Not-So Smart Balance
Somebody should sue butterlike spread-maker Smart Balance (SMBL) for false advertising. Not only is the company's management proving itself to be anything but smart, but the imbalance of sell vs. buy orders is causing its stock to topple.
Shares of Smart Balance got schmeared Tuesday, falling 24% to $3.91 after the company cut its 2010 sales outlook due to a soft economy. Smart Balance management says it now expects sales to rise between 2% and 4%, down from prior guidance of growth in the mid-teens.
Ouch! That's quite a forecast reduction. No wonder why traders cut through the company's share price like a hot knife through a butter substitute.In a statement, Chairman and CEO Stephen Hughes laid it on thick, saying, "The past two months have been particularly challenging, as consumer price sensitivity and very aggressive promotional activity in the spreads category have put pressure on our results." Hughes added that the company is enjoying success with its new milk products. The announcement caught Wall Street traders off guard because the company previously gave no hint of such a dramatic slowdown. The stunning revelation caused Key Banc Capital Markets analyst Akshay Jagdale to remark that Smart Balance may be "spread too thin." We could not have said it better ourselves. Dumb-o-meter score: 75 -- We think Hughes is milking the downturn excuse to hide the fact that competitors are eating away at his spread business.