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Euro nicks Gillette 3Q
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September 18, 2000: 10:44 a.m. ET
Exchange rates will cut revenue by 6%; shares hit lowest point in year
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NEW YORK (CNNfn) - Gillette Co. Monday became the latest big company to warn that the weak euro will hurt sales and profits in the latest quarter, causing its stock to nosedive to its lowest point in a year.
The Boston-based maker of razors, batteries and other consumer goods said it will top year-ago earnings of 32 cents a share in the third quarter, but a company spokesman contacted by CNNfn said it will miss average forecasts of 34 cents a share as compiled by First Call, which tracks Wall Street forecasts.
The company said lower sales from the weak euro would cause a 6 percent revenue drop in the quarter.
 "Sales are expected to be significantly affected by exchange, primarily the continued devaluation of European currencies," the company said in its statement. The company said it still is comfortable with the fourth-quarter forecast of 36 cents a share.
A lower euro hurts multinational companies when they have to translate sales in Europe back into dollars.
Gillette (G: Research, Estimates) stock plummeted $2.19, or 7.3 percent, to close at $27.62 Monday. That's below its previous 52-week low of $28.18.
Gillette said it also was hurt by its Duracell battery business in North America, which continued to perform below expectations in the quarter due to tough competition. It said the launch of Duracell Ultra alkaline batteries in the fourth quarter, along with more aggressive marketing, should improve results there.
Credit Suisse/First Boston analyst Carol Warner Wilke said she was not surprised at the warning because of the continuing problems with the euro and the fact that Duracell has lost three to four market share points to competitors Energizer (ENR: Research, Estimates), Ray-O-Vac (ROV: Research, Estimates) and private label brands over the last couple of years.
"I would have been more surprised if they didn't pre-announce," said Warner-Wilke, who maintains a "hold" rating on Gillette.
She's also concerned about the company's fourth-quarter earnings as well, particularly if the euro continues to slide against the dollar.
Wilke said Gillette did not do as good a marketing job as competitors a year ago when overall battery sales skyrocketed on Y2K preparedness. As a result, consumers, who have little brand loyalty when it comes to batteries, stocked up on other brands, she said.
"Gillette missed the boat. There's not a lot of brand loyalty, and now they're trying to spend heavily," Wilke said. "This could end up being a potentially ugly cycle. The category has become very promotional."
Amy Low Chasen, an analyst with Goldman, Sachs & Co., said this was exactly what she expected and is why she took the company off the buy list. She now gives Gillette a "market outperform" rating.
The company has been shedding units this year as it tries to improve profits.
Several other companies have made similar earnings warnings due to the euro's value recently, including McDonald's Corp. (MCD: Research, Estimates), which lowered its earnings forecast Wednesday, and consumer products maker Colgate-Palmolive Co. (CL: Research, Estimates), which had an analyst downgrade his rating due to the impact of the euro. Chemical maker DuPont Co. (DD: Research, Estimates) also pointed to the euro along with higher energy and raw materials cost when it lowered earnings guidance for the third quarter Sept. 7. 
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Gillette Co.
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