Stock of American Greetings Plunges On Inventory Plan
American Greetings Corp. unveiled a "productivity initiative" that the company said will exact a heavy toll on near-term revenue and earnings. The news sent shares of the nation's second-largest greeting-card concern down 32%.</br></br>In heavy composite trading on the New York Stock Exchange, American Greetings plunged $11.1875 to $23.875 after falling earlier to a new 52-week low of $23.25.</br></br>The strategy, the company said, is aimed at fattening future profits by allowing American Greetings to equal or better existing retail sales with less inventory. The plan is designed to let the company better exploit recent investments in technology that have shortened the time required to design, produce and ship a new generation of cards. Consumers' tastes in greeting cards are "changing faster than they have in the past," an American Greetings spokesman said.</br></br>But the first phase of the company's plan, which calls for a "sell-through" that will reduce permanently the number of American Greetings cards on retailer's shelves, will slice about $100 million from revenue for the fiscal year beginning Monday.</br></br>In essence, American Greetings will for a time replenish its existing cards on retailers' shelves at a rate lower than full replacement. Once that temporary process has lowered the retail-card inventory to the company's reduced target level, officials expect sales will continue at their current pace, or even strengthen.