In a sign that executive leadership is waking up to the full carnage of brand damage that has occurred, Bausch & Lomb Inc. cut its earnings forecast for 2006 by 78% due to signs of consumer backlash against the company after one of the company’s contact lens products was linked to an outbreak of eye infections in the U.S. and Asia. In 2006, Bausch & Lomb will be “unprofitable” although it forecast an improvement in 2007 pretax earnings. Bausch & Lomb expects pretax earnings of $70 to $80 million for 2006, much lower than the forecast last October of $325 to $335 million. Earning are expected to be $575.4 million for the quarter ending July 1, 2006, almost $30 million down from one year earlier. Benner Ulrich, a UBS analyst, said consumers’ reaction against Bausch products “was more drastic that we had originally expected” and apparently went far beyond ReNu with MoistureLoc. He also stated that customers “were not discriminating between different Bausch & Lomb products and were just moving to another brand.

Commentary: Bausch & Lomb unfortunately has been a case study in how NOT to handle a brewing crisis. We were astounded by their lack of responsiveness earlier this year. In the consumer product industry, credibility can be lost in the blink of an eye, with it taking years to recover, if at all (anyone remember the Suzuki Samurai?). As the UBS analyst pointed out, customers are moving away from ALL THINGS Bausch & Lomb, not just the affected products.