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This article was originally published in The Tan Sheet

Executive Summary

NEUTROGENA INDUSTRY-WIDE RETAILER CUTBACKS ON INVENTORIES was cited by the company as one reason for a 1% decline in U.S. sales to $ 49.4 mil. in the third quarter ended July 31. Domestic sales during the quarter reflect a $ 6.8 mil. unit volume decrease on existing products, including $ 500,000 from the discontinuance of two products, as well as an increase of $ 6 mil. from the introduction of new products. The discontinued products reflected in the quarterly results are two Neutrogena-brand eye care items, a gel and a makeup remover. Among the company's first half introductions were Neutrogena Chemical-Free Sun Blocker, Sunblock Stick SPF 25 and Neutrogena Glow Sunless Tanning Lotion for the Face and Spray for the body. The firm also launched Non-Drying Cleansing Lotion and Alcohol-Free Toner. Third quarter international sales dipped 4.5% to $ 12.3 mil. due to currency fluctuations and the softness of the European market, Neutrogena explained. Consolidated third quarter sales fell 2% to $ 61.7 mil. (see chart on following page). Despite sales declines, Neutrogena "held the bottom line" in the third quarter, with net income stable at $ 6.1 mil., Chairman and CEO Lloyd Cotsen stated in an Aug. 23 release. Neutrogena's net income "reflects the positive impact of moving from a heavy promotional schedule early in the year to a more balanced non-promotional sales mix," Cotsen said. Net income also "benefited from planned reductions in marketing expenditures and continuing cost controls," he added. The company's marketing and selling expenses were $ 30.5 mil. in the third quarter, down from $ 41.3 mil. in both the first and second quarters. Marketing and selling expenses were elevated in the first half due to spending on a domestic TV ad campaign that ran in April, new print ads and other marketing activities to support new products. Neutrogena did not introduce any products during the third quarter and said it expects to launch two next year. Cotsen projected that the company will have a "strong fourth quarter and superior year-over-year sales and earnings performance in the full fiscal year ending Oct. 31." Neutrogena's fiscal 1992 sales were $ 267.5 mil. In the nine months, Neutrogena's sales were $ 198.5 mil., up 4.3%. Nine month sales include an $ 8.4 mil. unit volume decrease on existing products, including $ 1.4 mil. from discontinued products. The nine month sales figure also reflects $ 19.9 mil. in new product sales. Net income was down 6.7% to $ 15.5 mil. in the nine months. Net income for that period includes a gain of $ 1.1 mil. from the adoption of Statement of Financial Accounting Standards No. 109. Chart omitted.

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