Restructuring pushes Alberto-Culver into the red

By Simon Pitman

- Last updated on GMT

Related tags Ceo james marino Business

Alberto-Culver has reported a big dip in profits for its first
quarter as restructuring costs and increased advertising
expenditure hit the bottom line - but a strong rise in sales and an
underlying increase in continuing operations helps cushion the
blow.

The company said that net sales were up 12.6 per cent on the same period last year, reaching $351.1m, a figure that was particularly driven by a strong performance from the Nexxus and Tressemme brands.

However, charges, which include those for the company's restructuring program, came to $31.4m, while the company's advertising and marketing expenditure was increased by 20.9 per cent, to reach $61m, compared to the same period last year.

Those costs were the main reason why a profit in the corresponding quarter in the previous year of $52.1m, was turned into a net loss of $5.9m for the quarter.

Discussing the restructuring charges that bore the brunt of the company's losses, CEO James Marino said: "In December we announced a reorganization plan that will lower corporate overhead costs and also announced plans to construct a new 500,000 square foot manufacturing facility in Jonesboro, Arkansas. Both of the decisions were carefully considered and should help increase margins in future periods."

He added that he expected to see cost saving benefits relating to the restructuring coming into play during the course of the financial year ahead, a fact that is also expected to partially offset the corporate and overhead costs that had previously been absorbed by the company's Sally business, prior to its separation from the group back in November last year.

The separation has carved up the business into two seperate entities: the beauty supply distribution operations of Sally and the consumer products operations of Alberto-Culver.

In turn the decision to divide the businesses also prompted Alberto-Culver to take the decision to introduce its restructuring program in an effort to streamline and consolidate the operations.

"The amount of work involved at all levels of the company in completing the Sally transaction and the wide variety of steps we have taken to reorganize our consumer products business could have been an enormous distraction in the quarter and one that could have negatively impacted our results,"​ said Carol Bernick, company executive chairman.

"It is a credit to our entire team that they were able to undertake all of this while still producing very strong results and I am extremely proud of their efforts,"​ she added.

The company is expecting to see solid gains, sales and earnings during the rest of 2007, but stressed that results will have to be considered on a quarter-by-quarter basis as restructuring expenses are likely to continue to impact the bottom line.

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