Head warns of tough winter ahead despite strong Q1 results

Wintersports manufacturers are bound to feel the true negative effects of the weak 2011/12 season in 2012/13, Head NV officials tell investors. They project double-digit percentage drops in the category's sales.

Head NV (OTC:HEDYY.PK) reported higher sales and narrowed its loss for the first quarter 2012, but officials gave a blunt assessment of slowing sales ahead for next winter.

The Netherlands-based ski, racket and diving equipment company reported first-quarter revenue up 15.6 percent, on a constant euro basis, to EUR 70.1 million ($90.8 million). The company narrowed its quarterly net loss to EUR 2.2 million ($2.8 million), versus a net loss of EUR 7.7 million ($9.9 million) a year ago.

The improvement was led by a 21.3 percent increase in Head’s racket sports sales to EUR 42.2 million ($54.7 million), due to warmer spring temperatures across North America and a recovery from the Japanese tsunami a year ago, officials said.

Head’s first-quarter wintersports equipment sales also climbed — up 4.2 percent to EUR 13.6 million ($17.6 million) — but officials downplayed the significance of the results.

“This is not a key delivery period for the division and consists mainly of close-out sales and some deliveries of bindings under contract manufacturing agreements for the next season,” Head officials said.

“Due to the very mild winter and late snow in both Europe and North America in 2011/12, sell out at retail was considerably down and this is impacting our pre-season orders for next year. We expect the worldwide pre-season orders this year to fall by double-digit percentage points compared to 2011," officials said.

“It is mainly the ski/binding systems that are down in sales with ski boot sales developing less negatively,” they continued. “Also the snowboard market is negatively affected by the poor snow conditions and pre-season bookings are expected to be even further down than the orders for alpine equipment.”

The public company remarks are some of the first describing what many wintersports manufacturers and retailers likely already know: While many manufacturers may have escaped this bad winter season (primarily because their orders were made before the reality of the weak winter), they will see the delayed negative effects in 2012/13 as retailers (still stocked with inventory) cut back on orders.

--David Clucas


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