Friday, April 16, 1999
Gibson earnings lower than expected
Cuts loom; move plans delayed
BY LISA BIANK FASIG
The Cincinnati Enquirer
Gibson Greetings Inc. warned investors Thursday that it expects significantly lower earnings in the first quarter and the year, a development that will force the card maker to take cost-cutting measures including job cuts and further delay in its relocation to Covington.
In a statement, Gibson Chief Executive Frank O'Con nell conceded that “certain components of our strategy simply aren't working in this increasingly competitive environment.”
Spokesman Gary Rhodes said the Amberley Village company will spend three to four weeks reviewing the entire organization, including all businesses and product lines.
Projected sales
“We built a cost structure based on projected sales levels that have not materialized,” Mr. Rhodes said, referring to expenses related to acquisitions and a shift in production mix.
“It's clear that we have to make some dramatic changes to our strategy to bring our company more in line with the realities of the marketplace.”
Gibson's stock plummeted Thursday — to $6.371/2, down $3.683/4.
Mr. Rhodes said it is too early to say how many jobs will be eliminated or when, but the reductions will be company-wide. Gibson employs 1,800 full-time and 5,400 part-time workers, 550 of whom are in the Cincinnati area.
The card maker also has withdrawn from any toy development outside of its successful Silly Slammers. That would include toys it introduced earlier this year at the American International Toy Fair.
Gibson said Thursday that based on a preliminary analysis, it expects a loss of 22 to 25 cents a diluted share in the first quarter. It also expects earnings for the full year to fall “significantly below” the 97 cents a share it reported in 1998.
The first quarter is the second-most important for Gibson, behind the fourth quarter. Its results are expected May 6.
Gibson is not a stranger to financial setbacks. Before Mr. O'Connell took the CEO seat in 1996, Gibson was losing millions.
This time, it ran into trou ble on two fronts: Card sales, by unit, have been declining industry-wide; and Gibson has been unable to land large accounts that would boost revenues.
Gibson's entry into major chains such as Wal-Mart has been blocked by its philosophy to eschew standard upfront fees and other retailer trade terms.
Product development
Mr. O'Connell thinks the money is better used for product development.
Gibson might have been trying to wag the dog with this set-up, but Jeff Stein, an analyst who covers Gibson for McDonald & Co. Securities in Cleveland, said the company's worst problems with retailers were well advanced before Mr. O'Connell joined the company. Those problems included its small market share and its outdated manufacturing plant, since closed.
“Its best hope is over time to be the secondary niche supplier in the industry,” Mr. Stein said.
Mr. Rhodes said Gibson must boost sales of its so-called everyday products, such as greeting cards.
Everyday card sales, which are not tied to any holidays, slipped 6 percent in 1998.
Gibson is not sure when it will relocate to RiverCenter in Covington. It originally was scheduled to move in January.
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