Greetings and welcome to the Interparfums First Quarter 2025 Conference Call and Webcast. At this time, all participants are in a listen-only mode. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Karin Daly, Vice President at Equity Group and Interparfums' Investor Relations Representative. Please go ahead, Karin.

Thank you, Kevin. Joining us on the call today will be Chairman and Chief Executive Officer, Jean Madar; and Chief Financial Officer, Michel Atwood. On behalf of the company, I would like to note that this conference call may contain forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from projected results. These factors may be found in the company's filings with the Securities and Exchange Commission under the heading Forward-Looking Statements and Risk Factors. Forward-looking statements speak only as of the date on which they are made, and Interparfums undertakes no obligation to update the information discussed. As a reminder, Interparfums consolidated results include two business segments. European-based operations through Interparfums SA, the company's 72% owned French subsidiary and United States-based operations. It's now my pleasure to turn the call over to Jean Madar. Jean?

Thank you, Karin. Good morning, everyone, and thank you for joining us on today's call. We started the year on a strong note with our reported net sales increasing by 5% or 7% on a like-for-like basis. Three of our top brands, Coach, Jimmy Choo, and Donna Karan/DKNY performed exceptionally well, as did our newest brand, Lacoste and Casale in their second year under our management. We also launched several compelling fragrances that contributed to our results, and we have many more sense to unveil for the balance of the year. Our prestige brand portfolio, the robust distribution network and agile business model has positioned us well to deliver strong and encouraging results. The flexibility of our supply chain allows us to respond swiftly during challenging periods to minimize potential disruptions and to consistently maintain our service level and competitive position. Fragrance stands out within the beauty industry for its resilience, driven by strong brand loyalty and its appeal as an accessible luxury especially approximated during times when consumers are more selective with their spending. Our top brands continued to drive growth at our European-based operations Jimmy Choo's legacy franchises, I Want Choo and Jimmy Choo Man, which included the introduction of Jimmy Choo Man Extreme performed exceptionally well. The new Coach for Men Eau de Parfum with NBA superstar Jason Tatum as the new face of Coach fragrances drove coach growth. Item demand for Solférino fragrance continued in early 2025 as well. As for Montblanc, sales are down compared to the prior year period as a result of the timing of innovation, but we are confident that the brand will achieve more favorable comparisons for the balance of the year with the upcoming launch of Explorer Extreme as a catalyst. For our United States-based operations, net sales rose 3%…

Thank you, Jean, and good morning, everyone. I will begin by discussing the consolidated results before breaking it down into our European and United States-based operations. As Jean shared and as previously reported, we delivered net sales of $339 million, a 5% increase from the first quarter of 2024. But on a like-for-like basis, our sales grew by 7%, and we remain on track to meet our guidance for the year. As a reminder, there is some seasonality to our business as a result of gifting occasions and launch cycles, so not every quarter will always necessarily line up. Gross margin expanded by 120 basis points to 63.7% from the prior year period as a result of favorable brand and channel mix. SG&A expenses as a percentage of net sales increased modestly by 10 basis points to 41.6%, with $52 million in A&P expenses to support sell-through at our retailers and drive traffic across all distribution channels, in-store and online. Once again, with 7% growth in A&P, we remain committed to continuing to spend A&P ahead of our top line growth while funding it through scale and other efficiencies. Our royalty expenses paid to brand owners or licensors averaged 8% of net sales during the first quarter, which is broadly in line with our historical run rates, but slightly favorable to the prior year period, largely due to brand mix. Overall, our consolidated operating income was $75 million for the quarter, a 10% increase from the prior year period, resulting in an operating margin of 22% or 120 basis point improvement from 2024 first quarter. Other income and expense for the three months ended March 31, 2025, was a loss of $1.7 million as compared to a gain of $2.1 million in the corresponding period -- prior year period, leading…

[Operator Instructions] Our first question is coming from Susan Anderson from Canaccord Genuity. Your line is now live.

