By Lisa Johnston
New products on display at the American International Toy Fair, held in N
One year after Y2K worries drove battery sales well above traditional levels in the closing months of 1999, two of the Big 3 battery producers-Duracell and Energizer-are showing some signs of a comparative year-to-year financial slowdown-even as their third calendar quarters come to a close.
In addition, the charged competitive selling situation, combined with expensive introductions of new, longer-life batteries, is tending to erode profit margins. This is especially true at Gillette-owned Duracell, where sales at this battery segment dropped 9 percent in the third quarter ending Sept. 30. Duracell profits were off 26 percent for the same three months, compared with the third quarter in 1999.
Rayovac, on the other hand, seems to have escaped much of the downward financial drift reported by Duracell and Energizer. Spurred by continued strong sales of alkaline, rechargeable and heavy-duty batteries, the Madison, Wis.-based battery manufacturer said it enjoyed record sales and earnings in the fiscal fourth quarter ended Sept. 30.
For the nine months, Boston-based Gillette said Duracell battery segment sales were down 5 percent and profits were off 26 percent, compared with the year-ago quarter. These negative results primarily reflect aggressive competitive activity, said Gillette, chiefly in North America; softness in the European battery market; and sharply higher marketing expenses.
Rising sales in North America tended to offset more sluggish sales in other world regions, but St. Louis-based Energizer still reported a total sales decrease of 1 percent for the three months ended Sept. 30, dropping to $478 million, compared with $485 million in the same three months in 1999. The company said sales outside North America were hurt by unfavorable currency valuations as well as volume declines.
Energizer, however, reported a 5 percent increase in earnings for its fiscal fourth quarter. Earnings reached $36.6 million for the three months, compared with pro forma net earnings, before unusual items, of $35 million for the year-ago fourth quarter.
Net sales in North America for the fourth quarter increased 6 percent to $309.5 million, compared with $293.1 million in the year-ago three months. The rise was attributed to incremental Energizer e2 sales.
However, North America's segment operating profit decreased 11 percent to $82.5 million, compared with $92.6 million in the same quarter in 1999. This decrease was attributed primarily to higher ad costs related to the Energizer e2 launch and continued support of the remainder of the Energizer and Eveready branded products.
"For the important October-through-December battery selling season, we expect a very difficult comparison due to last year's Y2K demand," said CEO J. Patrick Mulcahy.
"Last year, alkaline category sales were up 28 percent vs. historical increases in the 7 percent range. As consumer takeaway returns to normal historical trends, we anticipate that the category will experience a decline, compared with the exceptional growth in the last three months of 1999," he added.
In the fiscal fourth quarter, Energizer's total share at retail increased 2 percentage points, to 33.7 percent, said the company, and 1.7 percentage points, to 32.9 percent, for the year. It attributed the numbers to ACNielsen data for the period ended Oct. 7.
Fiscal-year sales increased 8 percent in North America, to $1.12 billion, compared with $1.04 billion in 1999. Operating profit in the North American segment increased 7 percent, to $311.9 million, compared with $291.4 million in the previous year. The company said it enjoyed higher sales and lower production costs that were partially offset by higher advertising, promotion, marketing and distribution expenses.
Total sales at Rayovac rose 13 percent to $194.5 million in the fourth quarter, up from $172.4 million in the year-ago three months. Net income climbed 159 percent to $12.7 million, up from $4.9 million in last year's fourth quarter.
"In the face of a very competitive marketplace, Rayovac was the only major battery manufacturer to achieve year-over-year sales growth for the quarter," said chairman/CEO Dave Jones.
The company's 13 percent growth in fourth-quarter worldwide sales was driven by total battery sales, which were up 22 percent. Alkaline sales rose 16 percent, and rechargeable battery sales were up 28 percent, due to strong sales in North America.
In the 12 weeks ended Sept. 23, Rayovac's total domestic general battery unit market share increased 1.5 percentage points vs. the same period a year ago and now stands at 18.8 percent, according to data released by ACNielsen. The company said total domestic alkaline unit market share for the same 12 weeks grew to 13.9 percent, up from 13.3 percent in the same period last year.
For the 52 weeks ending Sept. 23, Rayovac said its total domestic general battery unit share was 19.9 percent, an increase of 2.8 percentage points from the year-ago 12 months.
In the fiscal year, Rayovac reported record sales of $703.9 million, up 25 percent from the $564.3 million recorded in the previous 12 months. Total general battery sales climbed 41 percent, alkaline sales increased 19 percent and rechargeable batteries rose 26 percent. In North America, general battery sales over the year climbed 19 percent.
Net income for the year was up 59 percent to $38.4 million, compared with $24.1 million last year.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.