Marketing Costs, Falling Sales Cut RJR Nabisco Net Income

RJR Nabisco Holdings Corp. said Thursday that its profit fell 16% for the first quarter as it sold fewer cigarettes, spent heavily on reviving its Winston brand and saw its legal costs rise.

The No. 2 U.S. cigarette maker earned $179 million, or 52 cents per diluted share, in the latest quarter, down from $213 million, or 62 cents a share, a year ago. Revenue rose 4% to $3.95 billion.

The earnings results were in line with Wall Street expectations. RJR, whose brands include Winston, Camel and Doral, said its results also were hurt by the impact of the strong dollar on converted foreign earnings and by weakness in the Nabisco food business.

The company’s profit fell 11% in the tobacco business worldwide even as revenue rose 6%. Domestic tobacco profit fell 11% to $340 million as revenue rose 9% because of price increases.

Cigarette shipments fell 2%, which was in line with the industry trend.

Shipments of Winstons were up 6%, however, as the brand apparently benefited from the advertising campaign that pitches the smokes as a 100% tobacco blend without additives.

RJR, along with other U.S. tobacco companies, has increased prices four times in the last 10 months to raise money to pay about $30 billion in settlements of lawsuits with the states of Mississippi, Texas and Florida. The higher prices, while going to pay litigation expenses, put a damper on U.S. cigarette smoking.

RJR shares fell 25 cents to close at $28.50 on the New York Stock Exchange.

At a Glance

CONSUMER PRODUCTS

* Avon Products Inc. said its first-quarter operating earnings rose 29% to $53.2 million, or 24 cents a share, as it began to reap benefits from its restructuring program. The cosmetic and apparel maker’s sales jumped 9% to $1.18 billion.

* Maytag Corp.’s first-quarter profit rose 88% to $72.3 million, or 75 cents a diluted share, from a year earlier, beating estimates of 68 cents a share, as new home and commercial appliances and a retail agreement with Sears, Roebuck & Co. drove record sales. Sales jumped 31% to $1.04 billion.

* Quaker Oats Co. said first-quarter earnings climbed 54% to $52.5 million, or 36 cents a diluted share, from a year earlier, exceeding estimates by 2 cents, as foreign sales of Gatorade and cost-cutting helped offset weakness in its sports-drink and food businesses in North America. Revenue fell 9% to $1.09 billion, but expenses declined.

* Procter & Gamble Co.’s fiscal third-quarter profit rose 9% to $961 million, or 65 cents a diluted share, from a year ago, better than the expected 63 cents, as it raised prices for Bounty paper towels, Charmin bathroom tissue and other popular brands. Revenue rose just 1% to $8.88 billion.

* Sara Lee Corp. said its fiscal third-quarter earnings rose 10% to $227 million, or 46 cents a diluted share, from a year earlier, meeting analyst forecasts, led by gains in its packaged meats and household and body care units. Sales rose 2% to $4.74 billion.

FINANCIAL SERVICES

* American Express Co. said first-quarter earnings rose 15% to $520 million, or $1.11 a diluted share, from a year earlier, beating estimates of $1.07 a share. Revenue rose 9% to $4.52 billion.

* Bankers Trust New York Corp. said first-quarter earnings rose 11% to $222 million, or $2.01 a diluted share, beating forecasts of $1.96, as net income from investment banking and equity investments outpaced a decline in Asia. Total revenue increased 17% to $1.63 billion.

* Household International Inc. said first-quarter earnings jumped 30% to $170.3 million, or $1.54 a diluted share, from a year earlier as new credit card accounts and interest it charges borrowers increased. Earlier this month, Household agreed to acquire financial services company Beneficial Corp. for about $8.15 billion.

* Beneficial Corp. said first-quarter net income fell 22%, much more than analysts anticipated, as it increased its loan-loss provision and made fewer personal loans to consumers borrowing against anticipated tax refunds. The consumer finance company said net income, after a $110.8 million gain, was $76.7 million, or $1.35 a diluted share. Analysts had expected $1.78 a share.

