Physicians Formula looks to top-line growth in 2010

AZUSA, Calif. Physicians Formula, whose beauty products are sold in 23,700 stores operated by Walmart, Target, CVS and Rite Aid, narrowed its fourth quarter net loss and is optimistic about 2010 as it has rationalized 28% of its SKUs and has a "strong product mix" in the pipeline.

"Although our overall market share decreased as expected versus last year, mainly impacted by the loss of a major customer, we saw an increase in dollar sales for our strategic platforms, including our bronzers, Mineral Wear face powders, and natural and organic products," stated Ingrid Jackel, chairwoman and CEO. "Having rationalized 28% of our SKUs and with the promising start of our 2010 new products, we believe that we have a strong product mix as we begin 2010 that will enable us to increase both the efficiency of our product set and our market share in our core categories. In fact, after seeing our early 2010 new product sales, we believe we are in a good position to grow our top-line in 2010."

Net sales for the quarter ended Dec. 31 totaled $22.3 million compared with $28.2 million in the year-ago period. The decrease is primarily due to the previously announced loss of a major customer and lackluster retail POS trends for the masstige cosmetics market in both the United States and Canada.

Net loss for the quarter totaled $2.5 million, or a loss of 18 cents per share, versus a loss of $24.5 million, or $1.80 per share, in the year-ago period.

The current quarter's net loss includes a $4 million charge from the company's implementation of a SKU rationalization initiative designed to discontinue slower-selling products. The initiative, which concluded in late December after 2010 plan-o-grams were finalized with its retail partners, resulted in the discontinuation of about 28% of the beauty company's products as of Dec. 31.

"We believe we adapted well to the challenges we experienced in 2009. Although our top line was negatively impacted during the year, we made significant progress on our business model redefinition by improving our manufacturing efficiencies and diligently managing our general and administrative costs," stated Jackel. "As a result, we generated $9.4 million of net cash from operating activities for the full year and $3.6 million for the back half."