UPDATE 3-Less advertising aides Energizer, still cautious

Tue Jan 26, 2010 10:26pm IST

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* Q1 EPS $2.21 excluding charges vs Street view $1.84

* Sales rise 12.9 pct to $1.18 bln; Street view $1.14 bln

* Cautious on year, especially in battery business

* Shares down 1.9 pct after falling 4.3 pct (Adds analysts' forecast, updates stock move)

By Jessica Wohl

CHICAGO, Jan 26 (Reuters) - Energizer Holdings Inc's (ENR.N) quarterly profit and sales rose more than expected, but its shares slid as the company remained cautious about the rest of the year, particularly in its namesake battery business.

It was a strong quarter, "especially in light of the stagnant consumer environment," Chief Executive Ward Klein said in a statement.

Analysts, however, were disappointed that the better-than-expected profit stemmed largely from reduced spending on advertising and promotions, after the company said months ago that it would raise such spending this year.

Energizer's batteries, Schick razors and Playtex tampons compete against the Duracell, Gillette and Tampax products sold by Procter & Gamble Co (PG.N), which has also stepped up its promotions.

Sales climbed 13 percent to $1.18 billion, topping analysts' average forecast of $1.14 billion.

In the household products segment, which includes batteries, sales rose 9 percent. Consumers' purchases of batteries remain sluggish and Energizer said it was hard to tell what impact the economic downturn was having on trends.

The company's take on batteries does not seem "materially different" than last quarter, JP Morgan analyst John Faucher said, calling it "cautious, but not panic inducing."

Both Energizer and P&G's Duracell have been promoting products to drive purchases. This week, for example, one grocery store circular has a coupon for $2 off a pack of either company's batteries.

Sales of Energizer's personal care items jumped 20 percent, boosted by the June acquisition of the Skintimate and Edge shaving gels and creams business. But sales of tampons slid 12 percent, due to a drop in sales of the Gentle Glide products.

Energizer's shares were down 1.9 percent at $58.02 after falling as low as $56.55. P&G slipped 0.2 percent to $60.51.

ADVERTISING SPENDING STILL TO COME

In early November, Energizer said it expected to post low double-digit growth in earnings, excluding one-time items, in fiscal 2010, as it increases advertising and promotional spending to about 12 percent of sales.

Such spending fell to 7.5 percent of sales in the latest quarter, down from 9.3 percent a year earlier.

BMO Capital Markets analyst Connie Maneaty had expected advertising and promotion spending at 12 percent of sales in the quarter. She said the lower-than-anticipated rate added 50 cents per share to the company's profit.

Energizer said it still plans for spending of around 12 percent this year, and did not update its earnings forecast.

Energizer earned $125.7 million in the fiscal first quarter that ended Dec. 31, up from $111.0 million a year earlier.

Earnings per share fell to $1.78 from $1.88 because of an increase in shares outstanding after a May 2009 equity issuance.

The latest quarter included a charge of 36 cents per share related to Venezuela's currency devaluation, and other charges totaling 7 cents per share. Excluding those items, Energizer earned $2.21 per share, well ahead of analysts' average forecast of $1.84, according to Thomson Reuters I/B/E/S.

The change in the Venezuelan currency exchange rate was expected to cut an additional $5 million to $7 million from operating profit this year, on top of a hit of $15 million to $20 million Energizer already expected due to the use of a separate exchange rate for imports in Venezuela.

Energizer also said it expects to record a tax benefit of about $5 million during the current quarter related to the Venezuelan devaluation charge it has already taken. (Reporting by Jessica Wohl, editing by John Wallace and Maureen Bavdek)

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