VF anticipates 10 percent increase in '08 per-share earnings, expects 9 percent revenue rise
VF Corp. (NYSE: VFC) said it expects 10 percent earnings per share growth in 2008, despite investor worries about consumer-dependent sectors.
The company, whose outdoor brands include The North Face, JanSport and Eastpak, said revenue should climb 9 percent for the year. Both 2008 estimates exclude the impact of any new acquisitions.
Last month the company maintained its fourth-quarter forecast, saying its strong business model would offset some broader market challenges. VF will report its fourth-quarter and 2007 financial results on Feb. 5.
The company now anticipates five-year earnings per share growth in a range of 10 percent to 11 percent.
It also raised its five-year revenue growth estimate from a range of 6 percent to 8 percent to a range of 8 percent to 10 percent, with a goal of reaching $11 billion in revenue by 2012.
VF said it expects 6 percent to 7 percent growth from operations with 2 percent to 3 percent growth coming from acquisitions.
Sales outside of the U.S. are expected to grow 13 percent each year, meaning they would represent one-third of the company's total sales by 2012, with top-line contributions from company-owned stores pegged as eventually accounting for 22 percent of revenue.
VF anticipates its lifestyle divisions, which include outdoor, contemporary brands and sportswear, will continue to post strong results in the upcoming years. The company expects an outdoor and contemporary brands growth rate in the high single-digits to low double-digits, with sportswear revenue growth in mid single-digits.
Additionally, CEO Eric Wiseman, who succeeded Mackey McDonald recently, is expanding more profitable brands like The North Face abroad and opening stores under those labels, as well as diversifying.
VF Corp., which made about 10 purchases in the past five years including Lucy apparel and Kipling handbags, also will continue to be active in seeking out ideal candidates. Acquisitions are expected to contribute 2 percent to 3 percent to revenue growth. The company has sold its slower-growing intimate apparel business.
VF Corp. has been busy extending its product line-up, such as adding Reef and Eastpak apparel to their respective sandals and backpacks lines to spur growth. It also plans to reduce sourcing, freight and other costs to lift profit.
After the news, VF saw its biggest share jump in two years -- adding $5.44, or 8.4 percent, to $69.88 on Jan. 9.
Sun Capital urges Kellwood to terminate debt tender offer
Sun Capital Securities Group sent a letter to Kellwood (NYSE: KWD) on Jan. 10 urging the company to terminate its debt tender offer, saying it will be destructive to its equity value. Sun Capital owns approximately a 9.9 percent stake in Kellwood, which is the parent of Sierra Designs, Kelty and Royal Robbins.
In a letter to Kellwood's board, Sun Capital said the right way to maximize shareholder value would be to leave the notes outstanding for now, distribute the cash proceeds to shareholders, either in a special dividend or through a share repurchase, and then refinance the notes upon maturity.
"Alternatively, if the board understandably has concerns about management's business plan, the right approach would be to negotiate with Sun Capital or run a sale process where potential buyers would have the ability to assume the notes," wrote Jason Bernzweig, vice president of Sun Capital.
On Jan. 9, Kellwood began a cash tender offer of up to $60 million of its 7.875 percent notes due 2009. The offer is expected to expire on Feb. 6, unless extended or terminated by the company.
Last week, Kellwood said it planned to buy back $80 million of shares through an accelerated repurchase plan, which is in addition to the 1.1 million shares that have been repurchased for about $19.8 million under a previously announced buyback.
"The company's revolving credit facility has sufficient capacity to fund the company's ongoing growth plans at a lower cost than the debt to be repurchased," Kellwood said in an e-mail to the Associated Press. "The board believes that buying back stock and maintaining an appropriate capital structure delivers significant value to our shareholders."
In November, Kellwood rejected a $543.9 million buyout offer from Sun Capital for a second time, one month after the private investment company first made its unsolicited bid, which spurred a huge spike in the company's stock.
Eddie Bauer posts increase in Q4 same-store sales
Eddie Bauer Holdings (Nasdaq: EBHI) said fourth-quarter same-store sales rose 4.8 percent, compared with a 4.6 percent increase in the year-ago period, helped by the strength of its Internet, catalog and retail businesses.
