Lorillard Inc.'s profit fell 4.2 percent in the second quarter from a year ago as sales of its electronic cigarettes dropped.
The tobacco company, which is being acquired by competitor Reynolds American Inc., said Wednesday that increased competition and lower prices on rechargeable kits caused sales of its Blu electronic cigarettes to fall 35 percent in the quarter to $37 million from $57 million a year ago.
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"Despite a challenging quarter on e-cigs domestically, Blu remained the clear industry leader and we remain bullish on the outlook for electronic cigarettes in general," said CEO Murray Kessler.
The Greensboro, North Carolina-based company, which makes Newport and Kent cigarettes, bought Blu in 2012 for $135 million. Last year, it bought a UK-based electronic cigarette maker for $49 million to expand Blu internationally. The category is growing fast. Big tobacco companies, including Reynolds American and Philip Morris International, have launched e-cigarette products recently. Electronic cigarettes heat a liquid nicotine solution which then creates a vapor that users inhale.
Lorillard said its net income fell to $300 million, or 83 cents per share, from $313 million, or 83 cents per share, in the same quarter a year ago.
Adjusted to remove one-time items, it earned 84 cents per share. That's below the 88 cents per share that analysts surveyed by Zacks Investment Research expected.
Revenue slipped to $1.799 billion from $1.804 billion in the same quarter a year ago. Analysts expected $1.34 billion, according to Zacks.
Shares of Lorillard slipped 1 percent to $61 in trading before the stock market open Wednesday. Its shares are up 42.5 percent in the last 12 months.