Lorillard Raises Cigarette Prices, Competitors Likely To Follow

Lorillard Inc. (LO) has increased prices on most of its cigarette brands, its first such increase in seven months.

The company raised the price of its largest seller, Newport Menthol, by five cents per pack. Newport non-menthol, a relatively new but fast-growing line, is getting an 11 cent per-pack boost, while other brands will increase by eight cents a pack. Prices for discount brand Maverick will remain flat.

Lorillard last raised prices in late November, with a six cent per-pack increase for Newports.

Tobacco companies generally raise prices in quick succession, and Wells Fargo analyst Bonnie Herzog said she expects Altria Group Inc.'s (MO) Philip Morris USA and Reynolds American Inc. (RAI) to increase their prices by Wednesday.

"Overall the price increase is positive and the industry still does have pricing power," Herzog said in a client note late Thursday.

Most domestic tobacco companies are relying on higher prices to offset volume weakness. Lorillard, however, has benefited from increases in both prices and volume, as menthol cigarette sales remain a bright spot. Still, Lorillard's future remains uncertain as the U.S. Food and Drug Administration weighs restrictions on its core menthol products. The agency is expected to issue a report on the topic for peer review in July.

-By Melissa Korn, Dow Jones Newswires; 212-416-2271; Melissa.korn@dowjones.com

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