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Fitness financials: Amer Sports takes earnings hit on Precor sales plunge, plus Dick's Sporting Goods, Life Time Fitness, Wal-Mart

Amer Sports took an earnings hit on its Precor business, Dick's Sporting Goods' shares rose on an updated Q4 forecast, Life Time Fitness lowered its outlook for Q4 and FY '08, and Wal-Mart's same-store sales were up for January.

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Amer Sports takes earnings hit on Precor business

Amer Sports’ fourth-quarter and year-end results were rattled by dramatic sales and profit plunges in its fitness segment, including a 31-percent drop in fourth-quarter sales.

“The fitness market continued to be a challenge and Precor performed below expectations,” said Roger Talermo, Amer Sports’ president and CEO, in a statement. “Despite the several cost-cutting measures we made during the year, these could not offset the drastic and rapid sales decline in our fitness business.”

For the fourth quarter, Amer Sports’ net sales were EUR 495.3 million (USD $641.1 million) compared to EUR 497.1 million (USD $643.4 million). Net sales in local currency terms decreased 3 percent.

The group’s earnings before interest and taxes (EBIT) were EUR 35.2 million (USD $45.5 million) versus EUR 11.0 million (USD $14.2 million) last year. The results were hit by one-time product recall costs of Mavic and Atomic of EUR 6 million (USD $7.7 million). Last year’s results include EUR 42.7 million (USD $55.2 million) restructuring costs. Excluding both of these items the results weakened by 23 percent due to weaker profitability in its fitness and ball sports divisions.

Earnings before taxes were EUR 23.9 million (USD $30.9 million), or EUR 0.25 (USD $0.32) per share, compared to EUR 1.7 million (USD $2.2 million), or EUR 0.02 (USD $0.025) per share, in the same period last year. Net financial expenses amounted to EUR 11.3 million (USD $14.6 million) compared to EUR 9.3 million (USD $12.0 million).

For the full year, Amer Sports’ net sales decreased 5 percent to EUR 1.57 billion (USD $2.03 billion) versus EUR 1.65 billion (USD $2.13 billion) for the 2007 fiscal year. In local currencies, the company said net sales were at last year’s level.

EBIT was EUR 78.9 million (USD $102.1 million), compared with EUR 49.5 million (USD $65.0 million) in 2007. The company noted, excluding the EUR 42.7 million (USD $55.2 million) restructuring costs in 2007 and excluding the capital gain of EUR 13.1 million (USD $16.9 million) in 2008, EBIT was EUR 65.8 million (USD $85.1 million) in 2008 compared with EUR 92.2 million (USD $119.3 million) in 2007. The company said the main reason for the weakened profitability was the substantial sales drop in the fitness business.

Earnings before taxes were EUR 45.6 million (USD $59.0 million), or EUR 0.47 (USD $0.60) per share, compared to EUR 24.6 million (USD $31.8 million), or EUR 0.25 (USD $0.32) per share, last year. Net financial expenses amounted to EUR 33.3 million (USD $43.1 million), while they were EUR 24.9 million (USD $32.2 million) last year. Last year’s corresponding figure was reduced by realized interest rate swaps, which resulted in a gain of EUR 6.4 million (USD $8.2 million).

Taxes for the period were EUR 11.6 million (USD $15.0 million) versus EUR 6.1 million (USD $7.8 million) in the same period last year. The group’s tax rate was 25 percent comparable to last year.

In the fitness segment, fourth-quarter sales were down 31 percent to EUR 58.7 million (USD $75.9 million) from EUR 85.2 million (USD $110.2 million) in the same period last year. It local currencies sales were down 36 percent. EBIT was a loss of EUR 2.3 million (USD $2.9 million) versus EUR 13.0 million (USD $16.8 million) last year. The company said the weakened profitability reflects the significant fall in sales.

For the full year, Precor’s net sales declined 24 percent to EUR 220.3 million (USD $285.1 million) compared to EUR 291.0 million (USD $376.6 million) last year. In local currencies, it was down 20 percent. EBIT plunged 90 percent to EUR 3.8 million (USD $4.9 million) versus EUR 37.2 million (USD $48.1 million) last year. In local currencies, the drop was 89 percent. The company said the plunge was due to the significant fall in sales and lower gross margins resulting from a lower capacity utilization rate as well as increased raw material costs.

