Inter Parfums Shares Dropped: What You Need to Know

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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of fragrance bottler and seller Inter Parfums (NAS: IPAR) stunk up the place today, sinking as much as 10.2% on very heavy volume.

So what: The maker of perfume and deodorant brands such as Jimmy Choo and Lanvin is discussing contract terms with largest customer Burberry Group, and investors seem nervous about the outcome. Analysts see Burberry holding all the good cards, since the British luxury designer and retailer accounts for more than half of Inter Parfums' sales -- an account the company can hardly afford to walk away from.

Now what: The company also makes fragrances under license for Procter & Gamble (NYS: PG) , Gap (NYS: GPS) , and Nordstrom (NYS: JWN) , but none in the volume that the Brits order up. Burberry is one of the top five fragrance sellers in China and other developing markets, so this is the ticket to big sales growth. Burberry knows it and is likely to insist on better contract terms in exchange for that coattail ride. Push back too hard, and Burberry would be happy to take its big account to Avon (NYS: AVP) or L'Oreal instead -- welcome to the cutthroat world of high-end perfumes!

Interested in more info about Inter Parfums? Add it to My Watchlist.

At the time this article was published Fool contributorAnders Bylundholds no position in any of the companies mentioned.Motley Fool newsletter serviceshave recommended buying shares of Procter & Gamble. Try any of our Foolish newsletter servicesfree for 30 days. We Fools don't all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Check outAnders' holdings and bio, or follow him onTwitterandGoogle+. We have adisclosure policy.

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