Hi, thanks for taking my question. Nice job on the quarter. Maybe if you can give some more color, I guess, just on the US business, kind of what you're seeing, if you're still seeing some destocking there by the retailers or if you're still seeing sell-in mismatch with the sell-out. And then also, I think North America was up 14%. So if you can maybe just talk about the rest of the drivers there given that the US was only up 3%. Thanks.

Michel, you want can?

Yes, sure. Yes, overall, I think, as you know, we had last year, there was some destocking that happened at the beginning of the year, but that was largely abated as we -- as the year progressed. At this point in time, we're not really seeing a significant disconnect between sell-in and sell off. Obviously, retailers continue to be focused on cash and are managing their inventories tightly. But overall, we're not really seeing a significant impact there. Actually, our US business was quite strong this quarter despite the market being a little bit tight. As you know, last year, the market was up 20%, which was a sizable increase year-over-year. This year, the market is actually down for the quarter by 2%. But if you look at March and February, both months were actually more in line with -- were actually slightly up versus prior year period, so a 5% growth. So overall, despite the month of January being a bit challenging, I think it was driven by the fact that John this year had 4 weeks was -- had 5 weeks last year. So there's some mechanical effects there. Overall, the market is holding up pretty well. And if anything, what we're seeing is some moderate share growth here in the US. So hopefully, that answers that question.

That's simply good color. And then maybe if you could just talk about globally, I guess, what you're seeing from a consumer perspective in terms of fragrance trends. Are you seeing any slowdown in Europe, I guess, and then also in Asia.

Just go ahead.

For me, I will say that in general, the first quarter was not as strong as last year, of course, but it was still positive. As you know, we are a pure player in fragrance. So -- and fragrance was still again in the first quarter, growing comparing to the other segments of the duty, which are makeup and skin care. Regarding Europe, I think it is more challenging, especially in France and Germany, where NPD numbers were quite low or maybe negative in the first quarter. And we still see market in Asia moving into the direction where China, nothing really is happening. But it's balanced by Australia, for instance, and certain countries of Southeast Asia that are moving in the regulation. So, of course, we expect a smaller growth than last year, but the fragrance business is still growing.

Okay, great. Thanks so much. That’s really helpful. Good luck this year.

Thank you.

Thank you. Next question is coming from Korinne Wolfmeyer from Piper Sandler. Your line is now live.

Hey good morning team. Thank you for taking the question. I do want to touch a little bit more on tariffs. And any other color you can provide us on how you're quantifying the overall tariff exposure both direct and indirect? And I know it's going to be a minimal impact, and it seems like you have a lot of efforts in place to help mitigate. But how should we be thinking about the gross margin progression for the remainder of 2025 and even into 2026 when considering the tariffs? Thanks.

Yes, we're going to try both to answer. But as you know, we do not import any finished products from China, for instance. So, we don't have any impact on finished goods coming from China. We have still a certain impact because some of our components come from China, mostly metal pieces, caps, bumps, colors, that are not made in the U.S. But it -- that we are going to -- that we could get impacted is the 10% that when the goods come from Europe to the U.S. And -- so as I said in my remarks, where we have -- like gas or that have, let's say, 50% of their sales in the U.S. and 50% of their sales in Europe. Eventually, we want to make these products some of these SKUs in Europe and also in the U.S. So, on tariffs, yes, we're going to have to pay higher tariffs than last year. We think we can cover with certain price adjustments, certain negotiations and also certain decisions to move some feeling in the U.S. or outside of the U.S., it depends on where the products are sold. So, it's an exercise -- that is quite -- we are lucky because as we have improved our IT and information season, we are able to analyze quickly in order to make the decision. But it is definitely a challenge. Michel?

