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NEW YORK - The worst is behind Elizabeth Arden Inc., an analyst said Thursday, upgrading the stock to "Buy" as he cited cost savings and sales opportunities at Wal-Mart Stores.
SunTrust Robinson Humphrey analyst William Chappell, who previously rated the stock "Neutral," said the company's purchase last year of Liz Claiborne's fragrance portfolio boosted Elizabeth Arden's U.S. and international opportunities.
"These products not only gave Elizabeth Arden a strong set of top-selling products such as Juicy, Usher and Curve, but they also enabled the company to expand distribution of these products to its international channels," Chappell wrote in a client note.
Chappell also said the company continues to save costs. The company expects to generate between $10 million and $12 million in cost savings by fiscal 2011, or between 25 cents and 30 cents per share annually, Chappell said.
Chappell also said Wal-Mart Stores' Project Impact program will boost sales for all fragrances over the next few years. Under the new format, fragrances have between 20 percent and 30 percent more shelf space. Fragrances have also been relocated to a more prominent position at the front of the store.
"Elizabeth Arden has indicated that it is already seeing double-digit same store sales improvement in the reformatted stores," Chappell said.
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