Lorillard Inc. (LO) reported results for the first quarter of fiscal 2010 with earnings of $1.50 per share. Earnings were above the Zacks Consensus Estimate of $1.22 and were up 37.6% year over year.
Net sales for the quarter (including the excise tax) increased 32.6% year over year, primarily driven by the increase in federal excise taxes. However, excluding the excise tax, sales for the quarter increased 20.3% to $923 million driven by higher average prices, higher unit volume and lower promotional costs.
For the quarter, total wholesale shipment volume increased 12.1% to 8.863 billion units, while total domestic industry wholesale shipments declined approximately 2.4%. The increase in domestic wholesale shipments during the quarter reflects lower unit volume in 2009 resulting from tax-driven trade purchasing in anticipation of the increase in the federal excise tax on cigarettes on April 1, 2009.
However, the retail market share of Newport continued to increase during the quarter by 0.75 share points to 10.90%.
Gross margin expanded 190 basis points (bps) to 51.8% compared to 49.9% in the first quarter of 2009. The increase in gross profit reflects the increase in net sales partially offset by higher manufacturing costs, higher costs related to the State Settlement Agreements and the Federal Assessment for Tobacco Growers and the assessment of Food and Drug Administration fees. The operating margin also expanded 310 bps to 41.4% from 38.3% in the prior-year quarter.
The company has cash and cash equivalents of $1.7 billion and long-term debt of $735 million.
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