Fitness financials: Cybex says the wolf is gone, plus Reebok, Foot Locker, Hibbett, Puma, Sears

Fitness financials: CEO Aglialoro says the word is: "Cybex is back," Reebok reports flat Q1 earnings, Foot Locker ponies up $225 million for Footaction stores, Hibbett added to Standard & Poor index, Puma Q1 net profit up 65 percent, Accounting charge rocks Sears' Q1 earnings.

CEO Aglialoro says the word is: "Cybex is back"
Cybex CEO John Aglialoro told analysts in a quarterly earnings call April 26 that the "wolf at the door" he mentioned in the last few calls had been turned into a puppy. The Medway, Mass.-based, company (AMEX: CYB) for its first quarter ended March 27 reported net sales of $24.3 million for an increase of 18 percent compared to net sales for the first 2003 quarter of $20.6 million. Net income for the quarter was $375,000, or $0.03 per diluted share, which may not be huge but compares to a net loss for the first quarter a year ago of $1.78 million, or $0.20 per diluted share. Margins were up to 37.4 percent, compared to 32.5 percent a year ago. "Good is good, but better is higher than that," Aglialoro told analysts on the call April 26. He said the word at the IHRSA show last month was that "Cybex is back."

One hurdle for the company on its come-back trail remains interest expense, he said, since the interest rate the company is paying on its loans, refinanced in July 2003, is 15.5 percent, amounting to nearly $1 million per quarter in interest expense alone. "As we get to focus in," Aglialoro said, "we'll be able to get some dramatic decreases (in interest rate), which is significant since it'll enable us to plow all of that into debt and R&D and all that." He said the company will look to refinance this year.

In addition, the company in the first quarter this year had $385,000 in pre-tax income, compared to a loss a year ago of $1.84 million.

In SNEWS® chats with CEOs and top management at the IHRSA show a month ago, we also sat down over coffee (and a banana nut muffin) with CEO Aglialoro. After telling us we were too skinny, he tackled wide-ranging topics. "We needed to rediscover the nature of our existence," he said about Cybex's "down" period of the last couple of years. "The nature of our existence is to create innovative products. We were selling sugar, razzamatazz, the muscle bimbos, the 22-to-35 people. We got stuck in that market." Not that the company plans to ignore the younger group. But it needs to take a harder look at the other groups and that will help it financially. He said Cybex is on a three- to five-year plan and can't do it all right away, but is continuing to chip away.

"We've turned the corner," Aglialoro told SNEWS, "and our obvious goal is to continue on that track of higher returns and higher profits based on more innovation."

Cybex shares closed April 23 at 3.70, more than triple its lowest marks that had tickled around 1.00, but still off slightly from its 52-week high of 4.10 on April 14, 2004.

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Reebok reports flat Q1 earnings
On April 22, Reebok International Ltd. (NYSE:RBK) posted first-quarter earnings that were flat and below analysts' expectations due to lackluster sales of its athletic shoes and apparel. It earned $41.1 million, or 63 cents per share, for the quarter ending March 31, 2004, compared to $40.8 million -- also 63 cents a share -- a year ago. Analysts were expecting 67 cents per share. First quarter sales rose 4 percent to $831 million, from $798 million. U.S. footwear sales were up 2 percent, from $257 million to $261 million. Paul Fireman, Reebok's chairman and CEO, said U.S. footwear revenues were hurt by Footstar's bankruptcy filing, which was a major customer. Fireman said operating expenses increased by $30 million, compared to last year, as the company increased advertising and marketing as part of a long-term growth strategy. "Our first-quarter performance was consistent with our expectation that sales for the year would increase in the mid single-digit range and our earning growth would occur in the second half of the year," he said. Fireman said the company expects to meet its projected earnings growth of 15 percent for the year.

Foot Locker ponies up $225 million for Footaction stores
The bankruptcy court handling Footstar's Chapter 11 bankruptcy proceedings approved Foot Locker's (NYSE: FL) offer of $225 million to purchase approximately 350 Footaction athletic footwear and apparel stores from Footstar on April 21. Initially, Foot Locker signed an agreement to purchase the stores for $160 million in cash, but increased its offer to $225 million in response to competing bids from other suitors. The remaining terms of Foot Locker's agreement with Footstar remain substantially unchanged. Foot Locker Chairman/CEO Matthew Serra said the acquisition will be initially funded from cash and be accretive to Foot Locker's fully diluted earnings per share within the first full year of operation.

Standard & Poor's Ratings Services said that Foot Locker's announcement to redeem all of its $150 million outstanding 5.5 percent convertible subordinated notes due 2008 does not affect the ratings or outlook on the company (BB+/Stable/--). Foot Locker expects that most noteholders will convert their notes into shares of the company's common stock before the redemption date (June 4, 2004) given that the common stock has been trading at a price significantly greater than the conversion price. The equity issued from the notes conversion will largely offset the balance sheet impact from the Footstar acquisition. Standard & Poor's expects Foot Locker's overall financial profile to remain in line with the current rating. The 350-store acquisition will increase Foot Locker's already substantial holdings of 3,600 athletic retail stores in 16 countries in North America, Europe and Australia.

Hibbett added to Standard & Poor index
Full-line retailer Hibbett Sporting Goods (Nasdaq: HIBB) will replace Butler Manufacturing Co. (NYSE: BBR), a construction and engineering company, in the S&P SmallCap 600 Index after the close of trading on April 27. Hibbett will be added to the S&P SmallCap 600 GICS (Global Industry Classification Standard) Specialty Stores Sub-Industry Index. According to Standard & Poor, additions or deletions from its S&P equity index doesn't reflect an opinion on the investment merits of the companies concerned.

Puma Q1 net profit up 65 percent
Germany-based athleticwear maker Puma AG (PUM.XE) reported on April 26 a 65-percent jump in first-quarter net profit and raised its sales and profit outlook for the year. Net profit rose to Euro 80.4 million from Euro 48.8 million a year ago and sales increased 29 percent to Euro 443.8 million. The company's order backlog rose 20 percent as demand for its sportswear grew, the company said.

Puma said it now expects sales to grow between 15 percent and 20 percent this year, with pre-tax profit seen rising more than 30 percent. Plus, it estimates that its net profit will increase by at least 30 percent this year, as the company keeps costs in check, and expects its gross profit margin to surpass 50 percent this year, reaching a new high after last year's record 47 percent. Analysts said the profit figures were dramatically higher than expected, helped by the weak dollar. Puma pays for most of its products in dollars, while the majority of its sales are in Euros. Puma sales in the United States rose 16.7 percent to $74.3 million in the first quarter, with the order backlog up 23 percent in dollar terms, or 7 percent in Euro terms, according to the company. CEO Jochen Zeitz said Puma's success in the U.S. market was a result of not slashing prices and creating an image of exclusivity by limiting distribution.

Accounting charge rocks Sears' Q1 earnings
Sears, Roebuck and Co. (NYSE: S) reported a $859 million loss, or $3.90 a share, in the first quarter of 2004, compared with a profit of $192 million, or 60 cents a share, a year ago. Those figures include a one-time after-tax charge of $839 million, or $3.81 a share, for an accounting change related to its pension and post-retirement medical benefit plans. Without the charge, Sears' net loss would have been $20 million, or 9 cents a share, slightly better than the Wall Street consensus of a loss of 11 cents, according to analysts. Revenue fell 12 percent to $7.79 billion from $8.88 billion a year ago.

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