Outdoor financials: Royal Robbins Q4 sales up 24.5 percent, plus EU to tax shoe imports from Asia, Forzani, Crocs, Cabela's

Royal Robbins Q4 sales rose 24.5 percent, The EU announced it will tax shoe imports from Asia, Canadian retailer Forzani Group reported its Q4 and FY results, New IPOer Crocs received mixed opinions from brokerages, and Cabela's named a CEO for its credit card bank subsidiary.
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Royal Robbins Q4 sales up 24.5 percent
Fourth-quarter net sales for Phoenix Footwear Group (Amex: PXG) grew 60.2 percent, driven by Royal Robbins' 24.5 percent sales growth and the recently acquired Chambers and Tommy Bahama brands. Among its other brands are Trotters, SoftWalk, Strol, H.S. Trask and Altama.

Fourth quarter 2005 net sales for Royal Robbins were $3.7 million, up from $3.0 million a year ago. For the year, sales were $24.9 million, a 17.4 percent increase compared to 2004. Phoenix Footwear said that domestic sales for the apparel brand continue to be strong, driving the increased sales in the fourth quarter.

Additionally, during 2005, Phoenix Footwear finalized an agreement with its Canadian distributor, and as of January 2006, Royal Robbins began selling directly in Canada. Initial performance has been very positive and in line with the company's expectations, the company said. Over time, the company expects to see higher sales and better margins in this region. Phoenix Footwear added that the brand's futures bookings continue to be very strong, and initial fall bookings suggest Royal Robbins should experience continued growth through the fall of 2006.

For the entire company, fourth-quarter net sales were $33.2 million compared to $20.7 million for the fourth quarter of 2004. The company's organic growth, which excludes brands acquired in the last 12 months, was a negative 3.9 percent for the quarter. Net income was $71,000, or $0.01 per diluted share, compared to a net loss of $624,000, or $0.08 per diluted share.

Gross margin in the fourth quarter expanded 200 basis points to 37.4 percent, compared to 35.4 percent in the fourth quarter of 2004. The improvement in gross margin was primarily due to lower closeouts and mark downs. Operating costs increased 35.8 percent to $10.8 million, compared to $7.9 million in the fourth quarter of 2004. Operating income for the fourth quarter totaled $1.6 million, or 4.9 percent of sales, compared to an operating loss of $603,000 in the fourth quarter of 2004.

For the full year, net sales increased 42.9 percent to a record $109.2 million compared to $76.4 million for the comparable prior-year period. The growth was primarily attributable to a robust year-over-year increase from Royal Robbins and H.S. Trask and strong contribution from Chambers and Tommy Bahama in the second half of 2005. Also, during 2005organic growth in its "legacy" brands -- which includes Trotters, SoftWalk, Royal Robbins and H.S. Trask -- declined 2.4 percent as the strength at Royal Robbins and H.S. Trask was offset by sales declines in the other legacy brands.

Net income for the 2005 year was $1.2 million, or $0.15 per diluted share, compared to net income of $3.0 million, or $0.48 per diluted share, for the comparable period a year ago.

Yearly gross margin was 37.9 percent versus 41.3 percent for the comparable prior-year period due to recent acquisitions which generate lower gross margins than the company's other branded products and a higher level of footwear close-out and mark down sales as compared to 2004. Operating costs totaled $35.7 million, or 32.7 percent of net sales, versus $25.7 million, or 33.7 percent of net sales for the comparable prior year period. Operating income was $5.7 million, or 5.2 percent of net sales, down slightly from $5.9 million, or 7.7 percent of net sales, for the same period a year ago.

EU to tax shoe imports from Asia

On March 23, the European Union confirmed it would impose antidumping duties on Chinese and Vietnamese leather shoes next month, a step that could hit the bottom line of some U.S.-based shoemakers like Timberland and Wolverine World Wide.

The European Commission said the trade penalties are necessary to act against a flood of cheap imports from the two countries that it says break world trade rules. The commission said it had identified "clear evidence of disguised subsidies and unfair state intervention to the leather-footwear sector in China and Vietnam."

The antidumping measures will be phased in starting April 7 at 4 percent and will rise to 19.4 percent for Chinese shoes and 16.8 percent for Vietnamese footwear during a six-month period. Half of the 2.5 billion pairs of shoes sold in the EU last year came from China.

The EU said it will continue its investigation, slated to close in the autumn, which will decide if the duties should remain in place for as long as five years.

While Timberland said it is advancing strategies in response to this action -- including potential price increases on footwear products sold in Europe -- its preliminary estimate is that the duties will likely reduce its 2006 operating profits up to $10 million.

"We do not believe that our footwear is being imported into Europe at below market costs, and we believe that the imposition of percentage duties disproportionately impacts premium branded footwear companies, like Timberland, which have not caused injury to Europe-based footwear manufacturers," said CEO Jeffrey Swartz in a statement.

As a result of the duties being imposed, Wolverine said 2006 earnings would fall at the low end of a $1.34 to $1.40 per share range, but full-year revenue is still expected to range between $1.11 billion and $1.13 billion. The trade rule changes will reduce earnings between $0.04 and $0.05 per share, it added. Wolverine is the maker of Merrell and Sebago brand shoes, and the licensee of Patagonia Footwear.

