Gillette Co. chief executive James M. Kilts, trying one of the company's razors. A year after being hired, Kilts can point to several signs of progress.

Focus on core businesses sparks its turnaround

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t the beginning of 2001, Gillette Co. brought in James M. Kilts to turn around the Boston-based company. A year later, Kilts can point to several signs of progress.

Led by Mach3, Venus, and now the $9 Mach3Turbo, Gillette's premium razor business is on fire. But for many investors, the company's Duracell battery division remains a question mark.

Partly by investing more heavily in advertising, Kilts said, he was able to reverse market-share losses in many key product categories, including batteries. Kilts also cut costs and attacked inventory problems that were a drag on earnings.

Such steps helped Gillette improve its free cash flow and reduce its debt by more than $1 billion in 2001.

Some changes were already underway when Kilts took charge. In 2000, the year in which his predecessor was ousted, Gillette downsized its work force and sold its stationery division.

The strategy now is to focus on three core businesses: grooming, batteries, and oral care.

With much of Gillette's bad news concentrated in 2000, the year 2001 shines by comparison. Net income, which was $392 million in 2000, rose to $910 million in 2001 -- an impressive jump, but below 1999 net income of $1.26 billion. Revenues declined by 3 percent, to $8.96 billion.

For his turnaround efforts, Kilts got solid marks from one investor. "He's done a pretty good job," said Fredric E. Russell of Fredric E. Russell Investment Management Co.

In Gillette's annual report, Kilts wrote, "While the work we did last year was only a start, I'm pleased to report it's an excellent start."