WD-40 (WDFC) updates FY guidance

Multi-purpose lubricant, cleaning, and consumer products company WD-40 (NASDAQ: WDFC) is posting such good earnings that CEO Garry Ridge recently announced the company has revised FY guidance upwards. Net sales are predicted to grow 7-9% to $307-$313 million. FY EPS are predicted to be $1.70-$1.75 with net income of $29-$30 million. Ridge maintains these are viable numbers despite the capital expenditures necessary for WD-40 to open a direct sales operation in China by late 2007. WD-40 has posted these numbers despite increases in the cost of goods due to increases in the cost of raw materials, and a 10% increase in administrative expenses in 3Q 2007. Advertising and sales expenses are also on the increase by 12% as WD-40 moves into new markets outside the U.S.

WD-40 has no choice but to seek new international markets. Sales in Europe are up 23% in 3Q 2007 and up 17% in Asia/Pacific, not yet including China. These double-digit increases make up for the fact that sales in North America are down 2.5% in 3Q 2007. This decline is caused primarily by a 15% drop in sales of household products, which makes very little sense considering the company's flagship product, WD-40, posted a sales increase of just under 16%, and hand-cleaning products posted an impressive 12% increase. WD-40 makes well-known and widely respected cleaning products such as X-14 for cleaning soap scum and Carpet Fresh for removing spots in carpet. Granted, these products are a bit more expensive than competing brands, but these products unarguably work well and are found in the cleaning cabinets of many U.S. homes. After getting its China facility up and running full speed, perhaps WD-40 needs to turn its attention to convincing American consumers of the value of WD-40 products, not just their price.

Overall, 3Q net sales were up 6.2% and up 8.1% for 1Q-3Q 2007 inclusive. In addition to raising FY guidance, the company announced a $0.25 per share dividend.