Total sales for the period ended Dec. 29 rose 3.4 percent to $378 million from $365 million in the fourth quarter of 2006. Same-store sales at retail stores grew 8.6 percent, while same-store sales at the company's outlet stores fell 1.9 percent. Internet and catalog sales rose 9.7 percent in the quarter.
For the full year, same-store sales increased 4.4 percent, and total sales rose 3.4 percent to $989 million from $957 million in fiscal 2006.
"Overall, holiday results showed some encouraging signs of progress in our turnaround," Neil S. Fiske, president and CEO, said in a statement. "We finished the year and the quarter with a solid performance in December in the two largest and most important channels of our business, although overall results were negatively impacted by the continued softness in our outlet division."
The company is working to reduce costs by about $25 million to $30 million in 2008.
Amer to restructure winter and outdoor businesses, layoff 400 worldwide
Amer Sports said it is restructuring its winter and outdoor businesses after lower-than-expected sales in December. The reorganization plan will reduce its workforce by 400 positions globally during the next year. It plans to finalize the reorganization by this spring.
Despite good snow conditions in most of the important winter sports markets during December, Amer said that last year's reorder levels of winter sports equipment remained low. Its winter sports equipment sales for 2007 decreased 27 percent compared with 2006. Its previous estimate was approximately 20 percent.
"We continue to develop our business model, with a goal of reaching a solid level of profitability for our winter sports business regardless of market conditions," said Roger Talermo, Amer Sports president and CEO, in a statement. "This includes cost leadership enabling us to continue to invest in our strong brands. Our ambition is to increase our market share in winter sports equipment from its current 30 percent level to 40 percent globally."
The one-time cost of the reorganization is estimated to be EUR 40 million (USD $58.8 million) and accounted for in its 2007 financial statements. It expects to realize annual cost-savings of EUR 20 million (USD $29.4 million) in 2009.
According to the plan, the industrial production of winter sports equipment will be separated from the Salomon and Atomic brand organizations. As a result, the manufacturing of skis is planned to end in France, as well as the manufacturing of ski boots in Austria. Purchasing and sourcing activities will be further consolidated.
Wilhelm Kerl, currently the director of operations at Atomic, has been names vice president of operations for Amer's winter sports equipment.
Overlaps in R&D, sales, and administrative functions will be minimized, it said.
Annecy, France, will become the group's hub for ski boots, cross-country boots and bindings, outdoor apparel, footwear and cycling. The Altenmarkt, Austria, office will handle gliding products.
Amer said labor negotiations with employees have been started, and it will work in close collaboration with workers' representatives.
(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 Jan. 10.)
Sport Chalet releases preliminary Q3 '08 results
Sport Chalet (Nasdaq: SPCHA and SPCHB) released preliminary third-quarter results, sayings it sales and earnings were impacted by a challenging sales environment due largely to weak macroeconomic trends in the company's markets, especially in its core Southern California market.
The company said it expects to report third-quarter net sales of approximately $116.0 million compared to $114.7 million for the same period in the prior year. Comparable store sales for the third quarter are expected to decline approximately 7.0 percent from the same period a year ago.
Including a non-cash impairment charge of approximately $2.1 million pre-tax, or $0.09 per diluted share, which the company now expects to record in relation to certain California stores, Sport Chalet anticipates reporting a loss per diluted share in the range of $0.06 to $0.09 for the third quarter, compared to earnings per diluted share of $0.28 in the prior year's third quarter. Excluding the non-cash impairment charge, it anticipates that it will report earnings per diluted share in the range of breakeven to $0.03.
Management said it expects full fiscal year net sales will increase moderately over fiscal 2007, while comparable store sales are expected to decline 2 percent to 4 percent. Net income is expected to be lower than last year, it added.
Sport Chalet will report full financial results for the third quarter of fiscal 2008 in early February.
Forzani reports holiday season sales, appoints corporate/franchise president
The Forzani Group (TSX: FGL), Canada's largest retailer of sporting goods, said total retail sales for the 10 weeks ended Jan. 6, 2008, were up 21.3 percent from the prior year.
