Lexmark Lowers Earnings Outlook, Cites Supply and OEM Declines
The Lexington, Kentucky-based printer maker said it expected to turn earnings per share of between 62 cents and 67 cents -- dramatically lower than the guidance it had previously given Wall Street of between 82 cents and 92 cents per share. Revenue for the quarter was in the range that Lexmark had said it expected, but was characterized by lower-margin products, executives said.
Lexmark CEO Paul Curlander, in a conference call with financial analysts, said the company was feeling the pain from drops in inkjet printer unit sales in the past, saying it contributed to lower sales of inkjet supplies in the second quarter. In addition, the company continues to grapple with sluggish OEM sales to other vendors and aggressive pricing by rivals.
"The problem for Lexmark, we can't just meet the market [in cutting prices], we have to go a little further," Curlander said. While sales of inkjet printer units actually showed strength in the second quarter, he said, pricing was below expectations and inkjet supply sales continued to slump. "I think we're in a difficult situation," Curlander said.
"Unit growth is good, but it's costing us more to drive it than anticipated," Curlander said.
Curlander said it was too early to tell how channel inventory fared during the quarter, but the company suggested the most significant issues were hitting it in the retail space and with consumer sales.
The announcement seemed to catch some analysts as abrupt. During the conference call, one analyst asked if "all options are on the table" including breaking off parts of the business, making an acquisition or taking other action. Curlander declined to specifically address that question, saying the company would seek to address its challenges in the inkjet and supplies space.
In pre-market trading on Wall street, shares of Lexmark stock slumped by more than 12 percent to what would be a 52-week low of just more than $43. Lexmark is scheduled to report its full earnings on July 24.