Gillette Earnings Outstrip Expectations
BOSTON (AP) _ Shares of Gillette surged to their highest level in more than a year Tuesday after the company reported third-quarter profits that handily beat analysts’ expectations, thanks to strong blade and razor sales fueled by new marketing.
Boston-based Gillette, which makes razors and Duracell batteries, reported net income of $416 million, or 41 cents per share, up from $354 million, or 33 cents per share a year ago.
Analysts surveyed by Thomson First Call were expecting 36 cents per share.
The company’s shares rose $1.65, or more than 5 percent, to close at $34.15 on the New York Stock Exchange.
Sales rose 11 percent to $2.4 billion, driven by a 17-percent jump in blade and razor sales to $1.03 billion.
``To start with, it looks like a lot of the cost-cutting initiatives that were started under (chief executive James Kilts) a couple years ago are starting to bear fruit on the margin side,″ said Joe Altobello, an analyst at CIBC World Markets Corp. ``On the top line, clearly they’re able to take a lot of those savings and plow it back into marketing spending, which drives sales.″
Duracell sales rose 7 percent to $514 million, and profits were $106 million, or 35 percent.
Those figures were hurt by the effects of the company exiting its zinc carbon battery businesses in South Africa and India and lower prices, but were helped by customers stocking their pantries for Hurricane Isabel earlier this year. The drawing down of those consumer supplies, however, is expected to slow sales growth in the fourth quarter, the company said.
``Gillette met the challenges of increased competition in each of our core categories with strong marketing initiatives that drove very solid sales growth and record earnings per share,″ Kilts said.
For the first nine months of the year, Gillette earned $1.02 billion, or 99 cents per share, compared with $870 million, or 82 cents per share, a year ago. Sales rose 12 percent to $6.63 billion.
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