to a record $1,490,000,000 in sales for the full year in 2025. Foreign exchange movements positively impacted our top line, contributing 3% to growth in the fourth quarter and 2% for the full year. However, as outlined in recent quarters, the stronger euro has also driven higher costs across the rest of our P&L as well as on our balance sheet.

Organic sales, excluding FX and the completed phase-out of Dunhill and initial Sulphurino sales in late 2025, rose 3% in the fourth quarter and 2% for the full year, respectively. Gross margin contracted 20 basis points to 63.6% in 2025, and this was primarily driven by the higher costs due to tariffs. Tariffs resulted in about $12,800,000 in higher costs in 2025, or 0.9% of sales. We have been able to partially mitigate these impacts through favorable segment and brand mix, which each contributed to 20 basis points of margin expansion, as well as pricing, leaving us with a gross margin erosion of only 0.3% considering the situation and the tariffs.

We expect tariffs will continue to represent a significant headwind in 2026 as we annualize these tariffs for the full year. We continue to actively work on cost-saving programs and tariff mitigation strategies to help limit these impacts. We estimate that these programs, in combination with the full-year impacts of the price increases we took in August 2025, will enable us to maintain our gross margins flat in 2026. Moving to SG&A, SG&A expenses as a percentage of net sales were relatively flat in the fourth quarter at 54.3% compared to 53.4% in the prior-year period.

For the full year, SG&A increased 80 basis points to 45.5% of net sales from 44.7% last year, and this was driven by higher A&P spending as well as an unfavorable segment mix. A&P investments rose 10.5% for the fourth quarter and full-year periods as we continue to invest ahead of our growth and in line with our expected sell-out trends. Royalty expenses are included in SG&A and averaged approximately 8% in 2025, in line with our five-year run rate. Overall, operating income and margin declined for both the quarter and the full year as compared to the prior-year periods due primarily to the combination of lower gross margin and higher A&P.

Fourth quarter operating income was $28,000,000 for the quarter, resulting in an operating margin of 7.1% as compared to $36,000,000 and a 10% operating margin in the prior-year period. Full-year operating income declined by 2% to $270,000,000, resulting in an operating margin of 18.2%, or an 80 basis points decline from the prior year for the reasons laid out just above. Below the operating line, we reported a gain of $1,000,000 in other income and expense compared to a loss of $6,400,000 in 2024. The year-over-year change primarily reflects the following factors. First, we realized a one-time gain of $7,600,000 related to a debt extinguishment during the fourth quarter.

The second factor was a $1,200,000 increase in interest income to $5,800,000 during 2025 compared to $4,600,000 in 2024 as our cash position improved. Third was a reduction in interest expenses on borrowings of $700,000. These gains were partially offset by a loss on foreign currency of $3,700,000 compared to a gain of $500,000 in 2024. The significant swings in the euro-dollar exchange rate throughout the year helped our top line but have led to larger than usual FX losses throughout our P&L.

Our consolidated effective tax rate for the year was 23.3%, down 90 basis points from 24.2% in 2024 as we benefited from a one-time favorable net tax gain of $2,000,000 in 2025 following a positive outcome from prior-year tax assessments. These factors, combined with our disciplined execution and cost management, enabled us to deliver net income growth despite the challenging operating environment. Fourth quarter net income was $28,000,000, or $0.88 per diluted share, a 16% increase from the prior-year period. For the year, net income reached a record $168,000,000, with diluted EPS reaching $5.24, also a 2% increase compared to 2024. Now moving to our two business segments, I will start with European-based operations.

We delivered solid net sales growth in both the fourth quarter and full year of 2025. Fourth quarter sales increased 9%, driven by 4% organic growth and a 4% favorable FX impact. For the full year, reported sales rose 7%, including 4% organic growth and a 2% favorable FX impact. Gross margin for the full year was 66.1% as compared to 67% in 2024. The bulk of the 90 basis points erosion in gross margin was driven by tariffs, which represented $8,600,000 in 2025. While SG&A expenses increased 7% to $474,000,000, SG&A as a percentage of net sales remained relatively flat at 46.7% compared to 46.3% in 2024.

