Polaroid Says Quarter Misses Forecasts
Polaroid Corp. on Tuesday said profit again will lag forecasts as Wal-Mart Stores Inc., Kmart Corp. and other retailers buy less of its instant-photography cameras and film.
It’s the third straight quarter that Polaroid’s results will miss analyst expectations. Polaroid projected earnings of 55 cents to 60 cents a share for the second quarter, less than the 76-cent average estimate of analysts polled by IBES International Inc. It said profit in all of 1998 will be about $2.20 per share and less than the $2.49 analyst forecast.
Polaroid lost money in four of the last five years as the popularity of instant photography waned and sales stalled at about $2 billion. As big retailers trim inventories to cut costs, Polaroid is under pressure to show that new products can revive revenue, which hasn’t budged since the late 1980s.
“The question remains: What kind of demand can Polaroid generate to help drive the sales growth?” said Morgan Stanley analyst Rebecca Runkle. “Until this company can introduce new products, it’s going to be very difficult for them.”
The warning comes two months after Polaroid said it expected to meet analysts’ estimates for 1998. That forecast was made the day the company reported a larger-than-expected loss for the first quarter.
Polaroid’s latest estimate for 1998 earnings is problematic, partly because it includes about 70 cents in gains from real estate sales, Runkle said. For Polaroid to earn $2.20 a share, “a lot must go right and little can go wrong,” she said.
Polaroid Chairman Gary DiCamillo, hired in late 1995 from Black & Decker Corp., told analysts on a conference call that retailers’ inventory reductions will trim $100 million off this year’s revenue.
Excluding the inventory changes and a reserve for potential bad debts in Russia, Cambridge, Mass.-based Polaroid will earn about 60 cents to 65 cents in the second quarter, DiCamillo said. He said a rising dollar and “weakness” in developing countries is also weighing on earnings.
Yet DiCamillo said he sees “double-digit” profit growth in the third and fourth quarters and no change in the earnings outlook for 1999.
Meanwhile, the stock is down 23% the last 12 months and so-called short interest--a measure of how many investors are betting on a lower price--rose in six of the last seven months. Polaroid shares fell 31 cents to close at $39.06 on the New York Stock Exchange.
The stock isn’t falling more because many who own it are dismissing the second-quarter warning, betting that new products will deliver higher sales, Runkle said.
Later this year, for example, Polaroid plans to introduce the first disposable instant camera, called PopShots. Next year, Polaroid is to ship a hybrid 35-millimeter camera that allows people to get an instant print of the picture just taken.