Canadian retailer Forzani Group reports Q4 and FY results
Despite a 31 percent jump in fourth-quarter earnings, the Forzani Group (FGL.TO) said its full-year earnings were down due to weak results in its first two quarters.

Retail system sales for the fourth quarter were CDN $438.0 million (USD $375.3 million), compared to CDN $366.6 million (USD $314.1 million) last year. Excluding the impact of two new banners -- National Sports and Nevada Bob's Golf -- retail system sales for the fourth quarter were CDN $407.1 million (USD $349 million), an 11.0 percent increase over sales in the same period last year.

Total revenues, consisting of corporate store sales, wholesale sales, service income, equipment rentals, franchise fees and franchise royalties, were CDN $342.2 million (USD $293.2 million), an increase of 24.8 percent from the prior year. Exclusive of the impact of National Sports and Nevada Bob's Golf acquisitions, revenues increased to CDN $316.1 million (USD $271 million), or 15.2 percent over last year's fourth quarter.

Fourth-quarter corporate store revenues, at CDN $287.8 million (USD $247 million), were 25.4 percent above last year's revenues of CDN $229.5 million (USD $197 million) -- partially impacted by a stronger-than-expected same-store sales increase of 10.1 percent. Net earnings for the quarter were CDN $17.0 million (USD $14.5 million), or CDN $0.51 (USD $0.44) diluted earnings per share, versus CDN $12.7 million (USD $11 million), or CDN $0.39 (USD $0.33) diluted earnings per share.

Wholesale sales for the quarter were CDN $54.4 million (USD $47 million), up 21.4 percent from the prior year. Franchise comparable store sales were up 5.3 percent for the quarter on the strength of footwear, athletic and winter clothing.

For the full year, retail system sales were CDN $1.3 billion (USD $1.1 billion), up $202.2 million from last year. The company said the increase was a combination of same-store sales increases of 3.8 percent and 6.5 percent in corporate and franchise stores, respectively, and the sales resulting from the acquisition of National Sports in the first quarter of fiscal 2006 and the full-year impact of the addition of Nevada Bob's Golf. Without the two acquisitions, retail system sales for fiscal 2006 were CDN $1.2 billion (USD $1.02 billion), a 7.4 percent increase over sales in the same period last year.

Revenue was CDN $1.1 billion (USD $942.5 million), a 14.6 percent increase over last year. Exclusive of the impact of National Sports and Nevada Bob's Golf, revenue increased to CDN $1.04 billion (USD $891.1 million), or 5.6 percent over the prior year. Net earnings were CDN $13.8 million (USD $11.8 million), or CDN $0.42 (USD $0.36) diluted earnings per share, compared to CDN $21.5 million (USD $18.4 million), or CDN $0.66 (USD $0.57) diluted earnings per share, in the prior year.

Considered Canada's largest sporting goods retailer, it operates under the National Sports, Coast Mountain Sports and Sport Chek banners.

(Conversion of Candian dollars into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of March 24.)

New IPOer Crocs gets mixed opinions from brokerages
Following a successful IPO, Crocs (Nasdaq: CROX) saw its shares fall as much as 6 percent, as cautious opinions from two brokerages about the footwear maker's brief history and limited products outweighed bullish comments from other brokerages.

The company's stock hit an intraday low of $22.81 in morning trading, but closed down 5.5 percent at $23. The company went public on Feb. 8 at an initial public offering price of $21 per share and rose 36 percent in its first day of trading.

"While we view Crocs as well-positioned to realize near term market share gains, we believe the company's current reliance on two footwear styles and limited operating history both reduce visibility into long-term earnings growth potential and create a higher risk profile," SG Cowen & Co. analyst Elizabeth Montgomery wrote in a client note.

"The company's limited operating history makes forecasting potential seasonality and earnings variations more challenging," she added and started coverage with a "Neutral" rating.

Separately, BB&T Capital Markets analyst David E. Turner initiated coverage of Crocs's stock with a "Hold" rating, saying its price was "fairly valued," even as he projected strong sales and earnings growth over the next several years.

Turner said that Crocs' stock is trading at 27 times estimated 2007 earnings and a 50 percent premium to its peer group average. "While we believe a premium is clearly warranted, it's difficult to argue for a valuation significantly higher than current levels," he added.

Brokerages PiperJaffray and Thomas Weisel Partners separately issued notes starting coverage of Crocs with an "Outperform" rating. Both were joint book runners of Crocs' IPO in February.

Cabela's names CEO of bank subsidiary
Effective June 1, Cabela's (NYSE: CAB) has named Joseph Friebe as CEO of its wholly owned credit card bank subsidiary World's Foremost Bank, replacing David Roehr who retired in January. Friebe has been Cabela's vice president of direct marketing since 2003.

Ralph Castner has been acting as the bank's interim CEO. Castner will continue in his role as Cabela's vice president and chief financial officer and has also been elected chairman of World's Foremost Bank. Castner replaces interim bank chairman Orrin Wilson, who will continue as a board member.

Tom Boatman, World's Foremost Bank's chief operating officer and secretary, will also take the title of president. He had been serving as interim president since January.

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