Blyth 4Q sales, earnings decline, while full year sales stayed level

Blyth Inc., a Greenwich, Conn.-based designer and marketer of home decor and home fragrance products, reported its net sales declined 3.6% to $480.6 million for the fourth quarter, ended Jan. 31, compared to $498.8 million a year earlier.

Fourth quarter net sales were approximately even with last year. Operating loss for the quarter was $6.7 million compared to operating income of $65 million for prior year 4th quarter and reflects a one-time non-cash goodwill impairment charge of $53.3 million pre-tax, arising from a re-evaluation of the goodwill associated with the wholesale group, which includes CBK, Midwest of Cannon Falls and Colonial Candle.

In the wholesale segment, 4th quarter net sales declined to $180.8 million from $196.6 due to soft sales in most areas. The 4th quarter operating loss of $57.1 million includes the $53.3 goodwill impairment charge and compares to an operating profit of $9.3 million during last year's 4th quarter. Higher raw material and freight costs in the wholesale segment contributed to lower operating profits.

"Blyth's fourth quarter results on an operating basis reflect the challenges our business has experienced all year," said Robert B. Goergen, Blyth's Chairman of the Board and CEO. "Reduced consumer discretionary spending impacted sales in our direct-to-consumer channels in the U.S., and retailers in the wholesale channel remained conservative in their inventory positions."

Earlier this year, Blyth paused its plan to spin-off its wholesale segment while awaiting an IRS decision on whether the move would be tax-free. At the end of March, Blyth management announced it has engaged Bear Stearns & Co. to advise it on strategic alternatives within the wholesale segment, and will likely focus on one or more of its European wholesale businesses, where growth continues.

"Despite these areas of growth and management's best efforts to increase sales in our more challenging markets, commodity costs and freight surcharges had a significant effect on profitability throughout fiscal year 2005," Goergen said. "We continue to take proactive actions such as implementing select price increases and cost savings initiatives throughout our businesses in an effort to combat exogenous forces."

Net sales for the fiscal year were approximately even at $1.57 billion compared to $1,59 billion reported for the prior year. Net earnings were $24.9 million compared to $96.5 million for the prior year and a one-time tax expense of $9.1 million.

Most of Blyth's Wholesale business units and brands within its catalog & Internet segment experienced lower sales versus last year's 4th quarter.