Fitness financials: Accell Group sales boosted by acquisitions, plus Precor-parent Amer Sports, Sara Lee/Champion, Everlast, Gaiam, Foot Locker, Costco, Wal-Mart

Accell Group sales boosted by acquisitions
The Netherlands’ Accell Group, parent of Tunturi and recent acquirers of Wynne International, reported that sales for the first half of 2005 were up 5 percent to Euro 213.8 million (USD $264 million) compared to Euro 204.3 million (USD $252.3 million) in 2004. The company added that higher margins combined with a good sales mix helped increase its net profit to Euro 9.6 million (USD $11.8 million) by 26 percent. In 2004, profit was Euro 7.6 million (USD $9.4 million). Earnings per share were up 22 percent to Euro 1.10 (USD $1.36) from last year’s Euro 0.90 (USD $1.11).

In the past six months, sales have increased through the consolidation of acquisitions made in 2004. Organic sales remained at the same levels as 2004, the company said. Sales of the fitness product group were Euro 13.2 million (USD $16.3 million) for the first six months of 2005 compared to Euro 9 million (USD $11.1 million) in 2004. Accell said it expects a 10 percent increase in earnings per share for the 2005 fiscal year.

For background on the Accell Fitness purchase of Wynne in Canada earlier this year, see SNEWS® story, April 4, 2005, “Tunturi parent Accell buys Wynne in Canada.”

(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 Aug. 5.)

Amer reports sales up for fitness division
From January to June 2005, Amer Sports’ comparable net sales in local currencies rose by 6 percent and its net sales were up 3 percent to Euro 511 million (USD $631 million) compared to Euro 496.5 million (USD $613 million) last year — in line with the company’s objectives, it said. Gross profit was Euro 206.9 million (USD $255 million) versus Euro 204 million (USD $252 million) last year. Earnings before interest and taxes amounted to Euro 33.6 million (USD $41.5 million), including Euro 5.9 million (USD $7.2 million) in capital gains from the sale of properties. Earnings per share were Euro 0.29 (USD $0.35).

Net sales for Amer’s fitness division, from January to June, were up to Euro 113.5 million (USD $140.1 million) from Euro 101.4 million (USD $125.4 million). Net sales increased 16 percent in local currency terms. Seventy-eight percent of the net sales came from the Americas, where Amer said sales increased 15 percent. The company added that it has begun to capture more fully its global sales organization, which is yielding the increased results. In local currencies, the division’s EBIT declined 11 percent as a result of Amer not fully passing on the increased costs of steel and freight in its selling prices.

The fitness equipment division’s net sales increased by 16 percent in local currency terms. A total of 78 percent of the net sales came from the Americas, where sales increased by 15 percent. In line with its strategy, Amer Sports has begun to harness more fully its global sales organization, and this is yielding results. Stated in local currencies, the division’s EBIT declined by 11 percent, however, because the company has not been able to pass on in full the increased costs of steel and freight in its selling prices. In addition, the profitability of the businesses that were integrated last year has not as yet reached a satisfactory level

In 2005, comparable net sales in local currencies from Amer Sports’ current operations are expected to grow by 5 percent compared with the previous year. Earnings per share from current operations for 2005 are forecast to be Euro 0.90-1.00 (USD $1.11-$1.23).

In May, Amer Sports agreed to acquire Salomon, which includes the brands Salomon, Mavic, Bonfire, Arc’Teryx and Cliché, from adidas-Salomon AG. The acquisition is subject to customary conditions including regulatory approvals. When consummated, Amer said the transaction will have a significant impact on its net sales in the last quarter of 2005, but is estimated to have no significant impact on earnings per share in the current fiscal year.

(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 Aug. 5.)

Champion-parent Sara Lee Q4 hits rough patch  
Sara Lee (NYSE: SLE), parent of Champion, which has just finalized a licensing agreement with Lamar Health, Fitness & Sports, posted a fourth-quarter loss amidst a reorganization plan that was announced in February.