Yes, sure. Thanks Jean. Yes, hi Korinne. Tariff right now, we've estimated if we do-nothing scenario is about 300 basis points. We have a number of interventions that Jean has talked about that should enable us to get that down by about two-thirds. The rest will take a bit of time. And what we're planning to do is offset that through pricing. So, to answer your question around gross margin, because of the FIFO accounting and because we do have high inventory levels, we're not expecting any significant impact this year. And by the time it kicks in, we think the pricing actions that we'll be taking will offset that. Now again, there's a lot that can happen between now and the end of the moratorium, the 90-day moratorium, while we have plans in place and we're feeling comfortable that we know how to mitigate this. Ultimately, it's going to depend a lot on what really inevitably happens. And some of the actions that we're taking may be triggered or not depending on that situation. But overall, we're feeling pretty good about our ability to mitigate the impact. Q – Korinne Wolfmeyer: Thanks very much

I would like to add -- I would like to add that we have on average nine months of inventory for our products. So we are not going to see an immediate impact and this, we -- we still have three, four, five, six months to find the right solution to the tariffs. And as we said, we will do some pricing, not on every product, but on certain lines. And I'm sure you're going to ask me what happened is what happened to pricing if tariff appear, we will maintain the price increase. And if tariffs disappear, we will spend this money in extra advertising. But we will -- when we decide to increase prices, we cannot come back. Q – Korinne Wolfmeyer: Great. Thanks so much for all that helpful color. And then if I could squeeze in just one more on the operating margin in the quarter. It was -- came in a little bit higher than we had expected, and I know there were some drivers there. Can you just dive a little bit deeper into what the primary components of that upside were? And how we should be thinking about the sustainability of that operating margin lift throughout the remainder of the year? Thanks.

Yes, Korinne. So I mean there are really two key drivers of the operating margin. One was really the brand mix and the channel mix that drove the higher gross margin that was expected. A lot of the sales upside that we got actually came from our US domestic market, which comes at a higher -- because it's direct to retail at a much higher gross margin. So that was clearly a big factor in the upside surprise. On the other hand, when we look at our A&P investments, we were expecting to invest a little bit more in our original plans. And I think as we look through the situation, we felt it wasn't necessary. So we're shifting some of that to the second quarter. But those are really the two main drivers of the change. Q – Korinne Wolfmeyer: Wonderful. Thanks so much.

Thank you.

Thank you. Next question today is coming from Ashley Helgans from Jefferies. Your line is now live. Q – Ashley Helgans: Hi. Thanks for taking our questions. Congrats on the nice quarter. So just want to know how you think about premium making the portfolio more premium in a recessionary scenario? And do you still anticipate luxury to outperform as a category? Or do you think we might start to see a bit of a trade down. Thanks.

Michel, if you want to try to answer?

Yeah. I mean -- yeah, ultimately, the ultimately, the luxury category is continuing to grow faster than Prestige. Prestige is going to always be a large segment of the business. But if we continue to see where the growth is coming from, the growth is certainly coming from there because consumers this is part of concerns becoming more involved in the category. When they become more involved, they show more interest. They're looking for more premium products, more distinctive products. So I think we'll continue to see the luxury segment outperforming. And I think the way we're planning to play with this really is, I think you see this very clearly with some of the choices that we've done around our brand portfolio. Van Cleef, we're clearly moving up in distribution and premiumization, and we obviously have the launches of Sulfureno and more recently, the Annick Goutal acquisition. I mean, those are all basically plays in the upper luxury segment. And we're also looking at a -- more luxury offering through collections on some of the brands in our portfolio where it kind of makes sense if you think about what we've done on Donna Karan, for example, where we've launched the Cashmere Collection on MCM, where we've launched the park collection. So we continue to play on the higher end of the segment to offer the consumers some of the stuff that they're actively looking for. Jean?

Yes. In general, when I look at our portfolio, we performed better with brands that have products that sell at over $100 or €100 at retail. And that's why we are introducing a new MCM collection at $150 retail for three months. We're introducing a new Roberto Cavalli blockbuster at $120 or $130. This is a higher price point than before. And we think that it's a good positioning to have. There is quite demand and the consumer is willing to pay. The good news is that, there are more and more people in the US and in Europe. And of course, in Asia, that understand the quality of the product. They are more interested in more concentrated fragrance. So it resonates better and we're seeing good success at this higher price point.\

Great. Thanks so much.

