Fitness financials: Brokerages give Cybex thumbs-up, plus ClubCorp/KSL Capital Partners, September retail sales on the upswing, Costco

Fitness financials: Analysts optimistic about Cybex's foray into consumer realm. ClubCorp to buy KSL Capital Partners. September sales on the upswing, spurred by sporting goods growth. Costco reports Q4, FY '06 earnings.
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Analysts optimistic about Cybex's foray into consumer realm
Following on the heels of the Club Industry trade show in Chicago Oct. 5-7, at least three brokerage firms offered their outlooks on Cybex International. All seemed taken with Cybex's return to the consumer side of the business, starting with the consumer Arc Trainer. That piece was exhibited in a closed room during the show, and SNEWS® had discussed it a piece in September after the company showed a prototype at the Health & Fitness Business Show in Denver.

Ian Corydon, an analyst for B Riley, noted in his report that the consumer Arc Trainer will carry a price point of $3,495 -- up from its initially proposed $2,999 retail price -- and will offer better-than-average dollar margins to dealers. He said, "Several large specialty fitness dealers have committed to carry the product. Cybex will release a consumer Strength product in Q2 next year and a consumer Bike or Treadmill in Q4 next year. We expect Cybex's consumer product line to generate first year sales of at least $10 million."

B Riley added that it feels comfortable with its top and bottom line estimates for the remainder of the year. It's given the company a "buy" rating and $8 price target.

After meeting with Cybex, Ryan Beck & Co. analyst Mark Rupe wrote in a client note, "We continue to like Cybex shares given its strong product pipeline and solid growth prospects as Cybex moves into the consumer market, widely expanding its addressable market."

Rupe maintained his estimates for the company: 2006 and 2007 EPS estimates of $0.45 and $0.55, respectively. Ryan Beck's $8 per share price target is based on 14x its 2007 estimate, which it said "is in line with its peer group."

Dougherty & Co. is also optimistic about Cybex, saying in a research report: "Trading at 20.9x our FY 2007 EPS estimate of $0.34, we believe Cybex shares to be positioned for appreciation toward our $8.25 price target."

ClubCorp to buy KSL Capital Partners
ClubCorp has entered into purchase agreements with KSL Capital Partners for its portfolio of nearly 170 clubs and three resorts and with the Robert Dedman family for Pinehurst, the historic North Carolina resort. These two transactions, which are subject to closing conditions, have an aggregate transaction value of approximately $1.8 billion and are expected to close by the end of 2006.

KSL Capital Partners is a private equity firm with in excess of $1 billion in committed capital that invests in travel and leisure businesses. Its independent management company, KSL Resorts, currently manages three of the premier resort destinations in California, including the historic Hotel del Coronado in San Diego, renowned La Costa Resort and Spa in Carlsbad near San Diego, and Rancho Las Palmas Resort & Spa in Rancho Mirage, all in California.

KSL and ClubCorp said they have committed to a combined $150 million in capital investments over the next two years and to continuing to reinvest in current ClubCorp properties and expanding depending on market needs.

September sales on the upswing, spurred by sporting goods growth
With gas prices on the decline, retail industry sales for September (which exclude automobiles, gas stations and restaurants) rose a strong 6.3 percent unadjusted over last year and increased 0.7 percent seasonally adjusted from August, according to the National Retail Federation (NRF). The gains, which led third-quarter sales to rise 6.3 percent over 2005, were stronger than NRF said it had been expecting.

"As gas prices dipped last month, consumers had more disposable income to spend on other items, especially back-to-school necessities like clothing and sporting goods," said NRF Chief Economist Rosalind Wells in a statement. "If September's sales are any indication, shoppers appear confident heading into the holiday season."

September retail sales released by the U.S. Commerce Department show that total retail sales (which include non-general merchandise categories such as autos, gasoline stations and restaurants) dipped 0.4 percent seasonally adjusted from August and increased 5.1 percent unadjusted year-over-year.

Last month's sales gains were led by clothing and clothing accessories stores, which saw sales rise 3.0 percent adjusted from August and 11.9 percent over last year. Sporting goods, book, hobby, and music stores also saw strong growth of 1.1 percent from August and 9.1 percent over last year.

NRF expects retail industry sales to increase 6.5 percent this year over 2005. Holiday sales, which are defined as retail industry sales in the full months of November and December, are expected to rise 5.0 percent to $457.4 billion.

Costco reports Q4, FY '06 earnings
Fourth-quarter earnings for Costco Wholesale (Nasdaq: COST) edged up 1 percent, driven by a 19 percent revenue increase.

Net income grew to $355.6 million, or $0.75 per share, for the three months ended Sept. 3 from $354.7 million, or $0.73 per share, a year ago. Revenue including sales and membership fees increased $19.9 billion from $16.7 billion last year. Same-store sales, or sales at warehouses open at least a year, increased 8 percent.

Net income for fiscal 2006 increased to $1.10 billion, or $2.30 per share, from $1.06 billion, or $2.18 per share, a year ago. Revenue rose to $60.2 billion from $53 billion.

Costco currently operates 488 warehouses, including 359 in the United States and Puerto Rico, 68 in Canada, 18 in the United Kingdom, five in Korea, four in Taiwan, five in Japan and 29 in Mexico.

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