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Balance Bar Shares Fall 31% on Earnings News

April 02, 1999|MELINDA FULMER | TIMES STAFF WRITER

Shares of Carpinteria-based Balance Bar Co. plunged 31% Thursday on news that its first-quarter sales and earnings will fall far short of analyst expectations.

The country's No. 2 nutrition bar maker said it expects earnings of 5 cents to 6 cents a share on sales of $20 million when its earnings are released later this month. The company was expected to earn 12 cents a share, according to an analyst poll by First Call Corp.

Balance Bar had earned 11 cents on $17.5 million in sales in the year-earlier first quarter.

The firm's stock plunged $3.06 to close at $6.75 on Nasdaq.

Company officials blamed the earnings shortfall on heightened competition, seasonal fluctuations in demand for its products and increased spending to introduce its new Total Balance drink line. But analysts say the gross overestimation of sales and earnings raises doubt about the capability of the management team and the growth prospects of the energy bar industry as a whole.

"Missing the top line of projections like this is inexcusable," said Bonnie Kramer Tonneson, an analyst with San Francisco-based Hambrecht & Quist. "That cuts right to the credibility of the management team."

Balance Bar Chief Executive James Wolfe said the company missed its internal estimates of $24 million in sales in part because it failed to land a chainwide distribution deal with Kmart that was expected in the first quarter. Wolfe said he is optimistic about reaching a deal with Kmart.

Wolfe additionally blamed the weak results on competition from such weight-loss bars as Slim-Fast during the after-Christmas period.

Some analysts worried that the drop might signal a slowdown in the nutrition bar industry. "We think the category is maturing, so we're taking a very conservative stance," said Carole Buyer of Denver-based Hanifen Imhoff. She cut Balance Bar's rating Thursday from a "buy" to a "hold."

Meanwhile, Balance Bar's biggest competitor, privately held PowerBar Inc., says demand for its namesake nutrition bar remains strong, despite the entry of many new products to the market.

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Stock Slip

Less than a year after its initial public offering, shares of Balance Bar have plunged as the company's explosive growth has slowed. Monthly closes and latest:

Thursday: $6.75

Source: Bridge

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