Thank you. [Operator Instructions] Our next question is coming from Hamed Khorsand from BWS Financial. Your line is now live.

Yeah. Hi. First off, just following up on this conversation about luxury and premium. Do you feel like it has to be a price move to attract the consumer or is it the rarity value that's driving the consumer action?

I think it...

It's a mix -- I'm sorry, go ahead, Michel. Go ahead.

No. So I was going to say -- hi, Hamed, I was going to say that I think it's about consumers are smart. They don't just buy based on price. I think ultimately, it's about the distinctivity of the offering. And as consumers become more sophisticated I like to use the analogy of beer, right? You go from a mass beer to a more craft beer and -- and you see that pretty much as consumers become more involved in a category, their tastes evolve and they become more refined, and I think they become more involved. And I think that's really what the higher-end fragrances are offering. If you look at some of those -- some of the brands that have been very aggressive on pricing without necessarily offering the consumer real value, I think those are all brands that are kind of suffering. You see that their sales are down in units quite significantly. So I think that the consumer is looking for is looking for higher quality and they're willing to pay for the price. They're not just buying because it's more expensive. Jean?

Yes. Yes, absolutely. When we position a product at a higher retail price, it's because we are giving we are putting more into the product and the consumer understands this very well, and we have to -- it's not just the price, consumers do not react to a higher price or a higher price. You have to give them also the quality and the value also. I think that the distribution is quite important, where the products are sold exclusive distribution plays a lot in terms of desirability of the product. And that's why we are being very careful on where our products are sold.

Okay. And then earlier, you were talking about how there is some strength in the market, at least there was in Q1 and your plans to potentially raise prices during the summer. So why is the sales guidance staying flat?

Yes, go ahead, Michel.

Yes. I think the sales guidance is remaining flat. I mean, we grew 5%. I think we're -- our guidance right now is it 4%. As you can appreciate, there is a lot of volatility right now. I mean there's FX. If you look at the last month, the euro has gone from 103 to 113, which is a 10-point swing. We are still trying to understand the potential impacts of the tariffs. So I think what you're hearing is some degree of prudence here. Right now, this is what our run rates are giving us. And we have a tendency to be a little bit prudent in our guidance. And until we feel that upside potentially materializing, we're going to continue to be conservative for their guidance.

Yes, if I may say -- for me, it's obvious that we cannot, at this point of the year and with all what's going on in the world, increase or adjust the guidance it's maybe more important now than ever to be a very prudent. A lot of things could happen. Look, nobody was expecting this tariff, tomorrow we could have some countries banning products. So I think that we have managed this company with prudence, but we're also realistic. So if we need to address or revisit guidance, we will do, but it's very, very -- too early -- not sure to do it now.

Thank you.

Thank you, Hamed.

Thank you. Next question today is coming from Luca Kona [ph] from Lamberty Capital. Your line is now live.

Hi. Thank you for taking [Technical Difficulty].

We have reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Okay. All right. Thanks so much. All right. So thank you for joining our call today and really special thanks to our dedicated teams who continue to work diligently and adapt with fluidity to these other certain times. It's certainly a bit uncertain and we've really been driving greater efficiency and contributing to our ongoing success. I'd like to mention a couple of upcoming events. I'll be visiting Boston with a Piper Sandler on May 20th, then in June, I'll be participating in the TD Cowen Consumer Conference here in New York on June 3rd and 4th. And the Jefferies Consumer Conference in Nantucket on June 17th and 18th and a little call out to Ashley, thanks for your help with the logistics there. If you'd like to participate in these events, please reach out to their respective team members. If you have any additional questions, please contact Karin Daly from the Equity Group, who is our Investor Relations representative. Her telephone number and e-mail address can be found and our most recent earnings release. And we look forward to meeting with you at these events over the next conference call. Thank you again, and have a great day.

Thank you. That does conclude today's teleconference webcast. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today.