Advo Swings the Ax

Earnings fell by roughly half in Advo's(AD Quote) second quarter, matching the lowered forecast issued last week by the direct-mail media company. The company also announced a plant closure.

Advo earned $5.5 million, or 17 cents a share, in the quarter, compared with $10.5 million, or 33 cents a share, a year ago. Sales rose about 5% to $354.8 million. Analysts surveyed by Thomson First Call were forecasting earnings of 17 cents a share on sales of $355.5 million in the latest period.

Advo shook up its bulls last week when it cut its second-quarter earnings forecast, citing soft results in its so-called zone product. To drive profitability in future periods, Advo said Tuesday that it will close its Memphis production facility and outsource its graphics and print production operations.

"In total, these actions will result in savings of $7 million annually, with savings from the Memphis facility beginning in September-October 2006 and the majority of the savings from graphics print beginning in the October 2006-January 2007 time frame. The company expects to incur charges primarily related to severance totaling approximately $4 million over the next three fiscal quarters beginning in the third quarter of fiscal 2006."