What happened
Shares of Energizer Holdings (NYSE: ENR) trailed the market on Tuesday. The battery specialist's stock was down 13% by noon compared to a 1% drop in the S&P 500. That decline pushed the stock into negative territory for the year, down 6% in 2023 while the wider market is up 16%.
Tuesday's drop was powered by a surprisingly weak earnings announcement.
So what
The company said before the market opened this morning that organic sales fell 3% for the third quarter, which ran through late June. This decline occurred despite price increases on many of Energizer's products. Offsetting that boost was the fact that volume dropped in its core business lines of consumer batteries and auto batteries .
Management said it was surprised by the demand pressures, which were partly driven by a weakening industry overall.
Energizer's profits took hit as well. Gross profit margin fell to 38% of sales from 39% a year ago. Net earnings declined to $32 million from $52 million, and adjusted profit shrank to $126 million from $145 million. On the positive side, Energizer offset much of its profit pressures through price increases and cost cuts. "We have taken aggressive actions throughout the year to preserve the earnings power of our business," CEO Mark LaVigne said.
Now what
Those aggressive actions mean that Energizer will still hit its goal of boosting gross profit margin overall in fiscal 2023. Adjusted earnings should land at the low end of management's prior forecast, it said.
Yet sales will not rise in the low single digits as management had previously estimated. Organic revenue is now likely to decline at about that same rate, according to the revised outlook. That reduced guidance is the main reason the stock fell on Tuesday, and why it might remain volatile until there is a clearer path back to steady sales growth.
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Demitri Kalogeropoulos has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
