Target is gifts, holiday market Black & Decker tries to recapture profits with appliances, tools

'Lifeline of this business'

Household division offers KitchenTools for high-end cooking

New Products

October 05, 1997|By Sean Somerville | Sean Somerville,SUN STAFF

A year after its hit SnakeLight faded, Black & Decker Corp. is trying to recapture profits with new high-end kitchen appliances and more power tools for the professional and the do-it-yourself crowds.

The entries will play a huge role in the Towson company's fourth quarter -- a period that includes the holiday season and traditionally accounts for about 40 percent of Black & Decker's annual earnings.

"New products are the lifeline of this business," said Ann Buivid, vice president of marketing and new business for Black & Decker's household products division. "It's everything."

Black & Decker's performance in this year's fourth quarter, which started last week, may be more critical than in the past.

Late last year, Black & Decker warned that earnings would suffer in part because of sagging demand for the SnakeLight flexible flashlight, which finally fell to Earth after two years of booming sales. The company, which had earnings declines of 24.5 percent and 31 percent before managing a flat second quarter, reports third quarter results later this month.

Black & Decker shares, trading at about $42 a year ago, closed on Friday at $37.625 -- roughly a 10 percent decline. In the same year, the benchmark Dow Jones Industrial Average climbed by about 35 percent.

To be sure, new products are only one factor in Black & Decker's performance. The company must also worry about foreign currency, the European economy, taxes and costs.

Still, analysts are watching new products closely. The margins are generally higher than for existing products. Additionally, stores like Home Depot are looking to create excitement that will pull people into stores.

"New products are going to be what gives Black & Decker most of their growth in the third and fourth quarters," said Cliff Ransom, a NatWest Securities analyst who has a "buy" recommendation on Black & Decker stock.

Bullish or not, analysts praise Black & Decker's ability to develop strong new products. "Investors recognize new products as the lifeblood of the company," said Susan Gallagher, a Prudential Securities analyst who gives the stock a "hold" rating. "It seems that competitors are still a step behind. They've done well and they continue to need to do well."

For the company, the test begins now. This is when the result of months and sometimes years of labor becomes apparent. As always, Black & Decker introduced many of its new products at the annual hardware show in Chicago in August and started taking orders. Shipping began last month.

"We point all of our new products at the fourth quarter, because it's our biggest quarter," said Al Decker, 89, son of the company's co-founder who served as chief executive officer and remains a board member. "From this point on, we're shipping to beat hell. Our sales just keep going, from here to the middle of December."

What will hit in the marketplace is anybody's guess, as Black & Decker learned when it had to quadruple production of its SnakeLight in its North Carolina factory to meet demand.

"After 25 years of following Black & Decker, my ability to forecast the elephant is no better than theirs," Ransom said.

This year, Black & Decker has new products across its divisions, including its plumbing and lock businesses. The household products division may be making the boldest move. Attempting to capture the high-end cooking market, the division has introduced a line of appliances under a new KitchenTools brand name.

It is a gambit similar to the company's revival of the DeWalt name as a brand for professional tools. In both cases, Black & Decker is selling premium products without the company's name. One difference is that KitchenTools is a new brand.

The six-product line includes a $160 coffee maker, a $35 can opener and a $230 food processor. KitchenTools will try to snare market share from premier brands such as Cuisinart and Braun.

Buivid of household products said KitchenTools makes sense in several ways. "The margins are bigger on premium products than on baseline products," she said. "It also gives us access to channels we're not in."

While mass retailers like Wal-Mart and Kmart have long been rTC prime outlets for Black & Decker brand appliances, Black & Decker is using KitchenTools to push into high-end kitchen stores and upscale department stores.

"For the first time, we're in Bloomingdale's," Buivid said.

The company is shooting not only for the holiday gift market, but also for wedding gift business. It's too early to tell how the new products are doing. But early reviews are good, Buivid said.

Dayton Hudson Corp., a retailer that operates more than 1,000 stores and parent of Target and Mervyn's, has rated KitchenTools a 10 on a 10-point scale, she said. "That's a very tough account," Buivid said.

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