For the fourth quarter of fiscal 2005, Sara Lee said it lost $148 million, or $0.19 a share, for the quarter. In the same period a year ago, the company earned $354 million, or $0.44 a share. Excluding 55 cents in net charges for exit and business disposition activities, the group would have earned 36 cents a share, beating analysts’ average forecast for earnings of $0.31 a share. Net sales for the quarter were $4.8 billion, down 5 percent compared to $5.0 billion in the prior year’s fourth quarter, which included the positive effect of a 53rd week.

The company also announced plans to jump-start its sagging stock price, including a $2 billion stock-repurchase program. Sara Lee, which is in the first year of a five-year restructuring to shed $8.2 billion worth of businesses, or some 40 percent of its total revenue, said fiscal 2006 profit would be lower than Wall Street expected because of restructuring costs.

CEO Brenda Barnes, appointed in February to oversee the transformation plan, said the financial results “are not where we want them to be” and illustrate why the sweeping reorganization is needed. After years of juggling more than 150 brands — everything from Jimmy Dean sausage to L’eggs hosiery — Sara Lee in February announced a reorganization that includes spinning off its U.S. clothing business and selling its European clothing and meats and U.S. retail coffee units.

In case you missed the news about the Lamar licensing deal, see SNEWS® story, Aug. 5, 2005, “Lamar inks champ of equipment license with Champion Athleticwear.”

adidas to buy Reebok for $3.8 billion
On Aug. 4, adidas (ADS.F) said it will buy Reebok (NYSE: RBK) for Euro 3.1 billion (USD $3.8 billion), giving the company about 20 percent of the U.S. market. By combining adidas’ popularity in Europe among soccer and athletics fans with Reebok’s appeal to U.S. fans of basketball and football as well as its strong tap into the fitness market, the hope is to create a hearty rival to world leader Nike.

adidas-Salomon AG’s purchase of Reebok International Ltd. for $59 a share — a 34 percent premium over Reebok’s closing price the day before — combines two major brands with links to both athletics, lifestyle and fitness (It markets everything from treadmills to weights and balance boards and has a partnership with Icon). At the same time, neither company is forfeiting its own brand. adidas Chairman and CEO Herbert Hainer said the brands would stay separate but complement each other — a move that is likely to help them in their competition with Nike.

The merged company, which adidas said will enjoy Euro 125 million (USD $154.4 million) in annual synergies, will have sales of nearly $11.1 billion, with North America accounting for $3.9 billion. adidas has about $8 billion in annual sales while Reebok has nearly $4 billion. By comparison, Nike had $12.3 billion in sales in the year ended May 31 with its U.S. division contributing $4.8 billion.

adidas said it did not expect any significant reductions in the work forces of both companies. Chief Financial Officer Robin Stalker said the deal would likely lead to little if any significant restructuring costs.

Reebok shares rose $13.19, or 30 percent, to close at $57.14 Wednesday on the New York Stock Exchange, while investors pushed adidas up 7 percent to Euro 158.20 (USD $192.96) in Frankfurt. Nike shares rose $1.09 to close at $86.92 on the NYSE.

The deal is subject to regulatory approval in the United States and Europe as well as by shareholders. The companies said the transaction could close during the first half of 2006.

(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 Aug. 4.)

Everlast Q2 revenues increase 36 percent
Although historically a challenging period for fitness sales, Everlast Worldwide’s (Nasdaq: EVST) second quarter seemed to defy the odds and posted a 36 percent increase in net revenues. It hit a record $12.5 million compared to $9.2 million in 2004.

The company said the increase was attributable to net sales from continuing apparel operations and sporting goods, which increased 41 percent to $9.5 million compared with $6.8 million in 2004. Net licensing revenues advanced 22 percent to $2.9 million compared with $2.4 million in the prior period.