The increase in SG&A was primarily driven by a 9% rise in A&P expenses, totaling $219,000,000 for the year, representing 22% of net sales compared to 21% last year. Overall, net income attributable to European operations rose 2% to $144,000,000, but as a percentage of sales declined 60 basis points to 14.2%. Now turning to our United States-based operations, in the fourth quarter, we achieved 4% net sales growth on a reported basis and 2% organic growth, aided by a 2% favorable FX impact. Excluding the phase-out of Dunhill Fragrances that was completed in August 2024, full-year 2025 U.S. operations sales declined 3%.

Gross margin expanded by 40 basis points to 58.3% for the full year, driven by favorable brand mix by the 2024 Dunhill discontinuation, channel mix, and pricing actions, which more than offset the negative 0.9% impact of tariffs. SG&A expenses decreased 2% for the full year. However, SG&A as a percentage of net sales rose to 42% from 40.5%; this was largely driven by our lower net sales with the discontinuation of Dunhill. Additionally, in 2025, we kept our A&P investments steady at 16% of net sales compared to 2024 and made the choice not to reduce other areas of SG&A in light of new licenses which will be rejoining our portfolio in future years.

Overall, the full-year net income attributable to U.S.-based operations was essentially flat at $69,000,000, representing 14.3% of net sales compared to 13.3% in 2024, or improving margins. At December 2025, our balance sheet remains strong with $295,000,000 in cash, cash equivalents, and short-term investments, and working capital of close to $700,000,000. Accounts receivable was up 17% compared to 2024 on a reported basis; however, balances are reasonable based on 2025 record sales levels and higher FX impacts of the euro-dollar. While days sales outstanding was 73 days, up from 66 days in 2024, driven by changes in channel mix and FX, we are still seeing strong collection activity and do not anticipate any issues with collections of accounts receivable.

Despite FX headwinds, inventory levels were down 6% at year end compared to 2024, and inventory days on hand decreased to 244 days compared to 259 days in 2024, marking our lowest level since 2022. These decreases are a direct result of our effort to manage down inventory levels. We have also preserved a favorable inventory profile with a higher mix of finished goods relative to components. These improvements position us well to continue to drive further inventory efficiencies, and we will continue to optimize our inventory levels going forward.

By effectively managing our working capital in line with sales, full-year operating cash flow increased to $215,000,000, up $27,000,000 from the prior-year period and representing 103% of net income compared to $188,000,000, or 92% of net income, in 2024. We also took advantage of our stronger cash position and the lower stock price levels in 2025 to continue our share repurchase program. In 2025, we purchased $14,000,000 in shares and will continue to evaluate additional share repurchases if the stock price remains below what we believe is the intrinsic value. In the same vein, we are pleased to be able to maintain our annual dividend of $3.20 per share. Now moving to guidance.

As shared in our earnings release published yesterday evening, we are maintaining the outlook we provided in November. We expect sales to remain steady at $1,480,000,000 and diluted earnings per share of $4.85, a decline from 2025 that is referenced above, which included a one-time gain recognized in 2025, impacts from tariffs, and significant investments we are making to develop our newest brands and support our broader portfolio for 2027. We continue to anticipate a return to significantly stronger growth in 2027 driven by enhanced innovation across all of our key brands, including the development and distribution of our newest brands. While we are seeing moderating demand in certain international markets, our core fundamentals remain solid.

We continue to advance a strong innovation pipeline supported by long-standing relationships with global distributors and retailers. Combined with a stable and resilient consumer base, these trends reinforce our confidence in delivering consistent performance and long-term value. Before we begin the Q&A section of the call, I want to note that we are anticipating filing our Form 10-Ks early next week. All audit and reporting procedures are continuing to progress. With that, we will now open for questions.

Operator: Thank you. And at this time, we will conduct our Q&A session. Your first question comes from Sydney A. Wagner with Jefferies. Please state your question.

Sydney A. Wagner: Hi, thanks for taking our question. So in terms of revisiting your guidance later in the year, what are some specific metrics that you will be looking for or need to see to give you confidence to update the guide? And I am just curious, is the category or your own pipeline or innovation uptake more of the swing factor in that? And then my other question, just on promotion, some peers have called out some pressure there. Can you share a little bit more about what you have seen? Thank you.

