K2's Q3 results foreshadow 'good winter season'
K2 Inc. (NYSE: KTO) said its third-quarter net income rose 29 percent, helped by record sales of winter gear including skis, snowboards and performance apparel. Included among its numerous brands are Volkl, Marker, Marmot, Ex Officio, Marmot, Atlas and Tubbs.
Net income rose to $21.5 million, or $0.40 per share, from $16.7 million, or $0.32 per share. Excluding options costs and amortization, adjusted profit rose to $23 million, or $0.43 per share, from $18.1 million, or $0.34 per share.
Sales rose 4.9 percent to $356.9 million from $340.4 million, as gross margins improved to 38.6 percent from 36.8 percent a year ago.
"The strong results in the third quarter reflected a record winter business for K2 Inc., driven by K2 and Volkl ski and snowboard products, and Marmot winter and performance apparel. For Marmot, we were extremely pleased with significant sales and operating income growth for the quarter," Richard Heckmann, K2's chairman and CEO, said. "The early outlook among retailers is for a good winter season, which is reflected in our results this quarter."
Net sales of its action sports segment, which includes winter products, totaled $149.5 million in the third quarter of 2006, an increase of 2.4 percent from the 2005 third quarter, primarily due to increased sales of K2 skis and K2 and Ride snowboards offset by decreased sales of Volkl skis due to the timing differences in shipments between the third and fourth quarters. Operating profit for the third quarter of 2006 was $33.1 million, a 26.6 percent increase compared to the operating profit in the third quarter 2005.
In its apparel and footwear segment, which includes Marmot and Ex Officio, net sales were $62.1 million in the third quarter of 2006, an increase of 18.8 percent from the 2005 period. Sales were driven by growth in Marmot winter outerwear products, which were offset by declines in skateboard shoes and apparel. The operating profit for the third quarter of 2006 was $5.8 million compared to an operating profit of $6.4 million in the third quarter of 2005. The decrease in profit was due to lower gross profit as a percentage of sales and higher selling, general and administrative expenses as a percentage of sales.
The marine and outdoor segment generated net sales of $80.8 million in the third quarter, an increase of 2.1 percent from the comparable quarter in 2005, while the team sports division's net sales were up 2.4 percent to $64.5 million
Looking ahead, K2 said it expects sales of $1.36 billion to $1.38 billion for the year. Net income for the same period is seen in a range of $0.73 to $0.76 per share, while adjusted profit is seen in a range of $0.83 to $0.86 per share.
Altor Equity Partners Acquires Helly Hansen Holding
Swedish private equity firm Altor Equity Partners AB has agreed to acquire Moss, Norway-based outdoor-wear supplier Helly Hansen Holding in a secondary buyout from Investcorp Bank BSC and Orkla ASA for an undisclosed price.
The deal, announced in Sweden on Monday, Oct. 23, returns the 129-year-old company to its Nordic roots after three years of 70 percent ownership by Investcorp, a Manama, Bahrain-based buyout shop.
Helly Hansen, a popular brand among skiers and marine sportspeople, supplies technical apparel and footwear for outdoor sports through its Sport & Leisure division. It also sells working clothes through its Workwear division. A dedicated Special Products unit, which accounts for about 20 percent of sales, manufactures survival suits for the oil and gas industry and helicopter rescue teams.
The company generates annual sales of approximately $210 million worldwide and employs about 600 people in Europe, North America and Asia.
Altor partner Hugo Maurstad declined to reveal any financial details of the transaction, citing an agreement with the sellers. He said Helly Hansen had undergone a significant repositioning during the past few years and that Altor would continue to support it in streamlining its supply chain, strengthening its retail business and expand the Special Products division.
"We will look at add-on acquisitions," he said, indicating that such acquisitions could be a way to invest more equity in the company. He suggested that Altor might hang on to Helly Hansen for four to six years.
Investcorp and its co-investor, a Norwegian conglomerate, gave no indication of the returns on their investment in Helly Hansen. KPMG Corporate Finance and Silver Steep Partners LLC (Nate Pund and Sally McCoy) advised on the sale for Helly Hansen. Altor turned for financial advice to SEB Enskilda ASA and Cardo Partners AS. It tapped Norwegian law firm Thommessen Krefting Greve Lund AS for counsel.
