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US companies say it's not the economy, stupid
( 2003-09-27 14:38) (Agencies)

The "weak" economy appears to have fallen out of favor as the preferred excuse for U.S. companies' profit shortfalls. Instead, they're laying the blame on anything from high crab prices to a dearth of Tupperware parties.

In the latest week, according to figures from Reuters Research, nearly 30 companies ranging from Darden Restaurants Inc. to telephone company Verizon Communications warned of weakness in their results ahead of the next quarterly earnings period in October.

But few fell back on those old standards -- the weak economy, the soft economy and the harsh economy -- as a chief reason why their profits would miss expectations.

"We're seeing a lot of company-specific issues," John Caldwell, chief equity strategist at McDonald Financial Corp. in Cleveland, Ohio. "By and large we don't think the pre-announcements were that bad this week. There weren't that many of them and they weren't that large. And there were no blowouts."

In fact, one or two companies, including home improvement chain Lowe's Cos. Inc., even credited a healthier economy for raising the quarterly outlook. In all, just over a dozen companies were on record this week as increasing forecasts.


Darden, parent of the Red Lobster restaurant chain, said its second-quarter earnings would miss an projection due to an all-you-can-eat crab promotion, where its patrons literally ate as much as they could and drove up the company's crab costs. The stock tumbled 15 percent the following day and the executive who headed the unit left the company.

In another corporate misstep, Tupperware Corp. -- known for its at-home sales representatives who host parties to sell plastic food containers -- on Wednesday forecast a third-quarter loss.

Tupperware blamed a failed experiment to sell its products at the Target Corp. discount chain. The push into retail led to a dramatic drop in Tupperware party bookings, which shattered sales and sales-force recruiting in North America. After the announcement, Tupperware stock suffered its worst one-day loss in five years, dropping more than 15 percent.

Verizon said its profit would fall well short of expectations because of costs from pacts with its unions and weak demand for traditional local service as more customers shift to wireless telephones.

Still, not everyone likes to leave the economy untarred. A warning from media conglomerate Viacom Inc. based on softness in the local advertising market signals still soft spots linger in the chronically recovering economy.

"The only one that stuck out to us of maybe being indicative of the overall market was the pre-announcement by Viacom that had to do with spending in local markets," Caldwell said. "That's the only one that stood out from a macro (-economic) point of view."

Viacom cut its 2003 earnings outlook and said at the time "while the economic recovery has translated into robust national advertising, the pace of recovery in the local advertising markets going into the fourth quarter is not as rapid as had been anticipated."

Reuters Research is a unit of Reuters Group Plc.

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