Rayovac, Duracell Lower Sales Expectations
By Jeff Malester -- TWICE, 1/22/2001
MADISON, WIS. -Taking it on the chin from a projected 12-13 percent decline in sales, battery maker Rayovac expects lower-than-anticipated financial results for its fiscal-2001 first quarter. The company expects diluted earnings per share to be in the range of 30-33 cents, down from the 48 cents reported in the same three months of last year.
Much of Rayovac's expected first-quarter sales decline can be attributed to comparisons with the unusually healthy battery environment in last year's first fiscal quarter, when sales were driven by Y2K concerns, as well as an unusually active storm season. This year's category sales also are being negatively impacted by cautious retailers who are reducing year-end inventories, said the company.
Rayovac's key competitor Duracell, one of the big-three battery makers, along with Rayovac and Energizer, is also sounding warnings about the upcoming quarter. Duracell, which is a segment of Gillette, said it expects overall fourth-quarter sales to be down by low single digits, reflecting lower battery sales coupled with the exchange impact of the strong U.S. dollar.
Industrywide battery category sales for the quarter ending Dec. 31 are now expected to be down 10-12 percent, said Rayovac.
"We believe the current quarter sales decline is an abnormal event, and we expect the industry will return to historical and normal growth levels of 7-8 percent in early 2001," said Rayovac chairman/CEO Dave Jones.
"Rayovac should resume its above-industry growth in the second fiscal quarter, driven by continued distribution gains and product innovation in a number of channels of distribution," said Jones.
The company said diluted earnings per share will continue to expand faster than sales, with year-over-year growth of about 18-20 percent over the next three quarters.
"We remain confident in the strength of our brand and our powerful value proposition, and believe that we will achieve our fifth consecutive year of record sales in spite of the first-quarter softness," said Jones.
As for his company's Duracell segment, Gillette senior VP/chief financial officer Charles W. Cramb said, "Despite the sales decline, we are encouraged by Duracell's recent market share performance in the United States. Aggressive merchandising and display programs have generated share gains in the alkaline battery category for the first time this year. We remain optimistic that the battery market will return to its traditional 6-8 percent growth rate in 2001.
"For the first quarter in 2001, Gillette anticipates that overall net sales will decrease in the mid-single-digit range. This reflects the expected continuation of significantly unfavorable exchange rates, lower retail replenishment of batteries, and higher marketing expenses in support of a very strong new products program."