Timberland forecasts 30 percent drop in full-year earnings
Timberland's (NYSE: TBL) third-quarter profit fell due to sluggish sales of boots and children's shoes. It also forecast a 30 percent drop in full-year earnings due to ongoing weak sales and antidumping duties.
Net income dropped to $51.9 million, or $0.82 per share, from $69.2 million, or $1.02 per share, a year ago. Revenue declined to $503 million from $505.9 million in the year-earlier period.
The company said that third-quarter revenues were down slightly as gains in new brands, including SmartWool, Timberland apparel, casual footwear and Timberland PRO series were offset by anticipated declines in boots and kids' sales.
International revenue increased 6.9 percent, or 3.6 percent on a constant dollar basis, supported by growth in southern Europe, distributor markets, Canada and Japan. U.S. revenues decreased 7.2 percent, due primarily to lower boots and kids' sales, which offset benefits from the addition of the SmartWool brand to the company's product portfolio and strong growth in key expansion categories such as Timberland PRO series footwear and Timberland apparel.
Third-quarter results reflected global gains in apparel and accessories revenue, which partially offset anticipated declines in footwear revenue, the company said. Apparel and accessories revenue increased 27.5 percent to $129.4 million supported by the addition of the SmartWool brand and growth in Timberland apparel sales globally. Global footwear revenues fell 7.8 percent to $368.0 million as gains in casual footwear and Timberland PRO series partially offset declines in boots and kids' sales.
Timberland said its forecast for full-year earnings per share will decline 30 percent from 2005 earnings of $2.35 per share, which excludes restructuring and other costs. Earlier this year, the company predicted a 25 percent drop in profit.
The company also forecast that flat U.S. sales growth will offset a double-digit increase in global sales. It also predicts continued pressure on operating profit through the first half of 2007 due to continued weakness in boots and kids' sales, rising wage pressures, and antidumping duties on European Union footwear sourced in China and Vietnam.
Columbia's Q3 profit falls 9.3 percent
Despite a 10.8 percent increase in third-quarter sales for Columbia Sportswear (Nasdaq: COLM), earnings were down 9.3 percent for the apparel and footwear company.
The company reported sales of $454.1 million, with earnings of $60.3 million, or $1.67 per share, compared with 2005 third-quarter sales of $409.7 million, with earnings of $66.4 million, or $1.74 per share.
The company attributed the change of earnings for the quarter to the fact that in the third quarter of last year Columbia Sportswear recorded a tax benefit of $5.6 million, or $0.14 per share, resulting from the favorable conclusion of various income tax audits.
Compared to the third quarter of 2005, U.S. sales increased 12.8 percent to $276.3 million, other international sales increased 15.1 percent to $57.8 million, European sales increased 6.9 percent to $66.4 million, and Canadian sales increased 1.9 percent to $53.6 million for the third quarter of 2006.
Among its product segments, sportswear sales increased 16.6 percent to $146.6 million, outerwear sales increased 8.1 percent to $217.8 million, footwear sales increased 8.8 percent to $69.4 million, equipment sales increased 150.0 percent to $4.5 million, and accessories sales decreased 7.6 percent to $15.8 million compared to the third quarter of 2005.
"Third-quarter gross margins were higher than anticipated due to better than expected gross margins on Columbia-branded sportswear, Pacific Trail, and Mountain Hardwear apparel," CEO Tim Boyle said in a statement. "Growth in global sales was driven by strong demand for our sportswear and outerwear products domestically and, to a lesser degree, sportswear in Europe and outerwear in our international distributor markets."
The company reported that as of Sept. 30, 2006, spring backlog increased 15.4 percent to $414.5 million, compared to spring backlog of $359.3 million on Sept. 30, 2005. Consolidated product backlog, which includes global fall orders at Sept. 30, 2006, was $693.9 million, an increase of 17.8 percent compared to consolidated product backlog of $588.8 million on the same day in 2005.
"Spring order growth was strong, driven by exceptional sportswear growth globally. Spring outerwear orders were also strong," Boyle said in a statement. "Footwear orders, including our new Montrail brand, increased less than the corporate average; however, excluding Montrail orders, global spring footwear backlog decreased slightly."
The company said it expects fourth quarter 2006 revenue growth of approximately 14 percent and earnings decline of 4 percent to 7 percent, including approximately $1.1 million in after-tax stock-based compensation expense, compared with the same period of 2005. For the full year 2006, the company expects sales growth of approximately 11 percent and earnings per share of $3.26 to $3.29.
