Jarden Feels The Wal-Mart Squeeze

Robinson Humphrey analyst Bill Chappell put out a note about his recent trip with Jarden (JAH) management to visit clients. (Don't sponsored trips compromise analyst independence? But I digress...)

He wrote that the meetings "were relatively subdued with both investors and management trying to fully explain the 50% drop in the stock price over the past four months." Never mind that management can't control the price of a stock: Maybe it's down because organic growth last quarter, by some estimates, slipped into the red.

No wonder the company is back in acquisition mode with its purchase of K2. Also worth noting: Chappell writes that Jarden only recently has been hit by the same "inventory adjustments" have been affecting many suppliers to Wal Mart (WMT) over the past year and a half. This year, Chappell writes, the adjustments should slice Jarden sales by $100 million, or 3% of total revenue. Jarden spins this loss of sales as "penalties for success." But maybe it's something simpler -- and this loss of business with Wal-Mart was only a matter of time.

As I wrote in the summer of 2005: Wal-Mart is the exclusive licensee of the General Electric (GE) brand of small appliances. Holmes Group, which is owned by Jarden, has been among the manufacturers that helps design and manufacture GE products for Wal-Mart. That's a plus, I wrote. "But who," I added, "is to say that Wal-Mart won't seek lower prices by threatening to take or actually taking that business to independent factories?"

Nobody, which may very well be what's happening.

Comments

[Fritzy]

Even Wal-mart will continue to buy products from Jarden as long as Jarden continues to deliver innovation and value to both retailers and consumers. Retailers often have a hard time anticipating trends and thinking outside the box from a design perspective. And even Wal-mart will have a hard time matching the economies of scale that Jarden has achieved by pooling the production of millions of home appliances.