Dreyer’s Stock Melts After It Warns of Rising Costs

Shares of the No. 1 U.S. ice cream maker, Dreyer’s Grand Ice Cream Inc., slumped 14% Wednesday after the company warned that a rise in the cost of dairy products, vanilla and energy will hurt its 2001 earnings.

Higher raw material costs could cut earnings at the Oakland-based company by 20 cents per share over the year, Dreyer’s spokesman William Collett said.

“Investors have focused on the news that a confluence of negative commodity items will impact results in 2001,” said Merrill Lynch analyst G. Leonard Teitelbaum in a note to investors.

Dreyer’s also reported disappointing fourth-quarter results. While its net loss narrowed, the figures were still worse than Wall Street expectations.

The net loss was $794,000, or 4 cents per diluted share in the fourth quarter ended Dec. 30, down from $2.04 million, or 8 cents per diluted share in the 1999 fourth quarter. The consensus of analysts’ estimates was for earnings of 3 cents per share, according to First Call/Thomson Financial.

The loss is after taking into account the dilutive effect of recent acquisitions and the impact on Dreyer’s of the bankruptcy of the Grand Union Co., a major Northeastern grocer.

“It was our exposure to Grand Union’s bankruptcy and an earnings dilution due to the third- and fourth-quarter acquisitions,” Collett said.

Shares of Dryer’s lost $4.94 to close at $30.06 on the Nasdaq stock market.

Sales for the quarter were up 17.7% to $285.1 million from $242.1 million in the year-earlier quarter.

Though Merrill Lynch lowered its full-year 2001 earnings per share forecast range to $1.15 to $1.20 from $1.30 to $1.35, Teitelbaum said the rise in commodities costs were only “bumps in the road” for Dreyer’s.

Teitelbaum said he maintains his intermediate and long-term “accumulate” ratings for Dreyer’s based on his view that its brands “continue to perform strongly” and that it is “an attractive business.”