As a researcher and an investor, I often like to dig around SEC filings (Yes, this is what I do on my free time to generate research and investment ideas).
Today, I ran across Elizabeth Arden’s 10-K filing mentioning the impairment of $39.6 mil of Justin Bieber and Nicki Minaj’s licenses in December of 2014.
Here is the excerpt from the 10-K.
Estimates of future cash flows are based on a long-term financial outlook of our operations and the specific brands to which the intangible assets relate. However, actual performance in the near-term or long-term could be materially different from these forecasts, which could impact future estimates and the recorded value of the intangibles. For example, during the second quarter of fiscal 2015, net sales of Justin Bieber and Nicki Minaj fragrances fell significantly below expectations, and we reviewed these license agreements for potential impairment. Given the significant decline in net sales during the second quarter of fiscal 2015, and the expectation for a continued decline of sales in future periods, we determined that these intangible assets were fully impaired and recorded a total impairment charge of approximately $39.6 million during the second quarter of fiscal 2015 to write off the carrying values of both the Justin Bieber and Nicki Minaj licenses.
….loss attributable to Elizabeth Arden common shareholders for the year ended June 30, 2015, was $246.3 million compared to $145.8 million for the year ended June 30, 2014. The decrease in results compared to the prior year was due to the lower net sales and gross profit and higher selling, general and administrative expenses, due primarily to the write off of the Justin Bieber and Nicki Minaj licenses
The write off accounted for almost 20% of Elizabeth Arden’s net losses, OUCH!
And the burn still hurts because in a recent conference call, an analyst asked about bringing back Bieber’s perfume and the CEO Scott Beattie gave an indirect answer of celebrity perfumes not going away (Ohhhh).
The moral of the story? Celebrity fragrances are a bit risky and they can be completely written off.