During the second quarter the company’s operating results were impacted by several non-recurring events aggregating $600,000. Net income adjusted for these non-recurring costs was approximately breakeven, or nil per share from continuing operations for the three months ended June 30, 2005, and $56,000, or $0.02 per basic share, for the six months ended June 30, 2005, period. Reported net loss was $596,000, or $0.18 per common share, for the quarter.

Additionally, after its success in Asia, Everlast announced that it’s expanded its relationship with Hong Kong-based Stelux Watch Ltd. for the launch of Everlast-branded watches in the Middle East, Central America, Australia and New Zealand. The Stelux line of Everlast watches will begin shipping immediately. In addition, SNEWS® learned earlier this summer that M&M Fitness, the company named as its licensee for coming fitness equipment, is run by Modell’s Sporting Goods (see SNEWS® story, July 18, 2005, “Modell’s is the one behind Everlast fitness equipment by “M & M Fitness”).

Gaiam reports lower net loss for Q2
Second quarter revenue for Gaiam (Nasdaq: GAIA) was up 28 percent with a lower loss reported compared to a year ago.

Revenue was $21.7 million from $17.0 million recorded in the second quarter of 2004, primarily due to strong sales in its retail business segment, the company said. Net loss for the second quarter was $766,000, or $0.05 per share, compared to a loss of $2.2 million, or $0.15 per share, last year.

Gaiam’s retail business segment, which distributes media and other proprietary products to retailers, generated revenue of $9.7 million in the second quarter of 2005, a 45 percent increase from 2004’s $6.7 million. Revenue for its direct-to-consumer segment was $12 million, or 16 percent higher in the second quarter of 2005 than in the comparable period in 2004. The improvement of the overall revenue growth rate to 28 percent, from 11 percent in the preceding quarter, represents Gaiam’s fourth consecutive quarter of accelerating internal growth, it said.

During the second quarter of 2005, Gaiam also generated cash from operating activities of $2.2 million, and increased its cash position on June 30 to $12.3 million, up from $10.9 million on Mar. 31. In July, the company announced it had entered into a deal to pay $40 million to buy the assets of GoodTimes Entertainment, which has a video library containing more than 2,000 titles.

Foot Locker lowers guidance after poor results in Europe
Foot Locker’s (NYSE:FL) shares fell 8 percent after it cut its quarterly guidance in the wake of poor sales in Europe. It was among the big losers as shares dropped more than $2 trading on the New York Stock Exchange, closing at $23.65. The stock has traded between $19.98 and $29.95 over the past 52 weeks.

Sales for the 13 weeks ended July 30 rose 3 percent to $1.31 billion from $1.27 billion a year ago. Strong sales in the United States and other regions offset the drop in Europe, leading to an overall increase in same-store sales of 1.3 percent. Excluding the effect of foreign currency moves, total sales for the quarter were up 2.2 percent. U.S. sales were led by strong results at the company’s Champs Sports locations, which posted a double-digit increase in same-store sales.

Foot Locker said it expects earnings for the second quarter of $0.27 to $0.29 a share, falling short of analysts’ profit estimate of $0.35 on sales of $1.37 billion for the quarter.

Costco July sales up 8 percent
Costco (Nasdaq: COST) reported net sales of $4.02 billion for July, an increase of 8 percent from $3.71 billion in 2004. Same-store sales for July climbed 5 percent, with U.S. sales up 4 percent and international sales up 12 percent. The retailer said it had one fewer trading day due to the timing of the Fourth of July holiday, negatively impacting sales by 3 percent to 4 percent.

Wal-Mart reports higher-than-expected July sales
Wal-Mart Stores (NYSE: WMT) reported that its U.S. same-store sales in July were stronger that expected, up 4.4 percent compared to the 3 percent to 5 percent anticipated. Total sales for the company were up 10.7 percent to $22.8 billion. The Wal-Mart Stores division was also up — 10.9 percent to $15.2 billion. The division’s same-store sales were 4.2 percent compared to 2.4 percent last year. It estimates comparable August sales in the United States to be in the 3 percent to 5 percent range.

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