Weak consumer spending and continuing declines in the stock market hurt fourth-quarter profits of three of Baltimore's major corporations, all of which reported disappointing results yesterday.
Power-tool maker Black & Decker is slashing 1,200 jobs worldwide as it anticipates steep sales declines in the coming quarters. The cuts come as the Towson-based company, whose business is heavily dependent on housing and auto markets, reported a 77 percent decline in quarterly earnings. Its stock was hammered, falling $8.09, or 21 percent, to close at $30.65.
Money manager T. Rowe Price Group said its earnings were slammed because the stock market remained weak and investors pulled money out of its mutual funds. And Under Armour was hurt as cash-strapped consumers cut spending, prompting retailers to cancel orders of its athletic wear.
Black & Decker
"We are facing a financial and economic crisis unlike anything in our professional careers," Nolan D. Archibald, Black & Decker's chairman and chief executive officer, said during a conference call with analysts.
About two-thirds of the Black & Decker jobs being eliminated will be in manufacturing, mostly at a plant in Mexico, said company spokesman Roger A. Young. Employees in Asia, Tennessee and California also will be affected. The cuts include 125 that Black & Decker announced earlier in the month. A small number are also in the Baltimore area, although the company would not provide specific numbers.
This is just the latest round of job cuts for Black & Decker, which employed about 22,000 at the end of last year, down from about 25,000 in 2007.
The company reported fourth-quarter earnings of $43.7 million, or 73 cents per share, compared with 187.4 million, or $2.94 cents per share, for the same period a year ago. The earnings for the quarter ended Dec. 31 reflect a $20.8 million pre-tax restructuring charge.
Sales for the quarter decreased 17 percent to $1.4 billion, with actual declines aggravated by a strengthening of the dollar.
Conditions are expected to stay tough this year. Black & Decker expects double-digit percentage declines in sales for the first three quarters of the year and a 20 percent fall in the first quarter, though it expects to remain profitable.
Archibald said the company has adjusted to the downturn by maintaining product development and closely managing capital spending and inventory levels. Nicholas Heymann, director of global industrial infrastructure at Sterne, Agee & Leach, said Black & Decker is making the correct decisions to maintain business in "hellish markets that are going to be soft for an extended period of time - housing, automotive."
He said his biggest concern is whether the company will be able to maintain the dividend on its stock.
T. Rowe Price
T. Rowe Price's fourth-quarter profit plunged 87 percent as its mutual funds' assets fell amid steep market losses and clients withdrew more money than they put in for the first time in eight years.
Shares fell almost 11 percent, or $3.55, to close at $29.85.
The Baltimore money manager reported net income yesterday of $24 million, or 9 cents per diluted share, in the three months ending Dec. 31, compared with a profit of $190.7 million, or 68 cents per diluted share, in the year-ago period.
Market volatility prompted Price to take an $88.4 million charge to reflect the lower value of investments in its mutual funds. After taxes, that charge amounted to 22 cents per share, the company said.
Price fared better than most money managers during the past year and has avoided broad job cuts. But as D.J. Neiman, an associate analyst at William Blair & Co., put it, "Contrary to some beliefs, T. Rowe is not immune from a horrific market environment."
Revenue slid 30 percent to $416 million, from $598 million in the year-ago period.
Assets under management dropped 20 percent to $276.3 billion, from $345 billion in September, due to market declines and client redemptions.
In its mutual funds, net outflows were $2.2 billion, making the third quarter the first time since the third quarter of 2001 that the company saw more money go out than come in.
For the year, Price saw net inflows of $17.1 billion.
"It's been a hard year and a hard quarter for our clients, shareholders and our employees," chief executive officer James A.C. Kennedy said in an interview from London. "Keep in mind that we took it very seriously that the majority of our clients lost money with us. That hurts us as it hurts our clients."
"We're very focused on performing for our clients going forward," Kennedy added.
In response to deteriorating market conditions, Price has been cutting expenses, including advertising and promotion. The company has stopped hiring for "all but strategic positions." It reduced last year's bonuses, and the company is freezing salaries this year for higher-paid employees.
Sports apparel company Under Armour also said it will look at ways to manage costs this year, including lowering capital expenses and not opening any full-price stores.
The company's fourth-quarter earnings fell by half as consumers held back on buying expensive athletic gear, causing retailers to cancel or return orders. "We're approaching 2009 with an appropriate degree of conservatism," Kevin Plank, Under Armour chairman and CEO, said during a call with analysts yesterday.
Under Armour reported fourth-quarter earnings of $8.3 million, or 17 cents per share, compared with $16.9 million, or 34 cents per share the same period a year ago. Revenues increased 2.5 percent to $179.3 million.
The company said it has expanded its hedging strategy to reduce its exposure to foreign currency exchange rates that have become more unfavorable as the dollar gets stronger.
Under Armour also said that it has entered into a new three-year, $180 million revolving credit line with PNC Bank as the lead arranger. It replaces the company's existing $100 million credit line. The company continues to pursue growth opportunities; it is due to release a new running shoe this weekend.
"We will continue to invest in the business that will fuel our long-term growth, but we're not blind to the realities of the current state of the consumer," Plank said. "We will prioritize those investments to ensure we're delivering both short-term and long-term value for our customers."
Hit by the slump
Black & Decker
* 1,200 job cuts * 77 percent profit decline
* Double-digit sales declines expected this year
T. Rowe Price
* 87 percent profit decline
* First net outflows from mutual funds since 2001
* Salary freeze for many employees
* Profit falls by half; sales growth virtually stops
* Revenue hurt by stronger dollar
* Increases line of credit