Separately, the company said it will start paying a quarterly dividend of $0.14 per share, with the first installment payable Nov. 30 to shareholders of record at Nov. 16.
SNEWS® View: Footwear is an area that analysts, industry experts and pundits, including SNEWS®, are watching closely. The departure of Brad Gephard rose more than a few eyebrows to be sure, but those eyebrows practically leapt off the faces of those watching Columbia when the company systematically canned its Montrail reps and turned over the Montrail accounts to existing Sorel reps. Now, no one is saying Sorel reps aren't good at what they do. The real question is how on earth Columbia management imagines that a Sorel rep has sufficient knowledge, connections and expertise to effectively sell and represent a rather technical outdoor and trail running Montrail footwear line to specialty outdoor retailers? Maybe the company was trying to trim pennies from the budget in the face of analyst scrutiny, but we've already heard from more than a few significant Montrail accounts that they are NOT happy with the state of things currently and the loss of good reps. It will be interesting to see how the Montrail transition continues to shake out. So far, it's been anything but smooth.
Deckers' Q3 beats analyst expectations
Third-quarter earnings for Deckers Outdoor (Nasdaq: DECK) jumped 19 percent, aided by a strong showing by its Ugg brand.
Net income climbed to $10.6 million, or $0.83 per share, from $8.2 million, or $0.63 per share, in the year-ago period. Earnings came in ahead of the company's previous guidance of $0.51 to $0.54 per share, and above analysts' estimate of $0.54 per share.
Sales rose 19 percent to $82.3 million from $69.2 million last year, also exceeding analyst expectations for $73.8 million in revenue.
Angel Martinez, Deckers president and CEO, attributes the company's strong quarterly sales to Ugg's 18.4 percent increase in sales, adding, "Ugg sales once again outpaced our expectations." Ugg net sales for the quarter were $67.9 million versus $57.3 million for the same period a year ago.
Teva net sales for the third quarter increased to $10.0 million compared to $9.7 million for the same period last year. Simple net sales increased 108.8 percent to $4.4 million for the third quarter compared to $2.1 million for the same period last year.
Deckers said Simple's core sandal and sneaker product lines were the largest contributors to its sales boost. Additionally, the Green Toe collection experienced strong retail sell-through across all channels of distribution and in all geographic regions, it added.
Deckers raised its 2006 profit forecast to a range of $2.75 to $2.78 per share, from a previous projection of $2.39 to $2.45 per share. The company also lifted its sales forecast to a range of $287 million to $290 million, from a prior forecast of $272 million to $278 million.
Amer Sports sales take a hit on late Salomon deliveries
Amer Sports' third-quarter total net sales were down 2 percent as a result of Salomon's deliveries of winter sports equipment being late and rolling over to the last quarter.
Third-quarter net sales were Euro 471.9 million (USD $601.4 million) from 2005's Euro 483.6 million. Gross profit was also down -- by 6 percent -- to Euro 192 million (USD $244.7 million) from Euro 204.2 million last year. Earnings per share were Euro 0.52 compared (USD $0.66) to Euro 0.53 last year. EBIT for the quarter was down 9 percent: Euro 57.9 million (USD $73.7 million) compared to Euro 63.5 million last year.
Third-quarter net sales for the Salomon division, which includes Mavic and Arc'Teryx, were down 5 percent: Euro 179.6 million (USD $228.9 million) compared to Euro 189.4 million the previous year. Net sales for the winter sports equipment were down 17 percent, Euro 92.6 million (USD $118 million) versus Euro 111.3 million last year, while apparel and footwear were up 13 percent, Euro 62.5 million (USD $79.6 million) versus Euro 55.3 million last year. The company noted that the fastest growth in apparel and footwear was seen in sales of Arc'Teryx's winter apparel.
Amer said that part of Salomon's winter sports equipment deliveries slated for September were delayed, impacting net sales for the quarter. "This delay was caused by Salomon's logistics partner not being able to deliver all the winter sports equipment to market on schedule, creating a three-week backlog at the end of September. This situation is expected to return to normal in the final quarter, but it may affect the amount of re-orders received during the period," Amer said in a statement.
Atomic's net sales for the quarter were down slightly, about 1 percent: Euro 93.3 million (USD $118.9 million) versus Euro 93.8 million in 2005. Suunto's third-quarter net sales were up 12 percent to Euro 18.3 million (USD $23.3 million) from 2005's Euro 16.4 million. Amer said sales of wrist-top computers grew by 20 percent.
