Lorillard Inc.'s (LO) second-quarter earnings fell 2.4% as declining shipments slowed the tobacco company's sales growth more than expected. The No. 3 U.S. cigarette producer by revenue dominates the market for menthol cigarettes, which are increasingly popular among younger smokers, though overall smoking rates have declined. Lorillard is also making a push into the fast-growing electronic cigarettes market with its $135 million acquisition of Blu Ecigs in April.
The strategic shift to battery-powered e-cigarettes also comes as the U.S. Food and Drug Administration weighs a possible crackdown on menthol-flavored cigarettes. Lorillard reported a profit of $284 million, down from $291 million a year earlier. Per-share earnings rose to $2.17 from $2.05, due to fewer shares outstanding in the most-recent quarter. Excluding items such as acquisition costs, earnings were $2.19 in the latest period. Sales, excluding excise taxes, rose 4% to $1.21 billion.
Analysts polled by Thomson Reuters had most recently forecast earnings of $2.32 a share on revenue of $1.25 billion. Gross margin was flat at 35.4%. Total wholesale shipments fell 1.2%, and domestic wholesale shipments, which exclude Puerto Rico and U.S. possessions, were down 1.3%. Sales volume for Lorillard's Newport brand, which represents the bulk of its sales, declined 2% and its domestic retail market share remained at 12%. Shares closed Tuesday at $135.25 and were inactive premarket. The stock has gained 26% over the past year.
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