UPDATE 3-Arden gives gloomy outlook despite strong Q3

* Q3 loss 19 cents ex-items; Wall Street est loss 32 cents

* Modest boost in retail sales, new fragrance boosts Q3

* Sees 2009 profit below Street on softer int'l sales

* H1N1 flu fears could weigh on travel retail business

* Shares fall as much as 9 percent (Recasts; Adds analyst comments, background, stock activity)

BANGALORE, May 7 - Cosmetics maker Elizabeth Arden Inc forecast a full-year profit below Wall Street expectations despite a stronger-than-expected performance in the latest third quarter, and its shares fell as much as 9 percent.

The maker of celebrity perfume brands like Britney Spears and Mariah Carey blamed weakness in its international markets, particularly its higher margin travel markets and its European business, for the lackluster 2009 forecast.

Arden's business has been hurt by the recent strengthening of the U.S. dollar, which mitigated the value of overseas sales.

"The recent emergence of the swine flu could exacerbate travel retail woes, as fears of contracting the virus keep consumers from flying," Wedbush analyst Rommel Dionisio said.

The drop-off in air travel could hurt sales in the company's travel retail business, which accounts for about 5 percent of sales but a higher level of profits, Dionisio added.

For 2009, Arden expects earnings of 38 cents a share to 50 cents a share and net sales to decline 6 percent to 6.5 percent. Analysts expect fiscal 2009 earnings of 73 cents a share, before special items, according to Reuters Estimates.

Arden, which announced job cuts earlier this year, is taking steps such as reducing inventory and speeding up cost savings to improve profits in fiscal 2010.

Q3 BEATS STREET

Arden, also known for its Prevage anti-aging skin products, said net loss was $3.7 million, or 13 cents a share, in the third quarter ended March 31, compared with $3.8 million, or 14 cents a share, a year earlier.

Excluding restructuring and certain expenses, Arden posted a loss of 19 cents a share. This compares with analysts' forecast of a loss of 32 cents a share, according to Reuters Estimates.

"We are seeing modest improvement in retail sales performance and are continuing to build market share," CEO Scott Beattie said in a statement.

Arden also said the performance of its recently launched fragrance-- Pretty -- has exceeded the company's expectations thus far.

Sales fell 3.4 percent to $203.5 million, as more women spend cautiously on beauty products in a bid to conserve cash in a deepening recession.

Earlier this week, Arden's rival Estee Lauder Cos Inc reported a 70 percent fall in quarterly profit, while world's largest direct seller of cosmetics, Avon Products Inc, posted a 36-percent drop in quarterly profit.

U.S. cosmetics companies have been hurt by weak customer traffic at department stores, where they have cosmetics counters, and the recent strengthening of the U.S. dollar, which lessened the value of overseas sales.

"Though we are gaining comfort that retailer inventory destocking in the US is largely coming to an end, we await greater visibility on Arden's new product outlook for the latter part of 2009 before becoming more bullish on its shares," Dionisio said.

He has a "hold" rating on the stock.

Arden shares fell to an intra-day low of $7.82, before recouping some losses to trade down 34 cents at $8.24 late Thursday morning on Nasdaq.