Avery Dennison Corp. entered the COVID-19 outbreak crisis from a position of strength financially, operationally and commercially, its chief executive said in late April. Speaking during a conference call with analysts to discuss fiscal first quarter results, Mitch Butier said the Glendale label and graphic materials manufacturer has often been resilient across economic cycles. “Historically, our businesses have rebounded quickly in the year following a recession,” Butier said during the call. “Now, it’s too early to call but if the depth and duration of the economic impact across this cycle is similar to what we experienced in the Great Recession, we would be targeting 2021 earnings and free cash flow above 2019 levels.” The company reported on April 29 adjusted net income of $140 million ($1.66 a share) for the quarter ending March 28, compared with adjusted net income of $126.6 million ($1.48 a share) in the same period a year earlier. Revenue decreased by 1 percent to $1.7 billion. The stock price, however, has lost about 8.5 percent of its value for the year through June 3, when it closed at $119.75. Ghansham Panjabi, a senior research analyst with R.W. Baird & Co. Inc., gave the company an “outperform” rating, with a price target of $120, according to an April 30 research note. “A combination of a diversified portfolio, a track record of strong execution and a solid capital position should help Avery Dennison successfully navigate the significant near-term challenges on the horizon – while emerging from the downturn from a position of strength,” Panjabi said in the note. Avery Dennison develops and manufactures products in three divisions – label and graphic materials, retail branding and information solutions and industrial and health care materials. In the first quarter, the label and graphic materials division showed an increase in sales while the other two units had a decrease. Chief Financial Officer Greg Lovins said during the conference call that in the second quarter the revenue from the retail branding and information solutions division would decrease by about 40 percent due to extended retail store closures and the shutting down of factories, primarily in Asia and Central America, for much of April. “So we expect April to be the worst of it but continuing to be down about 40 percent for the whole quarter,” Lovins said. “And of course, given that a large portion of our RFID (radio frequency identification tags) business is related to apparel, we would expect RFID then to be down commensurately a bit as well, given just the overall impacts on the apparel industry particularly in April.” In his research note, Panjabi said that Avery’s global presence in the retail branding division is a key advantage with demand increasing as retail production ramps back up. “With that said, the segment still faced (and continues to face) declines in the apparel end-market that is stemming from widespread closures of malls and retail outlets,” Panjabi wrote. “In terms of RFID, sales were up mid-teens in 1Q20, though retail headwinds will likely impact the business in 2Q20, while we also note that some trials have been delayed within RFID.” RFID technology is a type of tag that allow manufacturers to track individual products and retailers to control inventory. In the conference call, Butier mentioned that the food industry had delayed trial tests of RFID due to restaurants closing or going only to delivery or pick up service. The company is hearing from other customers, such as in the logistics industry, who have a greater need for automation and for the RFID technology that will meet that need. “We’re seeing a huge ramp up within the logistics (industry),” Butier added. “If you think about the volume of packaging going through e-commerce … that’s likely to only increase.” Customers have been talking with the company about the RFID technology and want to accelerate their adoption of it, Butier continued. “Our conversations … continue to reinforce the confidence we have in this business, this product, RFID, the building out of the intelligent labels platform as we get to a more digitized world,” he added. In the conference call, Lovins said that Avery Dennison was suspending its annual guidance forecast due to the coronavirus pandemic creating uncertainty about global demand for its products. He was, however, able to give some second quarter predictions. “Based on April trends in which sales are down roughly 18 percent versus (the) prior year, we expect that our second quarter sales will be down 15 percent to 20 percent on an organic basis,” Lovins said during the call.