Prestige Brands Holdings' second change in the CEO post in three years may spark questions, but could help the company rebuild, a market analyst says.

The OTC drug and personal care product firm announced that Mark Pettie resigned Sept. 2 as president and CEO due to differences with the board.

Matthew Mannelly immediately replaced Pettie as Prestige president and CEO and was named a board member, the firm said Sept. 3.

Mannelly has "extensive experience in packaged goods, sports, fitness and apparel" for firms including Nike and Quaker Oats, where he was in charge of the Gatorade drink line, according to a release.

Prestige also announced it completed a 10 percent staff reduction and that quarterly sales for its products, which include Chloraseptic sore throat relief spray, Wartner and Compound W wart removers and Clear Eyes eye drops, are on track with its expectations.

Jon Andersen, an analyst with William Blair & Co. who follows Prestige, said he sees the firm's announcements as "largely net neutral for the stock."

"Mannelly appears to have solid credentials and may bring fresh approaches to help rebuild the company's organic growth prospects over time," Andersen said in a same-day research note.

The change did not significantly move the firm's share price in either direction in trading on the New York Stock Exchange. The price increased from an opening of $7.06 on the day Pettie resigned to a Sept. 3 close of $7.39 before dropping to a close of $7.29 on Sept. 4.

However, Pettie's resignation after joining Prestige in January 2007 "is sure to raise some questions, as there have now been several leadership changes at senior levels of the company over the past few years," Andersen added.

Pettie's predecessor as CEO, Frank Palantoni, also had a short term. Palantoni joined the firm as CEO in March 2006, but he resigned in June that year after he and the board agreed to his departure, according to Prestige.

The lead director of Prestige's board, Gary Costley, said Pettie's resignation followed discussions on his and the board's "divergent views about the company's strategic direction during the current economic climate."

A spokesman for the Irvington, N.Y., firm declined to comment on the "divergent views."

At an analysts' conference in March, Pettie said the firm would take "a hard, critical, very objective look" at its brands, shed less profitable products and shift resources to Chloraseptic and its other major OTC and household lines, which account for two-thirds of total sales (¹ Also see "Prestige Brands Says Some OTC Brands Will Go, But Major Lines Will Stay" - Pink Sheet, 16 March, 2009.).

He said less profitable brands drag down Prestige's top-line growth by 1 percentage point annually. The portfolio management began in May 2008 and would continue indefinitely as part of a reorganization expected to stabilize organic sales growth.

However, the firm's performance during this reorganization apparently was not enough to mitigate the board's difference of opinion with Pettie.

Net revenues for the firm's fiscal 2009 - April 2008 through March 2009 - declined 4.3 percent to $312.7 million in a market slowed by a global economic slump. For its fiscal 2008, the firm reported 3 percent growth in net revenues to $326.6 million, according to Prestige.

The firm reported Aug. 5 relatively flat net sales of $73.2 million for its fiscal 2010 first quarter (² Also see "Sales & Earnings In Brief" - Pink Sheet, 10 August, 2009.).

Costley said the firm is confident in Mannelly's abilities "to grow our business and drive profitable and disciplined growth for our company in the years to come."

Prestige expects $2 million in ongoing annual cost reductions from the 10 percent staff cuts, which, "while painful from a personal standpoint, will result in a more efficient organization in the future," Costley said.

The reductions reached senior-level positions, including VP-human resources, controller and chief marketing officer, and a chief marketing officer, in the OTC & Personal Care Products division.

Andersen estimated the 10 percent reduction to be equivalent to approximately 10 employees.

- Katie Stevenson ( ³ k.stevenson@elsevier.com )

Prestige Brands Replaces CEO Due To Differences With Board

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