Business briefs for April 22, 2004

Thursday, April 22, 2004 | 11:12 a.m.

American Airlines narrows loss

FORT WORTH, Texas -- AMR Corp., parent of American Airlines, narrowed its first-quarter loss to $166 million as the world's largest carrier cut costs and passenger traffic rose.

The net loss per share was $1.03, compared with $6.68, or $1.04 billion, a year earlier, the airline said in a statement Wednesday. Sales rose 9.5 percent to $4.51 billion from $4.12 billion.

American trimmed costs per seat for each mile flown by 17 percent because of changes made in past year to cut $4 billion in annual spending. The carrier's passenger traffic rose 8.8 percent from a year earlier, when the Iraq war and fear of severe acute respiratory syndrome reduced travel.

"This is the third quarter American has shown the benefits of their improved cost position," said Darren Bagwell, an analyst at Thrivent Financial, which holds AMR shares. "That's what makes them so attractive."

The company was expected to have a loss of $1.04 a share, the average estimate of 11 analysts polled by Thomson Financial.

AMR joins Northwest Airlines Corp., Delta Air Lines Inc. and Continental Airlines Inc. in reporting narrower losses for the quarter. Southwest Airlines Co., the largest discount carrier, had a higher profit.

Sales, profit soar for coffee chain

SEATTLE -- Starbucks Corp., the largest U.S. coffee shop chain, said second-quarter profit jumped 53 percent as sales increased at the fastest pace in almost four years. The company also raised its full-year earnings forecast.

Net income climbed to $79.5 million, or 19 cents a share, from $52 million, or 13 cents, a year earlier, the Seattle-based company said Wednesday. Sales in the quarter ended March 28 rose 31 percent to $1.24 billion, helped by a 12 percent gain in the number of transactions.

Starbucks, which added 267 coffee shops worldwide last quarter, is expanding in the U.S. with smaller stores and more drive-through locations. Under Chairman Howard Schultz, 50, the company has sped service with new espresso machines, boosted sales from its prepaid Starbucks cards and attracted customers by offering wireless Internet access.

China shipments drive profit

ATLANTA -- United Parcel Service Inc., the world's largest package-delivery company, said first-quarter net income rose 24 percent as economic growth boosted shipping, particularly from China.

Net income increased to $759 million, or 67 cents a share, from $611 million, or 54 cents, in the same period last year, the Atlanta-based company said in a statement. Sales climbed 11 percent to $8.92 billion from $8.02 billion.

United Parcel's international shipments rose 6.4 percent, led by a 60 percent jump from China. U.S. shipments, helped by recoveries in manufacturing and wholesaling, were up 5 percent, Vice President Teresa Finley said in an interview.

United Parcel was expected to earn 62 cents a share, the average estimate in a Thomson Financial survey of 16 analysts.

Price cuts bleed revenue

BEDMINSTER, N.J. -- AT&T Corp., the largest U.S. long- distance telephone company, had a 47 percent decline in first-quarter net income as lower prices for corporate communications service drove down revenue.

Net income fell to $304 million, or 38 cents a share, from $571 million, or 73 cents, a year earlier, AT&T said in a statement. Revenue at the Bedminster, N.J.-based company slid 11 percent to $7.99 billion from $8.99 billion.

AT&T is losing ground to rivals with wireless operations, one of the few sources of growth in the telecommunications industry, and to local carriers that have entered the long- distance market.

Profit up on overseas sales

Louisville, KY -- Yum! Brands Inc., the operator of the Taco Bell, KFC and Pizza Hut restaurant chains, said fiscal first-quarter earnings rose 21 percent, helped by international sales. The company raised it annual forecast.

Net income increased to $142 million, or 47 cents a share, from $117 million, or 39 cents, a year earlier, the Louisville, KY-based company said in a statement. The results beat expectations by 2 cents a share. Revenue in the period ended March 20 rose 9.3 percent to $1.97 billion.

Chief Executive David Novak, 51, has been adding KFC and Pizza Hut outlets in the U.K. and China, where sales were boosted by a weak dollar. Novak is adding foods such as oven-roasted chicken at KFC, which is better known for fried chicken, to cater to health-conscious customers and slow a decline in sales.

Spinach makes for strong results

DUBLIN, KY -- Wendy's International Inc., the third-largest U.S. restaurant chain, said first-quarter profit rose 20 percent, boosted by sales of new products including a spinach-and-chicken salad. The company said earnings this year will rise more than it expected.

Net income climbed to $52.8 million, or 45 cents a share, from $43.9 million, or 38 cents, a year earlier, Dublin, Ohio- based Wendy's said in a statement. Results beat expectation by 2 cents a share. Sales rose 20 percent to $834.8 million.

Chief Executive John Schuessler also added Homestyle Chicken Strips as Wendy's competes with McDonald's Corp., the No. 1 restaurant chain, for health-conscious consumers. Wendy's focus on speed of service and quality of food has helped take market share from closely held Burger King Corp., the No. 2 chain, analysts said.

