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Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K
Current Report Pursuant to Section 13 OR 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported):
October 6, 1998
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JEAN PHILIPPE FRAGRANCES, INC.
(Exact name of Registrant as specified in its charter)
Commission File Number 0-16469
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Delaware 13-3275609
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
551 Fifth Avenue, New York, New York 10176
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(Address of Principal Executive Offices)
(212) 983-2640
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(Registrant's Telephone number, including area code)
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Item 5. Other Events.
The press release of the Registrant dated October 6, 1998, a copy of
which is annexed hereto as Exhibit no. 99.1, is incorporated by reference
herein.
Item 7. Exhibits.
The following document is filed herewith:
99.1 Press release of the Registrant dated October 6, 1998
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused and authorized this report to be signed
on its behalf by the undersigned.
Dated: October 6, 1998
Jean Philippe Fragrances, Inc.
By: /s/ Russell Greenberg
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Russell Greenberg,
Executive Vice President
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FOR IMMEDIATE RELEASE CONTACT AT THE COMPANY
October 6, 1998 RUSSELL GREENBERG
EXECUTIVE VICE PRESIDENT
CHIEF FINANCIAL OFFICER
(212) 983-2640
Jean Philippe Fragrances Announces it Expects Lower Operating
Results for the Third Quarter of 1998 and The
Closing of Its Brazilian Subsidiary
New York, New York, October 6, 1998: Jean Philippe Fragrances, Inc.
(Nasdaq National Market: JEAN), announced today that estimated results of
operations for the three (3) months ended September 30, 1998 are expected to be
lower than prior internal estimates of management. Jean Philippe also announced
its plans to close its Brazilian subsidiary.
Management anticipates that earnings are expected to be approximately
$1.0 million, or $0.11 per diluted share, for the three (3) months ended
September 30, 1998, as compared to $1.6 million or $0.18 per diluted share for
the three (3) months ended September 30, 1997. Net sales are expected to be
approximately $22.4 million for the three (3) months ended September 30, 1998,
as compared to $24.5 million for the three (3) months ended September 30, 1997.
Earnings are expected to be approximately $3.4 million, or $0.38 per diluted
share, as compared to $3.1 million or $0.33 per diluted share for the nine (9)
months ended September 30, 1998 and 1997, respectively. Net sales are expected
to be approximately $67.3 million for both the nine (9) months ended September
30, 1998, and the nine (9) months ended September 30, 1997.
Management attributes the lower than expected results to the following
three (3) factors: (1) competition in the domestic alternative designer
fragrance market; (2) economic turmoil in Russia; and (3) the inability of Jean
Philippe do Brasil, Ltda., a wholly-owned limited liability company, to
penetrate the Brazilian marketplace.
As previously reported, the overall market for Alternative Designer
Fragrances in the United States has become extremely competitive and very price
sensitive, and customers are reducing inventory levels. This trend is expected
to continue into the fourth quarter of 1998 and is affecting the entire
industry. The Company's Alternative Designer Fragrance lines first encountered
heavy discounting by certain competitors in the fourth quarter of 1996. As
previously reported, in January 1997 the Company matched the competition's
pricing structure by reducing selling prices by approximately 30%, and regained
much of the market share initially lost as a result of such price competition.
However, as a result of such selling price reduction, net sales in this category
declined 13% in fiscal 1997, as compared to 1996; increased only 4% for the
three months ended March 31, 1998, as compared to the three months ended March
31, 1997; and decreased 4% for the three months ended June 30, 1998, as compared
to the corresponding period of the prior year.
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In an attempt to combat the negative impact of this industry-wide
trend, the Company is in the process of developing a line of moderately priced
fragrances which are not Alternative Designer Fragrances. Utilizing prestige and
upscale concepts in bottle design and packaging, the Company is creating a line
of unique and high quality fragrances to be sold domestically and
internationally, in existing and new distribution channels, at mass market
prices. Although management of the Company believes that this new concept of
moderately priced fragrances will not affect its other core fragrance
businesses, no assurances can be given the new line will be successful. The
Company expects to launch its new line in the fourth quarter of 1998.
The second factor contributing to the lower than estimated results is
the economic turmoil in Russia. For the third quarter of 1998, the Company will
have no net sales from Russian Territories, as compared to net sales of
approximately $3.5 million for the third quarter of fiscal 1997. Further no
assurances can be given that the economic turmoil will abate in the foreseeable
future, and thus management is uncertain as to whether the Russian market will
again become viable in the near future. However, the Company does not have any
material exposure with respect to accounts receivable from its Russian
customers.
The third factor contributing to the lower than expected results was
the inability of Jean Philippe do Brasil, Ltda., a wholly-owned limited
liability company ("Jean Philippe Brazil"), to effectively penetrate the
Brazilian marketplace. As previously reported, sales generated by the company's
Brazilian subsidiary, Jean Philippe Brasil, were $2.0 million in 1997 as
compared to $3.0 million in 1996, and this trend has continued for the first six
(6) months of fiscal 1998, with net sales decreasing to $0.4 million from $0.8
million for the first six months of fiscal 1997. Management believes such
decline reflected the Brazilian consumers' fear of a possible currency
devaluation brought on by the Asian crisis. In addition, as previously reported,
Jean Philippe Brasil underwent an organizational change during 1997, whereby it
terminated its contract with its exclusive sales representative. However, Jean
Philippe Brasil was not able to effectively penetrate the Brazilian marketplace
as a direct seller. In view of the less than optimistic Brazilian consumer
confidence level, heavily regulated Brazilian environment, and the inability to
date to increase sales in Brazil to an acceptable level, the Company has
determined it is in its best interest to close its Jean Philippe Brasil
subsidiary. Such closing is not expected to have a material adverse effect on
the Company's results from operations. In addition, the Company is in the
process of entering into a distribution agreement with a well known Brazilian
fragrance distributor. Such agreement is expected to include the purchase of all
existing inventory.
Note: Except for previously reported information, the foregoing
constitutes forward looking information, which is managements' estimates of
future events based upon certain assumptions, which are subject to events over
which management may have little or no control.
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