Sluggish Sales Cut Coca-Cola Profit 11%
Coca-Cola Co. said Thursday that its profit fell 11% in the third quarter because of slow sales in Eastern Europe, Turkey and Russia and a recall in Europe.
Net earnings dropped to $787 million, or 32 cents a share, from $888 million, or 36 cents a share, a year earlier--the fourth consecutive decline in quarterly earnings.
The year-ago figure included 1 cent per share in one-time gains.
Total sales grew 9.4% to $5.2 billion in the quarter. But global case sales of beverages, a key indicator of growth, were up just 3.5%.
Coca-Cola warned six weeks ago that profit would fall to 33 cents or less, versus forecasts at the time of 36 cents, because of sluggish sales.
It was the latest piece of bad news for Chairman Douglas Ivester, including the recall sparked by contaminated drinks, a race discrimination lawsuit and problems completing purchases.
“This past year has not been what the company’s share owners or its management, most especially me, want or expect,” Ivester said in a statement. “Our volume and profit results and our stock price have disappointed us all.”
Ivester repeated earlier comments that some key economies are starting to rebound. Sales in Japan, Mexico, Brazil and the U.S.--four of Coca-Cola’s top five markets--were “very encouraging,” he said.
The European recall reduced Coca-Cola’s profit by 2 cents to 3 cents a share in the quarter. The company pulled its drinks after about 250 consumers became ill in Belgium and France.
Case sales were up 2% in North America; in Europe, they grew 3%. Sales in most European markets have returned to levels before the June product recall in Belgium and France, the company said.
Coca-Cola’s shares have fallen 20% this year, although they gained $1.56 to $54.31 on the New York Stock Exchange on Thursday. The stock hasn’t fallen for a full year since 1980.
At a Glance
Other quarterly earnings, excluding one-time gains or charges unless noted:
* Gillette Co. said its profit edged down 0.3% to $352 million, or 32 cents a share, in line with reduced analyst estimates, as sales fell 0.9% to $2.51 billion. But the razor company also warned that fourth-quarter results will decline by a “middle to high teens” percentage rate as it trims inventory. Analysts had expected fourth-quarter earnings of 42 cents, up 7.7% from a year ago. Gillette said it may sell its Braun appliance and stationery products businesses, which have been pulling down its earnings.
Gillette has warned four times about its earnings since April. Analysts had cut their latest forecasts after the firm warned of a sales decline last month. In after-hours trading Gillette shares tumbled $4.38 to $33.50 on the NYSE on Thursday.
* McDonald’s Corp.’s earnings rose 12% in the third quarter to $540.9 million, or 39 cents a share, a penny better than forecasts, on a 7% increase in sales to $3.44 billion. The fast-food giant benefited from new products such as bagel sandwiches, the installation of a system that makes foods as they’re ordered, and marketing campaigns such as those with Walt Disney Co. tied to the “Tarzan” and “Inspector Gadget” films. Sales at all restaurants, including those owned by franchisees, rose 8% to $10 billion. McDonald’s stock fell $1.81 to $42.31 on the NYSE.
* Merck & Co., the No. 1 U.S. drug maker, reported a 13% increase in earnings for the third quarter to $1.54 billion, or 64 cents a share, matching estimates. Sales jumped 20% to $8.2 billion, with a boost from its cholesterol reducer Zocor, blood pressure pill Cozaar and a new painkiller, Vioxx. Zocor sales rose 17% to $1.16 billion, even as sales of rival drug Lipitor, made by Warner-Lambert Co., climbed 72% to $981 million. Zocor sales, excluding stocking by drug wholesalers such as McKesson HBOC Inc., rose about 20% in the U.S. Sales of Cozaar rose 27% to $350 million.
* Monsanto Co. reported third-quarter profit from continuing operations of $10 million, or 2 cents a share, contrasted with a loss of $111 million, or 18 cents, a year ago, as strong sales of its arthritis drug Celebrex helped it meet higher expenses. Monsanto, a life sciences company that also makes the top-selling weed killer Roundup, said sales from continuing operations rose 14% to $1.95 billion. The results were below the 10-cents-a-share average estimate of analysts polled by First Call Corp., but some analysts included results from Monsanto’s discontinued operations in their estimates.
* Raytheon Co. said its profit dropped 33% in the third quarter to $198 million, or 59 cents a share, as sales rose 6.6% to $4.73 billion. The defense and electronics company had warned last week that sales and profit this year and next will be less than forecast because of competitive pricing by rivals and delayed orders. The quarterly results exceeded analysts’ average estimate, which had been revised to 55 cents from 91 cents a month ago.
* Reebok International Inc.’s profit slipped 2.3% in the third quarter to $27.6 million, or 49 cents a share, a penny better than analysts expected. Sales fell 9.6% to $793.9 million as demand weakened for its Rockport shoes, Classic white sneakers and Reebok clothing. Sales of the Ralph Lauren line of shoes grew.
* R.J. Reynolds Tobacco Holdings Inc. said its profit from continuing operations dropped 30% to $110 million, or $1.01 a share, better than the 98 cents analysts were expecting. Retailers ordered fewer cigarettes after the company joined price hikes initiated by its larger rival Philip Morris Cos. Sales gained 31% to $1.99 billion, reflecting the higher prices. U.S. shipments were down 11.6%, more than the industry total. This is R.J. Reynolds’ second quarter as a stand-alone company. It was spun off in June from RJR Nabisco Holdings Corp.
* Sears, Roebuck & Co. said its third-quarter earnings fell 11% to $265 million, or 69 cents a share, as the department store operator lost sales to lower-priced or trendier rivals. The results beat the revised 64-cent average estimate of analysts polled by First Call Corp. and Sears’ own forecast of 63 to 67 cents. Revenue declined 2.7% to $9.54 billion. While sales of appliances and electronics were brisk, overall retail sales fell 4.1% to $6.8 billion.
* Sybase Inc. said its third-quarter net income soared more than sevenfold to $16.1 million, or 19 cents a share, from $2.21 million, or 3 cents, a year ago, exceeding estimates of 14 cents, as it cut costs. Revenue rose 3% to $216.1 million.
* Tandy Corp., operator of the Radio-Shack electronics chain, said its profit from continuing operations jumped 24% in the third quarter to $59.8 million, or 29 cents a share, a penny higher than estimates, as sales rose 14% to $960 million.
* Tyco International Ltd. said its profit nearly quadrupled in its fiscal fourth quarter to $782.7 million, or 92 cents a share, from $207 million, or 25 cents, on higher sales and cost cuts made at newly acquired companies. The world’s biggest maker of electronic connectors said sales jumped 22% to $6.2 billion. Results for both periods are restated to include AMP Inc., which Tyco purchased in April, and U.S. Surgical Corp., acquired in October.
* Union Pacific Corp. said profit soared more than sixfold in the third quarter to $218 million, or 86 cents a share, beating estimates of 82 cents, as the largest U.S. railroad hauled more freight and cleared the remnants of a logjam that snarled its system a year ago. Union Pacific earned $34 million, or 14 cents, in the year-earlier period. The company said cost-cutting also boosted results. Revenue increased 9% to $2.89 billion.
*
Bloomberg News and Reuters were used in compiling this report.
