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$26.69 0.11 (0.41%)
9/4/2008 4:03 PM

Alberto-Culver Company (ACV)

CAPS Rating:
***

The Company develops, manufactures, distributes and markets beauty and health care products as well as branded food and household products.

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Avatar NetscribeConsGds (93.22) Submitted: 2/07/07 12:49 AM : Underperform Start Price: $22.77 ACV Score: -31.77

Alberto-Culver engages in the development, manufacture, distribution, and marketing of beauty care, house hold, health care, and hair care products in the United States and internationally. It sells its beauty and health care products mainly through its direct sales force, food and household products through retail outlets and hair care products primarily through brokers.

Company has spun off its Sally Beauty business due to its strategy of expanding distribution channels that directly compete with Sally Beauty. Sally Beauty is the largest distributor of beauty products and operates more than 2,700 Sally Beauty Supply stores worldwide. Now, Alberto-Culver has lost this benefit and the business has also come under pressure since Sally Beauty contributed about 63% of the company’s revenues and profits. Competition from large players like Procter and Gamble and L’Oreal is likely to become tougher as the company used to sell its competitors’ products along with its own products through Sally Beauty. On the other hand, spin-off has eased off the pressure on Sally, which is in a mood to offer products that compete with Alberto-Culver.

On the profitability front, stabilizing oil prices could aid company’s operational performance. Nonetheless, weakening dollar has encouraged foreign companies to import raw materials from US, which is tightening the supplies. Alberto-Culver does have a strong brand like Nexxus, which was one of the major drivers for fiscal 2006 performance. However, management does not expect the same level of growth in 2007 from Nexxus, as there is no strong pipeline in that brand unlike fiscal 2006. Further the company anticipates over 40% downslide in its volumes in the second quarter. Factoring all these elements, the scrip does not look an exciting investment opportunity in the one-year time frame.

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Avatar NetscribeConsGds (93.22) Submitted: 5/22/07 8:11 AM

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Alberto Culver (ACV) delivered a moderate performance in the second quarter of fiscal 2007 as revenues rose by 4.8%. ‘Nexxus’ brand was one of the prime factors in driving the sales growth. However, the brand’s sales have slowed down since its launch, and are unlikely to drive revenues in the coming quarters at the same rate considering the management’s less aggressive stance on further investments and lower product pipeline.

Year 2007 seems to be an experimental one for ACV as company has made investments to restage its St.Ives and VO5 brand. Also, company has discontinued its low margin private label adhesives and the struggling Nourishing Oasis Line from Alberto VO5 brand. However, it would be too early to ascertain the success from these actions. ACV is likely to suffer from its spin off from the Sally beauty business considering the loss of strong distribution network and the business interests of the latter. Additionally, Cederroth international segment contributing over 13% to the sales failed to deliver a healthy topline growth owing to the mutual termination of distribution relationships, which could haunt the future prospects.

Company’s ‘TRESemme’ brand gained acceptance in the US and UK. However, going forward, management has no strong initiatives to drive revenues from this brand. Additionally, skin care business is posing challenges for the company with growing pricing pressures in the industry. Thus, the outlook looks uncertain and it is better to stay away from the scrip at the current levels.

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