Jean Madar: Michel, you want to start?

Michel Atwood: Yes. On the guide, look, we are just starting the year. We had a really strong Q4, but we are waiting to see really what happens. The environment remains very, very volatile. We are seeing a slowdown in market growth. The market growth in the fourth quarter for the markets that we are tracking was up 2%, and it is definitely starting to slow down. For the year, we are at about 3%. So definitely a slowdown in the market. The destocking situation was a lot better in the fourth quarter. Shipments were better than expected, and we saw some restocking.

At the same time, we believe that structurally destocking will continue to be a factor as retailers and distributors normalize their inventory levels. It is just a normal part of the cycle, and so we are waiting to really see how all of that plays out. In terms of our innovation pipeline, we have a very, very strong innovation pipeline for 2027, but for 2026 our strategy is really more of a flankering strategy. So we are waiting to see also how that holds up and how that is being received in the market before we feel comfortable updating our guidance.

Jean Madar: Yes. Thank you, Sydney, for the question. Regarding the guidance, as you know, this company has always been conservative, and we spent a good amount of time reevaluating the guidance, and we have decided to keep it and not to change it. Because even though we have had a quite good January and February, and I think we are anticipating a strong first quarter, the visibility is not great. So we are cautiously optimistic, and instead of retouching the guidance many times, I prefer to wait a little bit more. So it is not a sign that things are not going well. It is just we continue in our approach of being prudent.

With this regarding the guidance, the promotion—Michel, you want to answer on the promotion?

Michel Atwood: Yes, I mean, as you know, much of the whole industry in the U.S. took pricing related to tariffs. Those price increases largely went through, but we did see an uptick in promotions in the fourth quarter, a little bit more discounting than usual. I think this is normal. In this category, as you know, we do not typically do a lot of discounting. We typically offer the consumer value in the form of gift sets and GWPs. But I would say there were a little bit more of these friends-and-family discounts than we have seen normally in the fourth quarter, but nothing out of the ordinary.

Michel Atwood: Yes, nothing significant, but maybe a slight uptick, but nothing significant and nothing of any large magnitude.

Jean Madar: Thank you.

Operator: Next question comes from Aaron Adansky with Goldman Sachs. Please state your question.

Aaron Adansky: Hello. Thank you for taking my questions. I have two. First, on the portfolio, after signing the two new brands that you recently announced, do you have any further capacity to secure additional licenses, and in that context, would you prefer to add brands more in the mass end of the fragrance industry or build up the prestige presence further? And then my second question is on the flanker pipeline that you have mentioned for this year. Can you please give us a sense of your expectations of which brands you expect to gain market share in 2026? And conversely, which parts of the portfolio are you relatively more cautious about at this stage in the year? Thank you.

Jean Madar: Okay, Aaron. Let me try on the first one. Do we have capacity to take more after the signing of these two new brands, which are David Beckham and Nautica? Before I answer the question, let us take two minutes to analyze what we think we can do with these two brands. David Beckham is an icon. David Beckham has huge name recognition, and we think that in this lifestyle world, we can do well. This is not the first transfer of a license we will do from Coty. We have done it with GUESS. We have done it with Lacoste. We have done it with Cavalli. All went well.

I think that these two new brands are a good addition to the portfolio. Let us not forget that the portfolio of Inter Parfums, Inc. is very diversified. We go from very high-end Van Cleef, Graff, Boucheron, to very lifestyle. So we think that this addition and what it brings to us and what we can bring to them is a great fit. So this being said, do we still have capacity after these two brands? And the answer is yes, absolutely. We have the structure, we have human structure, and also the process and the desire to grow the portfolio. So we can take more.

And we are working on more, and without any guarantees that we will be able to make an announcement, we are working on very important brands. So for us, evolution of a portfolio is a natural thing to do. We will add some smaller brands. We will add newer and more important brands. We have the capacity. We have distribution also. Let us not forget that we are present in 110 countries, 120 countries, either directly or through our distributors. And there is an appetite for newness. So this is for the portfolio and the new brands. Michel, do you want to answer on the flankers?

