Avery Dennison 1Q Net Drops 18% On Weaker Margins; Revenue Rises

Avery Dennison Corp.'s (AVY) first-quarter profit declined 18% as the office-supply and label manufacturer reported weaker margins and raw material costs jumped, although revenue grew and the adjusted bottom line topped Wall Street's expectations.

The company's earnings jumped in each quarter of 2010, as the retail market has improved and Avery has benefited from cost-cutting efforts. Avery also has responded to rising raw-materials costs with price increases.

Avery posted a profit of $44.8 million, or 42 cents a share, down from $54.7 million, or 51 cents a share, a year earlier. Excluding restructuring charges and other impacts, earnings fell to 51 cents from 61 cents. Revenue climbed 6.7% to $1.66 billion.

Analysts polled by Thomson Reuters expected a profit of 47 cents on revenue of $1.66 billion.

Gross margin narrowed to 27.4% from 28.4%.

Sales of pressure-sensitive materials--its largest business--improved 10%. Its smaller office and consumer products unit reported a 13% drop, while sales rose 8.8% for the retail branding and information solutions business.

Shares of Avery, which affirmed its full-year earnings target, closed at $43.11 Tuesday and were inactive premarket.

-By John Kell, Dow Jones Newswires; 212-416-2480; [e-mail]