Coke Says Recall, Slow Sales to Hurt 3rd-Quarter Profit

Coca-Cola Co. warned on Friday that its third-quarter earnings will fall short of analyst estimates because of a product recall in Europe, higher marketing costs and sluggish sales in struggling foreign countries.

The world’s largest soft-drink maker said it expects profit in the range of 34 to 35 cents a share for the third quarter, compared with 35 cents a year ago. It would be the fourth-straight quarter of lower earnings for Coke.

On top of that, the company will reduce earnings by an additional 2 to 3 cents a share because of the massive recall stemming from a health scare in Belgium and France.

Coca-Cola was expected to post third-quarter earnings of 36 cents, the average estimate of analysts polled by First Call Corp.

The warning adds to a string of bad news this year, including the recall and bans of its drinks in Europe, problems completing purchases, continued slow sales abroad and a racial suit in the U.S. It also dashes hopes for a quick turnaround, following Chairman Douglas Ivester’s assurance in June that “the worst is behind us.”

Coke’s shares dropped $2.13 to close at $57.38 on the New York Stock Exchange. The stock is down 14% so far this year.

The company said the withdrawal of its drinks in Europe will also hurt fourth-quarter profit, though it didn’t give specifics. It’s expected to earn 32 cents in that quarter.

Illnesses among 250 Belgian and French consumers in June forced Coca-Cola to suspend sales and recall its drinks as several nations banned its beverages. The cause was traced to contaminated drinks produced at plants operated by Coca-Cola Enterprises Inc., in which Coca-Cola has a 40% stake.

During the third quarter, Coke boosted advertising and introduced new packaging in Belgium to help win back customers, and it plans to keep up the aggressive marketing campaign. Efforts have included free-drink giveaways and putting Coca-Cola “greeters” in supermarkets to talk with consumers.

“Trends indicate that consumer confidence levels are on track to return to pre-incident levels by the end of the year,” William P. Casey, president of Coke’s Greater Europe Group, said in a statement.

Coke also said it expects retail sales in the U.S. to improve after it decided to raise prices this year.

The company said it expects to meet the average estimate of $1.56 a share next year.