Black & Decker reaffirms profit outlook

Its stock slides nearly 10% after Home Depot lowers its earnings forecast

January 04, 2003|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Shares of Black & Decker Corp. fell nearly 10 percent yesterday after one of its largest customers said that its retail sales slid in the fourth quarter and that full-year earnings would be lower than expected.

In response to late Thursday's announcement by Home Depot Inc., the Towson toolmaker reaffirmed yesterday its earnings estimates for last year's fourth quarter and full year financial results.

Black & Decker said in a statement that it would meet or exceed analysts' profit forecasts of $1.01 per share for the fourth quarter and $3.19 for all of 2002. The company plans to release results for 2002 and provide its outlook for this year Jan. 30.

"We expect to deliver excellent operating profit improvement on low single-digit sales growth for the fourth quarter, as we had anticipated," said Nolan D. Archibald, Black & Decker's chairman and chief executive officer, in a statement yesterday. "As a result, we are comfortable with the consensus earnings estimate for the fourth quarter."

Black & Decker's shares lost $4.20 to close yesterday at $40.01.

Their drop coincided with a 14 percent decline in Home Depot's shares. Home Depot's stock fell $3.50 to close at $21.38 yesterday after the No. 1 home improvement company announced that it was revising its earnings guidance for 2002 from $1.57 per share to between $1.53 and $1.55.

Home Depot said fewer people than expected bought products in traditional gift categories such as power tools and hardware during last month's crucial holiday shopping period.

Barbara B. Lucas, a Black & Decker spokeswoman, declined to comment on the toolmaker's sales performance in the fourth quarter or the company's outlook for this year, pending the company's Jan. 30 release.

Black & Decker is in the middle of a major restructuring effort to cut operating expenses.

In November, the company said it would shut its Easton plant in Talbot County by the end of this year, laying off 1,300 people and transferring the work to plants in North Carolina, Mexico and Brazil.

Home Depot has a significant relationship with Black & Decker. In 2001, the toolmaker derived 20 percent, or $861.8 million, of its $4.33 billion in annual sales from Home Depot, according to a company filing with the Securities and Exchange Commission.

Lucas declined to give a current sales percentage but said the company is required to disclose significant sales relationships each year in its annual report.

Home Depot sells several different Black & Decker products, including Black & Decker and DeWalt power tools and accessories, Kwikset security hardware and Price Pfister plumbing products.

"There are a lot of other factors that affect our business," Lucas said of Home Depot's earnings forecast revision.

"We deal in all the major markets in the world," she said. "We are in other businesses besides power tools, and other factors have affected our results for the year."

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