Michel Atwood: Yes. Maybe I will just build a little bit on what you said. I think coming back to our design and our structure, the fact that we operate with two segments gives us a lot more capacity to manage bigger brands, to manage more brands. We also have our hub in Italy, which is run by U.S. operations. So that gives us a third hub, and it gives us the opportunity to put the right brands in the right places where they will get more attention, where people will have more affinity with the brand.

So, for example, we will be managing the David Beckham brand out of Italy, whereas we will be managing the Nautica brand out of the U.S., and obviously the Longchamp brand out of France. So again, that is part of this. Now, the other thing is we believe there are many brands out there that are underserved and that could benefit from our expertise, as Jean pointed out. We spend a lot of time looking for new opportunities. We will continue to do so. The timing—obviously, the moment when we have conversations and we get brands—can take time because, as you know, licenses have an expiration date.

And if you look at what we have announced recently, even if we have announced the licenses, we do not get them immediately. So that is always a factor and that continues to play into that fact. And then, on the flankers, look, our flankers are really designed to hold share, not necessarily to build share, but they are necessary to drive healthy top- and bottom-line growth. When a line starts to get a little bit more worn out, that is when we go out and design new blockbusters, and we have a significant pipeline of new blockbusters in 2027 across all of our key brands, whether it is Jimmy Choo, Coach, Montblanc, Lacoste, GUESS.

So we have a significant amount of new launches that will be coming. So really, for next year, what we believe is we still have brands like GUESS, Lacoste, and Cavalli that will outperform. Montblanc, Jimmy Choo, and Coach, I think, will be more moderate growth, but will continue to do well, we believe, with our existing flanker strategy.

Jean Madar: I agree. We are really looking at 2027 as a very special year because the five biggest brands in the portfolio will have five very important launches, real blockbusters. It is quite unusual for us. It happens once every, I do not know, every ten years. So we are gearing up for that, but we will have reasonable growth in 2026 with our strategy of flankers.

Aaron Adansky: Very clear. Thank you. Merci.

Operator: Thank you. And your next question comes from Susan Anderson with Canaccord Genuity. Please state your question.

Susan Anderson: Hi, thanks for taking my questions. I guess maybe just to follow up on the gross margin, I think you were originally expecting maybe a little bit less deleverage in the fourth quarter. Maybe if you could just talk about what happened there versus your expectations? And then also looking to this year, should we think about the cadence of the gross margin—should we expect it to be, I guess, down in the first half as we still have the tariff impacts and then potentially in the back half to get to that flat for the year? Thanks.

Jean Madar: This is a perfect question for Michel. Michel, go ahead.

Michel Atwood: Thank you, Jean. Hey, Susan, yes, look, the gross margin in Q4, the erosion looks pretty scary, I think, when you see the 300 basis points, and it is a combination of a lot of puts and calls that all went in the opposite direction. Sometimes these things tend to neutralize themselves, but in this particular case, they were all unfavorable. So if you really look at it, first of all, you have the tariff impact, which hit us fully. There is always a ramp-up with FIFO, and as we buy inventory, it kind of makes its way through. It made its way fully into the fourth quarter, and that basically represented about two points for the quarter.

The other thing that we talked about is foreign exchange. So foreign exchange helped us on the top line but really hurt us significantly because a lot of the products that we sell are not actually made in Europe, and so with the cost based in euros while our sales were in USD. For perspective, the euro was at 1.07 last year and was at 1.16 this year. So with about 50% of our sales denominated in dollars, that also had a significant impact. The last piece is a little technical, but it is channel mix.

As you know, some of our business is with direct-to-retailers with higher gross margin but also higher A&P, and some of our business is with distributors with lower gross margins and lower A&P, and in the fourth quarter, we had significantly more of our business through distributors rather than direct to retail. It was about a 68% mix of business versus 63%. So it is a combination of all those factors, and it is true that it looks a little bit scary. But overall, going back to next year, we feel that we have good mitigation strategies in place that will enable us to get to roughly a flat gross margin.

And yes, we should see some hurts in the first and second quarter, and we should see improvements in the third and fourth quarter as we lap tariff impacts in the back half of the year and our cost savings and efficiency programs actually start to kick in.

Susan Anderson: Okay, great. Thanks. That is very helpful.

Jean Madar: Thank you.

