Outdoor financials: VF shares rise on analyst upgrade, plus Forzani, Collective Brands, Liberty Media/Backcountry.com

VF shares rose on an analyst upgrade, Forzani reported a drop in its Q2 profit, Collective Brands' Q2 sales rose 30.4 percent, and Liberty Media said it plans to split Liberty Entertainment into a separate company.

VF shares rise on analyst upgrade

Shares of VF Corp. (NYSE: VFC) rose after an analyst said the company has strong brands and operations and upgraded the stock. VF is parent of The North Face, JanSport, Eastpak and Eagle Creek, among others.

Shares rose $3.33, or 4.2 percent, to $83.12 in morning trading on Sept. 3. It closed the day up $4.55, or 5.7 percent, at $84.34. The stock has traded between $63.68 and $89.01 during the past year.

Credit Suisse analyst Omar Saad wrote in a note to investors that he was upgrading the stock to "Outperform" from "Neutral" with a $100 price target.

"While VF's strong brands, best-in-class operations, and channel diversity should allow it to outperform the competition in this recession, the best reason to own VF is for its unrivaled acquisition platform and blossoming international growth," he wrote.

The company reported in July that sales rose 11 percent despite a difficult environment. And, international sales represent 28 percent of total revenue and that is growing at a high-teens percentage rate, Saad said. The North Face and Vans are doing well internationally, he added.

Saad said VF is one of the few companies that "consistently executes high-return brand acquisitions," which he expects the company to continue making over the next few years amid a weak consumer spending environment.

Forzani reports drop in Q2 profit

Forzani Group Ltd (TSX: FGL) said its second-quarter profit declined as consumers spent less due to a sluggish Canadian economy. Its retail banners include Fitness Source, Sport Chek, Sports Experts and Coast Mountain Sports.

Net income fell to CDN $1.5 million (USD $1.4 million), or CDN $0.05 a share (USD $0.04), in the quarter ended Aug. 3, from CDN $5.4 million (USD $5.05 million), or CDN $0.16 a share (USD $0.14), in the same period last year. Cash flow from operations decreased to CDN $10.9 million (USD $10.1 million), or CDN $0.35 per share (USD $0.32), from CDN $13.8 million (USD $12.9 million), or CDN $0.41 per share (USD $0.38), in the prior year.

Excluding the impact of the acquisition of Athletes World, earnings for the quarter were CDN $1.9 million (USD $1.7 million), or CDN $0.06 (USD $0.05).

Revenue rose to CDN $295.6 million (USD $276.4 million) from CDN $292.4 million (USD $273.4 million).

Sales at corporate stores open more than one year fell 6.5 percent, and sales at franchise stores were 0.6 percent lower.

Combined gross margin for the 13 weeks ended Aug. 3 was 35.8 percent of revenue, or CDN $105.8 million (USD $98.9 million), compared to 34.9 percent, or CDN $102.1 million (USD $95.4 million) in the previous year.

Retail system sales for the quarter were CDN $356.7 million (USD $333.6 million), a 1.5-percent increase from the comparable 13-week sales of CDN $351.3 million (USD $328.5 million).

Corporate-owned stores, including flagship Sport Chek, represent about 60 percent of revenue, but their performance has lagged sales growth at franchise stores, such as Sports Experts and Nevada Bob's Golf, the company said.

In June the company said it planned to test new types of retail offerings, including S3 stores, which sell snow, skate and surf merchandise.

Also, the company declared a dividend of CDN $0.075 (USD $0.070) per Class A common share, payable on Nov. 3 to shareholders of record on Oct. 20.

(Conversion of Canadian dollars into U.S. dollars is for information only, is not necessarily relative to earnings, and is based on the currency rate as of Sept. 3.)

Collective Brands' Q2 sales up 30.4 percent

Second-quarter net sales for Collective Brands (NYSE: PSS) were up 30.4 percent, including the addition of Stride Rite. Collective Brands also owns Saucony and Hind, which were part of the Stride Rite acquisition.

For the quarter ended Aug. 2, net sales were $911.7 million. Net sales for Payless and Stride Rite were $704.4 million and $207.3 million, respectively, for the second quarter of 2008.

Comparable store sales, including Payless Latin America, increased 0.2 percent, as higher retail prices offset lower unit volume.

Second-quarter net earnings were $8.1 million, or $0.13 per diluted share including $36.2 million in pre-tax expenses, or $0.41 per share, related to litigation matters. Excluding the litigation items, earnings were $33.6 million compared to second-quarter net earnings of $24.9 million in 2007.

Second-quarter earnings per diluted share, excluding litigation items, were $0.54 an increase of 42.1 percent compared to second-quarter earnings per diluted share of $0.38 in 2007.

Selling, general and administrative (SG&A) expenses were 28.4 percent of sales in the second quarter of 2008, an improvement of 30 basis points compared to the second quarter of 2007. SG&A expenses were $259.2 million in the second quarter of 2008, up $58.2 million versus the prior year period due to the addition of Stride Rite.

Net interest expense in the second quarter was $16.8 million compared to net interest expense of $0.8 million last year. Its income tax benefit was $2.8 million.

Collective Brands inventory was $483.3 million at the end of the quarter, up $113.3 million compared to the same period last year due to the addition of $136.9 million of Stride Rite inventory.

Collective Brands said it anticipates an operating profit growth rate in the mid-teens over time. This long-term goal is predicated on low-single-digit comparable store sales growth. The company also anticipates that comparable store sales growth may be below its long-term goal.

Liberty Media plans to split Liberty Entertainment into separate company

Liberty Media Corp. (Nasdaq: LINTA/B, LMDIA/B, LCAPA/B) said it would spin off its Liberty Entertainment business into a separate entity that will hold $2 billion in debt incurred in the company's April investment in DirecTV Group Inc., freeing the parent company to focus on other objectives.

Liberty Entertainment, one of three publicly traded segments of Liberty Media, owns 50 percent of DirecTV and all of the cable-network Starz Entertainment, among other companies. Its Liberty Interactive Group is the parent of Backcountry.com.

The parent will exchange all shares of Liberty Entertainment tracking stock for shares of the subsidiary in the move, and Liberty Media officers would continue to run the separate company.

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