Valspar Corp. saw first-quarter profits plunge 50 percent as the paint and coatings maker suffered tough comparisons to year-ago results that included sizable gains from the sale of a business division.
That aside, the Minneapolis paint and coatings maker was nipped by lower sales of its products at Lowe’s, negative currency translations and a hit from some customers putting off new orders because of high paint inventories.
Minneapolis-based Valspar said first-quarter sales fell 13 percent to $885 million. Profits were down to $52 million in the quarter that ended Jan. 29, in part because of particularly strong results in the same quarter a year ago that included a one-time $48 million gain from the sale of one of its businesses, officials said.
Excluding one-time items, adjusted earnings for the quarter were $53 million, or 66 cents a share, a penny better than analysts expected. Sales, however, missed expectations by $20 million.
Valspar’s stock dropped 2.6 percent to close Thursday at $78.26 a share.
While executives wrestled with a 20 percent drop in paint sales and a 10 percent drop in coating revenue, they reaffirmed their prior guidance for full fiscal 2016. Excluding currency effects, the company said sales would grow by “mid-single digits,” and adjusted earnings should reach $4.80 to $5 per share. Fiscal year 2015 earnings were $4.85 a share.
Foreign currency translations will continue to be an issue through 2016 as long as the U.S. dollar remains high, officials said. Valspar CEO Gary Hendrickson said the negative currency impact is expected to rise slightly in 2016 from 2015.
Company officials noted that, as expected, the first fiscal quarter saw lower-volume sales from Lowe’s, which several months back stopped carrying one of the Valspar paint lines. Valspar still sells other products through the big-box chain.
While that was a loss, officials noted they recently scored a victory. Lowe’s has agreed to sell Valspar’s Cabot stain products in its stores.