It's Not Just The Airlines

From a drop in film use at tourist sites to declining copy paper purchases in corporate offices, the ripple effects of Sept. 11 are reaching into the far corners of the economy.

Many businesses reported an impact, direct or indirect, from the airliner hijack attacks on New York and Washington in their quarterly earnings statements issued this month.

While some consequences, like the toll on airlines, already were well-reported, others are emerging for the first time or in unexpected ways, such as shrinking sales in toilet paper and tissue to hotels. There have been some beneficiaries, too, like canned soup, video rentals and florist companies.

"In July, I wasn't expecting that 747s would be flying into buildings or that we would be worried about biological warfare. A lot has changed," said Tom Siebel, chief executive of Siebel Systems Inc., after the software maker's profits dove 48 percent in the third quarter.

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In some cases, companies were already struggling in a slowing economy and may be rushing to blame the attacks for poor performance. But for others, a dramatic shift in consumer behavior after Sept. 11 could well be providing an unexpected boon - or bane - for corporate profits.

"Use your imagination as to what doesn't get bought and what doesn't get done," said David Orr, chief economist for Wachovia Securities. "It can have a big effect on the economy."

Eastman Kodak Co., the world's largest photography company, reported a 77 percent drop in third-quarter earnings. It also lowered fourth-quarter guidance for the critical holiday picture-taking season to no more than 15 cents per share, well below analysts' estimates of about 46 cents.

The reason? Flat film sales as the terror attacks dampens travel by tourists, who usually take pictures on their trips. Kodak's U.S. consumer business dropped 1percent for the third quarter, leading to net earnings of $96 million, or 33 cents a share.

Also hit hard were forest products makers International Paper and Weyerhaeuser, which reported deeper losses after corporate layoffs and reduced advertising cut into paper production.

Weyerhaeuser's profits fell 54 percent to $91 million, or 41 cents per share, and International Paper, the No. 1 paper producer, had a net loss of $275 million in the third quarter.

"There's been less demand for magazines and catalogs, and as people were laid off, we had empty offices and people no longer at their computers and photocopy machines, so clearly that has had an effect," said Joshua L. Zaret, analyst for ABN AMRO Inc. in New York.

It's not all bad news.

Campbell Soup Co. acknowledged financial stumbles in its canned soup division before Sept. 11 as consumers-on-the-go ran toward seemingly easier-to-prepare items. But this week it said earnings this quarter will be better than expected, after Americans stocked up on canned goods after the attacks.

Campbell's soup, a popular staple in U.S. homes during World War II and the Cold War, said it expects earnings per share between 40 cents and 42 cents, up from 33 to 36 cents, when it reports results on Nov. 14.

Blockbuster Inc., the world's largest video rental chain, said it expects a long-term earnings boost as uneasy consumers stay home more. The Dallas-based company had a 92 percent rise in third-quarter earnings, mostly from strong DVD sales.

"As people enjoy time and security at home, we think it's a lasting trend," said John Antioco, chairman and chief executive. "Clearly, people's behavior has been adjusted, and this will translate to continued affection for video (rentals)."

And aircraft makers General Dynamics and Bombardier predict strong business jet sales and in some cases are boosting production despite the economic slowdown. Their bet: Executives in the long-term will prefer travel by private jet given the uncertainty of security via commercial air travel.

Other ripple effects:

  • Kimberly-Clark Corp. had quarterly profit fall for the first time in three years. It attributed the decline in part to lower demand for tissues and toilet paper in hotels, airports and office buildings, which makes up 15 percent of company sales.

    The maker of Huggies diapers, Kleenex tissue and Scott toilet paper reported net income of $419.4 million, or 79 cents a share, in the third quarter, vs. $440.4 million, or 81 cents a share, a year earlier.

  • 1-800-Flowers.com reported solid earnings and forecasted even stronger growth. The company, which picked up 455,000 new customers during the usually slow summer season, cited an uptick in flower sales following the attacks.

    "We believe we are well positioned as our customers...continue (to) express themselves and connect with all of the important people in their lives - family, friends and business acquaintances - particularly now as we nter the important holiday season," said CEO Jim McCann.

    By Hope Yen © MMI The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed