Charlotte / NC. (li) Lance Inc. reported net revenues for the first quarter ended March 27, 2010 of 221,6 million USD, an increase of three percent over the prior year first quarter net revenues of 215,8 million USD.
The Company´s branded product net sales, which represented about 57 percent of total revenue in the 2010 first quarter, decreased approximately one percent from the first quarter of 2009. Net revenue was negatively impacted by increased promotional pricing during the first quarter of 2010. Sales of branded products to grocery stores, dollar stores, mass merchandisers and distributors increased compared to the same quarter of last year due to the acquisition of Stella D´Oro, new product offerings and growth of existing products with new and established customers. These increases were more than offset by double-digit revenue declines from certain channels, including convenience stores, up-and-down the street customers, and food service establishments, largely reflecting the impact of lower consumer spending in these channels.
The Company´s non-branded product net sales increased approximately seven percent in the 2010 first quarter. Growth in this category was well below recent trends, reflecting increased promotional activity from branded competitors, resulting in lower volume than the Company´s expectations.
Lance realized first quarter 2010 net income of 1,2 million USD excluding special items, or 0,04 USD per diluted share, as compared to first quarter 2009 net income of 6,5 million USD, or 0,20 USD per diluted share. The special items recognized during the first quarter of 2010 consisted of after-tax expenses of 1,9 million USD associated with an unsuccessful bid for a targeted acquisition. Including the special items identified above, first quarter 2010 net loss was 0,8 million USD, or a loss per diluted share of 0,02 USD.
«We are disappointed that our first quarter revenue, profit margin and EPS were well below our expectations», commented David V. Singer, President and Chief Executive Officer. «Our non-branded sales were impacted by more aggressive promotional pricing by branded competitors. Our branded sales suffered from less effective promotions in an increasingly competitive environment. Because we expected higher sales in the first quarter, we committed additional costs to support future growth. The combination of higher costs, softer than planned volume, and less productive promotions lowered our profit margin significantly in the quarter. Since this margin squeeze occurred in our seasonally weakest quarter, our EPS suffered significantly. We are taking steps to reduce our operating costs, making changes to our promotional approach to improve productivity, and taking actions to support our volume growth. We believe these measures will drive a rebound in our profit margin, especially as we move into our seasonally stronger quarters».
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