Armor All Earnings Take Plunge of 71%

Pelted by an ailing retail industry and increased competition, Armor All Products Corp. is having trouble polishing up its profits.

The maker of Armor All Protectant and other car-care products said Tuesday that its second-quarter earnings plunged 71% to $1 million, down from $3.6 million a year earlier.

Revenue for the quarter ended Sept. 30 declined 7% to $23.5 million from $25.3 million a year earlier.

Armor All stock, traded over the counter, closed Tuesday at a 52-week low of $10.75 per share, down 75 cents, on news of the earnings report.

“With retail sales slowing down, there’s a lot of product in the warehouses and the shelves of retailers,” said Marvin L. Krasnansky, vice president of corporate relations for McKesson Corp., which owns 83% of Armor All Products of Aliso Viejo.

Krasnansky said the company has also been hurt by a decline in the number of retail outlets that carry its products. The number has fallen to about 100,000 from 113,000 two years ago.

“The consolidation reflects the mergers, acquisitions and bankruptcies among retailers,” Krasnansky said. “The general-merchandise retailers are less willing to carry automotive products to compete with the automotive specialty stores.”

And then there is the problem of increased competition from companies such as First Brand Corp.’s STP division, which markets the Son of a Gun! protectant. Despite heavy advertising and competitive pricing by STP, Krasnansky said, Armor All Protectant still has more than 75% of the market.

The competition from STP and from Turtle Wax and other car protectants has forced Armor All to spend more on advertising and is squeezing profits, the company said. Besides the protectant, introduced in 1972, Armor All also sells other car-care and wax products that compete with Turtle Wax and First Brands’ STP items.

Armor All launched a cost-control program in March, when President and Chief Executive Jeffrey M. Sherman resigned and was replaced by Kenneth C. Hicken, chairman of McKesson. The company said, however, that it expects overall expenses will be the same this year as last.

For the six months ended Sept. 30, earnings declined 67% to $3 million, and revenue dropped 7% to $56.5 million. One bright spot was international sales, which rose 40% during the six months and now make up 13% of Armor All’s total sales.