Tuesday, July 20, 2010

Johnson & Johnson Consumer Marketing Costs Will Explode

Johnson & Johnson (JNJ) experienced disaster within their domestic consumer sales channel. Domestic division reported a 14.3% decline. International sales increased an anaemic 1.8% which was attributable to FX fluctuations. Management is blaming slow spending consumers. Problem with the excuse is that once brand loyalty shifts to generic options JNJ will be faced with a permanent loss of market share or will have to mount expensive recapture marketing campaigns.

Difficult decisions coming which management is not addressing in the earnings release. Margins will be squeezed with additional marketing costs.

Disclosure: No position in any stocks mentioned in this post.