Operator: Your next question comes from Hamed Khorsand with BWS Financial. Please state your question.

Hamed Khorsand: Hi, good afternoon, Jean. Just wanted to ask you, you have talked a lot about the top five today. Is there anything in your other brands that could be a breakout situation for you to get into the top five, or you are not expecting that this year?

Jean Madar: This year, breaking into the top five, I do not think so. Michel?

Michel Atwood: No. I mean, hi, Hamed. Look, our largest brands are really our engines of growth, and they are diverse. They meet the various categories, price points, gender. I think those are really where we are going to get the growth going forward. I think effectively the tail-end portfolio will either be stable with brands like Lalique and Rochas or will probably continue to decline. And then those will eventually bleed out and probably be opportunities for us to consider exits, as Jean talked about, cleaning up our portfolio.

Jean Madar: I do not think that the top five are brands that are anywhere above or around the $200,000,000. The second tier is really below that. So there is quite a difference between the first tier and the second tier. But we will add with new licenses that we are taking. I think that Longchamp has great potential. We think that Nautica has great potential. David Beckham also. So let us not forget, for example, if we take Lacoste, we took Lacoste, we doubled the sales in less than three years. We took Cavalli, we increased sales 50% in two years.

So we know what to do with new brands, and I think that there is a lot of potential for the new brands in the portfolio.

Hamed Khorsand: Got it. And then, Michel, on the working capital end, there was a considerable amount of free cash flow generation in Q4. I think that is very seasonal. But is there a potential for more here as you try to wind down some of the inventory, or is that more just a function of how the industry is right now with the destocking?

Michel Atwood: Yes. Well, look, one of the upsides of sales starting to normalize is you are not investing as much in working capital, right? So definitely, the sales normalization has helped us deliver working capital improvements, but we have also done a lot of good work in terms of managing out those inventories. And I think we are going to continue to see that, and we are going to continue to see strong operating cash flow productivity going forward.

Hamed Khorsand: Great. Thank you.

Jean Madar: Thank you, Hamed. Thank you.

Operator: And your next question comes from Aaron Adansky with Goldman Sachs. Please state your question.

Aaron Adansky: Hi, thank you for the follow-up. I wanted to quickly ask on the trends that you are seeing across your key regions, so by geography, so far in 2026. Where are you seeing the strongest, whether it is the demand for your own brands or for the category as a whole? And conversely, in which geographies have you seen a relatively slower start to the year than you expected? Thank you.

Jean Madar: So I am going to try, but Michel follows this very carefully. What I see is the U.S. is doing well. In very short words, the U.S. is doing well. Southern Europe is doing fine. Northern Europe is more difficult. Eastern Europe is okay. This is for the U.S. and Europe. In Asia for us, China continues to be slow—nothing new. Australia is showing some strong signs of growth. We traveled a lot in the first two months of the year to make sure that Christmas went well. What we see is, in general, the level of inventory in stores or distributors is not high, which is a good sign. Sell-through was good. Nobody is holding too much.

The level of reorders is quite strong. So we are not really worried. Michel, I am sure you can add more things.

Michel Atwood: I would just build on that, Jean. LatAm obviously continues to do very, very well. I think our brand portfolio is really resonating well with the consumers. And then in Asia, while we had a little bit slower sales, we fixed our distribution in India and Korea, and I think we will expect to see some good bounce back in 2026 behind that intervention, on top of what you just said for Australia.

Aaron Adansky: Great. Thank you very much.

Jean Madar: Thank you, Aaron.

Operator: And there are no further questions at this time. I will hand the floor back to Michel Atwood for closing remarks.

Michel Atwood: Thank you again for joining our call today. Before I end the call, I would like to express my sincere appreciation once again to our teams for their tremendous effort throughout 2025. Our achievements are a direct reflection of our people, their dedication, creativity, the unique contributions they bring every day, and particularly the agility that we have had to deal with this year with all of the moving pieces that we all are aware of. If you have any additional questions, please contact Devin Sullivan from The Equity Group, our investor relations representative. Thank you, and have a great day.

Jean Madar: Thank you.

Operator: This concludes today's conference. All parties may disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has positions in and recommends Interparfums. The Motley Fool has a disclosure policy.