American Greetings Corp posted a 10-fold jump in quarterly profit, helped by lower expenses and improved inventory management, sending its shares up as much as 27 percent to their highest in more than a year.
However, the company said the effects of the economic slowdown could hurt its business in the next two quarters.
The recession could dampen demand in the second half of this fiscal year, Chief Executive Zev Weiss said on a conference call with analysts.
The company also said it remained cautious about general economic conditions in Britain, which might put pressure on its international performance in this fiscal year.
The company raised its forecast of cash flow from operations to $160 million for the year ending in February 2010, up from its prior view of $105 million to $115 million.
It lowered its capital expenditure view to $35 million from its earlier forecast of $35 million to $45 million.
Separately, the greeting cards maker said in a regulatory filing it had amended its receivables purchase agreement, lowering the amount of available financing to $80 million from $90 million.
PROFIT JUMPS 10-FOLD
For the second quarter ended Aug. 28, the Cleveland-based company earned $23.1 million, or 59 cents per share, compared with a profit of $2.3 million, or 5 cents a share, a year ago. The results included a pretax benefit from an insurance program of $7.9 million, or about 19 cents a share.
Revenue fell 8 percent to $356.4 million.
When the revenues come through just fine, you get the extra benefit of gross margin, a company executive said on the call. But if you are watching your fixed costs as well, you get basically a double benefit, and I think that is what is going on.
Two analysts on average had expected the company to earn 6 cents a share, before special items, on revenue of $362.7 million, according to Reuters Estimates.
Inventories decreased 20 percent to $208.1 million.
Selling, distribution and marketing expenses fell 24 percent to $117.5 million in the quarter.
Shares of the company, whose brands include Carlton Cards, Gibson, Recycled Paper Greetings and Papyrus, were trading up 23 percent at $18.38 at midmorning Thursday on the New York Stock Exchange, making them the top percentage gainer on the exchange. They touched a high of $19.00 earlier in the session.
(Reporting by Renju Jose in Bangalore; Editing by Gopakumar Warrier)