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RFID Adding to Some Bottom Lines

Checkpoint Systems and Avery Dennison have reported that revenue from RFID products is growing.
Posted By Mark Roberti, 11.01.2012
There has been a great deal of bad news in the radio frequency identification industry over the past three years. A number of companies have gone bankrupt, while others have been bought out by competitors. But there are signs that the tide might be turning.

When announcing Avery Dennison's third-quarter financial results, Dean Scarborough, the company's chairman, president and CEO, said: "Continued top-line momentum in pressure-sensitive materials and a rebound in Retail Branding and Information Solutions' [RBIS] core business, as well as accelerating adoption of RFID, drove better than expected earnings for the quarter. As a result, we raised our guidance for full-year earnings per share."

Avery's press release announcing the results reported that sales increased by approximately 7 percent compared to the prior year, driven by increased demand from U.S. and European retailers and brands, including accelerating RFID adoption. It also noted that the operating margin improved by 310 basis points, to 1.9 percent, driven by increased RFID profitability, partially offset by higher restructuring costs. Adjusted operating margin improved by 500 basis points.

During a conference call with analysts, Scarborough stated: "I'd say close to one-third of the growth that we had in the quarter was due to RFID adoption. I do want to make the point, though, that the core business of RBIS came back. And so it's not just an RFID story. RFID is definitely an add-on, and we do see an acceleration of adoption by major retailers. So we're feeling, I'd say, bullish about the impact on RFID, and we're clearly well-positioned as the go-to player as companies implement item-level marking using RFID. So I'm happy about that."

Checkpoint Systems, reporting its third-quarter results in September, also cited RFID as its driver for growth: "While revenue overall declined during the quarter, we are pleased that new customer wins in Asia Pacific, North America and Europe, combined with higher levels of business with retailers in North America and the United Kingdom, contributed to a 15.7 percent revenue increase in our systems business, driven equally by EAS [electronic article surveillance] and radio frequency identification systems. Furthermore, our Merchandise Visibility business, which includes our end-to-end solution of RFID hardware and software, tags and labels, service and support, continues to gain traction with expanded testing and further installations at several major retailers worldwide."

George Babich, Checkpoint Systems' interim CEO and president, said: "Last quarter, I announced a newly refined strategic direction for Checkpoint. Our goal is to transition from a product-driven merchandise-protection business to a provider of solutions that give retailers ready insight into the on-shelf availability of merchandise in their stores."

The fact that these two publicly traded companies have acknowledged RFID is more than just a good sign that adoption is accelerating. It might also be a signal to venture capitalists that there is money to be made in RFID, and now might be a good time to start looking at RFID companies again.

Mark Roberti is the founder and editor of RFID Journal. If you would like to comment on this article, click on the link below. To read more of Mark's opinions, visit the RFID Journal Blog, the Editor's Note archive or RFID Connect.

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