Fitness: Did you hear?…
Nike to buy Converse, Galyan's updates financials, Nautilus revises earnings, GU hydration drink has branding issues, Polar is moving,
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>> Pending regulatory approval, Nike, Inc. (NYSE: NKE) will acquire Converse, Inc., the nearly 100-year-old footwear company, for $305 million plus the assumption of Converse’s working capital liabilities. According to Tom Clarke, Nike’s president of new business ventures, “Converse is one of the strongest footwear brands in the world, and our strategy for growing through non-Nike brands is to identify strong brands with superior management teams…to drive even greater revenue and earnings performance.” Nike apparently will keep North Andover, Mass.-based, Converse a separate division run by existing CEO Jack Boys. Converse, with its heritage products like All Star, Chuck Taylor and Jack Purcell, generated $205 million in revenue in 2002, with worldwide wholesale sales of all products, including its licensing partners and affiliates (excluding Japan) of $390 million. Nike’s FY 03 revenues were $10.7 billion. SNEWS View: Let’s see, you have about $600 million in cash in the bank, and spend $300 million for a company with sales that had sales of $205 million in 2002, with anticipated sales that are expected to just top $300 million in 2003–not a bad deal. Sure, Nike has to take on some liabilities, but it is more than offset by the leverage power this gives the company with retailers such as Foot Locker — as long as Converse remains a brand with cache. Converse gains in the deal with improved sourcing as well as, we hope, creative assistance with its marketing, which Converse stinks at and Nike is, well, both famous and infamous for. As for Converse owners Bill Simon and Marsden Cason, they appear to have done it again — made millions from a brand that was bankrupt when they bought it. They did the same at The North Face, though their deeds there are hardly remembered in a positive light.
>> Galyan’s Trading Company, Inc. (NASDAQ: GLYN) updated its guidance for its fiscal second quarter ending Aug. 2, 2003 — expecting comparable store sales to decline 8 percent to 10 percent, resulting in sales of $160 million to $164 million and fully diluted earnings per share ranging from a loss of $0.03 to a gain of $0.01. Previous expectations were sales of $171 million to $177 million with EPS of $0.16-$0.22. The company attributed the declines to the challenging economy and unfavorable weather, which resulted in slower sales of produce such as swimwear, sandals and shorts and greater than anticipated markdowns. Expect Q2 results and the outlook for the year in Galyan’s conference call Aug. 21.
>> The Nautilus Group Inc. (NYSE: NLS) said it is revising its earnings expectations for the second quarter and the year based on preliminary information and current market conditions it called “a challenging business environment.” As of July 9, the company said it expects to report second quarter net sales in the range of $95 million to $100 million with a corresponding earnings per share range of $0.13 to $0.15, although revisions are possible in the final report. For the year, the company’s revised 2003 revenue estimate ranges from $450 million to $470 million with corresponding earnings per share estimate ranging from $1.00 to $1.10. In terms of revised earnings on a quarterly basis for 2003, the company expects the third quarter will represent approximately 18 percent to 20 percent of earnings. It expects operating cash flow for the year to be approximately $35 million to $40 million. “A challenging business environment, Bowflex product line competition, and lackluster consumer spending continue to affect our business,” said Brian Cook, CEO, in an official statement. “In the first and second quarters of this year, increased competition has had an adverse affect on direct sales of the Bowflex product line and soft consumer spending has negatively impacted both our direct and commercial/retail divisions. The Nautilus Group will report actual second quarter results on July 30, with a conference call at 2 p.m. PST. For more, go to www.nautilusgroup.com.
>> So much for brand name awareness of GU’s sports hydration drink introduced more than a year ago. As the official drink at aid stations at the Western States 100 mile race in late June, runners that came through almost never asked for it by its name — GU2O. Rather you’d hear them ask for “that GU drink,” “that GU stuff,” “that GU junk,” “the pink stuff,” or even the likes of Cytomax or Gatorade, which are of course competitors. Ah, the downfall of fancy names like (what’s that again?) GU2O.
>> After being long headquartered in Woodbury, N.Y., heart-rate monitor manufacturer Polar Electro will move its North American headquarters to Lake Success, N.Y. That will increase the company’s space from 33,500 to 51,500 square feet where it will be at the high-tech corporate center known as “i.park,” now only 16 miles from midtown Manhattan. The move is scheduled for September.