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7.  G I L L E T T E  C O.

Hurdles loom for razor giant's turnaround

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ust over two years into its turnaround, "solid progress" is the mantra at Gillette Co (G).

The Boston company has had great success with blades and razors, especially with flagship products such as the Mach3Turbo and Venus. Its oral-care lines shows promise. But its third business, Duracell batteries, has been a chronic headache.

In early 2001, Gillette brought in outsider James M. Kilts to turn around the company. His strategy included imposing efficiencies and spending more on advertising. In 2002, company sales rose 5 percent to $8.45 billion as razors achieved a record-high global market share. Consumers trading up to pricier razors was one reason why net income rose 34 percent to $1.2 billion.

That increase was also boosted by cost cuts and by lower debt levels and interest rates. Gillette closed out 2002 with "good momentum," Kilts said.

Challenges loom. Deflation is a threat in the battery category. And two rival brands have joined forces. Energizer Holdings Inc., whose batteries compete with Duracell, recently bought the Schick-Wilkinson Sword razor brands. Energizer now battles Gillette on two fronts. Schick had been owned by pharmaceutical giant Pfizer Inc., where the razor brand languished.

At Energizer, Schick is expected to get more attention, and already there is talk of a Schick four-bladed razor attempting to chip away at the edges of Gillette's razor dominance.

By the reckoning of Joseph Altobello, an analyst with CIBC World Markets, Gillette's turnaround still has some way to go.

"I look at it as a five-year plan," he said.

CHRIS REIDY

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