Amer Sports said consumer sales were affected by both the overall withdrawal from discretionary spending by many households and by a significant reduction in the number of specialty dealers compared to the prior year. Demand for commercial equipment remained healthy until the late fall, after which the tight credit market made it more difficult for small customers to finance equipment investments, it added.

During the fourth quarter, Precor had two rounds of layoffs, eliminating 41 positions spread across all departments in the company.

Amer Sports said in its 2009 outlook for fitness that the short-term outlook for Precor remains uncertain due to the globally weak macro-economic environment. It added that Precor is focused on strengthening retail distribution in the United States and geographical expansion.

“The sporting goods sector is affected by the financial crisis. Even if sell-out from stores has remained on a relatively healthy level, many of our retail clients have taken a cautious approach and are destocking their inventories,” Talermo said in a statement. “In some cases again, our clients have been postponing their ordering due to the tight credit conditions in the financial markets. All in all, in the environment we are in, our outlook is more uncertain than normally. Our current view is, however, that our earnings in 2009 will improve thanks to the improved cost efficiency, in winter sports equipment in particular.”

The company declined to offer further guidance for 2009.

(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 Feb. 5.)

Dick’s Sporting Goods shares rise on updated Q4 forecast

Dick’s Sporting Goods (NYSE: DKS) said it expects fourth-quarter profit will at least reach the midpoint of its prior guidance, sending the company’s stock shares up.

Dick’s will record a pretax impairment charge between $165 million and $180 million for the fourth quarter ended in January. Despite that, the company said it doesn’t plan to close any stores, and said its liquidity position won’t be hurt by the charge.

The impairment charge consists of $140 million to $150 million for goodwill and other intangible assets acquired as part of the 2007 Golf Galaxy acquisition. It also includes $25 million to $30 million for the write-down of Golf Galaxy, Dick’s Sporting Goods, and Chick’s Sporting Goods store assets.

Excluding the one-time items, the company estimates fourth-quarter earnings per share at least at the midpoint of its previously forecast of $0.49 to $0.56 per share.

Shares rose $1.89, or 16.79 percent, to close at $13.15 on Feb. 6.

Life Time Fitness lowers outlook for Q4, FY ’08

Life Time Fitness (NYSE: LTM) lowered its forecast fourth-quarter 2008 and full-year 2009 results, saying it was impacted by lower average dues on new memberships, slightly higher membership attrition and continued declines in demand for in-center services.

The company said it anticipates a profit of $0.31 to $0.34 per share in the fourth quarter, including a one-time charge of $0.08 per share. The charge is related to severance costs, write-offs on land and other expenses related to its decision to slow the development of new fitness centers.

Quarterly revenue was forecast at $192 million to $194 million in revenue.

For the full year, the company cut its annual profit guidance to a range of $1.80 to $1.83 per share, from $2.01 to $2.04 per share. It now expects $768 million to $770 million in revenue, below its earlier forecast of $775 million to $780 million.

In 2009, the company said it expects a profit of $1.50 to $1.70 per share and $830 million to $860 million for the year.

Life Time Fitness shares dropped $2.87, or 20 percent, to close at $11.28.

The company fourth-quarter results will be released on Feb. 19.

Wal-Mart’s same-store sales up for January

For the month of January, Wal-Mart Stores (NYSE: WMT) said its same-store sales rose 2.1 percent as consumers bought necessities like groceries.

Sales in stores open at least one year rose 2.1 percent at Wal-Mart stores and 2.4 percent at the Sam’s Club warehouses during the four weeks ended Jan. 30. Including fuel, same-store sales rose 1.5 percent.

Sales rose nearly 2 percent to $27.74 billion compared to $27.26 billion last year. International sales fell 7 percent to $6.65 billion, hurt by the stronger dollar.

Wal-Mart said that it will stop providing a monthly forecast of same-store sales and estimate same-store sales on a quarterly basis instead. It will continue to report monthly same-store sales.

–Compiled by Wendy Geister

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