Valspar Corp. reported a 6 percent bump in fiscal third-quarter profits and raised its forecast for the year Tuesday despite currency woes and the loss of sales from Lowe’s decision last year to swap suppliers for one type of paint.
The quarter’s adjusted earnings were $109 million, or $1.33 per share, above the $1.26 per share analysts had expected.
Total sales fell 7 percent to $1.15 billion, which was marginally below the $1.17 billion analysts had forecast.
Valspar, which is based in Minneapolis and makes paints, stains and coatings, saw its stock price fall 3 percent, or $2.43 a share, to close at $73.30 Tuesday.
Officials credited the strong profit gains to “significant productivity initiatives,” including new customer wins and results from the recent acquisition of the Quest auto finishing business.
CEO and Chairman Gary Hendrickson said Valspar now expects per-share earnings for the full fiscal year to reach $4.55 to $4.65, up from its prior guidance of $4.45 to $4.65.
The uptick belied concern that Wall Street analysts had about Valspar losing one of its paint lines at big box retailer Lowe’s. With the loss of that line of specialty priced paint, Valspar estimated that it would lose $150 million to $180 million a year in sales.
But Hendrickson told analysts Tuesday that Valspar still has 400 employees inside Lowe’s stores and has recently seen a surge in sales there for the remaining lines of Valspar paint that are priced both higher and lower than the line Valspar lost.
“Those sales are going extremely well,” he said.
As a result, the annual sales loss is now expected to be at the lowest end of the original estimate, Hendrickson told analysts during a conference call.
For the quarter, total paint sales fell 7 percent to $444 million, with 3 percentage points of the drop attributed to negative currency translations.
Despite the drop in paint sales, paint profits were up 18 percent to $52 million as officials cut expenses, increased prices and saw gains from the recent acquisition of the Quest auto finishing business, which generates about $200 million in annual sales.
Valspar’s coatings sales fell 6 percent to $640 million during the quarter, and profits fell 2 percent to $122 million, mainly due to currency translations and project delays caused by bad weather,
Hendrickson told analysts that international sales were strong, particularly in China and in Latin America. He also noted that Valspar is seeing positive results from its B&Q retail expansion in England and from the U.S. expansion of products into Ace Hardware stores.