BOSTON (AP) -- The Gillette Co. may have the top-selling razor, but it's still getting nicked.
A report of listless third-quarter earnings and warnings of dim prospects in the final months of the year sent Gillette stock sliding Friday. Things may turn around at the diversified shaving giant, but not before it tackles a few serious kinks in its operations, analysts said.Among the burdens Gillette must bear: profits have been in the doldrums for several product lines -- including Braun appliances and Paper Mate and Parker pens.
"I think Gillette is feeling the consequences of a double whammy right now," said Ira R. Weiss, dean of the College of Business Administration at Northeastern University. "They are committed to being either first or second in every sector that they serve, and I think they are going through some problems in some of the weaker sectors."
In a report after markets closed Thursday, Gillette reported flat earnings for the third quarter and its chairman and chief executive officer, Michael C. Hawley, warned investors to expect a fourth-quarter sales decline "in the mid-single digits and quarterly earnings decrease in the middle to high teens."
Its stock fell as much as 10.6 percent Friday before regaining some lost ground. It ended the day down 5 percent, or by $1.871/2, at $36 a share. Its stock has been falling steadily since March, when it hit a 52-week high of $64.371/2.
William Steele, an analyst with Bank of America Securities, expects Gillette to fix its problems, but said the immediate future could be rocky.
"I think they understand the nature of the problem and they can turn it around," he said. "The question is: what is going to be the effect on earnings for the next 12 to 18 months?"
Profits for Gillette's flagship line of razors and blades climbed 24 percent in the July-September quarter, and Duracell batteries and Oral-B toothbrushes also brought in earnings. But profits for Braun products dropped 39 percent. And for the first nine months of the year, profits from stationery products fell by 78 percent from a year ago.
After the earnings report was released Thursday afternoon, company officials suggested they might try to shed underperforming products, a strategy Weiss applauded.
"They really need to think about whether the stationery and appliance companies can really ever get back to double-digit growth," he said. "My sense is they have got to go back to some of the core products."
Slumping markets in Latin America and Asia also have hurt Gillette sales. Also, a strong dollar has eaten into profits on strong European sales, which are made in local currencies, Weiss said.
"The conversion rate is killing them in Europe, even though sales are good there," he said.
Gillette continues to dominate the United States shaving market. Its triple-bladed Mach 3 razors and blades -- which were introduced last year and retail for more than $6 -- were the nation's top sellers in the one-year period ending July 18, according to Information Resources Inc., a Chicago-based firm that tracks product sales.
But for the time being, Wall Street remains cool on Gillette.
Analyst Catherine Lewis of Morgan Stanley Dean Witter continued to rate the stock neutral for the time being.
"The stock looks expensive on estimates that decline every couple of months and in which we have no confidence," she said. "We expect (Gillette) will eventually get its act together, most likely before yearend 2000."