ROCHESTER, New York (Bloomberg) — Eastman Kodak Co.'s U.S. film sales dropped 4.5 percent in the four weeks ended Nov. 5, as the world's largest photography company lost market share to rival Fuji Photo Film Co..
Kodak's share of the U.S. film market dropped by 2.3 percentage points in the period, while Fuji gained 1.8 percent, said Jonathan Rosenzweig, an analyst with Salomon Smith Barney Inc. Kodak is the largest seller of film in the U.S., with an estimated 65 percent of sales, and Fuji accounts for about 25 percent, analysts said.
An abrupt slowdown in September film sales prompted Kodak last month to lower its fourth-quarter profit outlook to below what analysts had estimated. The company is trying to maintain leadership in film and paper sales while investing in digital products and services to stay at the top of the photography and imaging market.
"It just continues what had been a pretty sad saga for this company," said Lynn Yturri, who manages the $800 million One Group Equity Income Fund in Scottsdale, Arizona. "This is a company that is a victim of technological change," he said, noting he'd sold about 120,000 shares of Kodak since August and now holds about 30,000.
Kodak shares fell $2.19, or 5 percent, to $41.75. The shares of Rochester, New York-based Kodak have dropped 37 percent this year.
The decline in Kodak's market share may be the result of price increases, said Rosenzweig, who has an "outperform" rating on the company's shares. Kodak's average aggregate price for film rose by 5.8 percent year-over-year, while Fuji's gained 0.2 percent, he said. Fuji film sales increased by 7.7 percent during the four-week period.
The data used by analysts does not include wholesale club channels, said Gerard Meuchner, Kodak spokesman. The company became the exclusive distributor at Wal-Mart Stores Inc.'s Sam's Club wholesaler stores in May.
Kodak doesn't comment on market share between quarters, Meuchner said, adding the company stands by its statement in October that it will hold its U.S. consumer film market share for the year.
Kodak controlled 80 percent of the U.S. film market as recently as 1996, compared with Fuji's 10 percent. Fuji slashed U.S. film prices in 1997 to gain market share, prompting price cuts by Kodak. Film sales accounted for about two-thirds of Kodak's $14.1 billion in sales last year.
"The results (in the recent period) are fairly weak and they're going to have to overcome that in the month ahead," Rosenzweig said. Though October is probably the least important month in the quarter, the data does show Kodak's hoped-for recovery at the retail counter is occurring more slowly, he said.
Overall film sales fell in the four weeks ended Nov. 5, the second 1.1 percent drop in a row. If the trend continues, Kodak may find it difficult to meet its fourth-quarter earnings estimate, Caroline Sabbagha, an analyst with Lehman Brothers Inc., wrote in a report. It's still too early to reach that conclusion, she said. She has a "neutral" on Kodak.
"Our guidance has not changed," Meuchner said. Kodak said last month that it expects to earn $1 to $1.15 a share. The average per-share estimate of nine analysts surveyed by First Call/Thomson Financial is $1.07 for the fourth quarter.