Shares of Libbey Inc. were drubbed again Tuesday after the company reported an expected but nevertheless disappointing first quarter in which the company lost more than $6 million.
Even though investors had been braced for the news, it still resulted in a selloff that sent shares tumbling 14 percent to close at $9.21 on the New York Stock Exchange. Year to date, Libbey is down nearly 53 percent.
While officials with the Toledo-based company have been open that Libbey needs to work through some of its own issues, including a lack of innovation and an overly complex product portfolio, top executives said Tuesday one of the biggest challenges is the widespread upheaval in its market.
A number of Libbey’s top competitors are struggling financially and have been slashing prices trying to get whatever sales they can. That in turn has depressed pricing for the entire industry.
“These businesses are really, really in trouble,” Libbey Chief Executive Bill Foley said of certain competitors. “The thing that befuddles us is that in spite of all that, they’re taking their prices down even further. It’s a race to the bottom.”
Sales for the quarter were $173 million, down 5.4 percent from last year.
Libbey was already anticipating narrower profits to start the year as it had two furnace rebuild projects in the works and was embarking on the initial phase of a major initiative to build a new e-commerce platform. Currency headwinds were also expected to continue.
But a far more challenging pricing environment than it expected as well as some unexpected costs related to natural gas hedges in Mexico all added up to a loss of $6.6 million, or 30 cents a share, in the quarter. In last year’s first quarter, Libbey had a profit of $718,000, or 3 cents a share.
As a result, Libbey said it will look to shave $5 million in operating expenses this year and would push back or cut some expected capital improvement projects.
However, officials said the company is committed to continuing its current strategy of new product introductions and forging ahead with the e-commerce project that’s meant to replace some of the sales being lost to consumers who are shunning traditional brick and mortar stores.
Mr. Foley told analysts on a conference call about the earnings that many of the new products the company is launching are higher value items that will command higher prices, helping to improve overall margins.
“We’re fortunate to be competing from a position of strength and we’re taking advantage of that position by investing in new products and e-commerce capabilities to grow market share while others may not have that flexibility,” he said.
The company said it expects to continue the course with its quarterly dividends and continuing to pay down debt.
“In the short term these market conditions are impacting our profitably, but we have the strongest balance sheet in our industry,” Mr. Foley said.