RICHMOND, Va. (AP) — Newport maker Lorillard Inc.'s profit fell 4.2 percent in the second quarter as sales of its market-leading Blu electronic cigarettes dropped and it sold fewer cigarettes.
The nation's No. 3 tobacco company, which is being acquired by competitor Reynolds American Inc., said Wednesday that e-cigarette sales to fall 35 percent to $37 million in the quarter as it faced increased competition from Reynolds and Altria Group Inc., which both began to expand their own e-cigarette brands nationally during the quarter.
Lower prices on its rechargeable e-cigarette kits also hurt its bottom line, but the brand still held more than 40 percent of the U.S. market.
The tobacco industry is focusing on cigarette alternatives like e-cigarettes for future sales growth because the decline in cigarette smoking is expected to continue. E-cigarettes heat a liquid nicotine solution which then creates a vapor that users inhale. The market reached nearly $2 billion in sales last year.
The Greensboro, North Carolina-based company bought Blu in 2012 for $135 million. Last year, it bought a U.K.-based electronic cigarette maker for $49 million to expand Blu internationally. The category is growing quickly.
"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," CEO Murray Kessler said in a statement.
The company did not host a conference call with investors regarding its earnings as it awaits its $25 billion deal with Reynolds to close. As part of the deal, Lorillard is selling Blu to the U.K.'s Imperial Tobacco and Reynolds plans to focus on its Vuse e-cigarette brand.
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