Slower Sales Growth for Blyth, Inc.

Blyth, Inc., the leading manufacturer of candles in the U.S., reported lower than expected sales growth for the second quarter ended July 31. Sales increased 2.4% to $235.4 million and net earnings improved 10.5% to $18.1 million. For the six months, sales rose 7.6% to $510.2 million and net earnings increased 12% to $39.1 million.

“We are pleased to report continued solid earnings growth for the second quarter despite the slower than expected sales growth,” said Robert B. Goergen, chairman and chief executive officer. “The fundamentals of our business are firmly in place. We look forward to returning to stronger sales growth during the second half.”

Several factors were blamed for the slowdown in sales growth in the second quarter. On an annualized basis, approximately 26% of Blyth’s sales are outside the U.S. While Blyth has continued to experience double-digit sales growth as measured in local European currencies, a significant portion of these sales were made in euro-based countries where the average currency value during the second quarter declined approximately 11% year-to-year versus the U.S. dollar.

Secondly, while the majority of productivity measures for the direct sales channel were largely on target, the recruiting efforts for new independent sales consultants in the U.S. fell below expectations during the first half. This result may reflect the overall strength of the employment market, but, in any event, led to lower sales in the U.S. in the second quarter. Based on early indications from several recently implemented programs, management believes that renewed growth in sales will occur in the second half.

Finally, Blyth has chosen to de-emphasize and, in some cases, exit low margin product lines. Some of these product lines, such as citronella candles that were down more than 50% year to-year, traditionally experience their strongest sales levels in the second quarter. In addition, Blyth sold a significant portion of its Cultural Heritage business, resulting in a 28% decline in that business’ sales, year-to-year. Lastly, in Europe, the company also de-emphasized certain low margin product lines in its recently acquired consumer retail businesses.