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Are the big consumer goods companies pumping up earnings by cutting back on ad spending?

In this sputtering stock market, major companies have a powerful incentive to keep earnings-per-share in line with analysts' expectations. Any deviation on the downside, and a company's stock gets punished severely. Gillette Co., Eastman Kodak Co. and Procter & Gamble Co. are three consumer products companies whose stocks have been hard hit in the last quarter.

The stock market is extremely jittery these days, ready to take a dive on the flimsiest excuse, such as worry that consumer goods companies won't gain much from an expanding economy. Do analysts think consumers will buy more liquid detergent when times are bad?

I get the feeling that Wall Street will reward companies for keeping earnings on target no matter how artificially they do it. What stock analysts want is consistency, and they're not particular how companies get there, short of cooking the books.

So when The Wall Street Journal reported that Gillette had reduced its ad spending to keep earnings up, Gillette's stock fell a measly half-point when the Dow Jones average was off 63 points.

The Journal said that Gillette managed a 14% rise in second-quarter per-share earnings (but below estimates) in part because the company's ad spending dropped 21% from a year earlier. If advertising expenditures had remained even with last year, earnings apparently would have increased less than 11%, the Journal stated.

Cutting back on ad money "is part of the way they've been meeting earnings growth expectations in the last few quarters," a stock analyst at Bear, Sterns & Co. told the Journal.

The analyst, Constance Maneaty, explained to me that most of the consumer goods companies managed their advertising in the same way, turning ad spending on and off depending on capacity and what new products are in the pipeline. Gillette will soon introduce its next-generation shaving system, so the company might be holding back ad money for the launch, although Ms. Maneaty noted that sales promotional expenditures were actually up.

The launch date for the new razor is "set in stone," she said, so Gillette might have used couponing and trade deals to clear the shelves of the old merchandise.

Ms. Maneaty maintained that the companies she follows view advertising as an investment, even though they manipulate ad levels "as they see fit."

There's always some excuse to cut back on advertising, whether it's to make up for an earnings shortfall or to squirrel away dollars for a new product introduction.

The stock market is certainly not an ally of advertising. Ms. Maneaty was not at all critical of Gillette or any company for cutting back on advertising to bolster earnings, so when times get tough companies have free rein to slash ad support-and they do it with a vengeance. The only thing that counts on Wall Street is next quarter's earnings, so advertising's ability to build brand equity over a long period of time falls on stock traders' deaf ears.

Top management is completely cowed by the stock market because their compensation depends on how their companies' stocks perform. So they are willing to sell off manufacturing plants, indeed entire product lines, to appease the insatiable appetite of the stock market gods.

In the face of this constant pressure, what chance does a commitment to advertising-and the brands that it builds-have in today's very fragile

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