Costs and ad spend hit Alberto Culver profits
spend and a rising costs have led to an 18 per cent drop in net
profits, despite the fact that sales for the third quarter grew at
well above market rates.
Net sales for the period increased by 9.2 percent to reach $385.5m, whereas net earning from continuing operations grew by 18.2 per cent to $24.2m. The quarterly net sales and earnings were up on market analyst's expectations, with the market generally expecting a sales figures of between $378m - $379m. But increased production costs, restructuring costs and an increase in ad spend all hit the bottom line, which meant that third quarter net profits fell from $30.5m in the same period last year, to $25.1m this year. The company reported increasing advertising, marketing, selling and admin spend by 3.2 per cent, to $167.2m, with the specific figure for ad spend rising 5.5 percent to $73.7m Production costs rose 10.9 percent to reach $183m and restructuring costs came in at $63m, although this figure was down on the $67m spent during the same period last year. During the first 9 months of the year, the company's net sales rose by 8.7 per cent to reach to $1.12bn, whereas net profit fell from $139.5m to $41.8m. The results also reflect the fact that the company split its consumer products business and its Sally BSG distribution operations into two distinct business operations back in November of last year, which means that Sally results were considered as discontinued operations. Earnings from these discontinued operations amounted to $930,000 during the quarter, compared to $10.1m for the corresponding period of 2006. CEO James Marino said that he had been particularly encouraged by the performance of the company's TRESemme and Nexxus brand, which had outpaced category growth rates, with TRESemme performing particularly well in Latin America. However, Marino did also state that for the St. Ives skin care line, despite sales going well for facial and body wash products, lotions had proved to be a particular 'challenge', for which the company was taking a long-term approach towards rebalancing.