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Alberto Culver reports Q4 earnings

10/27/2009

MELROSE PARK, Ill. Alberto Culver, whose brands include Nexxus, St. Ives and TRESemme, posted fourth-quarter sales that were essentially flat, compared with the prior year and earnings per share relatively in line with expectations — results that at least one industry observer viewed as "solid" in light of a tough comparison and heightened competitive activity.

Sales for the fourth quarter totaled $385.2 million, compared with $386 million in the year-ago period. Organic sales for the fourth quarter rose 2.7%.

Diluted earnings per share from continuing operations were 32 cents, compared with 20 cents in the year-ago period. Excluding restructuring and discrete items, earnings per share increased 6.5% to 33 cents per share in the current quarter.

"Fiscal year 2009 was another successful year for Alberto Culver. We generated strong organic sales and earnings growth in a very difficult environment, continued to strengthen our hair care market shares and we're exiting fiscal year 2009 in a very strong financial position," stated V. James Marino, president and CEO.

According to Morgan Stanley analyst Dara Mohsenian, earnings per share of 33 cents were a penny above consensus but in-line with Mohsenian's estimate, with reinvestment of gross profit upside on higher than expected gross margins back into marketing.

"While near-term fundamentals have lowed with tough comparisons and a heightened promotional environment, we expect improving results in 2010 as Alberto Culver benefits from easier comparisons (post Q1), lower commodity costs and a margin benefit from its new Jonesboro [Arkansas] facility," stated Mohsenian in a research note.

Mohsenian also stated that Alberto has "significant international expansion opportunity from both a geographic and a brand standpoint in its hair care business" and estimates that expansion into new international markets could drive 250 to 300 basis points of long-term revenue growth contribution.

Alberto competes in seven of the top 20 global hair care markets, which represent 30% of the roughly $64 billion global hair care market, or 16% of the international market excluding the United States.

Mohsenian also believes that hypothetical acquisitions could drive higher returns based on the company's historical track record with acquisitions and a favorable merger and acquisition environment for acquirers.

"We have no knowledge of any potential acquisitions, and we are unaware of any comments by management regarding a sale of the company. That said, in November 2006, Alberto split itself into two companies, Sally Beauty Holdings and Alberto-Culver, and issued a $25 per share dividend to its shareholders. This split-up suggests to us that the company could be receptive to further consider strategic options at some point," stated Mohsenian. "However, Alberto is installing SAP worldwide and recently opened a new manufacturing facility in Jonesboro, Ark., in early 2008, which suggests that it may not aggressively pursue strategic options near term."

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