Markets & Finance

Bad Tidings from American Greetings


American Greetings Corp.(AM) shed nearly 10% of its market value on Sept. 28, after announcing disappointing sales in its second quarter results amid a new plan to manage inventory.

The Cleveland greeting card company lost $13.2 million, or 23 cents per share from continuing operations during the three month period ended Aug. 25. In the same quarter last year, American Greetings had earned $3.8 million, or 6 cents a share.

Investors had been prepared to see the company hit the red, but not like this. The median analyst earnings per share (EPS) estimate on the stock amounted to 15.7 cents loss, according to the San Francisco research firm StarMine.

Chief Executive Officer Zev Weiss said in a press release on Sept. 28 that his financial results were slightly below his plan by a few million dollars.

American Greetings recently launched a "scan-based trading" initiative with Wal-Mart Stores (WMT) and Target Corp. (TGT), in which the greeting card company must take back inventory the retailers don't sell. The company has also been trying to improve the quality of its cards, according to press reports.

American Greetings' net sales dropped to $360.1 million during the quarter, compared to net sales of $385.0 million during the same period last year.

The stock plunged 9.9% in afternoon trading to $22.55 per share on the New York Stock Exchange.

The holiday season has yet to arrive. Because the second half of the fiscal year is stronger seasonally than the first half, Weiss expects to manage his previously announced earnings per share guidance for the full year of 80 cents to $1.00. StarMine says its mean analyst estimate for the full year is 86.7 cents.

Standard & Poor's (like BusinessWeek.com, a unit of The McGraw-Hill Companies) slashed its opinion on the stock Sept. 28 to sell from hold, noting that the company's card and scan-based trading initiatives will pressure sales and earnings through the end of the year. Analyst Jason Asaeda also reduced his 12-month target price to $22 from $1 per share.


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