Amer's outlook for 2006 remains the same, estimating that full-year sales will be approximately Euro 1.8 billion (USD $2.29 billion) and earnings per share Euro 0.90 to 1.05 (USD $1.14 to $1.33).
(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 Oct. 25.)
Third-quarter profit for Prana parent falls
Third-quarter profit fell 16 percent for Prana parent Liz Claiborne (NYSE: LIZ), weighed by lower wholesale apparel sales and higher selling, general and administrative expenses. It also reduced its full-year financial forecast.
The company reported net income of $95.2 million, or $0.93 per share, versus a prior-year profit of $113.5 million, or $1.06 per share. Excluding restructuring expenses and other items, adjusted earnings totaled $0.96 cents per share. Revenue rose to $1.37 billion from last year's $1.34 billion.
Liz Claiborne forecast earnings per share between $0.75 to $0.80 per share for the fourth quarter, and from $2.50 to $2.55 per share in fiscal 2006. It said sales are expected to increase in the high single digit range in the current quarter, and in the low single digit range for the year.
West Marine Q3 profit falls on store closing costs
West Marine (Nasdaq: WMAR) reported that its third-quarter profit fell on store closing costs, while sales climbed 4 percent.
It had net income of $376,000, or $0.02 per share, versus a prior-year profit of $2.02 million, or $0.09 per share. Revenue rose to $195.6 million from $188.6 million in the year earlier period. Sales in stores open at least one year rose 2.4 percent.
The quarter's results included a pretax charge of $1.5 million for store closing costs, which reduced profit by $0.04 per share.
The company said earlier this year it would close an undetermined number of underperforming stores.
GSI Commerce reports third-quarter results
For the third quarter, GSI Commerce (Nasdaq: GSIC) reported net revenues of $118.5 million and a net loss of $6.2 million, or $0.14 per share. That compares to net revenues of $84.9 million and a net loss of $4.5 million, or $0.10 per share, in 2005.
Included in the 2006 net loss is a non-cash charge of approximately $700,000, as well as incurred cash and non-cash charges totaling $700,000 related to the retirement of its former president and chief operating officer. These two items, which were not included in the company's financial guidance, impacted net loss for the quarter by $1.4 million or $0.03 per share.
The company announced the retirement of its president and chief operating officer, Robert Blyskal, effective October 2006. Michael Rubin, the company's chairman and CEO has assumed the role of president. The company does not plan to fill the position of chief operating officer at this time.
Wellman posts larger net loss
Wellman (NYSE: WLM) reported a wider third-quarter loss, citing disappointing results after raising prices and a charge related to closing an operation. The company posted a net loss of $39.2 million, or $1.23 per share, for the quarter, compared with a net loss of $8.9 million, or $0.28 per share, for the same period in 2005.
"We experienced a disappointing quarter because of reduced volumes which resulted from our efforts to implement selling price increases," Tom Duff, Wellman's chairman and CEO, said in a statement. "In our fibers business, our chemical-based raw material costs increased by substantially more than we were able to increase our selling prices. Our net earnings were also adversely impacted by a charge, which was principally non-cash, related to the closure of our Johnsonville fiber operations."
Crocs acquires EXO Italia
Crocs (Nasdaq: CROX) has acquired EXO Italia. Headquartered in Padova, Italy, EXO Italia designs and develops EVA (Ethylene Vinyl Acetate) based finished products, primarily for the footwear industry. Since 1993, EXO Italia has worked with several leading branded consumer companies to produce EVA-based footwear for the global marketplace. Ron Snyder, president and CEO of Crocs, said, "EXO's expertise in design, product, tool, and process development will be a tremendous asset to us as we look to further diversify our footwear offerings and attract new consumers to the Crocs brand."
VF to close facility, lay off nearly 400 workers
VF Corp. (NYSE: VFC) said it will close a Winston-Salem facility and lay off 391 workers by March. The work done at the facility, which does laundering and finishing for VF jeanswear, will be moved to places outside the United States that are closer to where the jeanswear products are made.
A VF representative said in the announcement that the affected workers would get packages that would include severance pay, educational assistance for retraining, help finding new jobs and other benefits.
VF is the parent company of The North Face, JanSport, Vans and Eastpak, to name a few.
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