July 26, 2010 - U.S. Newport, Lorillard's flagship menthol-flavored premium cigarette brand, is the top selling menthol and second largest selling cigarette in the U.S. In addition to Newport, the Lorillard product line has five additional brand families marketed under the Kent, True, Maverick, Old Gold and Max brand names. These six brands include 41 different product offerings which vary in price, taste, flavor, length and packaging.
Net sales were $1.520 billion for the second quarter of 2010, compared to $1.519 billion for the second quarter of 2009. Gross profit for the quarter was $542 million, lower than $552 million in the year-ago quarter, and gross margins contracted 120 basis points to 52.2% from a year ago's 53.4%, reflecting higher costs related to federal regulations.
Lorillard's second quarter domestic wholesale shipments decreased 0.6% compared to the same period in 2009 versus a 7.1% decline in total domestic wholesale industry shipments. Lorillard's domestic wholesale shipments increased 5.3% in the first six months of 2010 compared to 2009, while total domestic wholesale industry shipments declined 4.9%. Lorillard's domestic retail market share increased by 1.0 share points over the year ago period to 12.8%.
Newport domestic retail market share increased by 0.5 share points over the year ago period to 10.9% from 10.4% in the second quarter of 2009.
Maverick - At the retail level, based on our (Lorillard) data, Newport achieved a 10.93% share in the first six months of this year, an increase of 0.66 points over the same period in 2009. Maverick grew 0.44 points for the same periods of comparison, achieving a 1.44% retail share of market.
Question: you think about Newport’s share performance in the first half of the year, just in light of continued intense competitive activity, whether it’s from Marlboro menthol or Camel, how would you assess the Newport’s performance and really just kind of looking at the share and profitability balance that you’ve been able to achieve?
Martin Orlowsky, CEO, President, board chairman:
Well frankly, we haven’t really witnessed any significant shifts in terms of the competitive framework so far through the year. I would not necessarily, I can’t anticipate at this stage of the game whether there’s going to be any radical or significant change occurring. So assuming all things remain as they’ve pretty much been, the Newport brand should continue to perform competitively, as it has.
Could you provide us with an update on where the MST (moist snuff tobacco) development stands?
We’re still continuing on a path of having, of being in a position to compete in that category. I don’t have anything specific to add at this point, but we still continue to have the interest.
Question: And any timeline when you want to have a product on the market?
In a reasonable time in the near future.
Lorillard, Inc. Reports Second Quarter 2010 ResultsLorillard, Inc., 7/26/2010.
Lorillard Inc. Q2 2010 Earnings Call Transcript, Seeking Alpha, 7/26/2010.
Q&A - Lorillard Inc. Q2 2010 Earnings Call Transcript, Seeking Alpha, 7/26/2010.