Avery Dennison Corp.'s (AVY) third-quarter profit fell 0.3% as sales for the office-supply and label manufacturer continued to slide amid weak customer demand but it boosted margins.

But results were better than expected.

Avery Dennison in July cut its dividend in half and said it saw the possibility of continued poor market conditions beyond 2009. Avery has slashed its work force and cut costs amid weakening demand during the economic downturn as customers make the most of their existing office products rather than buying new ones.

For the quarter ended Oct. 3, Avery Dennison reported earnings of $62.5 million, or 59 cents a share, down from $62.7 million, or 63 cents a share, a year earlier. Excluding items such as restructuring costs and write-downs, earnings rose to 82 cents a share from 81 cents a share.

Revenue declined 10% to $1.55 billion as the company's two biggest business segments - pressure-sensitive materials and retail-information services - saw sales drop 9% and 14%, respectively, from a year earlier.

Analysts polled by Thomson Reuters forecast earnings of 57 cents a share on $1.47 billion in sales.

Gross margin rose to 28.1% from 25.2%.

Shares of Avery Dennison closed at $36.84 Monday and were inactive premarket Tuesday.

 
   -By Nathan Becker, Dow Jones Newswires; 212-416-2855; nathan.becker@dowjones.com;