(Reuters) - Elizabeth Arden Inc (>> Elizabeth Arden, Inc.) reported its biggest ever quarterly loss due to a steep fall in sales of celebrity perfumes, particularly the Justin Bieber and Taylor Swift brands, sending its shares plunging as much as 25 percent.

The company said fourth-quarter sales fell 28.4 percent, the steepest in a decade, and warned that the weakness, which started about a year back, would continue for the next six months.

Still, investment firm Rhone Capital LLC agreed to invest nearly $100 million (60.17 million pounds) in Elizabeth Arden through preferred stock and warrants.

The company's net sales in fiscal 2014 were hit by fewer launches of perfumes, retailers reducing inventory, heavier discounting and a decision to prune the distribution of its key brands, CFO Rod Little said on a conference call.

While teens and young adults still like celebrity-branded perfumes, they have less disposable income to spend on such discretionary items given the high unemployment among youth, according to market research firm Euromonitor International.

Elizabeth Arden had five of the top 10 celebrity perfumes in the United States last year, but the overall market for these perfumes is shrinking, according to Euromonitor.

This has had a bigger impact on Elizabeth Arden, which gets about 75 percent of its sales from perfumes, than on rivals such as Estee Lauder Cos Inc (>> Estee Lauder Companies Inc), L'Oreal SA (>> L'OREAL) and Coty Inc (>> Coty Inc), who rely more on sales of cosmetics.

Elizabeth Arden's total sales fell 13.4 percent in the year ended June 30, with the fall increasing each quarter. About half the 14 percent decline in its North American sales was due to celebrity perfumes.

Distributors and retailers were selling the company's products for too little, CEO Scott Beattie said.

FRESH FUNDS

The result caps a year in which Elizabeth Arden saw a potential suitor walk away, launched a restructuring programme, and started exploring alternatives to prop up its business.

The review process ended on Tuesday with Rhone Capital's investment of $50 million in preferred stock and 2.5 million through warrants in exchange for a board seat and a stake of about 7.6 percent in the company.

Rhone agreed to cap its stake at 30 percent after the exercise of the warrants, which are worth about $49 million based on the stock's Monday close.

"Rhone's investment might support the shares in what would otherwise be a painful day," BMO Capital Markets' Patrick Trucchio said in a note.

While Elizabeth Arden said it expects sales to increase in the second half of fiscal 2015 as comparisons ease and pricing improves, Trucchio believes it would take years for the company to return to "historical levels of profitability".

Net loss attributable to Elizabeth Arden widened to $155.9 million in the quarter from $5.0 million a year earlier. Net sales fell to $191.7 million.

The stock was trading down 24 percent at $14.93 in afternoon trading, making it the top percentage loser on the Nasdaq.

(Editing by Savio D'Souza)

By Devika Krishna Kumar