N.J. firm targets thieves, growth

It began in 1969 as a small upstart in South Jersey that helped libraries track books through security tags.

Today, Checkpoint Systems Inc. is a global concern whose core business is to help retailers track inventory and thwart shoplifters with high-tech tags and equipment. Its clients include Best Buy Co. Inc., the Home Depot Inc., and Kohl's Corp. in the United States, Carrefour S.A. in France, and Don Quixote in Japan.

And if last week's news from Checkpoint is a harbinger, the company is positioning itself to become an even bigger player in the multibillion-dollar industry that makes money from the fear of people stealing.

The Thorofare company forecast 2008 earnings exceeding analysts' expectations and appointed Robert van der Merwe (pronounced van der MEER) as chief executive officer.

Van der Merwe said in an interview this week that his goal was to turn the Gloucester County company into a $1-billion-a-year player in an industry serving retailers that lose an estimated $41.6 billion annually to theft.

"If you're under $1 billion, it's rather expensive to run a company in the United States," said van der Merwe, who has worked for Kimberly-Clark Corp., Xerox Corp. and Colgate-Palmolive Co. "The sooner you grow and become mid-cap, the easier it is to hurdle that cost that comes with it."

Most recently, van der Merwe was chief executive of Paxar Corp., a maker of retail identification and tracking systems, which he helped sell to a larger competitor. In the interview, van der Merwe said his goal at Checkpoint was to create long-term growth.

"We're not running the company from a quarter-to-quarter basis," said van der Merwe, 55. "We're here to develop long-term shareholder value."

Checkpoint's annual sales from 2000 through 2006 lingered close to $700 million, but company executives said yesterday in a teleconference with analysts that they expected to report 2007 revenue of $820 million.

Van der Merwe's appointment caps several years of ups and downs for Checkpoint, including layoffs, antitrust litigation, restructuring, and vacillating stock performance.

Officials said several major acquisitions in 2007 boosted performance heading into the new year and would help generate double-digit sales and earnings growth in 2008.

The company's products include closed-circuit-TV security systems; disposable labels programmed with antitheft radio signals and then woven into clothing; reusable security devices affixed to apparel and other retail merchandise that set off alarms if not paid for; and labels for garments and other merchandise.

Checkpoint earnings have been generally strong but uneven since 1993, when the company began a period of sharp growth.

Its stock performance has reflected this. In 1994, as Checkpoint was beginning to expand significantly, the shares sold for $9.63 each. By 2005, the average stock price was $24.65, but that dropped a year later to $20.20. The 2007 average was $25.98, though it dipped during this fall's lackluster retail holiday season. It closed yesterday at $23.73, down from $30.25 at the end of October.

Earnings have followed a similar trajectory. In 2002, for example, Checkpoint posted a loss of $1.10 a share, followed by a profit of 82 cents a share in 2003, a loss the next year and profits in 2005 and 2006.

Company officials said they expected to report a 2007 profit of between $1.33 and $1.38 a share.

Van der Merwe's appointment culminates a reshuffling of top management that began months ago with an executive search, as Checkpoint increasingly focused its growth on markets abroad. Van der Merwe brings considerable experience overseeing international business operations.

In December, Checkpoint promoted Raymond Andrews to chief financial officer. Andrews, 54, had been chief accounting officer since August 2005. Former chief executive George Off will continue as chairman to guide the new team.

In last week's announcement, Checkpoint said it expected earnings per share to increase to $1.65 to $1.75 in 2008, driven largely by recent acquisitions that have expanded the company's reach into new geographic markets. Checkpoint operates in 31 countries, and two-thirds of its business is overseas.

A key acquisition in 2007 was Sidep, a Chinese company that expands Checkpoint's security-label manufacturing capacity in Asia and boosts sales of retail security systems in the region. Also, the purchase of a unit of Alpha Security Products Inc. gives Checkpoint a new line of products to sell to retailers.

Company officials have downplayed any effect the sluggish retail industry may have on their growth strategy.

The recent dip in stock price, which coincided with the holiday retail season, was likely a result of overall market volatility, van der Merwe said.

"I think some folks do hear

retail

and they automatically assume, well, Paxar, Avery Dennison, Checkpoint, these companies are focused in on retail and therefore will suffer accordingly," he said. "I don't know that that's accurate. Many of these companies have underlying businesses that move volume regardless. Consumers have to buy certain things, they have to shop."

Off, the company chairman, said yesterday that the company's unexpected sales momentum in the latter part of 2007 was the result of last-minute orders. But those orders cost more to fill, he said, and would cut into the company's profit margin.

Off also said van der Merwe "is the right guy to accelerate our growth. He hits the ground running."