Fitness financials: Nautilus stock drops 6 percent on analyst downgrade, plus Everlast, Crocs, Town Sports Int'l, adidas/Reebok, Foot Locker, Finish Line, Amer, Costco, Wal-Mart

Nautilus stock dropped 6 percent on an analyst downgrade; Licensing revenue boosted Everlast's Q4; Crocs' Q4 and FY '05 results rose significantly from last year; Membership and ancillary club revenue have driven TSI's Q4; adidas reported a Q4 loss on the Reebok acquisition; Foot Locker's Q4 profit was up by 8 percent; Finish Line posted flat Q4 same-store sales; Amer Sports made available its 2005 annual report; Costco reported Q2 earnings and February sales; and Wal-Mart released February sales.
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Nautilus stock drops 6 percent on analyst downgrade
After being downgraded from "buy" to "neutral" by Merriman Curhan Ford on March 3, shares of Nautilus (NYSE: NLS) fell $0.96, or 6 percent, to $15.14 in midday trading on the New York Stock Exchange, closing the day at $15.12. The stock is now down 19 percent since the year began.

Eric Wold, an analyst at Merriman Curhan Ford, cautioned investors against buying the stock, saying the company's cash flow isn't likely to improve until the second quarter at best. "We are recommending investors move to the sidelines and wait for more visible signs of improvements before jumping into the stock," he said in a client note.

In February, Nautilus reported an 80 percent decline in fourth-quarter earnings, as manufacturing problems and product delays hurt its results. The company also forecast first-quarter earnings that were below the analyst expectations at the time.

Wold said he thinks Nautilus' manufacturing levels for some key products have improved from year-end levels and are on track with the company's expectations. But because of issues with inventory and retail partners, Wold said "any cash flow improvements may be delayed" into at least the second quarter, "keeping debt on the balance sheet longer than anticipated."

Nautilus shares have traded recently between a low of $13.51 (Jan. 18, 2006), with its 52-week high of $29.65 dating back to July 2005.

Licensing revenue boosts Everlast's Q4
Record increases in sporting goods sales and licensing revenues helped Everlast Worldwide's (Nasdaq: EVST) bottom line in the fourth quarter and 2005 fiscal year. The company said it plans to expand its licensing programs even more in 2006.

For the fourth quarter, net revenues jumped 34.8 percent to a record $14.1 million as compared to net revenues of $10.5 million in 2004. The company said the increase was from record sporting goods sales of $11 million, which achieved a 31 percent increase over the 2004 period, along with a 49 percent increase in record net licensing revenues.

It also had a 349 percent increase in fourth-quarter operating income from continuing operations to $1.7 million, while earnings increased to $2.2 million compared with the $300,000 loss reported last year. Net income for the quarter was $630,000, or $0.18 per basic common share and $0.16 per diluted common share, as compared to a net loss from continuing operations of $1.2 million, or $0.38 loss per basic and diluted common share, in the 2004 comparable period.

For the year, net revenues increased 29 percent to a record $43.3 million as compared to $33.5 million in 2004. The net revenue growth was achieved by a 32-percent increase in net licensing revenue to $12 million as compared to $9.1 million in 2004, along with an increase in sporting goods net revenues of $6.8 million to a record $31.3 million, a 28 percent increase over 2004. Its loss decreased slightly, to $948,000, or $0.24 per share, from a loss of $1 million, or $0.33 per share in 2004. Adjusted for discontinued operations, Everlast said it earned $1.8 million, or $0.47 per share in 2005.

"One of our objectives in 2006 is to expand our licensing business into untapped geographic locations, including India and China," Seth Horowitz, Everlast's chairman, president and CEO, said in a statement. "We also plan to grow our existing licensing programs across Europe with licensees in manufacturing, marketing and distributing in our core competency categories of apparel, sporting goods, boxing equipment and footwear."

For 2006, Everlast said it expects earnings per share to grow by double-digits over 2005's continuing operations results.

In trading on Feb. 28, Everlast shares closed $16.42 -- up $2.60. Its high in the past 52 weeks was $17.40 on Feb. 8, 2006 with a low of $3.39 on Oct. 25, 2005.

Crocs' Q4 and FY '05 results take significant leap from last year
After going public earlier this year, Crocs (Nasdaq: CROX) reported double-digit increases across the board for its fourth-quarter and full-year earnings results.

For the fourth quarter, revenues were $33.6 million compared to $5.4 million in 2004. Net income $4.1 million, or $0.12 per fully diluted share, compared to a net loss of $1.0 million, or $0.04 per share, for the three months in 2004. The net income includes a non-cash stock-based compensation expense of $1.3 million for the 2005 quarter and $357,000 for the 2004 quarter. Gross profit was $17.8 million, compared to last year's $2.4 million, and selling, general and administrative expense was $10.9 million this quarter versus $3.5 million in 2004.

For the 2005 fiscal year, revenues were $108.6 million, compared to revenues of $13.5 million in 2004. Net income for 2005 was $16.7 million, or $0.51 per fully diluted share, compared to a net loss of $1.6 million, or $0.07 per share, for 2004. For the year, its net income also included a non-cash stock-based compensation expense of $4.7 million compared to $1.8 million for 2004. Gross profit for 2005 was $60.8 million, compared to $6.4 million for 2004, and selling, general and administrative expense was $33.9 million for 2005, compared to $7.9 million for 2004.

