Newell Rubbermaid, the maker of a wide range of consumer products ranging from Sharpie pens to storage bins, slashed its outlook for the year Friday as consumers continue to struggle finding jobs in a lackluster economy.
Less than two hours after the Atlanta company warned investors that it would likely fall short of Wall Street expectations in the current quarter, the government reported that employers in May added the fewest jobs in eight months.
The unemployment rate edged up to 9.1 percent at the same time that consumers are being asked to pay more for everything from clothing to gasoline.
Rubbermaid President and CEO Mark Ketchum said he expects the second half of the year to pick up, yet investors bailed on the company's stock, sending shares plummeting nearly 12 percent, the biggest percentage loss by far on the S&P 500 index Friday.
The second-biggest loser on the S&P was Monster Worldwide Inc., the global online employment company.
Like consumers, Rubbermaid is wrestling with rising costs for raw materials, which is driving up the cost of making everything from T-shirts to tires.
Citi Investment Research analyst Wendy Nicholson reaffirmed a "Buy" rating on the company. But she also said that she remains mindful of the company's exposure to raw material costs and the dismal picture for U.S. housing, which directly affects Rubbermaid's sales of storage bins and other items.
Last week, the Standard & Poor's/Case-Shiller 20-city monthly index showed that home prices in large metro areas have sunk to their lowest levels since 2002. Cities that appeared to dodge the worst of the housing crisis are feeling the pain now.
Newell Rubbermaid Inc., which had stuck to its full-year outlook as recently as April, now expects 2011 normalized earnings growth of 5 percent to 10 percent, down from rise 10 percent to 12 percent earlier. Core sales are expect to climb between 3 percent and 4 percent, down from 4 percent and 5 percent before.
The company on Friday predicted earnings of $1.60 to $1.67 per share, below Wall Street expectations of $1.69, according to a poll by FactSet.
Rubbermaid's stock fell $1.94 to $15.03.
Ketchum said that some of the company's retail customers are lowering their growth expectations for the year in the U.S., and that that has cut into orders.
Nicholson said the reduced forecasts were not a good sign, but also not surprising given falling consumer demand. She pointed out that the company's shares have fallen 12 percent since the beginning of April.
Looking to the second quarter, Newell Rubbermaid said that its earnings per share may be as much as 15 percent lower than Wall Street estimates.
Analysts had been looking for quarterly earnings of 48 cents per share.
In April Newell Rubbermaid reported that its first-quarter profit rose 30 percent, benefiting from a lower tax rate, better profit margins and reduced interest expense. The company also announced that it was raising its quarterly dividend by 60 percent.