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Non-Tech : Gillette (G) - Even Buffett Justify This One
G 44.08+0.1%3:26 PM EST
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To: Rainy_Day_Woman who wrote (643)1/20/2001 4:24:08 PM
From: Demetre Deliyanakis  Read Replies (2) of 684
 
HI

My family has owned G stock off an on since the 1970's. My dad was an employee from 1956 to 1988.We use their products every day. I think that the company's old guard did a fantastic job running the company until about 1998. The problems that the company has had since then are well known.
It was obviously tough to continue to deliver 15% plus eps growth when the emerging economies fell apart in 1998 and the strong dollar since then has hurt the company's profits in Europe.

G has spent a fortune on developing and marketing new products.

The problem is that the higher margins on premium products such as MACH 3& Duracell Ultra has not been high enough to offset the additional spending on marketing and developing them yet.

I think the strategy will pay off over the next few years as more people switch to the premium products, and the company reduces advertising and marketing expenditures.

On the positive front for this year, the euro is strengthening which help boost profits, since G gets about 1/3 of its revenues from europe.

Also, the company has a plan to reduce expenses and improve gross margins. The savings from the restructuring will begin to show up later this year.

Thirdly, G will benefit from higher P/E multiples due to the influx of technology scarred investors looking for more stable companies

Fourthly, talk about consolidation will continue to grow. G has mentioned as a takeover candidate in the past, and I think that PG or Colgate would make excellent partners.

I think we will see $40 by year end

your comments would be appreciated
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