Crocs completed an initial public offering of 11,385,000 shares of common stock at $21 per share on Feb. 13. The company sold 4,950,000 shares and netted $96.9 million. The remaining 6,435,000 shares were sold by other shareholders who made $126.0 million. Crocs said it is using the proceeds to repay bank loans and for working capital and general corporate purposes. Since the results were reported within the 25-day period following the company's IPO, it did not host an earnings conference call.

Its shares closed at $26.60 on March 2 after trading between $26.50 and $27.42 on the Nasdaq.

Membership and ancillary club revenue drive TSI 's Q4

Town Sports International Holdings (TSI) reported double-digit percentage growth for its fourth quarter and 2005 year, driven by growth in membership revenue and ancillary club revenue. It operates the New York Sports Clubs, Boston Sports Clubs, Washington Sports Clubs and Philadelphia Sports Clubs brands.

Total revenue for the fourth quarter grew 11 percent to $98.5 million from $88.7 million for the same period last year. Membership revenue for the quarter grew 10.3 percent to $82.5 million from $74.8 million. Ancillary club revenue grew 18.2 percent to $14.5 million from $12.3 million. Total operating expenses were $87.6 million compared to $80.3 million.

For the full year, total revenue grew 10.1 percent to $388.6 million from $353.0 million in 2004. Membership revenue for the year grew 9.0 percent to $321.7 million from $295.2 million for the prior year. Ancillary club revenue totaled $62.4 million, up 17.7 percent from $53.0 million. Operating expenses totaled $348.3 million 2005 compared with $318.7 million for the prior year.

Same-club revenue increased 8.5 percent during the fourth quarter compared to the prior-year period and 6.9 percent for 2005 compared to 2004.

adidas reports Q4 loss on Reebok acquisition

With Reebok firmly under its wing, adidas (ADSG.DE) now has to get the U.S. company on more stable ground financially as can be seen from its recently reported fourth-quarter loss.

The German company lost Euro 4 million (USD $4.78 million), or 2 euro cents a share, in the fourth quarter. That compares with a fourth-quarter profit of Euro 20 million, or 45 euro cents a share, a year earlier. It said part of the loss was from costs related to its takeover of Reebok and expenses ahead of this summer's soccer World Cup

adidas said marketing expenses rose, but revenue also was up 27 percent to Euro 1.5 billion (USD $1.8 billion), as demand for sneakers and World Cup-themed products like jerseys increased overall orders.

The company also said Reebok reported a $47.4 million net profit in the fourth quarter on revenue of $930 million.

For the year, adidas' net profit rose 30 percent to Euro 434 million (USD $518 million), or 7.73 euros (USD $9.23) a share. That compared with Euro 333 million, or 6.54 euros a share, in 2005. Revenue rose more than 12 percent to Euro 6.6 billion (USD $7.9 billion) from Euro 5.86 billion. The 2005 figures were revised to reflect adidas' May sale of its Salomon unit to Amer Sports for Euro 485 million.

Despite the fourth-quarter decrease, CEO Herbert Hainer said the company was poised to raise its earnings by more than 10 percent this year, with revenue increasing in the "high single-digit" percentage range. Both of those figures excluded Reebok. Despite the hit to its earnings, Hainer added that Reebok's sales are expected to reach approximately Euro 2.8 billion (USD $3.3 billion) in 2006.

Looking ahead to the end of 2006, Hainer said sales should rise in the single digits, with double-digit growth forecast for Asia and North America, and growth in Latin America.

Shares of the company fell 6.1 percent to close at 155 euros (USD $184.99) in Frankfurt trading on March 2.

(Conversion of Euros into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of March 2.)

Foot Locker Q4 profit up by 8 percent
Foot Locker (NYSE: FL) said fewer taxes and insurance proceeds related to hurricanes helped boost fourth-quarter profit higher by 8 percent. Profit rose to $96 million, or $0.61 per share, compared with $89 million, or $0.57 per share, in the year-ago period. The company received $3 million from insurance proceeds, and $6 million from a reduction in its income tax valuation allowance. Sales increased 2 percent to $1.56 billion this year compared with $1.54 billion. For the full year, its profit was $264 million, or $1.68 per share, on sales of $5.65 billion.

Finish Line posts flat Q4 same-store sales
Despite a 10 percent rise in overall revenue, Finish Line's (Nasdaq: FINL) fourth-quarter same-store sales were flat.

Net sales for the quarter were $399 million versus $361.4 million in 2004. Comparable store net sales for the quarter were flat compared to the 8 percent increase reported for the comparable 13-week period last year.

For the full year, net sales were $1.306 billion, an increase of 12 percent over net sales of $1.167 billion in 2004. Same-store sales for the year increased 1 percent on top of a 9 percent increase reported last year.

Amer Sports offers published 2005 annual report
Amer Sports' 2005 annual report is now available in English and Finnish. A printed version of the report can be ordered by e-mail from amer.communications@amersports.com. It can also be downloaded as a PDF file from the company's website, www.amersports.com.

Costco reports Q2 earnings and February sales; Wal-Mart releases February sales
Costco (Nasdaq: COST) said second-quarter profit slipped 3 percent against year-ago results that were flattened by a large tax gain -- $296.2 million from $305.5 million a year earlier. Earnings per share were flat at 62 cents. Stripping out one-time items, earnings for the year-ago quarter were $263.4 million, or 54 cents a share. Total sales rose 11 percent to $13.78 billion while sales at stores open at least one year was up 7 percent.

Costco also reported a 7 percent same-store gain for its February sales, above the 6.5 percent forecast. Wal-Mart (NYSE: WMT) reported a 3.2 percent increase in same-store sales for the month.

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