In Business This Week
Edited by Robin Ajello
HEADLINER
A.G. Lafley: Turning the Tide
When he was named CEO of then-tumbling Procter & Gamble (PG
) in 2000, A.G. Lafley vowed to build investor confidence in his turnaround one step at time. On Oct. 29, he hit full stride: P&G posted a 33% hike in net income for its fiscal first quarter, beating Wall Street forecasts for the fifth straight quarter; even after special charges, profits were up 14%. The maker of Tide, Pampers, and Crest reported an 11% surge in sales, the biggest jump in seven years.
Even better, P&G boosted sales and profits in all five of its business sectors, despite a down economy in which both it and rivals have stepped up price promotions. The gains clearly show P&G is winning back customers, a key step in building a sustainable turnaround, notes Banc of America Securities analyst William Steele.
Of course, falling commodity prices and savings from restructuring gave a boost to earnings. Analysts say cost-cutting will save P&G about $490 million this fiscal year, down from roughly $700 million the last. Lafley's next goal: continuing to hit sales and profit targets as those savings wind down.
By Robert Berner
Jean Therapy at Wal-Mart
Discount-store habitues will soon find that nothing comes between them and their Levi's. On Oct. 30, Levi Strauss unveiled its latest offering, an inexpensive jean dubbed Levi Strauss Signature, to be sold at mass-marketers starting with Wal-Mart Stores (WMT
) next July. Privately held Levi's has sold its products primarily through traditional department stores, but its long-rumored move into discounters will be key to its efforts to reverse years of declining sales by drastically boosting retail distribution. In 2001, Levi's sales fell 8.3%, to $4.3 billion.
While the Signature line will bring a cheaper Levi's product to the masses, marketing experts worry that Levi's risks eroding its already shaky brand cachet. It could also alienate its core department-store customers, who might not appreciate seeing the Levi's name at Wal-Mart next to the laundry detergent and motor oil.
Verizon's Strong Signal
Verizon Communications (VZ
) is a standout in the battered telecom industry. On Oct. 25, the New York-based company reported third-quarter earnings of $4.4 billion on revenues of $17.2 billion, beating its year-ago profit of $1.9 billion on revenue of $17 billion. By contrast, the other regional Bells--SBC Communications (SBC
), BellSouth (BLS
), and Qwest Communications (Q
)--all reported revenue and earnings declines. While acquisitions helped Verizon, it was the wireless unit that provided the boost. The nation's largest wireless service posted a net gain of 803,000 subscribers for the quarter, better than No. 2 Cingular Wireless.
The SEC: No More Hiding Games
Enron made famous the corporate tactic of hiding debt in off-balance-sheet partnerships. Now, the Securities & Exchange Commission aims to put a stop to such practices. On Oct. 30, the SEC proposed rules requiring public companies to disclose most such arrangements in their financial reports. The proposed rules would lower the threshold for disclosure, requiring companies to reveal off-balance-sheet transactions if there is more than a remote chance they'll have a material effect on the company. The SEC will issue final rules by Jan. 26.
Comcast Rides the Broadband Express
With satellite services signing up customers hand over fist, how can cable operators keep up? Answer: with lots of new services that tap the growing demand for broadband. The strategy seems to be working: Comcast (CMCSK
), set to become the nation's largest cable company when it closes its merger with AT&T Broadband later this year, said on Oct. 28 that it had signed up 170,000 new high-speed data customers in the third quarter. That's the most broadband subscribers Comcast has picked up in any quarter. It brings the total to about 1.3 million, or 15% of Comcast's overall cable subscriber base.
Asbestos Fallout Reaches Insurers
The corporate asbestos crisis just keeps spreading. Dozens of manufacturers who subjected workers to the toxic material in the '60s and '70s have been bankrupted by jury awards. On Oct. 25, a jury found Union Carbide responsible for causing asbestos injuries to workers. Now insurers are suffering from asbestos exposure as well. On Oct. 30, property-casualty insurer Chubb (CB
) said it lost $242 million in its third quarter due largely to its need to set aside $625 million in reserves to cover claims from manufacturers it insured. Chubb isn't alone: Travelers Property Casualty and Allstate boosted their asbestos reserves earlier in October, and St. Paul added to its reserves last June after settling a claim worth $580 million.
Et Cetera...
-- Qwest Communications (Q
) announced $41.4 billion in write-offs and restatements.
-- Warren Buffett will step down from Gillette's (G
) board in May, after 14 years of service.
-- Boeing (BA
) will cut up to 1,500 more jobs.
CLOSING BELL
Threadbare
Tommy Hilfiger (TOM
) shares fell 20% to $7.50 on Oct. 30 after the designer said profits would be lower than expected this year and sales are in a slump. Hilfiger will close 37 of its 44 stores at a cost of $95 million. The company is seeking a new CEO to take over in 2004 when Joel Horowitz leaves.
CLOSING BELL
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Copyright 2002, by The McGraw-Hill Companies Inc. All rights reserved.
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