HEALTH SERVICES

* Baxter International Inc. said first-quarter profit rose 10% to $164 million, or 58 cents a diluted share, from a year earlier, beating estimates by a penny. Revenue rose 2% to $1.47 billion, with sales outside the U.S. hurt by the strong dollar.

* Beverly Enterprises Inc. said first-quarter earnings fell 2%, in line with estimates, to $18 million, or 17 cents a diluted share from a year ago. The nursing home operator’s revenue fell 15% to $697.4 million.

INSURANCE

* American International Group Inc., the biggest publicly held insurer, said first-quarter earnings rose 13% to $850.8 million, or $1.21 a diluted share, matching estimates, led by gains in its financial services unit.

* American Bankers Insurance Group Inc.’s first-quarter earnings rose 11% to $28 million, or 60 cents a diluted share, from a year earlier, matching analyst estimates, as the insurer benefited from financial market gains and increasing sales of its credit insurance policies.

The credit card and loan insurer’s profitability and marketing savvy drew insurer American International Group and the marketer and franchiser Cendant Corp. into a bidding war for the company in the quarter.

RETAILING

* Sears, Roebuck & Co.’s first-quarter profit fell a less-than-expected 27% as higher revenue from its home services business partly offset an increased provision for late credit card payments. The giant retailer said it earned $133 million, or 34 cents a diluted share, up from $182 million, or 46 cents, a year earlier. The most recent quarter includes a gain of 6 cents a share from accounting changes, while the year-ago quarter includes a gain of a penny. Revenue rose 5% to $9.16 billion. Sales at stores open at least a year rose 5%. Analysts had expected earnings to fall to as low as 23 cents.

* Starbucks Corp. said fiscal second-quarter earnings rose 57% to $15.1 million, or 17 cents a diluted share, from a year earlier, meeting expectations. Revenue climbed 35% to $289.6 million, with help from a 48% gain in sales of its Frappuccino line of bottled coffees.

* Tandy Corp. said first-quarter earnings rose 6% to $37.1 million, or 34 cents a diluted share, from a year ago, in line with expectations. Sales fell 3% to $1.29 billion, but same-store sales at Radio Shack jumped 11%.

* Dow Chemical Co. said first-quarter profit fell 10% to $405 million, or $1.77 a diluted share, from a year ago--a better-than-expected performance--as it used lower raw-material costs and improvement in its specialty chemical businesses to partly offset a strong dollar and weakness in Asia. Revenue fell 3% to $4.83 billion. Analysts expected $1.75 a share.

OTHER INDUSTRIES

* AirTouch Communications Inc. said first-quarter earnings more than doubled to $167 million, or 30 cents a diluted share, beating estimates of 26 cents, as the wireless-phone company saw strong increase in customers in its international operations. Revenue rose 15% to $958 million.

* Gateway 2000 Inc. said first-quarter earnings rose 12% to $75.9 million, or 48 cents a diluted share, from a year earlier, exceeding estimates of 44 cents. Revenue rose 22% to $1.73 billion. The direct seller of personal computers, which changed its name to Gateway Inc. on Thursday, warned that it may face a slower second quarter and predicted a pickup in demand in the second half of the year.

* Raytheon Co. said first-quarter earnings rose 17% to $214.9 million, or 63 cents a diluted share, from $183.4 million, from a year earlier, meeting analyst estimates, as strong results in its aircraft and electronics units offset lower profit in its engineering business. Revenue rose 58% to $4.57 billion.

* Southwest Airlines Co.’s first-quarter earnings jumped 38% to $70 million, or 30 cents a diluted share, a year ago, matching expectations, as revenue rose 6% to $942.7 million.

* Union Pacific Corp. reported a first-quarter loss, matching expectations as a major logjam on the railroad’s tracks raised costs and hurt business. The company posted a final loss of $62 million, or 25 cents a share, compared with net income of $128 million, or 52 cents, in the year-ago period. Revenue fell 8% to $2.59 billion.

The loss included an expense of $18 million, or 7 cents a share, for Union Pacific’s ongoing integration of the 1996 purchase of Southern Pacific Rail Corp. The rail backup reduced the company’s profit by $260 million, or $1.05 a share, based on a comparison to the company’s previous performance.