Byline: Andrea M. Grossman

NEW YORK — Cutbacks in distribution and a 40 percent reduction of stockkeeping units led to double-digit sales decreases in Dial Corp.’s specialty personal care business, or SPC, for its fourth quarter and yearend periods.
The personal care division, which produces the Freeman and Sara Michaels brand, posted sales for the quarter ended Dec. 31 of $43.1 million, down 12 percent from $49.1 million a year ago. The division’s sales for the year were $114.6 million, compared to $137.7 million for the previous period.
Herb Baum, Dial’s chairman and chief executive officer, explained in a conference call to analysts Wednesday that a “good portion” of the 17 percent annual sales drop is due to the discontinuation of the Freeman and Sara Michaels sku’s, as well as a more targeted approach to distribution. The dramatic sku-reduction, which took effect in the fourth quarter, was part of Dial’s plan to streamline the division into profitability. The remaining bath and body sku’s make up nearly 90 percent of SPC sales, most of which have been repackaged for the first quarter.
Baum took Dial’s helm in August after its previous ceo, executive vice president of marketing, executive vice president and chief financial officer all resigned. He assembled a new team shortly after.
Throughout the year, Dial took several charges in relation to the division. In the fourth quarter, Dial took a $74 million charge to clean out inventory and to end a joint venture with Germany-based Henkel. In the second quarter, Dial filed a $23.9 million special charge, in part for consolidation of logistical operations. Baum noted there should not be any other charges for further SPC restructuring.
Baum also reiterated Dial’s interest in selling the division.
“As we look to a tough competitive environment in 2001, we are prepared to aggressively support our strong brands while we sort out noncore or weaker brands, the top contenders there being specialty personal care,” among others, he said.
Although Baum and his team have been working hard to improve the SPC division’s performance, he sounded like a deal to sell SPC could be imminent: Dial will agree to a divestiture that could result in a pretax write-down of slightly more than $200 million, with an aftertax write-down of $150 million to $170 million.
“If we get an offer that leaves us with $150 million to write down, we will probably feel that it is OK to move ahead,” Baum said, declining to specify how big an offer is required or what the company finally hopes to net.
Dial bought Sara Michaels and Freeman for nearly $260 million in 1998.
Baum noted that Dial is in intermediate talks with “five to six companies,” but he added that all interested parties haven’t visited Dial’s headquarters to look at the business. Baum refused to comment on whether the entire Dial business was for sale, but he said the sale of SPC might be seen soon.
“You will see a go or no-go in the next eight weeks,” Baum said.
If the unit remains with Dial, Baum assured that it would be accretive to operations. “As we look at the improvements at SPC and look at future cash flows on a keeper basis, [it] is not an impaired asset.”
For the first quarter of 2001, Baum expects SPC to continue to “trend negative” but not any worse than its fourth-quarter performance, which fell 12 percent in sales. In fact, Baum said Dial has budgeted a modest sales increase for SPC in 2001.
“We are talking to those that move lots of products, like Wal-Mart, Target and Kmart and there is a lot of competition out there and we disappointed them last year. Although we have a terrific looking line for the year 2001, we just need to solidify our business and prove that under new management that [we’ll] be a different story.”
For 2000, Dial posted a 4.8 percent dip in sales to $1.16 billion. An $11 million loss punctuated Dial’s year.

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