Excluding the impact of the acquisition of Athlete's World, total retail system sales were up 14.3 percent. On a same-store basis, total retail system sales were up 11.1 percent, the company said, as consumers responded positively to the more aggressive promotions in place throughout the quarter. Corporate same store sales increased 7.4 percent, while the franchise division retail same store sales were up 18.5 percent.
The company also noted that corporate store margin rates softened versus the prior year, but same-store margin dollars continued to track ahead of the prior year. The company added that its inventory position is very clean as a result of the strong overall sales generated quarter-to-date.
In other company news: Tom Quinn, president of Forzani's franchise group, has assumed the role of president for both the corporate and franchise businesses. In his newly expanded role, he will be responsible for all aspects of both the franchise and corporate retail groups. He joined the company in 1994.
Bill Gregson, formerly president and COO, has left the organization to pursue other opportunities, it said. Gregson joined Forzani in 1997 as the executive vice president of corporate retailing and was appointed president and COO in 2003.
Forzani said the reorganization is expected to result in a one-time charge to earnings of approximately $4.2 million.
Analysts say deteriorating consumer spending hurting sporting-goods retailers
An analyst lowered the target price on Cabela's (NYSE: CAB) based on fear of a deteriorating consumer landscape. Cabela's said in November third-quarter earnings fell 12 percent due to more promotions and disappointing sales at two stores opened last year.
Since then, its share price has slid 36 percent, but Credit Suisse analyst Paul Lejuez wrote in a client's note there is more downside to come.
Lejuez said Cabela's is facing both company-specific problems as well as a difficult consumer environment in which customers are pressured to cut spending due to high gas prices, and a weakening housing and credit sector. He cut his price target to $11 from $17 and kept his "Underperform" rating on the stock.
Shares fell across the sector on Jan. 9 -- Cabela's went down $0.81, or 5.8 percent, to $13.16, and Dicks Sporting Goods (DKS) lost $0.72, or 2.6 percent, to $27.49. One exception was Hibbett Sports (HIBB), which rose after Sterne Agee analyst Sam Poser initiated the company with a "Buy" rating.
He said he expects Hibbett will be pressured during the first half of fiscal 2009 due to the tough environment, but expects results to improve on better execution by the second half of the year.
West Marine Q4 same-store sales decline, trims '07 income forecast
West Marine (Nasdaq: WMAR) said fourth-quarter same-store sales slipped 3 percent as total sales fell on store closings, soft sales in the Southeast and some core merchandise weakness.
Sales for the 13-week period ended Dec. 29 dropped 4.9 percent to $117.8 million from $123.8 million. The company said that core merchandise weakness was partially offset by more heavily promoted electronics.
Total 2007 sales slipped 5.2 percent to $679.1 million from $716.6 million. For the year, same-store sales dipped 1.9 percent. Fiscal 2007 same-store sales do not include $6.1 million in sales from new stores and $6.8 million from remodeled and expanded stores.
Sales in the company's stores segment in 2007 slid 5.7 percent to $593.8 million, while port supply unit sales through distribution centers sagged 4.5 percent to $41.6 million. Direct sales division sales rose 1.3 percent to $43.8 million.
The company also noted that 2007 operating earnings will likely come in modestly below prior expectations due to lower fourth-quarter sales and some charges.
It also expects a fourth-quarter goodwill impairment charge of about $2.31 per share and approximately 4 cents per share in quarterly severance costs related to former CEO Peter Harris' resignation last month.
In addition, West Marine anticipates a $0.03 per share fourth-quarter asset impairment charge and higher-than-expected expenditures from an informal inquiry by the Securities and Exchange Commission. The company said it now expects fourth-quarter expenditures to top its prior estimate by about 5 cents per share.
West Marine said in an October regulatory filing that the SEC requested additional information on inventory accounting practices from 2001 to 2006 for its informal inquiry into restated financial results. The inquiry covers results from fiscal years 2002 through 2005 and quarterly financial statements for fiscal 2005 and the first three quarters of fiscal 2006.
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