Gillette reports higher earnings
BOSTON (AP) – The Gillette Co. said second-quarter profit rose 15 percent compared with a year ago, topping analysts’ estimates, but said an upcoming battle with rival Schick’s new four-bladed razor could trim future earnings. The Boston-based maker of toiletries and batteries reported profits of $338 million, or 33 cents per share, for the April-June period, compared with $293 million, or 28 cents per share a year ago. Last year’s figures included an after-tax gain of $21 million, or 2 cents per share. Analysts surveyed by Thomson First Call were expecting profits of 29 cents per share for the latest three-month period.
Gillette credited stronger blade and razor sales, as well as the favorable impact of a strong euro.
“The balance sheet, trends were improving. Across the board I thought it was a pretty good quarter,” said Joseph Altobello, an analyst with RIBC Capital Market Corp. Separately, Gillette announced plans to roll out three new shaving products: an update of its Venus system for women, to be called “Venus Divine;” a new three-bladed version of the two-bladed Sensor system; and a new version of the Mach3Turbo for men with a car-racing theme. Gillette is trying to stay on the cutting edge as it prepares to compete with Quattro, the first four-bladed razor in the business.
Quattro is being rolled out by rival Schick, a unit of St. Louis-based Energizer Holdings. The new product is expected to debut next month.
Gillette told investors on a conference call that share loss and increased marketing expenses to defend itself against Quattro could cost the company between 2 and 4 cents per share this year and between 5 and 7 cents per share next year. Wall Street expects the company to earn $1.26 per share this year and $1.40 per share in 2004.
However, Gillette insisted it did not believe Quattro would affect its goals of sales growth of between 3 percent and 5 percent and its overall earnings performance versus its peers.
“Despite this potential impact, we do not expect this activity to inhibit our ability to deliver our financial growth targets,” said Chris Jakubik, Gillette’s vice president of investor relations.
Gillette shares were up 3 cents at $30.40 in afternoon trading Tuesday on the New York Stock Exchange.
Altobello said the company’s estimates of the impact were in line with his own and he was not concerned Gillette, still the dominant blade and razor company, would be forced into a destructive advertising war.
“In the near-term you might see a hiccup but in the longer term it’s something they’ll manage,” he said. “I don’t think they’ll get into a spending war with Schick only because Schick knows they’re outgunned in the capacity to spend money. Gillette has much deeper pockets than Schick.”
Gillette’s sales rose 11 percent from $2.02 billion to $2.25 billion, but the company attributed 6 percent of that gain to favorable exchange rates, primarily in Europe.
Blade and razor sales rose 14 percent to $1.0 billion, with profit in that division up 17 percent to $377 million. Sales of Duracell batteries were up just 1 percent to $432 million, but the company squeezed out $54 million in profit, 20 percent higher than a year ago.
Operating profits were up 12 percent to $505 million from $449 million.
For the first six months of the year, Gillette reported profits of $601 million, or 58 cents per share, up 16 percent from $516 million, or 49 cents per share, in the first half of 2002.
Revenue rose to $4.23 billion from $3.76 billion a year ago.
AP-ES-08-05-03 1524EDT