Black & Decker expects to report lower 1Q revenue

But toolmaker says profit will `meet or exceed' forecast of analysts

April 03, 2003|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Black & Decker Corp. said yesterday that it expects to report lower-than-anticipated first-quarter sales, but earnings will "meet or exceed" Wall Street analysts' estimate, thanks to a major restructuring program that has helped improve operating margins.

The world's largest maker of power tools said it expects to meet or exceed the analysts' earnings estimate of 43 cents per diluted share. The Towson company had previously said its earnings would be in the range of 40 cents to 45 cents.

In the first quarter last year, Black & Decker made $33 million, or 41 cents a share, on sales of $951.7 million. The company, which plans to report first-quarter results April 24, did not release a first-quarter sales estimate yesterday.

Shares of Black & Decker rose $1.71 - or nearly 5 percent - to close at $36.91 yesterday.

In a statement, Black & Decker blamed a weak economy for its lower sales in the quarter, which ended Sunday.

In the fourth quarter of 2002, Black & Decker said it faced weak economic conditions, but still managed to post sales increases in most of its business segments. It reported record annual sales in its North American power tools and accessories segment.

A company spokeswoman declined to comment beyond the release yesterday.

Black & Decker's products - from power tools to plumbing supplies - are sold through a variety of retail channels, from generalized discount stores to "big-box" home improvement outlets. But many retailers have slogged through a tough couple of months and have faced lackluster or declining sales, thanks in part to a harsh winter and war worries.

"Basically, the market for a lot of consumer discretionary items has been weakening through the quarter," particularly in March, said Lawrence C. Horan, an equity analyst with Parker/Hunter Inc. in Pittsburgh who owns Black & Decker shares.

"This shouldn't come as a surprise," Horan added. "I think the surprise is they were able to maintain the earnings even at a lower sales pace."

Last year, Black & Decker had net earnings of $229.7 million, or $2.84 per diluted share, more than double the $108 million, or $1.33 per share, it made in 2001. Sales rose 3 percent to $4.39 billion.

The company's bottom line was helped by a broad restructuring program it embarked on last year, which involves job reductions in the United States and moving production to countries with cheaper labor costs.

It closed three U.S. plants and plans to shut its Eastern Shore plant - with a loss of 1,300 jobs - by year's end. Production is being shifted to countries such as Mexico and the Czech Republic.

The company expects the restructuring program to cost roughly $170 million and to generate $100 million in annual savings by next year. Through the fourth quarter last year, Black & Decker had spent about $150.5 million on the program.

The restructuring saved Black & Decker about $25 million last year, the company said.

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