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Higher volume and pricing, partially offset by an unfavorable product mix, evolved into a 3 percent increase in fiscal second-quarter sales for the North American battery business at Energizer. Sales climbed to $218.9 million for the three months, up from $213.5 million in the year-ago period.
North American battery segment profitability edged upward $2.4 million in the second quarter, reaching $51.4 million, compared with a year-on-year $49 million. Segment profit rose due to lower administrative, selling, advertising and promotion expenses, which were partially offset by a lower gross margin.
In North America, lithium- and rechargeable-battery product volume grew by more than 30 percent in the second quarter, ended March 31. Energizer Max unit sales declined 1 percent, reflecting retail inventory reductions slightly in excess of the 7 percent growth in consumer takeaway at retail.
Pricing for the quarter was favorable, reflecting recent price increases across all Energizer Max package sizes. However, this was partially offset by unfavorable product mix in the quarter due to a continued shift of sales to larger package sizes, which sell as lower pre-unit prices.
Gross profit in the U.S. batter segment declined $2.8 million in the second quarter, as unfavorable product mix and higher materials costs were partially offset by higher sales and production efficiencies.
Energizer said the overall U.S. battery category increased 6 percent in dollars for the quarter ending March 25, compared with the same three months last year. Retail consumption of Energizer's products increased 11 percent in dollars for the same time frame.
By focusing on lithium and rechargeable batteries, Energizer said it increased its battery share by 1.5 percentage points in the three months, bringing its share of the total retail category to about 38 percent in the second quarter.
For the six months, Energizer North American battery sales increased 2 percent, or $14.8 million, primarily due to higher volume, partially offset by an unfavorable product mix. Gross profit decreased $9.5 million for the six months.
Looking ahead, Energizer said U.S. battery price increases should provide favorable comparisons for the second half of 2006. However, unfavorable package size will likely offset at least a portion of pricing benefits.
Commodity costs for materials used in the battery segment, which rose considerably in recent months, should account for unfavorable costs of $38 million to $40 million for the full fiscal year, compared with the previous 12 months. About $19 million of this will be realized in the first half.
Consolidated Energizer sales for the second quarter were flat at $629 million, with higher North American sales offset by sales in the international battery segment.
Net earnings for the second quarter dropped to $50 million, from a year-earlier $56.2 million. Last year's second quarter benefited from $7.6 million in tax accruals and the recognition of tax benefits from foreign losses.
For the six months, consolidated Energizer sales climbed to $1.51 billion, up from $1.50 billion a year earlier. Net earnings came in at $170.5 million, down from $176.6 million.