Shares of Physicians Formula Holdings Inc. plunged 25 percent on Tuesday, the day after the cosmetics company reported a larger second quarter loss and worse outlook for the rest of the year than Wall Street had expected.

The Asuza-based manufacturer reported after Monday's market close a net loss of $3 million, or -14 cents a share, for the quarter ended June 30, compared a $276,000 loss (-4 cents) a year ago. Net sales rose 3.6 percent to $22.9 million. Analysts surveyed by Thomson First Call had expected an 8 cent per share loss on net sales of $24.5 million.

Physicians Formula products are sold in mass-market retail stores and compete with premium-priced brands such as Almay, L'Oreal, and Neutrogena. The quarter include a provision for anticipated returns in the second half of the year of higher-priced promotional kits, based on reports of weakening consumer demand.

"This leads us to believe that in this economic environment consumers are more inclined to purchase lower priced individual items compared to higher priced promotional kits," said Chief Executive Ingrid Jackel in a conference call with analysts.

The company revised downward its expectations for the full fiscal year. Executives see earnings per share of 52 cents to 57 cents on revenues of $120 million to $123 million, compared to a previous outlook of 65 cents to 69 cents on sales of $123 million to $125 million. Analysts on average are expecting 69 cents per share on $126 million in sales.

Physicians Formula shares closed down $2.49 to $4.50 in Tuesday trading on the Nasdaq.

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