Consumer-products concern WD-40 (NASDAQ: WDFC) had something of a rough third quarter. According to the press release, which was issued on Wednesday after the bell, sales were down over 16%. The company made 41 cents per diluted share. This was 8 cents less than the previous year's Q3 performance.
It was, however, 3 cents better than what the analysts were looking for, according to Earnings.com. Gross margin, it should also be noted, improved significantly. Driving this positive element of the story were efficiencies in the supply chain, price increases, and the drop in the price of oil.
Management believes in the equity of its brands. The company dramatically increased its investment in advertising and sales promotions. Overall, a smart move. During the recession, all consumer-products concerns want to be out there grabbing as much market share as possible. Whether you're a Procter & Gamble (NYSE: PG) or a Colgate-Palmolive (NYSE: CL), buying ads and printing up circulars can pay dividends. And defending name brands against generic equivalents is very important.
I think WD-40 held up reasonably well during the quarter. Cash flow seems to be okay. And we must remember that there are external concerns making things rough for the business. The fluctuation in the dollar is an example.
But am I overly excited about WD-40 right now? Truth be told, I'm not. I can't say I'm inclined to buy at this point. I don't get the feeling that I'd be investing in the best idea for capital appreciation if I put money down on this name. Sure, it probably will do well over the long term. But with the market possibly getting ready for a pause, there are bluer chips out there that should be considered.
At least WD-40 was able to beat the market this time around. Last quarter, this wasn't the case. Those interested in the company might want to wait for a better price, or at least consider trading with a tight stop.
Disclosure: I don't own any company mentioned; positions can change without notice.
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