Hot sales for new cold cereals

BATTLE CREEK, Mich. -- Kellogg Co., the largest U.S. cereal maker, said fiscal first-quarter earnings climbed 34 percent, the biggest gain in more than a year, boosted by higher sales of new products such as Corn Flakes with Real Bananas.

Net income rose to $219.8 million, or 53 cents a share, from $163.9 million, or 40 cents, a year earlier, the Battle Creek, Mich.-based company said. The results beat expectations by 2 cents a share. Sales in the quarter ended March 27 rose 11 percent to $2.39 billion, helped by foreign-currency gains.

Chief Executive Carlos Gutierrez, 50, spent more to market highly profitable new foods including Cocoa Rice Krispies snack bars, increasing U.S. cereal sales 4 percent. A shift by consumers to low-carbohydrate diets reduced cereal growth by about 1 percentage point, Gutierrez said.

Euro venture sale boosts profit

WHITEHOUSE STATION, N.J. -- Merck & Co., the maker of the Zocor cholesterol medicine, said first-quarter profit rose 4.8 percent as the company cut costs and sold its stake in a European venture with Johnson & Johnson.

Profit from continuing operations rose to $1.62 billion, or 73 cents a share, from $1.55 billion, or 68 cents, a year earlier, Whitehouse Station, N.J.-based Merck said today in a release. Sales rose 1.1 percent to $5.63 billion from $5.57 billion.

Chief Executive Raymond Gilmartin is cutting costs to prepare for the loss in 2006 of exclusive U.S. marketing rights for Zocor, Merck's top-selling medicine, which had $1.3 billion in quarterly sales. He's seeking approval to sell a combination of Zocor with Schering-Plough Corp.'s Zetia drug to bolster sales.

Sales drive profit

NEW YORK -- Colgate-Palmolive Co. said Wednesday its first-quarter profit climbed 4 percent, driven by a global increase in sales of its consumer products.

The New York-based maker of Colgate toothpaste, Palmolive dishwashing soap and other household products had net income of $338.5 million, or 59 cents a share, for the latest quarter, compared with $324 million, or 56 cents a share, in the same quarter a year ago.

The results matched the average estimate of analysts surveyed by Thomson First Call.

Sales for the quarter rose 6.8 percent to $2.51 billion from $2.35 billion.

Retailer posts $859 million loss

CHICAGO -- Sears, Roebuck and Co. sustained a hefty first-quarter loss, mostly because of an accounting change involving its pension and post-retirement medical benefit plans, and reported another weak showing for clothing sales.

The Hoffman Estates, Ill.-based retailer said Wednesday it is continuing efforts to streamline the company to improve efficiency and effectiveness.

The loss of $859 million for the three months ended April 3 amounted to $3.90 per share, compared with a profit of $192 million, or 60 cents, for the same period a year earlier.

Film manufacturer beats forecasts

ROCHESTER, N.Y. -- Eastman Kodak Co., battling through a tough transition from film to digital photography, said Wednesday its profit more than doubled in the first quarter and narrowly beat Wall Street forecasts. Its stock rose more than 5 percent.

The world's biggest film manufacturer also raised its profit guidance for all of 2004.

Helped by gains in digital products and the dollar's weakness abroad, Kodak earned $28 million, or 10 cents a share, in the January-March period, up from $12 million, or 4 cents a share, a year ago.

Without an 11 cents-a-share tax benefit and a 3-cent loss related to a recent acquisition, operational earnings were 18 cents a share. That beat the consensus forecast of 17 cents among analysts surveyed by Thomson First Call.

Tax benefit drives up profit

DALLAS -- Blockbuster Inc., the world's leading video-rental chain, Wednesday posted a 40 percent surge in first-quarter profit due to a one-time tax benefit.

The Dallas-based company had net income of $112.6 million, or 62 cents a share, for the latest quarter, compared with $80.5 million, or 45 cents a share, in the same quarter a year ago.

The latest results included a tax benefit of $37.1 million, or 21 cents a share, from the resolution of a federal income-tax audit that spanned from Jan. 1, 1997, through May 4, 2000.

Excluding the tax benefit, Blockbuster said it would have had earnings of $75.5 million, or 41 cents a diluted share.

Profit drops, expectations met

SAN ANTONIO -- SBC Communications Inc.'s profit dropped 61 percent in the first quarter from results swelled by the effects of an accounting change a year ago, but the telecommunications concern's results still easily surpassed expectations.

SBC, the nation's No. 2 local-phone provider, posted a profit of $1.9 billion, or 59 cents per share, in the three months ended March 30. That compares to $5.0 billion, or $1.50 a share, in the first quarter of 2003, which included a benefit of more than $2.5 billion because of accounting changes.

Not counting the one-time gains, SBC's earnings of 37 cents a share was five cents lower than the same period a year ago, but exceeded the analyst consensus of 32 cents, according to Thomson First Call.

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