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Company: Elizabeth Arden (RDEN)
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  No investment in the core business

Elizabeth Arden makes no commitment to research, development, or product innovation. In its own words, research and development expenditures are "not material."

Reply: In 2007 RDEN initiating enterprise-wide reforms to their IT infrastructure, improving distribution, pricing, and supply-chain efficiencies. The company's gross margin has improved dramatically since then, from the low 40% range, to a projected 49.5% in FY12.

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  Celebrity endorsements only take you so far

Elizabeth Arden relies on celebrity endorsement, not product quality or brand equity, to drive sales. Demand for Elizabeth Arden products is thus dependent on highly variable and short lived celebrity appeal and reputation.

Reply: What you're forgetting is that even though what you said is true about celebs, the fact is that there is always another star coming down the pipeline. Hollywood stars are out and fast as they are in, and thus the supply of stars in endless. Not to mention that the first comment is flat out wrong, because Elizabeth Arden is one of the oldest and most recognized names in the space (even if it is not the largest).

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  Dependent on weakening perfume market

The majority of Elizabeth Arden's revenues are derived from its fragrance products, a weak product category that is expected to experience declining sales volumes in the United States through 2010.

Reply: RDEN has the leading market share in the fastest growing sector of the fragrance industry, which is luxury brands at mass-retailers (i.e. CVS, rite-aid, Target, Wal-Mart, etc.) In fact they have close to 70% market share at these locations. Not only that, fragrance is thought of as an affordable luxury, bought by aspirational shoppers. During the latest recession, fragrance was the second best performing luxury item, seeing sales decline by only about 4.5%.

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