Black Diamond 3Q sales up on new apparel, but losses mount on higher costs and Pieps recall

Management tells investors it’s bringing in an additional senior executive and profitability experts to help.
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Black Diamond Inc. (NYSE: BDE), parent to its namesake brand, along with Gregory, Poc Sports and Pieps, reported higher sales for the third quarter 2013, but a third-consecutive quarterly loss sparked talk of bringing in senior executive help and profitability consultants.

The outdoor and wintersports company reported its overall sales up 8 percent to $48.7 million, largely due to the introduction of its apparel line, plus an increase of Gregory sales in Japan, where the company recently took over its distribution operations. Black Diamond CEO Peter Metcalf said the “limited” apparel launch totaled 240 of “its best retail doors,” including 25 styles and 440 SKUs.

Despite increased sales, the company reported a net loss of $1.3 million for third quarter — versus a net profit of $700,000 a year ago — due to higher costs, softer wintersports hardware wholesale orders and a $1.5 charge for a recent recall of its Pieps Vector avalanche beacon. Through the first nine months of 2013, Black Diamond Inc. is down $6.6 million, and its reserves are dwindling. As of Sept. 30, the company reported $4.4 million in cash and $46 million in debt, with $15.6 million available on its credit line. Metcalf said Black Diamond “has no plans to access the capital markets” and will work toward making the company profitable.

“During the third quarter, with the help of a leading consulting firm, we conducted a global profitability study across all product categories and geographies,” Metcalf said. “We are developing a better sense for the cost of a single SKU and expect this work will drive better marginal profitability in the out years and enhance working capital.”

Metcalf added that the company retained an executive search firm to find a senior executive leadership candidate for its lifestyle brand management and general management, specifically in the areas of apparel, retail and e-commerce.

"As we look out into the future — into 2015 and beyond — we understand and believe that retail and e-commerce will likely drive additional investment,” Metcalf said. “We continue to believe that we can fund these initiatives from our existing balance sheet and from our existing operations.”

After sending the stock up nearly 80 percent year-to-date in 2013 on excitement about the apparel launch, investors pulled back their enthusiasm some, sending the stock down 7.7 percent in after-hours trading Nov. 4.

--David Clucas

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